With the release of the 2024 government work report, “Vigorously promote the construction of a modern industrial system and accelerate the development of new quality productivity” has become a hot topic of discussion in all walks of life.

New quality productivity is an advanced productivity quality where innovation plays a leading role and scientific and technological innovation is the core element. It involves many cutting-edge industries such as big data, artificial intelligence, life science, and new materials.

Entering 2024, the popularity of generative AI technology continues unabated. It has deep potential in various application scenarios such as educational resource sharing, assisted teaching, personalized education, education evaluation and management, and the entire education industry chain is expected to usher in a wave of innovation dividends in the era of artificial intelligence.

As a higher education technology group focusing on digital talent education services, Neusoft Education (09616) has always paid close attention to the disruptive and leading role of cutting-edge technological innovation in education transformation and development, insisted on deepening the integration of science and education, the integration of industry and education, relied on the advantages of information technology, digital media and health care technology, etc., to create a rich digital education resource product matrix, and carried out extensive and in-depth cooperation with more than 550 colleges and universities across the country, including 31 “double first-class” construction colleges and universities with 64 “double high school plans” for vocational education.

In the long run, demand in the education industry is still rigid, and the wave of new technologies such as AI is expected to bring new incremental space. Neusoft Education's current high cost performance ratio is undoubtedly very attractive.

The “one, two wings” strategy creates a steady basic market, and the quantity and quality of performance have risen sharply

For a long time, Neusoft Education has insisted on creating value for learners as the center, and has vigorously expanded the two aspects of innovative education resource export and continuing education services based on full-time higher education. Relying on “education+technology” R&D capabilities, Neusoft Education has established a digital talent education service ecosystem where the three major business segments support and interact with each other.

In 2023, Neusoft Education's overall revenue and profit recorded double-digit growth. Total annual revenue was about 1,806 billion yuan (in RMB, same below), up 16.6% year on year; net profit during the year was about 430 million yuan, up 11.5% year on year.

Among them, revenue from full-time higher education services was about 1,453 billion yuan, recording a strong year-on-year growth rate of 23.7%; the two major businesses, export of education resources and continuing education services, performed well, with annual revenue growth rates of 5.3% and 8.3%, respectively.

Against the backdrop of increasingly fierce competition for higher education admissions, the higher education business has achieved healthy growth, driving a steady increase in both the number of students and the quality of running schools.

In the 2023/2024 academic year, the number of new students enrolled at the three universities exceeded 18,000. After completing registration, the number of students enrolled in the three universities was nearly 57,000, an increase of about 7.5% over the same period in 2022, reaching a record high. At the same time, the quality of student sources was still guaranteed. In terms of admission scores, the highest admission score of Dalian University reached 108 points in 2023, and the lowest scores for other majors all surpassed the provincial control line. According to the 2022 China University Rankings official website (CNUR), Chengdu University's student source quality ranking is at the top of the list of engineering colleges for residents.

During the reporting period, Dalian University and Chengdu University respectively opened majors in virtual reality technology applications and virtual reality technology, and have all successfully completed enrollment. Currently, a total of 25 majors from Neusoft's three universities have been selected for the “Double Ten Thousand Program” for first-class undergraduate majors. Of these, 22 are digital technology-related majors, accounting for nearly 90%. Dalian University won the first prize of the National Vocational Education Teaching Achievement Award, and is the only first prize of the National Teaching Achievement Award received by Liaoning Province in the field of vocational education.

In line with the development trend of digitization and intelligence in education in China, Neusoft Education continues to implement a connotative development line of running high-quality schools, providing full chain support for the interdisciplinary training of Chinese digital talents. Taking advantage of the “Dongfeng” of digitalization empowering the education industry, Neusoft Education is unleashing new potential for high-quality development.

Expanding the diversified education product matrix to highlight the scientific and technological heritage

Rooted in a long period of deep experience in running schools, Neusoft Education digitizes, commercializes, and platformizes its own unique educational methods and content to form a rich education product matrix covering multiple application scenarios, from platform to content, from software to hardware, providing strong support for the expansion of the “two-wing business”.

By the end of 2023, the company had many smart education series products such as smart teaching systems, cloud training systems, double innovation education management systems, smart academic engineering systems, etc., and sold 112 sets of education and teaching platforms and 19 sets of training room products and supporting teaching content to 104 colleges and institutions throughout the year, achieving revenue of about 81 million yuan.

