QSG is China’s largest online adult learning market provider by revenue. The adult learning market in China has proliferated, benefitting from increasing disposable incomes and strong demand for personal

development and lifelong learning. QSG is well positioned to capitalize on this growing market. We initiate with a Buy-Venture rating and a  U.S.$9.50 price target.

Investment Thesis

➢ QSG is ranked as China’s largest online adult learning market provider by revenue. The  success of QSG is underpinned by its easy to use, affordable, and accessible portfolio of online learning courses.

➢ QSG’s innovative learning approach, coupled with a robust technology infrastructure, has  resulted in strong growth in its user base. The total number of registered users on the platform has consistently grown over the last eight quarters. The registered users increased from 68.1 million in Q1:23 to 103.3 million in Q1:24.

➢ QSG is diversifying into the other personal interest learning market, away from the  historically strong financial literacy courses. This movement should boost growth as the other personal interest learning market is growing faster than the financial literacy market.

➢ Frost & Sullivan projects the adult learning market in China to reach over RMB1 trillion by  2027, growing at a CAGR of 12.6% during 2023-2027. We expect QSG to grow faster than the industry, underpinned by dedicated sales and marketing efforts.

➢ We are impressed by its strong balance sheet with no debt and cash balance (incl. short  term investments) of RMB879.8 million (US$123.6 million). We anticipate QSG to be free cash flow positive, providing ample flexibility to pursue growth opportunities.

➢ We initiate coverage with a Buy-Venture rating and target price of U.S.$9.50, implying a  capital appreciation potential of 170%.

Primary Risks

➢ The Company’s business is highly dependent on its ability to attract and retain learners and  convert them into paid users. Failure to attract learners to pay for the courses could adversely impact the profitability of the business.