ESG Assessment Of Online Education "New Forces": A Capital Besieged With "Love" And "Worry"

"Using technology to promote educational equity." This is a slogan for good future official website.

The rigid demand of education and the application of new technology have created the capital hustle of "online education" under the specific macro background.

"What's the effect of the 3000 yuan course?"

Faced with this problem, Beijing's parents interviewed feel quite helpless.

"Neighbors reported, I followed the newspaper."

This answer shows the most significant anxiety in the middle class.

Anxiety consumption has created a huge market.

From the statements of listed companies, the relevant online education listed companies can easily produce hundreds of millions of dollars in revenue report cards in the single quarter. Among them, the largest incremental business is the K12 payment course with the strongest willingness to pay parents.

Under commercialization, educational equity may turn into a "pay competition", while losing the original intention of relying on science and technology to flatten the unfair education of primary and secondary school students, and the aggravation of market anxiety is intensified "propaganda war" and "price war", and the "financial fraud" hidden in it.

These factors are closely related to the interests of investors, and investors are an indispensable part of this industry story.

In twenty-first Century, the Capital Research Institute has continuously released the report on online education growth force, online education "industry moat" report, online education "financial safety" report, online education "capital dependence" report and "online education" responsibility "report" five reports.

The five report focuses on 16 large-scale enterprises listed on the US stock market and have launched online education business as the research target. It includes both the good future of K12, who to learn and so on, including the New Oriental of traditional education, and the adult education platform such as Zhengbao distance education and Suntech institution.

The five report just answers the five major suspense of online education.

Q: what happened in the eye of the storm?

In the two reports of the online education growth force report and the online education industry moat report, it is impossible to learn from anyone.

Who will learn in the evening of May 18th? GSX.US Sixth times short.

Before that, learning from others is one of the most promising online education growth benchmarks in investment circles.

In the online education growth report, the research team sampled more than a dozen mainland brokerage analysts and public fund managers. The participants were from the leading buyer institutions such as Huaxia Fund, Harvest Fund, Yinhua Fund, and other seller organizations such as Guotai Junan, Galaxy Securities, Xingye securities and XinDa securities.

Most of the agencies think that who is the first to learn "growth power".

From its business revenue account, the K12 curriculum accounted for only 22.2% in 2017, and jumped to 73.2% in 2018, becoming the main force of revenue. In 2019, it rose 486.67% to 1 billion 707 million yuan again, accounting for 80.7%.

In May 6th, online education company and who learned to publish the first quarter financial results for the 2020 fiscal year, the revenue of this quarter was 1 billion 298 million yuan, up 382% from the same period last year, higher than that of Bloomberg's consensus (1 billion 141 million yuan); operating profit was 91 million 930 thousand yuan, an increase of 115.2% over the same period last year, much less than that of Bloomberg's unanimous expectation (102 million yuan).

K12 education is the development point of learning with whom.

Behind the surge in revenue, the number of K12 courses paid and customer unit price doubled.

In 2017, the number of trainees was 79 thousand and 600. In 2018, it increased by 863.7% to 767 thousand and 100. By 2019, the number of trainees has increased to 2 million 743 thousand, up 257.6% over the same period.

From the annual ARPU point of view, the price per student has been rising, from 351.76 yuan in 2017 to 760 yuan in 2019. The simultaneous increase of the number of trainees and the unit price of customers has led to a sharp rise in revenue.

The online education growth force report points out that compared to online one to one, the cost of large class mode is lower, but gross profit is higher. This is also the main reason for the respondents to determine who is the leader in learning growth.

The performance of the capital market responds to the judgement of the institution.

In June 6, 2019, who was listed on the New York stock exchange to start raising $207 million 900 thousand, is the Financing Authority of online education institutions. The first day of listing was quoted at $12.10, which was over 17% over the IPO issue price of 10.50 dollars.

After that, the price rose with anyone who learned the price, reaching a peak of $46.40, closing at $41.40 / share as of June 5th.

It took five years to learn from who was founded in 2014 and went public in 2019. From the data point of view, in the four quarter of 2019, who learned more than 4 times the revenue growth and net profit growth of more than 10 times.

However, the "beautiful" performance has become the main reason for those who are frequently short.

