Author | Juyidaojiu
Data Support | Pythagorean Big Data (www.gogudata.com)
If there is an industry that makes people feel the most thrilling this year, it must be education. Since the beginning of the Chinese New Year, many strong regulatory policies and measures have been introduced, which have had a significant impact on the entire sector index. During this period, epoch-making documents such as the "Regulations on the Implementation of the Civil Promotion Law" and the "Double Reduction Policy" were successively promulgated, and innovative education and training models including 5+2 custody and summer custody were also introduced.
Although some of the contents of the "Regulations on Implementing the Civil Promotion Law" on civil education and higher education institutions are inspiring, the subsequent statements on K12 and the introduction of the double reduction policy have completely pushed the entire industry to the bottom. After experiencing severe turmoil, the education sector is expected to usher in a new life, but investors have found that the industry has completely changed. K12, as the old and old dynasty, has been pushed to the guillotine by history, and vocational education, as a new aristocrat, will lead the entire education sector in the future, creating a new track and value growth space.
Source: Oriental Fortune and Online Information Compilation
1. A document at the bottom of the industry ignited the market
Although there have been rumors about favorable policies for vocational education in the market for a long time, it was not until recently that it was confirmed. On the evening of October 12, 2021, General Office of the CPC Central Committee and General Office of the State Council recently issued the "Opinions on Promoting the High-Quality Development of Modern Vocational Education" (hereinafter referred to as the "Opinions"). The "Opinions" proposes that vocational education is an important part of the national education system and human resources development , and shoulders the important responsibilities of cultivating diversified talents, inheriting technical skills, and promoting employment and entrepreneurship. The main goal proposed in the
file is that by 2025, the characteristics of vocational education will become more distinctive, the modern vocational education system will be basically completed, and the construction of a skilled society will be comprehensively promoted. The school management pattern has been further optimized, and the school management conditions have been greatly improved. The enrollment scale of vocational undergraduate education is no less than 10% of the enrollment scale of higher vocational education, and the attractiveness and training quality of vocational education have been significantly improved.
By 2035, the overall level of vocational education will enter the forefront of the world, and a skilled society will be basically established. The social status of technical and skilled talents has been greatly improved, the supply of vocational education is highly consistent with the demand for economic and social development, and its role in the comprehensive construction of a modern socialist country has been significantly enhanced.
Source: Xinhuanet
This document comes from the two offices, and the promotion and distribution specifications are very high. It is a few favorable policies on education recently and is also a positive statement on the highest specifications of the education industry this year. After the document was released, it was immediately interpreted by the market as a major positive and turning point in industry sentiment, and triggered a surge in the education sector's daily limit today.
Source: Tonghuashun
This policy has detailed support for the development of vocational education, which is specifically reflected in the following aspects:
1. Improve the modern vocational education system and establish the "vocational education college entrance examination". Specifically, it includes accelerating the establishment of the "vocational education college entrance examination" system and improving the "cultural quality + vocational skills" examination and enrollment methods. The recruitment and admission methods for vocational education may change in the future. The establishment of the vocational education college entrance examination in the future will surely open a super track.
2. Applied undergraduates are encouraged to carry out vocational undergraduate education, and applied undergraduates may receive more support in enrollment. Applied undergraduate schools are encouraged to carry out vocational undergraduate education to promote the attracting of more secondary and higher vocational graduates to apply for the exam; at present, major private universities are mainly applied undergraduates, and it is expected to receive more support in terms of vocational quotas and enrollment.
3. Improve the vocational education recognition system, enhance the social recognition of vocational education, and stimulate the demand for vocational education. On this point, relying on my country's superiority with the public economy as the main body will be reflected, and it may be the first to recognize vocational education experience through state-owned enterprises and other entities.
4. Integration of industry, education and research, encourage listed companies and industry-leading enterprises to hold vocational education, and provide combined incentives for "financial + finance + land + credit" to industry-education integration -type enterprises.The "Opinions" clearly proposes to encourage listed companies and leading industry enterprises to hold vocational education, and encourage all types of enterprises to participate in the holding of vocational education in accordance with the law. In contrast to K12 expelling private capital, the government fully encourages private capital to enter the vocational education field and is expected to usher in a financing boom in the future.
