《中國教育2030年市場展望》

AsiaPacificInsight

August31,202211:30AMGMT

ChinaEducation

TheViewfrom2030

Weseesignificantlong-termpotentialinnewbusinessinitiativesforK12after-school

educationplayers,butnear-termuncertaintyandvolatilitywillbehigh.

MorganStanleydoesandseekstodobusinesswithcompaniescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictof

interestthatcouldaffecttheobjectivityofMorganStanleyResearch.InvestorsshouldconsiderMorganStanleyResearchasonlyasinglefactorinmakingtheirinvestment

decision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

AsiaPacificInsight

Contriputors

MorganStanleyAsiaLimited+

ElsieSheng

EquityAnalyst

+8523963-0475

Elsie.Sheng@

MorganStanleyAsiaLimited+

LillianLou

EquityAnalyst

+8522848-6502

Lillian.Lou@

MorganStanleyResearch3

AsiaPacificInsight

TheViewfrom2030

Overseasmodelsshownewgrowthareas...:K12after-schooledu-cationdemandpersistsinviewoffiercecompetitiontoenterChina'stopuniversities,butitisbecomingmorediversifiedandfulfilledbydifferentproducts.WeanalyzedbusinessmodelsinKorea,JapanandtheUS,andnotethatKorea(vs.Japan)hasmorediversifiedformatsandhigherpenetrationofhomestudyprograms,whichevolvedinthewakeofKorea's1980s-90safter-schooltutoring(AST)ban.WeidentifyopportunitiesinChinaoutsideacademictutoring,including:1)homestudycontentandserviceproviders,2)smartlearningplat-forms/toolswithadvancedtechnology,3)non-academictutoring,and4)deepcooperationwithschoolsasin-schoolserviceproviders.

IndustryView...andlong-termopportunitiesthrough

ChinaEducation|2030:Weprojectthatfoursubsegments–

AsiaPacificnon-academictutoring,learningdevices,

In-Linelearningcontent,andeducationdigitaliza-

tion–willgrowat3%,14%,17%,and6%CAGRstoreachRmb685bn,Rmb106bn,Rmb102bn,andRmb924bnby2030,inourbasecase,whichassumesthatstudentsandparentsacceptthenewwaysoflearning,andthatproductofferingscontinuetobeoptimizedoverthenextfewyearsamidastableregulatoryenvi-ronmentwithnounexpectedheadwinds.OurbullcasesuggestsCAGRsof6%,17%23%and9%,respectively,andourbearcasesug-gests1%,10%,10%and4%.

Leadingplayershavetheedgeinconsolidationopportunities:Webelievecontentandtechnologyarethekeystosuccess,andthatleadingplayershavebothbrandappealandtheabilitytodevelopqualityproductsgiventheirunderstandingofwhatparentsandstu-dentsneed.AssumingEDUandTALcontinuetotakeshareinthecombinedsubsegments'Rmb1.8tnmarket,itimplies2-3timespoten-tialinlong-termmarketcapby2030.Discountingthatbacktonow,atabouta10%annualrate,stillimplies30-40%upsideforTALandEDU,and100%+forYoudao.Weadoptanaverageofthislong-termdiscountedvaluationandSOTPvaluation,basedonourF24esti-mates,toderiveourpricetargets,with10-30%upside,neartermforEDUandTAL.

Vocationaltrainingissensitivetoeconomiccycles:Travelrestric-tionsinAprilandMayresultedinnear-termdisruptionstostudentrecruitmentandalsocoursedelivery,andthereforetorevenuerec-ognitionforCEEandOffcn.ThedelayinthecivilserviceentryexamalsohadanimpactonOffcn'srevenue.Whiletherehasbeenamar-ginalimprovementsinceJune,andwestillseevocationaltrainingas

What’sChanged

YoudaoInc

From

To

PriceTarget

US$15.00

US$7.50

TALEducationGroup

PriceTarget

US$4.40

US$7.20

OffcnEducationTechnologyCoLtd

PriceTarget

Rmb6.20

Rmb3.50

ChinaEastEducationHoldingsLtd

PriceTarget

HK$6.70

HK$4.50

NewOrientalEducation&Technology

PriceTarget

US$23.20

US$35.10

asteadilygrowingsectorlongerterm,wepreferCEEoverOffcn.

