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Text / Tang Fei
Source: Value Planet (ID: ValuePlanet)
With the model of bilingual live broadcast and imparting knowledge while live broadcast, the Oriental Selection Live Room under New Oriental Online has recently become the hottest topic on the entire network.
The new “Live Broadcasting Brother” Dong Yuhui and the old “Live Broadcasting Brother” Li Jiaqi are only 1 year apart, but as the new and old top-notch in the shipping industry, the two seem to be far apart.
After it became popular, some of the live broadcast data of Oriental Selection began to decline. But this issue seems to be expected. Yu Minhong revealed in his personal account that the original plan was not to explode, but to proceed gradually. Explosion is like a volcanic eruption, which can have two consequences, devastating or constructive – where the ash is covered, plants will flourish.
Since the implementation of the “double reduction” policy in July last year, listed education companies have been “comprehensively slowing down” in a more stringent regulatory environment. The biggest problem for companies is not rapid growth, but how to protect themselves and save themselves when they survive or die. Live streaming, adult education, smart hardware, SaaS services, etc. have all become the direction of transformation for education companies.
But it is undeniable that the attempt of Oriental selection has indeed brought hope to the transformation of education and training institutions.
Benefiting from the success of the Oriental selection, the share prices of some leading education companies have risen significantly, and the share price of New Oriental Online has soared by 172% from June 10 to 20.
Is this really “good” news?
Can the explosion last?
In order to alleviate the imbalance of high-quality resources and aggravate the anxiety of education, the General Office of the Central Committee of the Communist Party of China issued the “Opinions on Further Lightening the Homework Burden and Off-campus Training Burden of Students in Compulsory Education” on July 24, 2021 (commonly known as “double reduction”) , marking the official landing of the double reduction policy.
Due to various reasons such as double reduction + epidemic, the education and training industry has ushered in a cold winter. New Oriental, a leading company, has successively announced the suspension of K12, the lease of 1,500 teaching points, and the closure of K9 business, etc., and the market value has shrunk by more than 200 billion Hong Kong dollars.
On December 28, 2021, New Oriental Online released its live broadcast delivery platform, Oriental Selection, through its official WeChat account, and founder Yu Minhong conducted the first live broadcast of agricultural products delivery, officially kicking off the prelude to New Oriental’s live broadcast e-commerce deployment.
As of the end of May this year, New Oriental’s live broadcasts have not caused much waves. There are not many people online in the live broadcast room and sales are bleak.
However, since June, the bilingual live broadcast of Oriental Selection has attracted wide attention from netizens, and the popularity of the live broadcast room has increased. Public information shows that since June 10, the number of fans selected by the East, the number of online live broadcast rooms, and GMV (total merchandise sales) have all experienced explosive growth, and the number of Douyin account fans has rapidly increased from less than 1 million to 1770 on June 21. Ten thousand. The single-day GMV of its live broadcast room has rapidly increased to the level of 10 million. On June 16, the single-day GMV of its live broadcast room even exceeded 63 million yuan.
At the same time, soaring sales also boosted the stock price.
Affected by the popularity of bilingual live streaming, the stock price of New Oriental Online increased by more than 50% on June 15 and June 16. Within a week, the stock price of New Oriental Online has risen nearly 6 times, and the stock price has risen more than 10 times since May.
However, from the opening of the market on June 17, the stock price of New Oriental Online began to fall. During the week from the 20th to the 24th, the cumulative decline of New Oriental Online reached 35.03%. As of the close of the 24th, it was reported at HK$18.58 per share, with a total market value of about HK$18.59 billion.
New Oriental Online’s share price trend since May. Source: WindAccording to New Oriental Online’s 2022 fiscal semi-annual report, for the six months ended November 30, 2021, the total revenue of New Oriental Online was 574 million yuan, a year-on-year decrease of 15.3%; the net loss was 544 million yuan, and the loss decreased by 19.3% year-on-year. During the reporting period, K12 education revenue was 271 million yuan, accounting for 47.2% of the company’s total revenue. Despite the cessation of K9 business, K12 education’s revenue fell by 19.7% during the period, still accounting for the bulk of the company’s total revenue.
