Product: Sina Finance listed Company Research Institute

Author: pan an

2021 is a special year for the education industry, the double reduction policy landed in the third quarter, subject education suffered an impact, and the education industry ushered in a great change.

In the third quarter after the double reduction, more than half of the 10 A-share teaching companies lost money. In particular, it is worth paying attention to the fact that while the policy on vocational education is improving this year, secondary public education and Kaiyuan education have changed from profits to losses.

In the third quarter of this year, the operating income of Zhonggong Education was about 1.445 billion yuan, down 68.79% from the same period last year, while the net profit lost 794 million yuan, down 151.08% from the same period last year. In fact, compared with the same period in 2019 before the epidemic, the decline in performance in the third quarter of 2021 is more pronounced, and it may be difficult for the performance of teaching and training to return to the pre-epidemic situation.

　　The high salary cost of the staff and workers in the middle public education from profit to loss

Since the beginning of this year, with the introduction of the national policy on the strong supervision of the education and training industry, the education industry has stood at the forefront of the wind and waves. The education regulator has stepped up its supervision of out-of-school training institutions for disciplines, which has cooled down online education rapidly. The education and training industry is in urgent need of transformation, and quality education, vocational education and training and educational informationization may become the main direction of the education industry in the future. However, the performance of the leading companies in the field of vocational education this year has not been satisfactory.

In terms of net profit, compared with the third quarter of 2019 before the epidemic, all 10 A-share teaching enterprises showed a decline in net profit. In particular, it is worth paying attention to the fact that while the policy on vocational education is improving this year, secondary public education and Kaiyuan education have changed from profits to losses.

In the third quarter of this year, Zhonggong Education suffered a huge loss of 794 million yuan, down 151.08% from the same period last year, while the net profit of Kaiyuan Education in the field of on-the-job education fell by 534.36%. Revenue from both has also declined.

In response to the concern letter of the Shenzhen Stock Exchange, Zhonggong Education said that the occurrence of "phased losses in performance" during the reporting period was mainly due to the regulatory policy trend of the education industry, and the decline in the number of civil servants and institutions directly led to a reduction in the number of participants in the training. and the impact of the epidemic repeatedly disrupting market enrollment.

Nearly 70% of the revenue of Zhonggong Education comes from offline channels. According to the semi-annual report of 2021, Zhonggong Education has more than 1800 directly operated outlets nationwide, covering more than 300 prefecture-level cities.

However, due to the influence of the epidemic, the advance of multi-provincial joint examinations, changes in plate enrollment plans, or postponement of examinations, the number of classes offered below the line of secondary and public education dropped by more than 70% in the third quarter of this year, resulting in a 60.88% drop in training attendance in the third quarter and a nearly 70% drop in income.

In the case of a sharp decline in income, the cost of secondary public education under the intensive farming line can not decline rapidly in the third quarter, which is also the main reason for the loss of secondary public education. Zhonggong has a large-scale full-time R & D team of more than 3000 people, as well as a large team of more than 18000 teachers, which makes its R & D expenses continue to rise by 7.53% to 293 million yuan in the third quarter of this year despite a sharp drop in enrollment. In the same period, the salary cost of staff and workers in public education is 505 million yuan, accounting for 55.8% of the total cost.

Due to the small number of large-scale examination programs in the third quarter of 2021, the company reduced its advertising and sales expenses accordingly. In the third quarter of 2021, the company's sales expenses were 500 million yuan, down 13.40 percent from 577 million yuan in the same period last year, and the financial expenses were 126 million yuan, 23.17 percent lower than 164 million yuan in the same period last year.

In the third quarter of 2021, the operating cost of Zhonggong Education was 904 million yuan, down 44.19% from 1.619 billion yuan in the same period last year. But that still doesn't match the 70% drop in revenue.

The share price of Zhonggong Education has also fallen sharply since February, with the biggest drop of more than 70%. In November 2020, the market capitalization of the company was close to 270 billion yuan. Now, a year later, the market capitalization of secondary public education has dropped to 57.5 billion yuan, losing 200 billion yuan.

　　It is difficult to restore the performance of "volume" teaching and training in the online industry.

After the landing of the double reduction policy, vocational education has become one of the transformation directions sought by discipline training institutions. Giants such as Gaotu Techedu Inc., TAL Education Group, New Oriental Education & Technology Group and other giants enter the market, which may have an impact on the leading position of public education in the field of public examination.

Due to the repeated impact of the epidemic, players in the field of vocational education have also added to the line. Chalk, which is also on the public exam track, relies on online families to get rich and seize the opportunity to expand during the epidemic. According to official account Chalk Planet, the total revenue of chalk education exceeded 4 billion yuan in 2020. According to previous media reports, chalk revenue in 2018 was only 900 million. Compared with 2020, chalk revenue is expanding at an average annual growth rate of 200 per cent.

Marketing has always been one of the competitive points of online education, and behind the "re-marketing" is the "difficulty in getting customers" of online education. Different from offline education with regional attributes, the acquisition of customers in online education has always been a pain point in the industry.