It is worth mentioning that in 2023, the company released the first metaverse smart health future education platform, building a smart digital vocational education ecosystem of “metaverse smart health big data+digital teaching resource library+online course+VR system+vocational education” to promote the deep integration of industry, education, research and use of metaverse technology. In addition, in terms of training room solutions, the company released new products for integrated training rooms for driverless driving, e-commerce big data, and software development.

According to the Zhitong Finance App, the company has now formed several online education and learning platforms, including Neusoft Education Online, Neusoft IT Cloud Academy, and Neusoft Smart Education Online, forming an online and offline education ecosystem of “online course+practical training+employment and entrepreneurship”. As of December 31, 2023, Neusoft Education Online has accumulated more than 1.7 million registered users and more than 150,000 course learning users; the cumulative study time of the course is about 37,000 hours, of which the proportion of paid courses is nearly 60%; more than 17,000 students have participated in human resources assessment services.

At the same time, “Neusoft Education Online” was awarded as an online platform partner of the Ministry of Industry and Information Technology's Education and Testing Center, and was selected as one of the 100 high-quality online vocational skills platforms recommended by the Ministry of Human Resources and Social Affairs. It is a resident of the Ministry of Social Affairs's online service platform for employment, entrepreneurship and vocational training, demonstrating that the company's brand influence continues to grow.

Promoting deep integration of industry and education, cooperation and joint construction have achieved remarkable results

Focusing on the characteristic “4S” (CaaS content as a service, SaaS software as a service, PaaS platform as a service, DaaS data as a service) product service system, Neusoft Education actively explores application scenarios for educational resources and deepens cooperation and integration with client institutions in interdisciplinary fields, cross-user groups, and cross-regional spaces.

In terms of export of educational resources, in 2023, Neusoft Education launched industrial college and professional co-construction cooperation with 62 colleges and universities. The total number of cooperative projects was 280, covering about 24,000 students, and achieving revenue of about 79 million yuan.

In 2023, Neusoft Education and Shenyang Medical College jointly established the Medical Health Science and Technology Industry College and Hebei University of Finance to achieve interdisciplinary cooperation; signed a contract with Shaanxi Preschool Normal University to establish the country's first digital intelligence education industry college to achieve empowering cooperation across user groups; and officially signed a joint “Belt and Road Digital Industry College” with Pu'er University and Savoy University in Laos to achieve international enabling cooperation.

In 2023, teachers and students from Neusoft Education and 21 partner institutions to jointly establish major/industrial colleges won 1 international, 30 national, 120 provincial and 41 industry-level awards in terms of teaching achievements and subject competitions. The teaching ability, student potential and professional strength of the partner institutions have all greatly improved.

In addition, in terms of continuing education services, the company's 2B training business has obtained more than 70 national, provincial and municipal training base qualifications, and implemented 166 2B training programs for 70 institutions in 20 provincial regions across the country, covering about 25,000 students, and the number of participants has tripled from 2022. Continue to expand the 2C training business brand coverage and online and offline delivery methods. The number of trainers is about 25,000 people throughout the year. In addition, in 2023, it was successfully approved as the first batch of pilot units for the construction of national universities for the elderly and co-construction units for national universities for the elderly.

epilogue

Currently, the vocational education circuit is entering a golden period of development, and the market size is approaching trillion yuan. According to Frost & Sullivan Consulting, China's vocational education market grew from 604.5 billion yuan in 2018 to 871.9 billion yuan in 2022, with a compound annual growth rate of 9.6%. It is expected to break through trillion yuan in 2024 and reach 1268.1 billion yuan in 2027.

Under the joint catalysts of favorable policies, emerging technologies, and immediate industrial needs, as emerging technologies such as AI, big data, and the metaverse participate more deeply in the entire teaching process, the vocational education market space will expand further in the future; at the same time, the rise of the “silver hair economy” will also spawn a broad “new blue ocean” on the health and geriatric education circuit.

Facing the future, Neusoft Education will adhere to scientific and technological innovation as an anchor, strengthen the “integration” (academic education business), expand the “two wings” (export of education resources and continuing education business), actively expand the fields of geriatric education and geriatric health care business, and form a new integrated development ecosystem with a high degree of interaction, sharing, and integration of teaching, medicine, and nursing. As the quality of the academic education business improves and the two-wing business accelerates large-scale development, future growth momentum will continue to be saved. At the current valuation level, the company's growth potential has not been fully recognized by the market, and it is a high-quality investment target with a very cost-effective allocation ratio.