Highereducationawaitsgradualfor-profitregistry:TherecentMoEapprovaloftemporaryfor-profitschoolcertificatesforprivateuniversitiesinHeilongjiangatend-Augusthas,inourview,kickedoffanofficialstarttofor-profitregistry,andweanticipateformalcertifi-cateissuancetooccurlikelyfromend-2022to2023,withotherprov-incestofollowinnext1-2years.Thiscouldgraduallyremovetheoverhangthatpressuredthesubsector'svaluation;wewouldfocusonselectinvestmentinqualityplayers.

Stockpicks–PreferK12after-schoolplayersovervocationaltrainingandhighereducationfromalong-termview:Interestisslowlyreturningtotheeducationsector,but,inourview,themarketdoesnotfullyappreciatethelong-termpotentialofnewbusinessinitiatives.Wethinkthecompaniesareontracktotransformanddiversify,butnear-termvolatilitycouldbesignificantastheyarestillataninitialstage.WelikeEDUandTALfortheirstrongproductdevel-opmentcapabilities,brandnames,andsufficientcashtosupportthetransition.Weexpectvocationaltrainingtograduallyrecoverfromnear-termCovidimpact,whilehighereducationawaitsthekeycata-lystoffor-profitregistry.

ElsieShengassumescoverageofEDU,TAL,Youdao,CEE,andOffcnwiththisreport.

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AsiaPacificInsight

Contents

5InvestmentThesis

10Resilienteducationdemand,butitwillbecomemorediversified

13OverseasExamplesofPossiblePathways

23NewBusinessInitiativesAfter"DoubleReduction"inChina

24#1.K12non-academictutoring-Atearlystageofrefiningproducts;relativelyslowmarketsizegrowthbutopportunityforleadingplayerstograduallygainshare

33#2.Intelligentlearningdevicesandhomestudycontent/services–Academiclearningdemandpartlyshiftingtopersonalizedsmartself-learning

38#3.Edtech–2Gand2Blearningsolutionsandtechnology

40#4.Otherareasthecompaniesareexploring:Overseasexpansionandlive-streaming

42Long-termPotentialwithNear-termUncertainty

46VocationalEducation-GradualRecoveryPostNear-termCovidDisruptions

47EarningsEstimateChangesandValuation

52FinancialSummary

57Appendix–Whatregulatoryuncertaintiesremain?

58RiskReward-NewOrientalEducation&Technology(EDU.N)

60RiskReward-TALEducationGroup(TAL.N)

62RiskReward-YoudaoInc.(DAO.N)

64RiskReward-ChinaEastEducationHoldingsLtd(0667.HK)

66RiskReward-OffcnEducationTechnologyCoLtd(002607.SZ)

MorganStanleyResearch5

AsiaPacificInsight

InvestmentThesis

AyearaftertheintroductionofChina's"doublereduction,"regula-tions,whichaimtoeaseafter-schoolpressuresonstudents,wefindourselvesaskingtwoquestions:

1.Iseducationinvestiblefromalong-termpointofview?

2.Ifso,whatwillthespacelooklikeby2030?

Wedoseelong-termopportunitiesinK12after-schooleducationasbusinessmodelstransform,andwesuggestselectinvestmentsinqualityhighereducationschoolsasfor-profitschoolregistryisrolledoutoverthenexttwoyears.However,weviewtheprivatepreschoolandprivateK12schoolsegmentsaspresentingmuchlessfavorableinvestmentopportunities.Inthisreport,wemainlyfocusontheout-lookforK12after-schooleducation–thekeydebateinthespaceright

now.

Toexplorewhatlong-termopportunitiesandbusinessmodelsmaybeavailable,welookedatafter-schooleducationincountrieslikeKorea,JapanandtheUS.

Korea'shistorymaypointthewayforward:Korea'sbanonafter-schooltutoringinthe1980sand1990sdidnotdestroydemandsomuchasforceitintootherchannels.WeexpectsimilardevelopmentsinChinafollowingthedoublereduction.Thedemandisstillthere,especiallyasgaokaocompetitionremainsfierce.Instead,thebigchangeinChinaisonthesupplyside,asthemajorityofacademictutoringinstitutionshaveclosedandtransformationisoccurring.

DemandinKoreashiftedtootherproducts:TheresponseofKoreaneducationcompaniestotheASTbanwastocreatemoreK12homelearningprogramsandothereducationalmaterials,besidesunder-ground1on1tutoring.InJapan,however,whichhadnosuchban,in-classroomASTremainsthenorm.Meanwhile,USeducationcompaniesaremorefocusedonprovidinglearningtechnologiesandplatformsupportthroughedtech.