5. "Opinions" promote the construction of a skilled society, enhance the social status of technical and skilled talents, and enhance the attractiveness and training quality of vocational education. The enrollment scale of vocational undergraduate education shall not be less than 10% of the enrollment scale of higher vocational education. Vocational Bachelor's degree is a kind of full-time bachelor's degree education. Like the traditional undergraduate degree, a bachelor's degree is still awarded after graduation.
Generally speaking, in the "Opinions", this support and statement of vocational education is very strong. The document itself plays a role in inheriting the past and opening up the future, paving the way for future student source diversion policies. It will still be issued in the future. It is a break to the past, one breaking and one building, and at the same time it will have great changes to my country's education model in the future.
2. The future and space of vocational education
my country's urgent support for vocational education is mainly due to the current serious imbalance in the current labor population structure. On the one hand, China's economy is undergoing rapid transformation in order to achieve sustainable development. China is shifting from the model of investment and manufacturing that drives economic development to a model driven by consumption, services and innovation. The demand for skills and talents has also changed. The lack of mastery of new skills by the previous generation and the younger generation avoiding vocational education has created a gap and a huge labor gap in manufacturing positions represented by repetitive manual labor or service positions that require basic cognitive skills such as data input and verification.
Source: "China's Skill Transformation", McKinsey Global Research Institute
On the other hand, as of March 2021 this year, my country's skilled workers had more than 200 million, and the proportion of total employment increased from 20% in previous years to 26%. Among them, more than 50 million high-skilled talents, accounting for 28% of the total number of skilled talents. The structural contradiction in my country's employment is still prominent, and there is still a significant gap from my country's labor population planning. According to the three-year plan of the State Council, as of March this year, there is still a gap of 4 million people. To this end, the country has been continuously providing favorable policy support in recent years, and it is expected that the trend will continue and will accelerate.
Source: Guosen Securities
There is no doubt that the reform of college entrance examinations for vocational education may bring qualitative changes to the industry. Corresponding to industry data, about 40% of junior high school graduates currently flow to secondary vocational schools, while taking Guangdong Province as an example, the proportion of secondary vocational colleges to be promoted to higher vocational schools is only about 30%; another source of students from higher vocational colleges to be educated is ordinary high school graduates. In the past two years, the rate of general high school admission to undergraduate is about 60%, and the rest flows to higher vocational schools. The proportion of college to undergraduate degree (junior college to undergraduate) in higher vocational colleges and universities is about 5-15%. As of December 2020, there were 311,500 vocational schools in the country, with 28.5718 million students; 6.0037 million students were enrolled in secondary vocational schools, accounting for 41.7% of high school education; 4.8361 million students were enrolled in higher vocational schools, accounting for 52.9% of ordinary undergraduate and junior college students.
In 2019 and 2020, the enrollment of higher vocational colleges increased by 1 million and 2 million respectively, with the year-on-year increase of more than 30% and 40%. Even if the proportion of to junior college and undergraduate remains unchanged, it is expected that the same proportion of graduating graduating graduating quotas in the next two years. In the future, after the connection between secondary vocational colleges, higher vocational colleges and vocational undergraduates is opened, the utility of private schools will be similar to that of ordinary undergraduates. It is expected that the gross enrollment rate will reach a high level of 65%-75% in the future. If the proportion of secondary vocational graduates to higher vocational colleges will increase to about 30%, it will increase by about 30% of the number of students enrolled in higher vocational colleges and universities; if the base (number of graduates of higher vocational colleges and universities) increases from the current 5%-15% to 30%, it can be expected that the vocational school quota will increase to 2-3 times the current level.
Source: Ministry of Education data compiled
3. Investment ideas
Issuance of vocational education opinions mainly favors two main investment lines.
The first is that vocational education track
vocational education and civil education were killed together before. The reason for civil education is very direct, but vocational education is emotion on the one hand, and on the other hand, civil education has also poured into this industry, the track has become crowded, and the industry has also set off an arms race to poach teachers, and the industry has become worse. But from the above analysis, we can also know that this track is clearly encouraged by policies, and it has now been confirmed by the official seal. Not to mention how much fundamentals can improve, at least from the perspective of emotions, when the market is so bottomed, when the industry leader Zhonggong Education fell 80% from its high point, it supports a large rebound.
