Billion children's literature and education lurking for nearly 10 years into a preschool education equipment leading value of more than 4 billion

Yitong Wenjiao is the leader of the preschool education equipment market; according to the 50 million school-age children, 75%-85% admission rate, per capita preschool education equipment costs 10%-20% of the tuition fees, the market size of this field is more than 50 billion; Policy and market sensitivity, channel control, and supporting training have obvious advantages, and business innovation capability is weak. In 2017, the expected net profit is 1.54-1.75 billion yuan, giving 25-27X PE, with a valuation range of 3.9-47 billion yuan.

Guidance | Kevin

Writing | Xu Qing

The preschool education market is huge. With the increase in the number of new births, the kindergarten admission rate and the per capita consumption level, the compound growth will exceed 10% in the next five years. At present, the benchmarking companies in this field, whether it is the A shares of Weichuang shares, Xiuqiang shares, etc., or the Hong Kong stocks' first control group, are half-way monks, and have been working for more than 20 years, with strong competitive independent companies, hundreds of millions Children's culture.

Founded in 2008, Yitong Culture and Education is the leader in China's preschool education equipment market.

Kindergarten education, the resources required mainly include learning materials, teaching aids and other educational equipment and teachers. According to the children of 3-6 years old, the population of this age group is 50 million, and the admission rate is expected to be 75%-85%, and the per capita preschool education equipment costs 10%-20% of the tuition fee. Judging from the above data, the market size of China's early childhood education equipment is more than 50 billion yuan.

According to the 13th Five-Year Plan, the kindergarten penetration rate will reach over 85% in 2020. In the next five years, China's new population is expected to be between 16 million and 18 million. Therefore, in the next five years, the preschool education equipment market will continue to expand with the stimulation of the two-child policy, the increase in admission rate, and the upgrading of preschool education.

Chen Xianxin, chairman and general manager of Yitong Culture and Education, was a middle school teacher. In 1994, he resolutely went to sea and started entrepreneurship in the field of early childhood education.

In the first ten years of entrepreneurship, Chen Xianxin did a home-oriented child reading. At the end of the 20th century, private kindergartens flourished and earned excessive profits, but the level of schooling was uneven. In 1996, the National Education Commission promulgated the "Working Regulations for Kindergartens", requiring kindergarten education to use games as the basic activity, and the status quo of kindergartens is far from the regulations. In 2004, Chen Xianxin turned from family-oriented children's books to kindergarten-oriented learning materials, which is the carrier of various kindergarten learning operations.

In 2008, Yitong Culture and Education was officially registered and its main business was kindergarten learning materials. In 2012, under the guidance of the “going to primary school” policy, Yitong Culture and Education launched the teaching aids for kindergartens.

The income of Yitong Culture and Education mainly consists of two parts: book materials and teaching aids. Since 2013, the number of teaching aids has increased significantly, and the proportion in the business has continued to rise, while the growth of book materials has decreased, and the proportion in the business has continued to decline.

In 2016, the total revenue of Yitong Culture and Education was 529 million yuan and the net profit was 122 million yuan. The three-year compound growth rate was 29.90% and 18.50% respectively.

In the process of doing preschool education, Yitong Culture and Education has formed a unique marketing method of “selling with training”. Up to now, free training for teachers has become a value-added service provided by Yitong Culture and Education to kindergartens.

In terms of sales model, Yitong Culture and Education is mainly distributed, and currently has nearly 500 dealers in 288 prefecture-level cities across the country. These dealers cover nearly 50,000 kindergartens. That is to say, every 4 kindergartens in China have a garden for the use of billion children's cultural and educational products.

Since 2000, with the changes in the requirements of the Education Commission, market demand and channel structure, the early childhood education equipment industry has also undergone changes. At the beginning of the 21st century, Dongxue and Hong En, who had been working with Yitong Wenjiao and providing primary auxiliary learning materials, had little interest. In recent years, with the rise of the Internet and the mobile Internet, digital media has gradually penetrated into the early childhood education equipment industry, and new media teaching aids such as Long March Education and Langlang Education have emerged.

In the past 10 years, Yitong Culture and Education has always kept up with the needs of the Education Commission and kindergartens, and has formed a good reputation in the industry and maintained steady growth. Next, the Billion Children's Church continues to optimize product structure, integration and sinking channels, and the product price per unit and the number of covered kindergartens will be improved. Of course, if Yitong Culture and Education can't keep up with technological changes in digital media, it may have a negative impact on the company.

Yi Tong Wenjiao, this relatively traditional but steady growth company, what kind of enlightenment does it bring to us in the context of the current investment boom in the preschool education industry? Love analysis will be analyzed from the macro level of business model, operational efficiency and other macro levels such as policy environment, market competition and corporate strategy.

