China Public Education (002607) Tracking Report No. 4: 19Q1 Performance Exceeds Expected Goals to Create Vocational Education Leaders with Vocational Education and Non-education

China Public Education (002607) Tracking Report No. 4: 19Q1 Performance Exceeds Expected Goals to Create Vocational Education Leaders with Vocational Education and Non-education

Event: On March 29, 2019, China Education announced the “First Quarter 2019 Performance Forecast”: Net profit for Q1 of 2019 was zero.


15 billion U.S. dollars, which actually turns around every year.

Opinion: China Public Education 19Q1 net profit 0.


1.5 billion (+ 269%?
+ 321%), exceeding market expectations.

China Education 2019Q1 achieved a net profit of 0.


1.5 billion (+ 269%?
+ 321%), a decrease of 51.94 million yuan in the first quarter of 2018.

The fundamental reason for the previous loss-making was the continuous strengthening of the company’s advantages in scale, increasingly rich categories and product structures, continuous improvement in management efficiency, and significant progress in digital transformation of operations such as the dual teacher paradigm and the development and upgrade of independent IT systems.

The public profit margin of CCP Education continued to increase.
The 18-year net interest rate was 7.

8%, 12.

7%, 13.

0% and 18.


1. Vertical integration and rapid response capabilities build core competitiveness Vertical integration and rapid response capabilities are the core competitiveness of Sino-Public Education.

CCP Education’s vertical integration capabilities cover the three dimensions of front-end marketing 厦门夜网 and channels, mid-end teaching and research, and alternative operations.

(1) The front-end channel covers all prefecture-level cities in China, and can quickly respond to the admissions information and accurately feedback the content of the admissions; (2) The mid-end teaching and researching has a strong central teaching and researching team of “big backstage, small front desk”, and can be developed through headquarters, branch campuses(3) The operator has more than 20 years of management experience. The financial and teaching and research headquarters in Beijing are under the control of the financial aspects. The Beijing headquarters has strong control over the branch campus, avoiding the out-of-control situation where other training institutions expand their locations in different places.

2. Short-term and 杭州风月网 medium-term: Four dimensions drive a clear growth path. The three main business areas of public education in China are civil servants, teachers, and public institution exam training. In 2018, the income was about 30, 12 and 10 trillion, and other business income was beginning to take shape.The scale and rapid growth of the postgraduate entrance examination and IT training.

At present, the Chinese public courses have covered more than 130 examination categories, and the number of new categories will continue to increase in the future.

Looking into the future, we expect that the number of public officials and public institution positions will remain stable in the future. The revenue of China-related public business is expected to maintain 20-30% growth in 19-20 years; the income of teachers and postgraduate training business is expected to maintain 60% and 100%The above compound growth.

The short-term and medium-term growth path of public education is mainly four dimensions: 1. Category development: 5000 megabytes of market space in the vocational employment training industry. The main curriculum categories include: (1) Public recruitment: public servants, institutions, teachers, military police, etc.2) Qualifications: teachers, accountants, medical and health, fire engineering, etc .; (3) Others: postgraduate research, IT skills, state-owned enterprise finance, studying abroad, etc.

Various courses are complex and diverse, and different regions are not the same. Strong R & D and rapid response are the foundation for the rapid growth of Sino-German business.

(1) Within the adult employment examination training industry, we believe that the three major business incomes of civil service examination training, public institution examination training, and teacher examination training will maintain approximately 20%, 25%, and 60% growth in the next three years.

(2) The development of the adult employment examination training industry. While public education takes root in the three major tasks of civil service examination training, public institution examination training, and teacher examination training, it will make efforts to lay out postgraduate training, finance / doctor / architect and other employment examinationsTraining areas; (3) Extending from examination training to skill training, and expanding other disciplines based on current IT skills training.

The success of Cong Gong in the field of postgraduate research proves its strong ability to expand across disciplines. The revenue of Cong Gong’s postgraduate research business in 2018 was about US $ 600 million, and we expect it to be about US $ 1.2 billion in 2019.

2. Channel sinking and college coverage, long tail market supply creates demand: As of April 2018, 620 directly-operated branches of CPG Education have covered 319 cities in 31 provinces.

(1) Channel sinking: Referring to the National Bureau of Statistics data, as of January 2019, there are 293 prefecture-level cities and 2876 county-level cities each year.

The number of cities covered by CCP Education exceeds that of Good Future and New Oriental, and it has completed the full coverage of all prefecture-level cities in China.

In the future, the public education channel network will gradually extend to county-level cities, transforming the gradual sinking of the channel network, and the demand for supply and creation, the employment training needs of the fourth and fifth tier cities may be further stimulated.

(2) University Coverage: Due to the vocational employment examination training, most of the training books come from universities.

At present, the number of colleges and universities covered by the Chinese government is about 200, and there are about 2,663 colleges and universities in the country. There is still room for growth.

3, the unit price of customers: whether it is early education training, primary and secondary school training or adult training, most quality training institutions are included in the pricing power.

For adult employment examination and training institutions such as China Public Education, the merger will allow the company to increase the unit price per year by appropriately increasing the length of student lectures and partially increasing the proportion of live lessons or recorded broadcasts; thus, the number of teachers in the company has already increased.With more than 10,000 people, through the continuous enhancement of teaching and research capabilities, the passing rate of students enrolled in classes has gradually increased, and the decline in refund rates is also expected to increase the overall customer unit price year by year.

4. Operational efficiency improvement: China Gong Education’s net profit margin for 2015-2018 is approximately 7.
8%, 12.

7% and 13.

0% and 18.
4%, which is on the rise year by year.