WefoundseveralmodelsthatcouldworkinChina,including:

?Homestudycontentanddeviceproviders:Thismodelorigi-natedinJapaninthe1950sbutquicklydevelopedinKoreaduringtheASTbanascompanieslikeKyowon,WoongjinThinkbig,andDaekyowerefoundedinthe1980s.Inthismodel,companiessendpackagesofstudymaterialstostu-dentsandprovideregulartutoringguidance.Theserviceisusuallysubscription-basedandmonetizedviamembershipfees.Nowadaystheseprogramsaredigitizedandcanbemorepersonalizedtostudents'needs.

?Smartlearningplatform/toolswithadvancedtechnology:TherearemanyedtechcompaniesintheUSthathelpstu-dentswithmoreefficientandpersonalizedself-studypro-gramsorhelpschoolsandteachersmanageandteachmoreeffectively(e.g.,learningmanagementsystemDesire2Learn,personalizedadaptivelearningKnewton,AleksandRiid).Therearealsobusinessesofferingmockuniversityentranceexams,suchasBenesseinJapan.

Exhibit1:WeseeopportunitiesinK12after-schooleducation,butshort-termuncertaintyandvolatilitywillbesubstantial

ChinaEducationStatusby2030

Preschool

K12

Highereducation

Schoolagepopulation2022-2030CAGRGER2021

Studentenrollment2022-2030CAGR

Privateschoolenrollment%

Regulatorytarget

-4.4%

88.1%

-4.0%

Private:49%

Privatefor-profit:12%

Affordableforallchildren

-2.1%

Highschool:91.4%

Compulsoryeducation:~100%

-1.8%

12%

Lowerstudentburden,refocusto

schooleducationwithpublic

schoolsaskeypart

-0.4%

57.8%

1.6%

24%

Toimproveschool

quality

Investmentimplications:

Privateschooleducation

Afterschooleducation

Source:NBS,MoE,MorganStanleyResearch.

Notfavorable,limitedquotaforprivatefor-profitpreschools

Notfavorable,withdecliningprivateSelectiveopportunitieswhenfor-enrollment%anddecliningschoolprofitschoolregistrygradually

agepopulationrollsout

Transformingtonewbusinessmodels;willtaketimetogradually

rampup,butpotentialforqualityproducts/services

200400600800

6

152

739

924

AsiaPacificInsight

?Non-academictutoring:Thenumberofeducationalinstitu-Marketpotentialofnewbusinessesby2030:Weanalyzedthe

tionsinKoreaprovidingnon-academictutoringservicesmarketpotentialofthesenewbusinessesunderbull,bearandbase

pickedupinthewakeoftheASTban,andthepenetrationofcasescenarios.Ourbullcaseassumesnewmodelsarewellreceived

after-schooleducationinnon-academicsubjectslikeartandbyparentsandstudentsandachievehigherpenetrationthaninour

hobbiesreached41%in2021(63%forprimaryschoolstu-basecase,whileourbearcaseassumesstudentsdonotadaptwell

dents,24%formiddleschooland15%forhighschoolstu-tothetransformationandundergroundprivatetutoringremains

dents).morepopular.

?Cooperationwithpublicschools:Anemphasisonimproving

thequalityofpubliceducationcangenerategovernment-Ourcalculationshowsthatlearningcontentanddeviceswillbethe

backeddemandforcontentandtechnology.Japanhasseenfastestgrowingsub-sectorfromarelativelysmallerbase,whilethe

privatetutoringplayersprovidecontenttopublicschools,growthofnon-academictutoringlikelywillbestablegivenitstarget

whileinKoreaandtheUScompaniesarealsoprovidingtech-studentsareyoungchildren–ademographicthatisdecliningdueto

nologysolutionstoschools.China'slowbirthrate.Butwithinthisstablemarket,wethinkthere

willbeopportunitiesforqualityplayerstogainshare.

Exhibit2:Breakdownofeducationcompanies'servicesbymarketcap–ChinacouldmovetoacombinationofKoreaandtheUS

Japaneducationmarketcapbreakdown

VariousformatswithASTasmajority

2B/2G

service

2%

Adult

education

19%

K12after

school

education

79%

Source:Refinitiv,MorganStanleyResearch.