According to the company, New Oriental Online is continuously changing its strategic center and adjusting its four business lines and service scope. During the reporting period and the foreseeable future, the company’s business includes five categories of university education, overseas test preparation, institutional cooperation, live broadcast business business, and educational intelligent hardware products.
Industry insiders predict that after the successful selection of Oriental, New Oriental Online will continue to invest in this field for a long time. On the recruitment website, Oriental Selection is recruiting bilingual anchors, English anchors, Douyin customer service, short video editors, operations editors and other positions, and has offered a monthly salary of 20,000 to 40,000 yuan for these positions.
At the same time as the stock price of online Oriental Online rose sharply, many education stocks also ushered in a general rise. From June 10th to 20th, New Oriental-S, Tianli Education, Siile Education, Doushen Education, and Onli Education rose by 23.9%, 61.11%, 41.26%, 112.3%, 21.11%
From the perspective of the broader market, the education sector (BK0740) rose by more than 26.4% in the month from May 17 to June 16.
China Merchants Securities International Research Report pointed out that the stock price of the education and training industry has rebounded sharply recently (it has rebounded 125% since May 1), and the bank believes that the reasons for the stock price rebound come from several aspects: the company’s stable net cash level and operating cash flow prospects On the upside, restructuring costs due to most business adjustments have been reflected in 2H21, so 2022 will be a new start.
The transformation of many enterprises has achieved results
Dongfang selected pearls and jade first, which naturally attracted the imitation of other education and training institutions.
Known as “the first strand of Chinese language training”, Doushen Education bears the brunt. Since October last year, Chairman Dou Xin has led the core members to release short videos on Douyin and other platforms to share knowledge of literature, literature and history. So far, although Dou Shen Education has incubated multiple accounts, there are not many viewers in the Dou Shen system live broadcast room. For example, in the live broadcast room of Dou Xin@Beanshen Scorpio Star, which has 1.23 million fans, in a live broadcast on June 23, the highest number of people online was 199, and the sales volume was 70,000 yuan in three hours.
Bean God selection. Source: Douyin
On June 18, Beanshen Education also launched a new account “Beanshen Selection”. In just one week, the account has attracted 500,000 followers. At present, the account has only released eight short videos, and the content mostly comes from the live content clips of other accounts.
In addition to live broadcasts, education companies have various transformation paths, including publishing, adult education, hardware and other directions.
A typical example is: TAL has set a strategic direction for transformation in 2021, including quality education, publishing, smart education, hardware, hosting, overseas and other fields. In 2021, relying on live broadcasts to sell books, TAL’s publishing revenue will be about 300 million yuan. Last year, Gaotu set four transformation priorities: university and adult education, vocational education, quality education, and intelligent digital products (AI animation courses for teenagers, etc.). NetEase Youdao has laid out diversified directions such as hardware and quality before the double reduction. At present, the focus of transformation is hardware, quality, entering schools, and adults. Among them, hardware has always been the long board of NetEase Youdao. Head Education changed its name directly to “Master Intelligence” and established a SaaS business unit to provide education SaaS services around scenarios such as pre- and after-school services for teachers and students, online teaching, and parent interaction. At the same time, education technology has transformed on-campus business, and deployed cases of “one teaching, one learning” in Beijing, Shanghai, Jiangsu and other places, and integrated it into the local education system.
From the results, each transformation has also gained something. A typical example is NetEase Youdao’s smart hardware revenue in the first quarter increased by 25.4% year-on-year to 253 million yuan, accounting for 21% of total revenue; together with education technology’s first-quarter revenue of 233 million yuan, exceeding the upper limit of the expected guidance by 11.1%, operating expenses decreased from a year earlier 82.1% and so on.
Jiang Ya, an analyst at CITIC Securities, believes that the recent outbreak of Oriental Selection has made us see a successful transformation of education and training companies, which reflects the reuse of content and organizational capabilities accumulated by education and training companies for a long time. It is gradually reflected, and it is expected to contribute to good performance in the future.
