According to the Zhitong Finance APP, Huaxin Securities released a research report stating that the overall industry is currently in a state of rigid demand, supply clearing, and alleviated policy risks. This presents a good opportunity for leading companies with deep accumulations and successful business transformations to reverse their predicaments, which has been initially validated since last year. At the current point in time, the performance recovery of educational training institutions still has elastic space; the clearing of small and medium-sized enterprises combined with the increase in industry entry barriers is expected to further concentrate the competitive landscape towards leading companies. The firm is optimistic about SCHOLAR EDU (01769), Excellence Education (03978), and XUEDA (000526.SZ), which have successfully transformed from K12 subject training to quality education and high school training, and recommends paying attention to SXN (600661.SH).
<h2>The main points of Huaxin Securities are as follows:</h2>
Policy: The double reduction policy has been effective, and marginal optimization has deepened the details
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<li>Double reduction and supporting policies: A significant reduction in off-campus training has achieved phased results. On July 24, 2021, the Ministry of Education issued the double reduction policy to alleviate the homework burden and off-campus training burden for students in the compulsory education stage; and a series of supporting policies were intensively introduced to refine and strengthen the management of off-campus training institutions. On October 28, 2022, the &#34;double reduction&#34; report indicated that the number of offline subject training institutions in the compulsory education stage was reduced from the original 124,000 to 4,932, a reduction rate of 96%, while the number of online subject training institutions was reduced from 263 to 34, a reduction rate of 87%. 2) Policy review and outlook: Reducing the burden of compulsory education is a long-term main line, and non-subject off-campus training is a beneficial supplement. ① China's education policy is divided into two main lines: regulating the development of off-campus training in the compulsory education stage, from initial exploration to strong control and then to classified management, supporting the development of non-subject training, with the main purpose always being to reduce the burden on students and promote comprehensive development; supporting the development of vocational education to cultivate high-quality labor and technical skills talents. ② Outlook: Regulate off-campus training institutions and encourage non-subject off-campus training.</li>
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Demand: Off-campus training remains a rigid demand, and quality education is growing rapidly
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The basic situation of high school subject training is stable, and the participation rate in non-subject training is expected to increase. ① The total number of K12 students has maintained a steady growth trend, with the CAGR of students in compulsory education/special education/high school education from 2017 to 2023 being +2%/+8%/+1%. ② The gross enrollment rate in high school has significantly improved, while the admission rate for ordinary undergraduate programs has declined. The gross enrollment rate in high school increased from 87% in 2014 to 92% in 2024, while the admission rate for ordinary undergraduate programs in 2023 was 37%, a decrease of 7 percentage points compared to 2017. ③ The base for non-subject training is large, and the demand for quality education is strong. In 2023, the number of K9 students reached 160 million, a year-on-year increase of 1.2%; the participation rates for off-campus subject/non-subject training and in-school after-school services were 13.5%/13.6%/30.8%, respectively.
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Education expenditure continues to grow, and the willingness to pay remains strong. ① At the macro level: The proportion of education expenditure remains stable overall, and K12 overall expenditure continues to grow. ② At the micro level: Per capita education expenditure for residents continues to grow, with most investment amounts in interest classes increasing. In 2019, the proportion of per capita education expenditure per household in the country/urban/rural areas to per capita disposable income was 28.8%/28.1%/37.5%, and after the double reduction, 85% of families maintained or increased their investment amounts in interest classes
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The off-campus training market is recovering, and there is vast potential for quality education. ① According to estimates, the K12 subject training market size is expected to reach 224.1 billion yuan in 2024, with high school expected to be 147.3 billion yuan, and the CAGR from 2024 to 2027 is expected to be 12%/14%. ② The quality education market size in China is expected to reach 646.3 billion yuan in 2024, a year-on-year increase of 29%, with a CAGR of 20% expected from 2023 to 2027.
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Supply: Clearing out benefits leading companies, returning to healthy competition
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<li>The potential for transformation direction remains strong, with leading companies having first-mover advantages. Quality education is the mainstream transformation direction for education and training companies, with lower difficulty in content migration and reuse; in high school subject training, those conducted in the form of full-time training bases have significant first-mover advantages. 2) ① After the &#34;double reduction&#34; policy, the number of educational training institutions has decreased, leading to a significant clearing out on the supply side of the industry. Before the &#34;double reduction,&#34; in May 2019, there were approximately 864,000 educational training institutions nationwide, of which about 187,000 were off-campus K12 subject training institutions; currently, there are about 126,200 educational training institutions in China, with only 9,312 being subject training institutions. ② After the &#34;double reduction,&#34; as small and medium-sized enterprises accelerate their exit, while the entry barriers such as applying for licenses continue to increase, the competitive landscape is further concentrating towards leading companies.</li>
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Risk Warning
(1) Risk of stricter policies; (2) Risk of slowing enrollment; (3) Risk of intensified competition; (4) Risk of macroeconomic pressure; (5) Risk of limited market-based pricing

01769

000526

600661

Huaxin Securities released a research report indicating that the education industry is currently in a state of rigid demand and supply clearing, with policy risks easing, and leading companies facing opportunities for turnaround. It is optimistic about the successful transformation of SCHOLAR EDU, Excellence Education, and XUEDA, and recommends paying attention to SXN. In terms of policy, the double reduction policy has achieved phased results, with a significant decrease in the number of off-campus training institutions, and further regulation of off-campus training will be encouraged in the future, promoting non-subject training

Huaxin Securities: The demand in the education sector is rigid, supply is clearing, and the leading companies are recovering and releasing elasticity