Koreaeducationmarketcapbreakdown

STEAM

Languageeducation

Collegetest

prep

4%

education

7%

Adult

education

6%

3%

K12AST

35%

2B/2G

service

K12Home

learning

program

18%

14%

Education

content

13%

USeducationmarketcapbreakdown

Language

learning

2%

Vocational

education

OnlineK121%

Education

content

20%

education

7%Onlineedu

platform

11%

Tertiary

education

26%

Childcare

13%

Workforce

training

16%

Edtech

4%

Exhibit3:PotentialsizeofChina'sK12educationmarketby2030

K12EducationAfterDoubleReduction

K12nonacademictutoring

Intelligentlearningdevice

Learningcontents

Educationdigitalization

-

1,000

2030Bear2030Base2030Bull2030Bull2021

564

685

874

505

75

136

106

33

59

102

24

528

1,200

1,109

BaseCAGR

3%

14%

17%

6%

Source:MorganStanleyResearchestimates.

MorganStanleyResearch7

AsiaPacificInsight

Otherexplorationsfromkeyplayers:Besidestheabovenewmodels,thereareotherneweffortssuchasTAL'soverseasexpansionandEDU'se-commercelivestreamingbusinessunderKoolearn.TALachievedtriple-digitYoYgrowthinF1Q22intheoverseasbusinessandtargetthisbusinesstoreach30%oftotalrevenue,longrun.IthasbuiltasystematicproductofferingintheUS,andweidentifyitsbrandname,premiumserviceandtopteachersasitsadvantages.EDU'se-commercelive-streamingtargetsapotentiallyhugemarketwith2025GMVofRmb5.1tn,basedonourinternetteam'sestimates,althoughcompetitionisfierce,volatilitycanbehigh,andvisibilityisrelativelylow.

Qualityplayershaveanopportunitytogainshare:Webelievethathavingastrongbrand(toattractparents),productdevelopmentcapability(abilitytofindnewdemandanddevelopproductsofhigh

Exhibit4:Players'newproductofferingstofitdemand

quality),andpasteducationexperiencewillsupportthetopplayersastheyconsolidateshareandsmallerplayersexitthemarket.

Forexample,inthenon-academictutoringmarket,thecurrentcon-solidationlevelislowerthaninacademictutoringpreviously,andtherearenonationalleadersyet.TheproductofferingsofEDUandTALinnon-academictutoringarenotyetmature,butwithongoingdevelopmentandrefinement,wethinktheywillenjoyanadvantageoverproductsofferedbysmallerplayers,whichmaytakethreeyearstoramp.

Newbusinessgrowthandmarginimprovementwillbekeyearningsdriversfortheseplayerslongerterm.

Source:MorganStanleyResearch

8

AsiaPacificInsight

Long-termmarketcappotentialforkeyplayers:WeforecastthatthemarketcapsofEDU,TALandYoudaocouldincrease2-3xby2030,assumingtheirbusinesstransitionsaresmoothandtheindustryenvironmentremainshealthywithnounexpectedhead-winds.Weapply15-20xP/Emultiplesfornon-academictutoringandeducationcontentsordevicebusiness,atadiscounttoaverage28-30+xP/EthatEDUandTALtradesatbeforethedoublereductionregulation.

Near-termvolatilitycouldbehigh;wecapturetheuncertaintybyapplyinga50%discount:Asthesenewbusinessinitiativesarestillataninitialstage,therewillbealotofvolatilityinthenearterm.For

example,EDU'ssharepriceinthepast2-3monthshasbeenhighlycorrelatedwithKoolearn'sandisrelatedtothechangesindailyGMVofDFZX.

Afterapplyinga50%discounttocapturethisuncertainty,wenotethattheOptimisticcasestillimpliesanopportunityfromthecurrentmarketcap.

The50%discountisroughlyequaltoanannual10%discountrate,whichwasthediscountratethatweusedfortutoringcompaniesbeforethedoublereductionregulation.

