China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

MD, Blue Lotus Research Institute

Gu Jun, CFA

Thematic (Sector/Industry)

China Consumer services / Thematic (Sector/Industry)

The key to understand education:(1) resource imbalance creates demand for after-school tutoring and in-school teaching. It will persist,(2) burden reduction is for real because China’s birth rate is dangerously low,(3) product will change from after-school tutoring to after-school tutoring+activities,(4) in-school teaching will also see less standardization in products,(5) but channel superiority, not product, is the key success factor in education so EDU and TAL still rule,(6) margin might deteriorate due to reduction in standardization but technology will improve margin,(7) speed of this happening is the key,(8) scalability is the problem for most in-school-teaching institutions. In the long run, we still prefer TAL and EDU.

The key to understand education:(1) resource imbalance creates demand for after-school tutoring and in-school teaching. It will persist,(2) burden reduction is for real because China’s birth rate is dangerously low,(3) product will change from after-school tutoring to after-school tutoring+activities,(4) in-school teaching will also see less standardization in products,(5) but channel superiority, not product, is the key success factor in education so EDU and TAL still rule,(6) margin might deteriorate due to reduction in standardization but technology will improve margin,(7) speed of this happening is the key,(8) scalability is the problem for most in-school-teaching institutions. In the long run, we still prefer TAL and EDU.

China Education Sector Update