Looking back at the Chinese education industry in the past three years, under the suppression of the “double reduction” policy sentiment, the whole thing has ushered in a dark time. It has experienced deep ecological restructuring. Various segments of the secondary market have dived in valuation, and the higher education sector has also been mistaken.
At the recently concluded two sessions, the “Report on the Work of the Government 2024" clearly proposed “guiding and standardizing the development of private education and vigorously improving the quality of vocational education”, which further sent a clear positive signal for the development of vocational education. Nowadays, education policy is blowing frequently, and the direction is becoming more and more clear. The sector's connotative and high-quality development tone has basically been determined, and the performance growth and certainty of the industry leader Neusoft Education (09616.HK) has also been verified.
In 2023, Neusoft Education's revenue and profits both hit record highs. Revenue for the year was approximately 1,806 billion yuan (RMB, same below), an increase of 16.6% over the previous year. Among them, revenue from full-time higher education services increased by 24.0% year on year, while the export of education resources and revenue from continuing education services increased by 5.3% and 8.3%, respectively. Gross profit was about 865 million yuan, up 29.7% year on year; profit to mother was about 430 million yuan, up 11.5% year on year.
How did Neusoft Education achieve such impressive results?
The integration of industry and education is flourishing, and the “two wings in one” business is growing steadily
In recent years, in order to meet the needs of economic and social development for highly qualified skilled personnel, the country has introduced a series of policies to promote the integration of industry and education.
In June 2023, 8 departments including the National Development and Reform Commission jointly issued the “Implementation Plan for the Action to Empower and Enhance the Integration of Vocational Education, Obstetrics and Education (2023-2025)” to support the integration of vocational education, obstetrics and education.
In July 2023, the General Office of the Ministry of Education issued the “Notice on Key Tasks to Accelerate the Construction and Reform of the Modern Vocational Education System”, which indicates the formation of a number of cross-regional industry-industry-integrated communities that deeply integrate obstetrics and education, connect services efficiently, and support industry development.
Neusoft Education is based on industry needs, and takes the modern industrial college as a starting point to actively seize opportunities for school-enterprise cooperation to educate people, achieve transformation from the education chain to the industrial chain, and improve the achievement of talent training goals. In terms of the full-time higher education business, Neusoft Education is demand-oriented. It ensures continuous development by optimizing and adjusting the professional layout, strengthening the leadership of superior majors, and ensuring the improvement of professional standards. Currently, we have carried out comprehensive in-depth cooperation with 144 companies in the fields of software engineering, smart logistics, artificial intelligence, etc., in customized classes, curriculum construction, laboratory co-construction, scientific research and development, internship training, etc., and a total of 231 integrated obstetrics and education projects have been approved. The quality of teaching has been steadily improving, and the number of students has been growing steadily.
In the 2023/2024 academic year, the number of new students enrolled at Neusoft Education's three universities exceeded 18,000, an increase of about 3.0% over the 2022/2023 academic year; the number of students enrolled was nearly 57,000, an increase of about 7.5% over the previous year, reaching another record high. As of December 31, 2023, the graduation destination implementation rate for 2023 graduates of Dalian University and Chengdu University both exceeded 95%, and the graduation destination implementation rate for 2023 graduates of Guangdong University reached 90%.
In terms of the two-wing business, the education resource export business closely follows the digital power strategy and is deeply involved in digital talent education services. Relying on a unique 4S product service system, Neusoft Education sold 112 sets of education and teaching platforms and 19 sets of training room products and supporting teaching content to 104 colleges and institutions, achieving revenue of about RMB 81 million. In addition, it has cooperated with 62 colleges and universities to establish industrial colleges and majors, bringing the total number to 280, covering about 24,000 students, and achieving revenue of about RMB 79 million. In addition, Neusoft Education continues to enrich the standardized solution matrix that serves the nine core tasks of Shuanggao Construction according to the needs of client colleges, and relies on the smart education series products it has developed and the 13 digital workshops it has built to provide a full range of services including teacher training, course research and development, practical training, employment and entrepreneurship, and competition counseling, and continues to deepen the depth of integration with customers. In 2023, along with the gradual implementation and continuous empowerment of the 4S-OMO service model in client colleges, teachers and students who co-built professional/industrial colleges with 21 partner institutions won a total of 1 international, 30 national, 120 provincial and 41 industry-level awards for teaching achievements and subject competitions.
In terms of continuing education services, the Group has deepened and expanded its continuing education service business. The 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.
Digitalization empowers business upgrading and technological innovation to achieve new breakthroughs
Under the wave of the times, the rapid development of digitalization is reshaping the development pattern of the education industry.
The National Education Work Conference held in January 2023 pointed out the vigorous implementation of the national education digitalization strategy, and the “Overall Layout Plan for the Construction of a Digital China” also proposed the same direction. Neusoft Education combines more than 20 years of IT operations and practical experience in the IT industry to create a comprehensive digital education product matrix from platform to content, from software to hardware, based on the 4S service model, to empower the two wings of business development.
In 2023, Neusoft Education released the first metaverse smart health future education platform, and launched a special training product serving competition standards — the Neusoft Smart Training System series software series, which received widespread attention from colleges and universities. In addition, the company has also iteratively upgraded a number of smart education software products, including cloud training platforms, cloud practice platforms, smart academic engineering systems, and engineering education certification support systems, to continue to enrich functions and optimize the user experience.
At the same time, on the basis of integrating and upgrading the original training room, Neusoft Education released a new driverless training room, e-commerce big data training room, and transportation big data training room, forming 23 smart training room products for ten major professional fields such as computers, artificial intelligence, health care, big data, Internet of Things, software development, intelligent applications, and metaverse, to provide customers with integrated practical training solutions. In addition, it has developed digital teaching content in the six core fields of artificial intelligence, big data, Internet of Things, computers, software, and digital media, based on key elements such as TOPCARES education methodology, interactive design, and “five new” integration. In 2023, 51 new courses were developed for 7 majors, and 2,227 new 1-5 level projects were built.
Furthermore, Neusoft Education has responded positively to national policies, developed and launched multiple online education platforms, mainly Neusoft Education Online and Neusoft IT Cloud Academy, with self-developed products as the core, to build 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.
After the two sessions, the term “new quality of productivity” was once again widely spread and became the focus of attention from all sectors of society. Under the trend of vigorously developing new quality productivity, digital talent education services have broad room for development. At the same time, with the rapid growth of the “silver hair economy”, it has spawned market space for health care and geriatric education. Neusoft Education follows the development trend, creates an innovative business model integrating “education+technology+medical care”, and continuously enhances market competitiveness. From IT to “IT+ digital media+smart health care”, create a smart education platform, digital creative platform and smart health care platform with 2B/2C integration, innovate and improve products and service solutions based on the 4S service model, explore and optimize the content of various educational resources, opening up new growth space for the company's future business development, while actively expanding the field of geriatric education and geriatric rehabilitation business, opening up a second growth curve outside of academic education through a new ecosystem integrating industry, learning, research, teaching, medicine, and nursing.
Overall, the current policy signals are clear and stable, endogenous demand in the education industry is strong, and it is gradually breaking out of its trough. The investment value of the higher education sector will be exploited by investors. In fact, Neusoft Education's valuation repair has already begun. Since February, its stock price once rose by more than 40%, and is generally returning to an upward channel.
With increased policies and favorable support, can it add another spark to Neusoft Education's stock price, which is still at the bottom of the valuation area? Please look forward to it.