The first thing to be questioned is its high gross profit margin. In the cost aspect, although the cost statistics of major educational companies are slightly different, teachers' salaries, office equipment rents and teaching materials fees remain unchanged. The short report questioned teachers who paid more than the industry average 40%-50%, the sales staff salaries were higher than the industry average 30%-40%, but the gross profit rate was higher than peers.

Judging from the latest situation, share prices are also picking up recently.

But will this be the end of the story? No one dares to vote.

Two question: is financial indicators safe?

In the online education "capital dependence" report, it is pointed out that a good future "self exploding dirty linen" is a major test of the "financial safety" of online education industry.

Secondly, with the fermentation of Rui Xing coffee fraud incident, the authenticity of revenue and profit has become an important factor that stirs up the credibility of stock prices and even stocks.

Online education "financial safety" report frankly, can not falsify registered users, difficult to eliminate the "brush" behavior, intensified "propaganda war" and "price war", the continuous expansion of the amount of loss, so that online education "financial security" has been questioned.

Good future announcement said that in the company's routine internal audit process, it was found that employees had faked the sales of the newly launched "light class" business. In the future, it is doubted that the employees collude with external suppliers, forge contracts and other documents, and exaggerate sales.

Exposing individual employees' financial fraud soon, in the evening of April 28th, good future announced the 2020 quarter of fiscal year fourth and unaudited financial reports for the whole year, annual revenue realized two digit growth, but net profit was surplus to deficit, down 130% to net loss 110 million 200 thousand US dollars.

This is the first loss year since its listing.

"The purpose of self disclosure is to prevent subsequent refinancing projects from being affected." A survey of brokerage practitioners believe that.

Prior to this, as the primary and secondary school's basic teaching and learning, the parent company of "learning and thinking and cultivating excellence" did not come from the IPO since 2010. It has never lost money and has maintained more than 40% annual revenue growth rate.

However, since the 2019 fiscal year, the growth rate of the good future has obviously slowed down, and the net loss has continued to expand. This is related to overweight online education and money marketing. From the point of view of marketing expenses, the marketing cost in the fourth quarter is 243 million US dollars, up 78.6% from the same period last year, which is 853 million US dollars in the whole year, up 76% over the same period.

In the future, there is no final conclusion about the future, but cracks have appeared.

According to the communication between the research team and the research objects, the market's most concerned indicators come from two dimensions.

One is "financial fraud", the second is "whether the user side has significant financial disputes", which affects the future safety of exhibition industry.

Online education "financial safety" report pointed out that the reason why "revenue scale" has become the focus of short selling agencies frequently, on the one hand, there are indeed cases of financial fraud in online educational institutions, such as Da Technology; on the other hand, in the current competitive situation, the head effect of scale of revenue and acquisition can bring great recognition to investors and help enterprises to get higher estimates. Value.

In twenty-first Century, the capital research institute based on this logic judgment, whether it is New Oriental, good future, or who learns, as an online educational institution with a large market value and the highest degree of market concern, the future will still be the focus of short agency concern.

The main contradiction of capital operation is the existence of cornerstone between the two level market traders, especially in the course of the development of the industry, a large number of primary market organizations have gained huge profit opportunities, and whether the legitimacy of this profit exists.

Three question: who has a "faucet"?

The authenticity of financial data is just the corner of online capital education. In the online education growth force report, frankly, "Internet efficiency has solved the scarcity of educational resources", "whether the Internet has brought the best teachers and the ultimate user experience", the core logic of these capital stories can not withstand scrutiny at this stage.

This also means that observing the perspective of online education needs to approach the angle of production.

If it is assumed that the financial data of the leading educational institutions in schools are accurate, the possible problems such as cleaning up bills, falsification of financial reports, transfer costs and fictitious revenues can be eliminated. Whether the growth of online education and the "moat" of the head can withstand scrutiny is also a difficult question to answer.

According to the analysis of online education responsibility report, although the online education industry has gone through a fierce competition for survival since the 2014, the platform that can survive many years is not only a large volume capital injection, but also a platform that has been profitable and self-sufficient.

Since 2017, the business model of leading online education companies has been gradually clearer, and the head players have landed in the capital market. But overall, the current online education industry is still in the initial stage of development, and the industry competition pattern is more dispersed.