The Guotai Junan Research Report pointed out that leading companies have plenty of cash on hand, and currently they are mainly transforming in the directions of vocational education, quality education, hardware, and live broadcast delivery; the management team of education and training companies has excellent management team and relies on relatively overlapping user groups. Incubation and running-in period, but the release after the business model runs through is worth looking forward to.
Industry valuation fixes
According to the statistics of China Merchants Securities International, from mid-May to mid-June, the market value of education leaders New Oriental and TAL had a discount of 62% and 40% compared to the latest reported net cash level, and now it has narrowed to 15% and 10%.
The discount ratio of market value to net cash has been significantly reduced, and the outlook for operating cash flow is improving. The industry-leading valuation is being repaired.
CICC believes that the current education and training companies are abundant in cash, and most of the company’s market values are lower than their cash values. Currently, there is widespread undervaluation, and the valuation of education and training companies is expected to recover above the net asset value.
Huaxi Securities is also optimistic about the deep logic behind the transformation of education companies. They believe that the explosion of the New Oriental live broadcast platform is not a flash in the pan, and is inseparable from the policy logic behind it. Under the national economic clarion call of seeking progress while maintaining stability, the key reform work of the platform economy reform has been completed, the platform economy has entered a period of normalized supervision, the platform economy has developed healthily and steadily, and the digital economy will enter an era of full bloom.
On the other hand, although the K9 business is stagnant, the demand for education and teaching in more fields is exploding.
According to public reports, in April and May this year, the surveyed unemployment rate in urban areas nationwide was 6.1% and 5.9% respectively. Among them, the unemployment rate of the 16-24-year-old main employment group in May was 18.4%; the 25-59-year-old main employment group unemployment rate was 5.1%, and the surveyed urban unemployment rate in 31 large cities was 6.9%.
Under the background of huge employment pressure, obtaining higher skills or academic qualifications through vocational education and training is one of the effective ways to solve personal and social employment problems. Therefore, the adult education (vocational education) track has also received high attention from users and the capital market. .
According to the monitoring data of “Dianshubao”, a large database of Netease, in 2021, the number of online vocational education financing in China will be 38, with a financing amount of 6.193 billion yuan, while the number of financing in 2020 will be 15, with a financing amount of 1.71 billion yuan. Both the number and the amount have grown substantially. From January to April 2022, 53 companies in the education industry received financing, nearly half of which were vocational education companies.
Typical listed companies such as Chuanzhi Education, Suntech, and Dana Education have achieved double growth in revenue and profit in their 2021 annual reports.
In addition, quality education, physical education, and aesthetic education for student groups are also on the rise.
Since last year, many places across the country have successively issued relevant guidelines for the entry of art subjects into the “high school entrance examination”. Wang Dengfeng, director of the Department of Physical Education, Health and Art Education of the Ministry of Education, proposed at a press conference that the aesthetic education class should teach children to appreciate beauty, discover beauty, and give students the ability to create beauty.
Taking Mianyang City as an example, the city has taken the lead in implementing art subjects to enter the senior high school entrance examination since 2020. Among them, the subjects of music and art are the subjects of the senior high school entrance examination, and the two subjects each have 10 points, accounting for 2.2% of the total score of the senior high school entrance examination. Students take the test through the computer operation method, which mainly examines the students’ mastery of art knowledge and the cultivation of artistic literacy through school art courses and art practice activities.
Wang Dengfeng said that the aesthetic education high school entrance examination will be fully implemented in 2022. At the same time, the three subjects of sports, music and art will be gradually included in the high school entrance examination, and the score will be increased to 100 points (up to 50 points for art).
This also provides new possibilities for the transformation of educational enterprises, and a new and huge market demand is being bred.
On the whole, the “return of blood” in the education sector in the past two weeks can be said to be one of the biggest good news in the field of education in the past year.
However, it is also because it is in the early stage of the capitalization process that the education and training industry has squeezed out more bubbles than other industries. After the bubble is squeezed out, practitioners have time to start thinking about how to return to the essence of service, in-depth polishing of products and experiences, and then return to corporate value.
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