The growth of book materials slowed down, and the proportion of business continued to decline.

Children's book materials are the starting business of Yitong Culture and Education. In the relatively traditional children's book materials market, state-owned publishing products have long occupied a major position, but the speed of innovation has not kept up with the requirements of kindergartens, and most private books are seriously under-recognized due to qualifications and funding restrictions.

Yitong Culture and Education not only provides products, but also provides a set of educational goals, methods and evaluation systems behind the products, and quickly stands out from similar enterprises.

The current book material market is quite mature, and the industry's gross profit margin is relatively high, maintaining around 70%. Kindergarten’s demand for book materials exists objectively, but the Ministry of Education issued the “Notice on Standardizing Kindergarten Conservation Education to Prevent and Correct the “Primary School” Phenomenon in 2011” and the “Guidelines for Learning and Development of Children Aged 3-6”. Will gradually reduce.

In the past three years, the income growth of books and materials of Yitong Culture and Education has gradually decreased, and the gross profit margin has remained at around 72%. However, due to the “de-primeization” policy restrictions and the company's product strategy adjustment, we expect that in 2017, the growth rate of books and materials of Yitong Culture will be reduced to about 10%, revenue will reach 356 million, and gross profit margin will be around 70%. .

Meet the "de-primeization" policy needs, play with teaching equipment and rapid growth

In the second half of 2012, the teaching aids of Yitong Culture and Education completed the research and development and began to be used for promotion.

Long-term deep cultivation in the field of early childhood education has created a sensitive policy and market sense of education. In 2010, Yitong Culture and Education also participated in the formulation of the national “Kindergarten Teaching Aids Standard” and became the industry standard setter.

The teaching aids and equipment of Yitong Culture and Education have been highly recognized by kindergartens. Nearly 100 kinds of regional activity materials have been launched, and they have quickly seized the market's first-mover advantage. The current teaching aid market is growing at a faster rate, and it is conservatively estimated that the industry growth rate is expected to remain above 50%.

The main business is also the new three-board company love cube of preschool education. In 2016, the overall operating income of the love cube increased by 113.67%, of which the sales of teaching aids increased by 236.53% year-on-year. The rapid growth of teaching aids has become the main reason for stimulating the growth of operating income.

In the past three years, Yitong Wenjiao teaching aids and equipment have also grown rapidly, accounting for a significant increase in operating income, with a gross margin of about 50%. In 2012, the children's culture and education was promoted to the national market. We expect that the growth rate of the equipment will be around 70% in 2017, and the revenue will reach 343 million, with a conservative estimate of gross profit margin of about 50%.

Training belt sales, supporting services form a strong user sticky

“Training with sales” is a unique marketing method for Yitong Culture. The quality of kindergarten employees is uneven and very hungry for training. At the beginning of its establishment, Yitong Culture and Education launched its professional training for directors and teachers. This is one of the reasons why the company stands out among many state-owned publishing houses and private cultural companies.

At present, Yitong Culture and Education will organize product seminars and training sessions with distributors or education departments every semester. Different from traditional marketing methods such as advertising, Yitong Culture and Education can solve kindergarten problems and understand market needs in real time. Develop and promote products that enhance the stickiness of kindergartens.

Training is a top priority. The number of trainers and the proportion of kindergartens covered is an important basis for judging whether the channels are strong. The analysis announcement found that the number of teachers and teachers covering the number of teachers and teachers in the decline showed a downward trend, indicating that the company's ability to control the channels is getting stronger and stronger.

In addition, the company has also established a nationwide teacher training network covering 23 provincial capital cities; the online training service of the 100 million children's kindergartens online school has formed a multi-level training system with offline training services.

At present, the offline teacher training of Yitong Culture and Education has stabilized, but the operation is biased. If Yitong Culture and Education expands the number of kindergartens covered by individual offline trainers, or Yitong Online School can better meet the kindergarten teacher training needs, then the control ability of Yitong Culture and Education will be improved and the operational efficiency will be improved.

Distribution-oriented, channel advantage leading peers

The customer of Yitong Wenjiao is kindergarten. Kindergartens have regional characteristics, and the sales of early childhood education equipment are highly dependent on local distributors. In the early childhood education equipment market, the company's dealer channel development and management capabilities directly determine the ability to liquidate.

As the pioneer of the kindergarten industry channel, the sales channels of Yitong Culture and Education have become mature. In recent years, the company has gradually increased its management of channels through integration and sinking channels, and has occupied an absolute advantage in the industry.