Up to now, even the largest New Oriental Enterprise in revenue and the two leading enterprises in the future will receive more than 10 billion of the leading enterprises in the next 2% years. The market share of K12 education is only about 2%.

According to the report released by Eri consulting, in 2019, there were millions of K12 training institutions in the country, most of them were micro organizations, and the number of micro institutions with less than 300 people in one year accounted for 60%.

Earlier, the online children's quality education platform for the Ming and the big language, due to the development of rash, financing misjudgment and other issues, the chain of funds to break the operation. The letter from Wang Jia Shu, the founder of Ming and Yang's big language, revealed that it had opened 4 academic year courses in late last year, which led to a substantial increase in input growth. The financing plan that was originally successfully promoted due to the huge impact of the epidemic on investors, was the last to be abandoned.

Even in the list of online education that has been listed, nearly half of the recent report period is at a loss.

In twenty-first Century, the latest net profit data compiled by the Institute of capital research showed that good future, fluent language, Youdao, Suntech organization, Pu Xin education, four seasons education, amber education, and resi's subject English still reported losses.

This differentiation means the Matthew effect of the industry development, and the leading enterprises to "enjoy the oligarchy dividend" cycle?

Obviously, logic is not valid.

Online education "industry moat" report points out that from the business mode, the performance of online education enterprises mainly depends on marketing drive.

At present, the share price of online education leading by the US stock market has been disclosed in 2019 annual report. The proportion of marketing expenses in revenue is over 20%, the highest is fluent, and the total sales cost in 2019 totaled 969 million yuan, while the total revenue of the company was 1 billion 23 million yuan, and the sales cost accounted for 94.74% of the total revenue. In the 2018 and 2019 fiscal year, the sales cost of fluency was as high as 110.70% and 94.74%.

On the other hand, the amount of investment in online education for R & D is far lower than that of marketing.

From the part of the online education leading enterprises that clearly disclosed the R & D expenses in the 2019 fiscal year, the intensity of R & D investment (R & D expenses accounted for the total proportion of revenue) is about 10%-20%, and the sales cost is only 1/4 to 1/2, or even less.

Four question: Why did the transformation of customers get caught in a strange circle?

The online education responsibility report shows that online education companies seem to have failed to achieve better results in marketing. On the contrary, it has pushed up the cost of attracting customers and made the industry into a vicious circle of losses.

A study of China Merchants Securities echoes the judgement that the conversion rate of online education -- the ratio of low price to positive price, is 15%-30% on average in summer and in autumn. The ratio of retention rate to normal price is 50%-80%. The conversion rate and retention rate were at a low level.

From the data disclosed by the Capital Research Institute in twenty-first Century, as a whole, the total cost of several leading online education leading enterprises in 2019 is over 100 yuan, the highest of which is Suntech organization, and the new passenger cost in 2019 is 4936 yuan, but the average customer price of the company is as high as 6497 yuan, followed by elite education, and the online business sector has a new customer cost of about 1500 yuan, while the average customer is an average customer. The unit price is as high as more than 20 thousand.

This is in line with the conclusions of the industry.

In the middle of 2019, the New Oriental Enterprise Development and strategic planning department jointly issued the "2019 China Education and training industry's innovation and wave outlook" published by the Oriental Institute of coordination, pointing out that the cost of paying customers for offline institutions is 500-1000 yuan, the cost of online institutions is 3000 yuan, and the one to one institutions are around 5000-15000 yuan.

On the contrary, because online education experience and effect are weaker than offline under the same conditions, the unit price of online institutions is much lower than that of offline institutions. What's more, many online education companies use lower unit price as a tool to grab channels.

In twenty-first Century, the Capital Research Institute survey data showed that in the head K12 online education company, the price of learning K12 courses is 70 yuan -95 yuan / hour, the high class classroom is 50 yuan -75 yuan / hour, the 51talk class unit price is about 40 yuan; the learning and thinking primary school to the junior middle school curriculum is 40 yuan -66 yuan / hour, the high school curriculum is 20 yuan -40 yuan / hour. According to people familiar with the matter, the price of the line work is generally 150-200 yuan under the same circumstances, and the unit price of online courses is only 1/10 to 1/3 of offline courses.

