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New Education Policy Brings Growth Opportunities for Kingway Education

·4 min read

The following post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga.

Photo by Green Chameleon on Unsplash

On October 12, the Chinese government once again issued a policy to encourage vocational education and skills training, creating a policy tilt for companies like Kingway Education (NASDAQ: EDTK). In the latest policy, the state supports listed Chinese enterprises to expand their business into occupational education and intends to allocate more funds to the sector.

This year, the Chinese government has made a drastic overhaul of its private education sector through a tremendous cut in the hours for out-of-class tutoring, which includes no class for holidays and weekends in a bid to ease the burden on primary and secondary school students. Most damagingly, companies offering after-school tutoring courses are forced to turn into a non-profit status and will no longer be permitted to list and fundraising.

The policy changes have cast a shadow over nearly all Chinese education stocks and led to a sharp drop in their market cap this summer. In order to stop losses, many companies have to sell or halt their operation.

For instance, OneSmart International Education Group (NASDAQ: ONE) announced that it was suspending all of its learning centers and education programs in China a few days ago, making it the first publicly traded education service provider in the country to stop most of its business amid a regulatory cleanup. And even before that, Youdao Inc (NASDAQ: DAO) also suggested that they are in talks to sell its after-school tutoring services, accounting for about a quarter of its overall business to top up the company’s cash.

According to the new policy, the Chinese government has reiterated its commitment to cultivating skilled talents, echoing its previous support for vocational education — particularly academic vocational education. It also encourages rural-oriented vocational education to deliver skills training to more peasants and laid-off workers.

Dawei Chen, the CSO of Kingway Education, said in an interview that building up a modern vocational education system can bring multi-benefits to the company, and the policy-backed vocational skills training provided by the company is compliant with the national regulations.

In the stock market, those who can weather the current national crackdown on the education industry can earn themselves a spectacular profit as most Chinese education stocks trade at or near all-time lows due to policy changes. Speaking of policy preference, companies like Kingway Education (NASDAQ: EDTK) that specializes in vocational education, and training will be the first of their kind to navigate the hassle and grow under favorable circumstances.

About Kingway Education

Kingway Education is a leading online education and technology service provider in China that has been focusing on vocational education since 2013. The company offers over 600 vocational skills training programs and multiple lab courses on the self-owned virtual training platform for simulation experiments.

Kingway Education’s users mainly include college students and graduates, professionals, re-employment groups and migrant workers, serving them with complementary course materials and hands-on training opportunities through online training materials.

For the fiscal year ended March 31, 2021, the company achieved revenue of $29.2 million, compared to $28.6 million in the previous fiscal year, an increase of 2%.

Specifically, the revenue of online education services, with the bulk of the part generated from paid membership, accounted for 99.3% of the total revenue. The gross profit was $14.5 million, while the previous year was $16.8 million. The number of registered members on the platform grew from 68.5 million in 2020 to 83.4 million in 2021, with 1.62 million paid users.

In August this year, Kingway Education announced a strategic partnership with Wuxi Talent Home (WTH), one of the largest flexible employment platforms in Jiangsu Province. In the framework of the cooperation, the company will provide free basic skills training courses and paid vocational skills certificate training courses for WTH.

Additionally, the company will also help WTH expand its business by increasing its customer sources, and in consideration, WTH agrees to share the corresponding revenue.

Mr. Gao Xiaofeng, CEO of Kingway Education, said, “The cooperation with WTH is an important step in our strategic development. We can effectively increase user stickiness and increase income by providing vocational skills training that is more tailor-made for the users. What’s more, the experience of the embedded collaboration between the internet platform and flexible employment platform can be replicated and applied in other regions, laying a more solid foundation for the companies’ further business development.”

The preceding post was written and/or published as a collaboration between Benzinga’s in-house sponsored content team and a financial partner of Benzinga. Although the piece is not and should not be construed as editorial content, the sponsored content team works to ensure that any and all information contained within is true and accurate to the best of their knowledge and research. This content is for informational purposes only and not intended to be investing advice.

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