Its beneficiary targets mainly include Zhonggong Education, China Oriental Education , China Science and Technology Training , etc.;
Zhonggong Education (002607.SZ): A leader in A-share national vocational education training institutions, has been deeply engaged in the fields of public education and vocational education for more than 20 years, and has involved diverse projects such as public examinations, teaching examinations, postgraduate entrance examinations and various qualification certificates. The company is far ahead of its peers in terms of company size, number of outlets, vocational education employees and number of students covered. The company's customer acquisition cost has basically remained stable, and the gross profit has steadily remained above 58%. The gross profit, net profit, ROE and other indicators are at the top of the industry.
China Oriental Education (0667.HK): The main business includes three sectors: auto repair, cooking and computer training. Skilled vocational education is currently the main direction of policy encouragement and belongs to the most pure vocational education target of blood. More support measures may be introduced in the future. As the leader in vocational education, the company has obvious scale advantages and relatively outstanding operation and management capabilities.
Chuanzhi Education :Chuanzhi Education is a leading non-educational and applied IT technology education and training institution in China. It can be provided to provide comprehensive IT training involving artificial intelligence , Python, etc. Currently, it owns sub-brands such as " dark horse programmer ", and has established 21 short-term training teaching centers in 19 cities. Its revenue ranks top 2 in the domestic IT education and training industry. Its IT personnel training is in line with the innovative direction of the national vocational education plan.
Kaiyuan Education (300338.SZ): The company successfully transformed into the education field and created a characteristic vocational education system. Its Hengqi Education and CUHK Yingcai mainly engage in offline financial accounting training and online vocational examination training businesses respectively. The company's main business is the education and training business segment. It belongs to a vocational education and training company in the vertical field of accounting.
The second item is in the higher education sector. At present, the valuation of some PE stocks in stocks has fallen below 10 times next year. This is mainly due to the early valuation of the education sector and the increase in tuition fees in the future, which will be accompanied by factors such as increasing investment. However, the performance of the upcoming interim report quarterly results in November are expected to remain stable. Since 2021, the acquisition of 25 private undergraduate universities has been approved, and the acquisition has been significantly loose. The latest quota of companies in the industry has recorded a significant increase, with the latest enrollment of Zhongjia Holdings +58%. With the opening of the vocational education system, the quota has ushered in room for growth. Higher education has strong demand and strong cyclical resistance, strong cash flow and have strong revenue certainty, significant industry scale effect, and the industry average gross profit margin/net profit margin is 60%/40%.
Its beneficiary targets mainly include Yuhua Education, Zhonghua Holdings, China Science and Technology , etc.;
Yuhua Education (6169.HK): A large education group currently has 29 schools, including 4 universities, 5 high schools, 13 K9 schools, and 7 kindergartens. The number of students in school is about 143,000, of which about 125,000 are higher education students. The proportion of K12 has dropped from 50% of the listing to only 10% at present. Previously, it was dragged down by the K12 part, and after completing the burden-breaking, it is expected that the overall valuation will increase.
Zhongjia Holdings (0839.HK): a leader in private higher education, with high school quality in its schools, including private undergraduate, junior college, vocational and technical schools, and overseas colleges and other diversified businesses. Its advantages include: 1) obvious scale advantages; 2) strong merger and acquisition integration capabilities, and the continued implementation of mergers and acquisition projects in the past few years have been verified; 3) The growth momentum of the independent college after the transformation of the independent college and the group's overall specialized school quota has been strong, and the successful acquisition of Chengdu Jincheng College further consolidates its leading position.
China Science and Technology Training (1890.HK): It is a leading private higher education group in China, focusing on professional education. Its self-built Guangdong University of Science and Technology and Zhaoqing schools are the largest private colleges and universities in South China and the largest private secondary vocational school in Guangdong Province. The first employment rate of its Guangdong University of Science and Technology has continued to be the first among private colleges and universities in the province in recent years. The employment rate in 2019 reached 97.8%, about 4.3 percentage points higher than the provincial average. Secondary and higher vocational colleges are also the key support targets for policy support.
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