The acquisition of online education has no geographical restrictions and advantages, with more and more players in the online education industry, in order to gain competitive advantage, online education institutions often adopt a variety of marketing forms, which also leads to huge sales costs.

Take the livelihood education of the vocational education company as an example. In the first half of this year, the cost of promotion and publicity of online education subjects increased due to the inclusion of online education subjects. During the reporting period, the company's sales and distribution expenses increased by about 1320% compared with the same period last year. This also makes the company's net interest rate of homing down 10.7 percentage points year-on-year to 35.6%.

Compared with the K12 education market, China's vocational education market is just emerging, and the market concentration is low. With the entry of new players, marketing volume and other problems that have appeared in the field of K12 education may also be repeated, and it will also have a further impact on the profitability of the industry, and it may be more difficult to recover the performance of teaching and training in the face of the epidemic.

It is worth noting that, different from the disciplinary education of the teaching system, the diversity of industries and jobs leads to diverse vocational training needs, many and fine racing tracks, a very scattered industry structure, and the high dispersion and low relevance of the adult field. it is destined to be extremely difficult across fields and industries. For vocational education enterprises, the creation of new growth points may be another difficult problem.

　　It is obvious that the industry lost more than half of its performance in the third quarter.

In the third quarter of this year, there has been a downward trend in the performance of out-of-school training, vocational education and wisdom education in A-share disciplines.

According to the performance of revenue and net profit in the first three quarters, University Education, Science and Technology Education, Tuowei Information and Intelligence Education all achieved a double increase in revenue and net profit, of which the net profit of Chunzhi Education increased by 361.21% compared with the same period last year. The net profit of Zhonggong Education, Doushen Education and Jiafa Education both declined, and the net profit of Qinshang shares returned to the mother fell by 1662.28%.

Judging from the results of the first three quarters, the situation of subject education enterprises is not so bad, on the contrary, the leader of vocational education has not performed well in the favorable wind of vocational education policy this year.

But in fact, the performance of XUE and Onli Education in the first three quarters depended largely on the year-on-year growth of education and training business in the first half of the year. The first-half net profit of XUE and Onli Education, which were hit by double declines, increased 1.5 times and 3.1 times respectively compared with the same period last year, partly making up for their losses in the third quarter.

Looking at the third quarter after the double reduction, more than half of the 10 teaching and training enterprises lost money. Among them, 7 had negative revenue growth compared with the same period last year, and only Doushen Education achieved an increase in net profit by disposing of assets, and more than half of the enterprises' revenue and net profit fell.

Among them, in the field of subject education, the net profit of university education and Onli education decreased by more than 200%, the net profit of Kade education dropped by 67.98% compared with the same period last year, and the net profit of Qinshang shares dropped by 6113.38%.

Although the net profit of Doushen Education has increased significantly, it mainly makes a profit of 80 million yuan from the disposal of the shares of some subsidiaries and some fixed assets, and its net profit of deducting non-parent education decreased by 435.32% to-40 million yuan compared with the same period last year.

In response to the decline in performance in the third quarter, a number of companies said it was closely related to the impact of the "double reduction" policy. Cod Education said that due to the "double reduction" policy, the company's K12 extracurricular training business's homing net profit fell 138 per cent from the same period last year from July to September 2021.

Qinshang previously acquired Longwen Education, a national education and training institution, but with the implementation of the "double reduction" policy, the education and training business of related disciplines is limited. During the reporting period, the company conducted an impairment test on the goodwill formed by the acquisition of Longwen Education, and the impairment amount reached 249 million yuan.

Vocational education and intelligence education companies, as Xinfengkou, also performed poorly, showing a general decline in net profit in the third quarter. In fact, the decline in performance in the third quarter of 2021 is even more pronounced than in 2019, before the outbreak.

Of the 10 selected companies, only Tuo Wei Information had higher revenue than in the same period in the third quarter of 2019, and its performance mainly benefited from its software cloud business, including smart education.

Before the "double reduction" opinion officially landed, Tuo Wei Information said that it would divest its educational and training business assets. On August 10, Tuowei Information announced that it had stripped off extracurricular training assets and full-time schools involved in compulsory education. After this divestiture, Tuowei Information actually does not have any business related to education and training at the stage of compulsory education, which involves wisdom examination and wisdom education business.

In terms of software cloud services in the first half of this year, Haiyantian Technology, a wholly-owned subsidiary in the intelligent examination field, achieved 134 million yuan in revenue, an increase of 496.95% over the same period last year. The domestic independent brand Zhaohan server and PC realized business income of 207 million yuan, an increase of 6015.68% over the same period last year. Education, training and even wisdom education are not the main pulling points of Tuo Wei's performance.

Jiafa Education is different. In the first half of this year, its standardized test equipment business accounted for more than 71% of its revenue, and intelligent education is its main business. However, with the construction of standardized examination rooms all over the country is becoming more and more perfect, the relevant market of the standardized test site equipment business of intelligent education package is also gradually saturated. In the third quarter of this year, Jiafa's net income from education declined one after another.

With the transformation of teaching and training enterprises, the education industry has also ushered in a reshuffle, vocational education, wisdom education can become a "true tuyere" still need time to test.