Investment Highlights

Robust Q2 FY2024 Financial Performance - QuantaSing showcased robust financial performance in the second quarter of FY 2024, posting a significant 24.7% year-over-year increase in revenues to RMB980.5 million ($138.1 million). Moreover, the Q2 topline also grew 12.8% q-o-q while surpassing our estimate of RMB927.05 million. This growth was primarily fueled by substantial gains in skill upgrading courses, alongside noteworthy advances in recreation and leisure courses partially offset by a decrease in revenues from financial literacy courses. Notably, the revenues from ancillary business lines rose markedly, with RMB49.3 million (US$7.0 million) in the second quarter of FY 2024, up from a modest RMB0.1 million in the same quarter of the previous fiscal year. This substantial growth primarily stems from the company's recent foray into live e-commerce, reflecting its strategic focus on diversifying income sources. Operational efficiency, as evidenced by improving margins, was primarily contributed by a slight y-o-y growth in sales and marketing, a decline in general and administrative expenses, as well as research and development expenses, hinting at effective cost management and an optimized operational model. Importantly, the sharp pivot from a net loss in the previous year to a net income of RMB107.6 million in this quarter is highly indicative of QuantaSing's fiscal prudence and its path towards a scalable and profitable business.

Q2 FY2024 Key Operational Updates - QuantaSing demonstrated robust financial and operational growth in Q2 FY 2024, with gross billings for individual online learning services surging by 24.0% sequentially and 15.4% year-over-year to RMB944.6 million. The company’s strategic focus on diversifying course offerings, particularly targeting the underserved senior learner segment, has shown traction, contributing to a significant 44.6% increase in registered users to 112.4 million and a 24.2% rise in paying learners to 0.4 million. This strong operational growth is supported by QuantaSing’s adaptability and innovation in the online education sector. The company has also initiated its foray into the AI sector, aiming to capitalize on its technological capabilities within the online learning domain. This new business line is dedicated to exploring and harnessing AI technologies and related areas, seeking opportunities for integration and synergy with its existing tech infrastructure.

QuantaSing Introduces YUNTING, Elevating Chinese New Year Spirits – QuantaSing recently ventured into the Baijiu industry by launching YUNTING, a premium Baijiu brand, marking a significant diversification into the private label business. This strategic expansion follows its successful foray into live-streaming e-commerce in June 2023, which has become a cornerstone of its growth strategy. YUNTING, crafted in the renowned Maotai town and featuring the "sauce aroma" profile, is brewed using fine sorghum, wheat, and water, applying ancient 12897-step fermentation, distillation, and aging techniques and craftsmanship, resulting in an incredibly rich and smooth character. This meticulous production method has earned YUNTING a government quality certificate, underscoring its high quality. By capitalizing on the Chinese New Year's increased demand for premium spirits and leveraging its robust online platform, QuantaSing aims to strengthen brand loyalty and consumer engagement and targets new revenue streams within the competitive Baijiu and e-commerce markets.

Valuation - In line with the sustained growth momentum and significant improvement in profitability, we have revised our revenue and profit estimates. These revisions, along with the update of the cash balance and reassessment of the comparable company analysis, have yielded a valuation of $11.72 per share. This valuation is predicated on the company's successful execution of its strategic plan.