Exhibit5:EDU,TAL,Youdao2030marketcapprojections,asbasedonourprojectionsof2030poten-

tialmarketsizes

Assumptions

EDU

Lessoptimistic

Basedonbearcasemarketsizeandlessoptimisticassumptionsofmarketsize

Optimistic

Basedonbasecasemarketsizeandincreasingmarketsize

BlueSky

Basedonbullcasemarketsizeandmoreoptimisticassumptionsofmarketsize

Nonacademictutoring

EDU'smarketshare

1.5%

2.0%

2.5%

2030P/E

15.0

18.0

20.0

Marketcap(US$bn)

2.9

5.7

10.1

Educationaldevice/contents

EDU'smarketshare

2030P/E

Marketcap(US$bn)

10.0%

15.0

1.1

15.0%

18.0

3.4

20.0%20.0

7.5

Live-streaming

EDU'smarketshare

2030P/E

Marketcap(US$bn)

0.1%

15.0

0.2

0.2%

20.0

2.2

0.2%25.0

6.6

Overseasconsulting,testprep,collegeandothers

2030P/E

Marketcap(US$bn)

10.0

1.7

10.0

2.3

10.0

2.8

EDUtotal2030marketcap(US$bn)

5.9

13.5

27.0

Marketcapafter50%discount(US$bn)3.06.813.5

Discountedvaluepershare(US$)

17.5

39.9

79.4

TAL

Nonacademictutoring

TAL'smarketshare

2.0%

2.5%

3.0%

2030P/E

15.0

18.0

20.0

Marketcap(US$bn)

3.9

7.1

12.1

Educationalcontents

TAL'smarketshare

2030P/E

Marketcap(US$bn)

10.0%

15.0

1.1

15.0%

18.0

3.4

20.0%20.0

7.5

Technologysolution

TAL'smarketshare

2030P/E

Marketcap(US$bn)

0.1%

10.0

0.1

0.1%

10.0

0.1

0.2%10.0

0.3

TALtotal2030marketcap(US$bn)

5.0

10.6

19.8

Marketcapafter50%discount(US$bn)

Discountedvaluepershare(US$)

3.9

8.4

15.4

Youdao

Nonacademictutoring

Youdao'smarketshare

0.3%

0.5%

0.7%

2030P/E

15.0

18.0

20.0

Marketcap(US$bn)

0.6

1.4

2.8

Learningdevice

Youdao'smarketshare

2030P/E

Marketcap(US$bn)

4.0%

15.0

1.0

4.5%

18.0

2.0

5.0%20.0

3.1

Others-adulttutoring,onlinemarketing,etc.

2030P/E

Marketcap(US$bn)

10.0

0.3

10.0

0.3

10.0

0.4

Youdaototal2030marketcap(US$bn)

1.9

3.8

6.4

Marketcapafter50%discount(US$bn)1.01.93.2

Discountedvaluepershare(US$)

6.8

14.6

26.3

Source:MorganStanleyResearchestimates.

MorganStanleyResearch9

PT

PT

AsiaPacificInsight

ToderiveourPTsforEDUandTAL,wecalculatetheaverageofF2410%ADRdiscount.ThisADRdiscountislowerthanthe20%thatwe

SOTPvalueandlong-termdiscountedmarketcap.WethenapplyaappliedpreviouslygiventherecentUS-Chinaagreement.

Exhibit6:EDU:PTcalculation

ProbabilitiesScenarioValuepershare(US$/ADS)

50%

F24SOTP

38.2

50%

2030Longtermmarketcapdiscountedvaluepershare

39.9

39.0

ADRdiscount

10%

35.1

Source:MorganStanleyResearch.

Exhibit7:TAL:PTcalculation

ProbabilitiesassignedScenario

Valuepershare(US$/ADS)

50%

F24SOTP

7.5

50%

2030Longtermmarketcapdiscountedvaluepershare

8.4

8.0

ADRdiscount

10%

7.2

Source:MorganStanleyResearchestimates

AsiaPacificInsight

10

1974

1976

1978

1980

1982

1984

1986

1988

1990

1992

1994

1996

1998

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

-

Resilienteducationdemand,butitwillbecomemorediversified

Regulationchangedsupplysidemorethandemand

Aftertheregulatorychanges,wethinkthekeystillcomesbacktodemandandhowplayerscanfulfillthisdemand.So,inthisreportwetakeastepbackandlookathowthedemandsidecouldevolveby

2030.

Demandstillresilientbutwillbecomemorediversified,especiallyforK12stageafterdoublereductionregulation:WeseethatdemandforeducationisstillresilientevenunderCovid,andweexpectittoremainsobutitwillbecomemorediversified.