We believe that in the future, the classroom penetration rate of dual teachers will be changed, and the rate of Taiwanization in the information system will gradually increase. The company’s long-term net interest rate is expected to exceed 20%.

(1) Penetration rate of double-teacher classrooms: Cong Gong Education began to reform the curriculum system at the end of 2017, and adopted double-teacher classrooms to improve the utilization rate of high-level teachers.

Online learning senior teachers cover teaching materials in multiple regions at the same time, with assistant teachers for tracking and feedback offline.

As of now, the coverage rate of Zhonggong ‘s dual-teacher classrooms for middle and senior teachers is less than 10%, and it is expected to exceed 30% in 2019 and more than 50% in the future.

We believe that after the penetration rate of double-teacher courses for middle and senior teachers has greatly increased in the future, it is expected to improve the operating efficiency and profitability of the company’s pen interview courses.

(2) IT informatization rate: The company started to develop IT system independently 10 years ago. All courses registration, live broadcast, test bank, and quizzes all realized full online operation.

3. Medium-to-long-term expectations: A strong vocational education group of non-degree vocational training and academic vocational schools issued the “State Vocational Education Reform Implementation Plan” earlier:The transition from paying attention to “doing” vocational education to “management and service”.

The government is mainly responsible for planning strategies, formulating policies, and supervising according to laws and regulations.

Giving play to the role of an important school running entity of an enterprise and encouraging qualified enterprises, especially large enterprises, to hold alternative vocational education, the existing people’s government can provide appropriate support in accordance with regulations.

We will improve the system of part-time and part-time salary for business management, technical staff and school leaders, and key teachers.

In 2020, 300 demonstration vocational education groups (alliances) will be initially established to drive the participation of SMEs.

Support and standardize the development of vocational education and training by social forces, encourage the development of joint-stock systems, mixed ownership and other vocational schools and various vocational training institutions.

Establish an open, transparent and standardized private vocational education access, approval system, explore the private vocational education exception list system, and establish a sound withdrawal mechanism.

“In the future, Zhonggong Education will take the vocational education group as its development goal, with both vocational education and non-diploma vocational training laid out at the same time. Endogenous growth and outreach mergers and acquisitions will promote Zhonggong’s growth logic.


1. Endogenous growth layout Non-degree vocational education training Adult professional employment examination market space The long-term market space reaches about 100 billion yuan.

Due to the complex unemployment rate, many college graduates and other highly educated talents will pay more attention to jobs within internal administrative and career establishments, teacher positions, and medical and health positions when seeking or adjusting for job positions., Take various types of talent recruitment exams, and then provide sufficient students for talent recruitment training.

According to the relevant data of the National Bureau of Statistics, there are 79.36 million employees in the civil service, public institutions, teachers, finance, and medical care. The working life of each type of staff is about 25-30 years. Therefore, about 3 million people participate in job rotation every year. We estimate thatThe job registration ratio is about 10: 1. About 30 million people take the exam each year. According to the current 25% participation rate and the average price of 4,000 yuan, the market for adult vocational employment examinations is about 30 billion. The current market share of public educationThe rate is about 30%.

If the participation rate in the future is increased to 50% and the average price per student is increased to 7,000 yuan, the long-term market space of the adult examination training industry may be increased to 1,000 trillion.

Considering the many areas of the adult skills training market, and the strong leader in education, Hengqiang, the leading company is growing faster than the average growth rate of the industry. In the future, the market share and profitability of leading companies may be higher than the current level.


2. Extension of in-vitro expansion of in-vitro layout of vocational colleges and financial institutions reported that HNA Group has merged and controlled the combined sale list of Changsha Southern Vocational College for many years, and a number of prospective buyers have participated in bidding.

The result has not yet been officially announced, and Li Yongxin, the chairman of CPG Education, will most likely take over the Southern Vocational College.

If the acquisition of Nanfang Vocational College is successful, it means that public education will be in the field of vocational education.

This acquisition means that the company has strongly cut into the field of academic vocational schools, and we predict that the company’s academic education layout is only just beginning.

According to the official website of Southern Vocational College, the school was formally established in 2000. It is a full-time ordinary higher education institution hosted by HNA Group and approved by the Hunan Provincial People’s Government and registered with the Ministry of Education.

The college occupies an area of nearly 1,000 acres, and is equal to Central South University and Hunan University in Yuelushan University Town. In 2018, there were 2,420 graduate students.

The College’s existing Department of Aviation Services, Department of Mechanical and Automotive Engineering, Department of Modern Information and Logistics, Department of Construction Engineering, Department of Economic Management, Department of Basic Education 5 Departments 1 Department, opened flight attendants, civil aviation transportation, hotel management, machinery manufacturing and automationThere are 26 majors such as e-commerce, covering the four major industries of modern manufacturing, modern information, modern management, and modern service.

Cultivation of military application-oriented talents.

HNA Group entered the Southern Vocational College through the acquisition of Huitong Industry in 2010.

Investment Advice.

In the future, Zhonggong Education will take the vocational education group as the development goal, and vocational education schools and non-diploma vocational training will be deployed at the same time. Endogenous growth and outbound mergers and acquisitions will promote the reorganization of Zhonggong’s growth logic.

Taking into account the rapid growth of the company’s overall revenue, and the dual teacher classrooms and the development and upgrade of independent IT systems, the company’s profitability has been improved. We expect the company’s net profit rate to continue to increase.

We maintain public education19?
The 20-year net profit forecast is 17.

33 and 23.
180 thousand yuan, EPS forecasts are 0.

28, 0.

38 yuan.

At present, the public education has a market value of about 80 billion yuan, maintaining the “Buy” rating of public education.
Risk reminder: the risk that performance commitments cannot be fulfilled.