Fluency and fairness are calculated by the unit price of passengers. The average passenger price is 341 yuan and 899 yuan respectively, which is basically close to the cost of acquiring passengers. Among them, the new passenger cost is 323 yuan in 2019, and the cost of new customers in the third quarter of 2019 is about 905 yuan.

Online education "industry moat" report predicts that due to the larger correlation between revenue pattern and sales cost investment, the capital boom that relies on the Internet to chase higher revenue ceilings is gradually subsiding. Users will complete the initial "offline" transformation to "online", and the competition pattern will be renewed to the deep plough of industrial logic.

Correspondingly, in the track of vocational education, the story is quite different.

Such as Zhengbao long distance education, ATA CREATIVITY GLOBAL, Hai Liang education and public nesting medicine, etc., have more significant brand advantage or offline layout advantage, the moat effect is more significant, but for the same reason, the business ceiling is low, and has no growth characteristics in the capital market, so it is difficult to arouse institutional investors' interest.

Five question: education can tell the story of the Internet platform?

In recent years, with the gradual explosion of online education draught, more and more capital is coming.

According to incomplete statistics of the twenty-first Century Capital Research Institute, the 16 stocks in the US involving online education business have only started the fund-raising amount of up to US $1 billion 541 million (about 10 billion 900 million yuan).

"Online education responsibility" report reveals that R & D, content, marketing network, supplementary liquidity, daily operation, debt repayment and potential investment opportunities are common projects invested by online education platform. Among them, online education companies have the two major purposes for R & D and marketing of the most common recruitment projects.

But contrary to capital expectation, the hematopoietic capacity of some online education platforms is not strong, or even very fragile, and can only be maintained through continuous financing.

The data is based on the fact that the cash flow situation of the head online education company that disclosed the data of 2019 fiscal year is now on the "ice and fire day" trend. Enterprises have suffered losses for many years, but cash is sufficient.

More fluently fluent, although the cash and cash equivalents at the end of 2019 had 283 million yuan and the current assets totaled 647 million yuan, it was not enough to cover the company's short-term debt. The financial statements showed fluency that accounts payable and bills at the end of 2019 were as high as 138 million yuan, payable 74 million 340 thousand yuan, short-term loans and long-term loans were 37 million yuan in the current period, and other current liabilities 865 million. Yuan, the company's total current liabilities of 1 billion 114 million yuan, the proportion of mobile only 0.58%.

From the cash flow generated by business activities, the top ranking companies are all K12 enterprises.

Among them, only the top six list professional online education leaders are protecting distance education, compared with the former there is still a big gap. Zhengbao distance education has been the first pioneer of online education in China.

Based on publicly disclosed financial data, from this stage of data, the New Oriental, the good future and the cash flow back condition of those who have learnt have already had a relatively significant advantage.

However, online education "capital dependence" report also pointed out that whether strategic expansion is safe will be the lifeline of enterprises at this stage. From the development stage, these enterprises still have to choose to accelerate their expansion to obtain capital recognition, so the risk factor has not decreased.

According to the earnings data, the total number of New Oriental learning centers is over 1000, and it is in the trend of synchronous growth. There are more than 600 physical learning centers in the future, and it shows the general layout of major cities throughout the country.

The growth of K12 courses for the three enterprises, the New Oriental and the good future basically follow the logic of the synchronous growth of the offline layout and the online exhibition industry. This also means that the duplication of both is more dependent on capital investment.

It is worth mentioning that in twenty-first Century, the same batch of investors surveyed by the Capital Research Institute had obvious differences when acting as different roles of capital and users.

In the course of research, the research team found that when institutional investors became "users, and how to assess the growth of online education brands", they gave a completely different attitude towards capital.

Interviewees are worried about whether the K12 model is in line with industrial logic, especially whether the online class can be guaranteed. For the K12 online education, it is impossible for the respondents to form "standardized" products and achieve the ultimate "zero cost zero" Internet effect.

Four seasons education, etc., is because respondents generally believe that offline brands turn to online, and they lack the "starting" advantage. At the same time, the four seasons education is less likely to be squeezed out of the market than the head office.