Asthesupplyofacademictutoringisremoved,formatwillbemorediversified:EspeciallyfortheK12stage,aftertheregulationremovedthesupplyoffor-profitacademictutoring,thepreviousK12

Exhibit8:EducationspendingwasresilientundertherecentCoviddisruptionin1H22,accordingtooursurvey

W12(4/12-15,'22)

W11(3/29-4/1,'22)

W10(3/23-26,'22)

W9(5/26-28,'20)

EducationSpendOverNextMonthvs.LastMonth

80%

0%10%20%30%40%50%60%70%

NochangeNet:Inc-Dec

Source:AlphaWise,MorganStanleyResearch.Note:ThesurveywasconductedduringJune24-28,2022,among2,027Chineseconsumers.

academictutoringdemandlikelywillbereplacedby1)not-for-profitacademictutoringbutwithlimitedsupply,2)non-academictutoring,3)publicschools'after-schoolservice,4)daycareservice,5)learningmaterialsorsmartdevicesandotheredtechproductstohelpwithhomestudy,and6)theundergroundmarketforone-on-oneandsmallgroupacademictutoring.

ThisisrootedinthreeparentalrequirementsforASTthatweidentifyfortheK12stage:1)liftacademicscores,2)developwell-roundedqualities,and3)takecareofthechildrenwhiletheparentsarebusy.AlthoughtheultimategoalforK12studentsisstilltoenteragooduniversity,thusdemandforhigheracademicscoreswillremainapri-ority,demandshouldgraduallydiversifyinlinewiththeongoingZhongkaoandGaokaoreforms,withtheirincreasedemphasisonnon-academicsubjects,likesportsandthearts.

Exhibit9:KoreashowsthatASTdemandwillcontinueaslongasitremainscompetitivetoentertopuniversities

90.0

80.0

70.0

60.0

50.0

40.0

30.0

20.0

10.0

KoreaASTpenetrationvs.tertiaryGERgapwithsecondaryGER

ASTParticipationrate

ASTban

Source:KoreanStatisticalInformationService,MorganStanleyResearch.

MorganStanleyResearch11

200720082009201020112012201320142015201620172018201920202021

Anxiety(%)StudyinMakeupforChildcare(%)others(%)Preparation

advance(%)classes(%)forhigher

schoollevel

(%)

GeneralAcademicSubjectsandWriting

MakeupforHobbies,Childcare(%)Tomake

classes(%)cultureandfriends(%)

development

oftalent(%)

ArtsandPhysicalActivities,Hobbies

Preparation

forhigher

schoollevel

(%)

others(%)

AsiaPacificInsight

Exhibit10:Educationdemandwillbemorediversified–productswillbecomemoreenriched

Source:MorganStanleyResearch.Note:Redshadeindicatesareasthatthebigprivateplayershavepotentialtoexpandinto.

Exhibit11:Koreashowsdiverseunderlyingreasonstoattendprivatetutoring,whichmayapplytoChinagivenculturalsimi-larities.Suchdemandcouldbefulfilledbynewproductformats

ReasonsforattendingprivateeducationofacademicandnonacdemicsubjectsinKorea

100

90

80

70

60

50

40

30

20

10

0

Source:KoreanStatisticalInformationService,MorganStanleyResearch.

12

AsiaPacificInsight

Playersneedtobuildenrichedproductandserviceofferingstofitthechange:Wethinktheabove-mentionedchangeswillraisethestandardsofplayersintheeducationsector,astheyneedtodevelopsuitablenewproductsorservicestocatertovariouskindsofdemand,andmeanwhilemaintainingcompliancewithregulations,vs.mainlyfocusingonacademictutoringbefore.

Thus,weexpectthetopplayerstostillhaveadvantagesintermsof1)well-establishedbrandnamesthatattractparentsandstudents,2)learningdataaccumulatedovertheyears,helpingthembetterunderstandstudents,3)pasteducationexperienceandR&Dcapa-bilitythatenablethemtodevelopproductsthatbetterfitneeds.

Exhibit12:Players'newproductofferingstofitdemand

Thekeyplayersareundertakingseveralkeytransformations,includingnon-academictutoring,studyhardware,learningcontent,2B,andedtech.Wealsothinkthereareopportunitiestoapplyedtechtootherproductstofurtherimprovetheuserexperience.Meanwhile,therearealsoexplorationsintonon-educationareaslikelive-streaming.

Wewilldiscussthepotentialofthesenewapproachesindetailinthefollowingsections.

Source:MorganStanleyResearch

MorganStanleyResearch13

25%20%15%10%5%

0%

AsiaPacificInsight

OverseasExamplesofPossiblePathways

Keyfindingsfromoverseas