Private Vocational Education in China: A Trillion Yuan Market

China is already moving in a direction many in the United States have called for: more vocational training.

21st Century: A股公司职业教育布局图景:如何挖掘新兴万亿市场?
On May 29th, China’s 21st Century Education Group (“21st Century Education”) became the second mainland private education unit on the Hong Kong Stock Exchange's IPO. According to reports, the core asset that carries more than half of its income is a private vocational college Shijiazhuang Polytechnic Vocational College.

Recently, Zhonggong Education announced that it will replace 100% equity of Yaxia Auto (002607.SZ) for RMB 18.5 billion. After the transaction is completed, Zhonggong Education will become the first share of the A share employment training. As of May 31, the resumption of the Asia-Pacific auto limit for 7 consecutive daily limit.

In recent years, due to favorable policy and rigid demand for industrial upgrading, vocational education and training have become increasingly popular with capital and markets. At present, there are dozens of listed companies in the A-share market involved in vocational education.

21st Century Business Herald combed and found out that in addition to the traditional vocational training institutions such as Zhonggong Education and Oriental Fashion, there are also a number of A-share companies whose main business is not education. They are involved in vocational education through “cross-border” related to M&A vocational education. Training business, they are either in transition to education companies, or through professional education to provide the upgrading of the main industry.

From the perspective of the breakdown of vocational education products, professional skills training has shown a stronger momentum than the qualification examination training.
A-share company accelerates the development of vocational education
The 21st Century Business Herald’s combing of 24 A-share listed companies involved in vocational education found that, on the one hand, traditional vocational education companies accelerated their business expansion, and on the other hand, they showed more and more cross-border development in the vocational education market. Mergers and acquisitions.

The main businesses for education include New Nanyang (600661.SH), Oriental Fashion (603377.SH), and China Hi-Tech (600730.SH). Dongfang Fashion, known as "the first unit of driving school", can be said to be a purely vocational education institution. The proportion of vocational education in New Nanyang and China Hi-Tech is not high. The newly released Nanyang 2017 annual report shows that vocational education The business realized operating income of 237 million yuan, a year-on-year increase of 5.33%, an increase slower than that of the K12 business.

Hongtao (002325.SZ), Kaiyuan (300089.SZ) and Culture Great Wall (300089.SZ) are cross-border companies that have entered the field of vocational education and have promoted it as one of the main industries.

Taking the Cultural Great Wall as an example, the company is a leading enterprise in the domestic art ceramics industry. In 2018, the Cultural Great Wall acquired 100% equity in Jade Education through major asset restructuring. Jade Education is mainly engaged in IT vocational education and training. At present, the training outlets cover approximately 29 cities across the country, and there are more than 60 schools. In 2017, they achieved a net profit of 103.05 million yuan, exceeding the promised net profit of 11.05 million yuan.

The 2017 annual report shows that the education sector has occupied half of the revenue of the Great Wall of Culture. According to reports, currently half of its business executives are served by jade education executives. In addition, the Great Wall of Culture has also passed control and equity participation, and has involved various business areas such as education informatization, vocational training institutions, vocational training institutions, and corporate training platforms.

Hong Tao shares its professional education as a major business outside the building decoration business. Since 2014, Hong Tao has successively acquired Zhongxin Xinwang, cross-examination education and Xueersen. Zhongxinxin.com and Xueanden.com belong to the professional education platform for the architectural decoration industry. Cross-examination education is a platform for education for vocational education.

In this regard, Southwest Securities Education Researcher Hang Ai believes that in recent years, listed companies have looked at the vocational education sector from numerous targets in order to improve their performance. There are two reasons for this. First, the education industry is in a state of supply less than demand in terms of supply and demand. Generally speaking, the income is relatively stable and the cash flow is very good. Second, from the perspective of valuation, these years M&A in the education industry can provide companies with a relatively high valuation premium.

"At the same time, the vocational education sector is in the policy dividend period. Whether it is from the country's future development trend or from the industry's own needs, vocational education is the A-share market is relatively optimistic about the plate." Hang Ai said.

For a listed company whose professional education has not become a main business, its vocational education products are often placed on the hope of transforming and upgrading its main business.

For example, Liu Taoxin, chairman of Hong Tao, once said that “the company is expected to build the new service network to serve the training platform for designers, engineering construction and technical personnel, establish labor skill standards (vocational qualification certification), and popularize industry knowledge.”

Another example is the predecessor of the Blue Shield Vocational Training Institute in Guangdong Province, Blue Dun stock training center, according to reports, China's current network security talent gap has reached 1 million, Blue Dun shares have been developed with a number of vocational institutions in China to develop cooperation in the training of security personnel Cooperation.

According to a review of 21st Century Business Herald reporters, listed companies also showed positive performance in holding independent private colleges or vocational schools. For example, HKUST's wholly-owned subsidiary of Science and Technology University of Technology (002230.SZ) is wholly-owned by the School of Mechanical and Electrical Engineering of Anhui Engineering University, Broadcom (600455.SH) holds 70% of the shares of City College of Xi'an Jiaotong University, and *ST Van Gu (002194.SZ) establishes wholly-owned Wuhan Van Valley. Electronic vocational and technical schools.

Analysts told reporters that well-run private colleges and universities can not only deliver qualified personnel to enterprises, but also provide stable and reliable cash flow and investment income, such as Shaanxi Jinye (000812.SZ) Holdings Xi’an University of Technology Mingde College. The operating revenue in 2016 was 153 million yuan and net profit was 35.224 million yuan.

However, according to Zeng Jun, partner and vice president of the Wisdom Group, from the perspective of vocational education companies, the current capital has not been sought after.

“At least so far, no listed company is willing to invest in the vocational education section because the development model of vocational education and training under the pure line is more stable, like the professional qualification examination mainly for individuals, and will not Because the policy is good, there will be a lot of demand and it will not attract capital to be sought after." Zeng said.

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