One of the performances of channel advantage is in quantity. Nearly 500 dealers of Yitong Culture and Education, covering nearly 50,000 kindergartens, are distributed in 288 prefecture-level cities across the country. Leading the way, in 2016, we began to expand the love cube of customers outside Hubei Province, the old textbook teaching aid provider Phoenix Kangxuan, and the new media courseware provider Long March Education.

In 2017, the company will continue to focus on expanding the number of dealers covered by the park.

One of the manifestations of channel advantage is in control. In 2016, Yitong Culture and Education directly controlled 5 dealers, and the self-operated ratio increased, which can be used as an important basis for the continued improvement of future performance. In addition, from the proportion of dealers in the share of sales, it can be seen that the current channels of billion children's culture and education are very scattered, and the influence of single channel on performance is small.

Involved in home education, not meeting sales expectations

In October 2015, the Ministry of Education issued the “Guiding Opinions of the Ministry of Education on Strengthening Family Education Work” to guide family education into a hot spot for kindergarten work.

In 2016, Yitong Culture and Education launched a home-school breeding product and entered the kindergarten family field, but the sales volume did not reach the expected target. Although the company's sales channels cover the whole country and deep into districts and counties, these dealers are mainly kindergarten channels and cannot directly reach the home users. In the future, in order to promote home gardening products, Yitong Culture and Education also needs to expand other sales channels, but in the short term will not make much contribution to the company's profits.

Internet + kindergarten short-term contribution to profit is not obvious

In 2016, Yitong Culture and Education launched the Internet + Kindergarten strategy. At present, the Internet mainly provides free Internet + kindergarten services, including the wisdom tree covering nearly 100,000 kindergartens and the palm-plating platform of over 50,000 kindergartens.

Therefore, we believe that in the short term, the contribution of the Internet + Kindergarten strategy to the company's profit will not be too obvious.

However, the company has many years of experience in operating demonstration parks in Wuhan, and has accumulated operational capabilities in environmental construction, teaching aids, teacher training, and information services. In the future, self-operated, joint ventures, and joint kindergartens will become the company's new product promotion channels.

Business is maturing, with a valuation of 3.9-4.7 billion

Analysis of the past five years of earnings, we can find that the company's gross profit margin showed a downward trend. Because the book materials with higher gross profit margins have decreased in the business, the proportion of teaching aids with lower gross profit has increased. With the adjustment of product structure, the overall gross profit margin may decline.

However, the overall gross profit margin in 2016 increased slightly year-on-year. It may be that after achieving large-scale production, the gross profit margin of the teaching aid business has increased. We believe that in 2017, the overall gross profit margin of Yitong Culture and Education may decline slightly, maintaining at around 66%.

The company's management expenses have not changed much; R&D expenditures are relatively small, about 5%-6%, and are recorded in management fees. The sales expenses accounted for a large proportion. Due to the enhanced control over the channels, there was a downward trend. However, in 2016, through the holding of five dealers, the sales expenses increased slightly year-on-year.

It is expected that while channel operation efficiency will improve, Yitong Culture and Education will continue to integrate and sink channels. In 2017, sales expenses may decline slightly in 2016, but the change will not be too great.

In summary, we believe that Yitong Culture and Education has strong sensitivity to policies and markets and can respond quickly to kindergarten demand. With the support of training, we have strong channel control capabilities, and build a nationwide dealer network with county-level units, which has a brand first-mover advantage in the industry.

In 2017, the product structure of Yitong Culture and Education will continue to be optimized, and the proportion of playing teaching aids will increase. With the improvement of the teaching system, the unit price will increase. Compared with other peers such as Love Cube and Phoenix Kangxuan, the market recognition of Yitong And the brand advantage is more prominent, which is conducive to the sales channel will continue to deepen, and the size of the covered kindergarten will continue to expand.

However, the innovation ability of Yitong Culture and Education business is insufficient, the existing business has matured, and the overall operational efficiency has been high. The gross profit margin may decline slightly in 2017, and the proportion of sales expenses to revenue may decrease slightly, but the overall situation will not be too Big change.

In the information system, the education of children's education has to be strengthened. With the introduction of multimedia teaching aids such as Langlang Education and Long March Education, the penetration rate of digital media in kindergartens has gradually deepened. If Yitong Culture and Education can't keep up with technological changes and market trends, it may have an adverse impact on the company's development.

We believe that in 2017, the growth rate of book materials will be reduced to about 10%, revenue will reach 356 million, the growth rate of teaching aids will remain at around 70%, revenue will reach 343 million, and the total expected education of billion children Revenue is around 699 million yuan, and the expected net profit margin is between 22% and 25%. The expected net profit range is 1.54-1.75 billion yuan. Give Yitong Children's Education 25-27X PE, the valuation range is 3.9-47 billion yuan.