The annual report results are released, cook music (KUKE.US) or become a "double subtraction" winner?

In the blink of an eye, the "double reduction" policy has been landed for more than half a year, during which time we have witnessed the struggle and pain of too many education enterprises, but we have also seen the strong vitality of some enterprises, and Cook Music (KUKE.US) is one of the typical examples.

Cook Music, China's leading classical music consumption and learning platform, with the past 15 years of deep cultivation in the field of classical music to become "China's largest classical music licensing service provider", and continue to grow on this development base, launched music learning business, quickly formed a business scale, and became a quality company with rare long-term growth and profitability in the quality education track.

With the disclosure of the 2021 financial report of Cook Music on March 16, the growth code for its high-quality growth has become clearer.

Investment copyright is strong foundation, music learning "comes out on top"

In 2021, the total revenue of Cook Music increased from 162.9 million yuan in 2020 to 302 million yuan, a year-on-year growth rate of 85.4%. Cook Music is divided into three business segments: copyright licensing and subscription, music learning solutions and live music performances, respectively.

Under the support of the huge copyright music library accumulated for 15 years, the three major business sections of Cook Music have shown strong resilience, and under the background of the continuous improvement of public copyright awareness, the revenue scale and operational capabilities have increased significantly.

Specifically, copyright licensing and subscription is the company's core business, in 2021 the business achieved revenue of 106.5 million yuan, an increase of 39.1% year-on-year, of which licensing revenue benefited from the increase in the scale of customers and licensing agreements to achieve substantial growth, from 58 million yuan in 2020 to 88.2 million yuan, an increase of 52% year-on-year, a record high. The number of subscribers is also increasing, from 766 in the same period last year to 802 institutional customers.

Cook Music's high-quality copyright resources are also expanding. As of December 31, 2021, the Company's copyrighted classical music content increased by 975 songs sequentially to more than 2.8 million, including 2.02 million traditional classical music tracks and 350,000 jazz, world music, folk music and other music genre tracks. In total, these include about 90,000 musicians, 2,080 instruments and 266 countries and regions, as well as 1,372 video programs, 427,000 audiobook content and 5,750 sheet music sets.

Secondly, from the perspective of the company's highly growing smart music learning business, the revenue of this business has doubled to 118 million yuan in 2021, and the total annual revenue exceeds the copyright licensing and subscription business, an increase of 100.8% year-on-year. Among them, the income of kindergarten students subscribing to smart music learning solutions reached 30.7 million yuan, an increase of more than 5 times over 2020; the sales revenue of smart music learning solutions was 87.4 million yuan, an increase of 62.4% year-on-year.

Operational data also grew in tandem with performance. In the fourth quarter of 2021, 32,424 students attended at least one paid Kukey course, compared with about 23,265 in the fourth quarter of 2020, an increase of nearly 40% year-on-year.

In addition, the company's live music performance business also performed well, achieving revenue of 77.4 million yuan during the period, an increase of 181.2% year-on-year.

In other words, the investment copyright gives Cook Music a strong vitality, and on this core, Cook Music forms a multi-wheel drive operating system. It is worth noting that, first, Cook Music is the only strategic partner of The Nassos Group in China, the world's largest independent classical music record company, with scarce resources to invest in copyright. Second, music is seen as an anti-recession asset, the works of established musicians are often extremely highly valued, and the classic music library has become one of the safe and considerable investments to some extent.

Accurate card-bit music learning to deepen resilience to sustainable growth

The success of Cook Music's intelligent music learning business is inseparable from the company's accurate judgment of the track.

The first is the classical music industry that Cook Music is deeply rooted in. In recent years, with the development of China's economy, the Chinese people's demand for elegant art continues to increase, classical music as a representative is also gradually from the niche to the public, the trend of "breaking the circle" is becoming more and more obvious, according to Anxin Securities statistics, the mainland online classical music subscription market from 2015 to 2019 compound annual growth rate of 26.6%, is expected to reach 254 million yuan by 2025 market space.

Mainland online classical music subscription market space (100 million yuan) and growth rate, source: Essence Securities

Along with the expansion of the classical music market, there is also the demand for classical music learning, which is the origin of music, that is, the self-learning attribute, which is the foundation of music learning. The data shows that the penetration rate of music learning among school-age children in China is only about 5%-9%, compared with the penetration rate of 40%-45% in developed countries such as Europe, the United States, Japan and South Korea, there is still room for improvement of 5-10 times. At the same time, in the "double reduction" policy, it is also mentioned that music and art should be gradually included in the college entrance examination, which means that classical music, which is the basis for music learning, is expected to achieve long-term benefits on the demand side.

However, there are still many problems in the popularization of music learning. The survey found that in recent years, affected by the accelerating process of urbanization, the trend of the mainland school-age population moving from undeveloped areas to developed areas has been strengthening, and the rapid increase in the education population has brought greater and greater difficulties and challenges to schools.

In the market, problems often mean opportunities, cook music with its own in-depth understanding of classical music, and with its powerful classical music library, to create a one-stop intelligent music learning system and intelligent hardware. The system breaks the limitations of traditional music learning, relying on the Internet so that the system is not limited by time and geography, can effectively solve the school teaching process, high teaching costs, few teachers and other pain points, but also brought good income to the company.

In the fourth quarter of 2021, in response to the policy trend of "music and art gradually included in the college entrance examination", Cook Music iterative business strategy, develop products and services for the primary and secondary school market, expand new channels, and focus on developing cooperation with public primary and secondary schools.

In addition to deepening the development strategy of private kindergartens, primary and secondary schools, Kuke Music also focuses on exploring public institutions and expanding public kindergartens, primary schools and secondary schools at the same time. This move undoubtedly grasps a new trend under the "double reduction": public and private schools have begun to diverge in quality education. In the one semester of the implementation of the "double reduction" policy, public schools as a whole "slowed down" and "relaxed the pace" in education, and obviously tilted towards diversified quality education. Bundling public schools can undoubtedly increase performance while increasing certainty for performance development.

Looking forward to the future, Cook Music said that in 2022, for the primary and secondary school market, it will develop equipment and software covering various musical instruments and music learning, forming a trinity of bureau, school and home, covering the cloud pipe end to achieve an overall music learning solution from process evaluation to result evaluation.

In January this year, in order to meet the growing demand for smart music devices, teaching systems and copyrighted music content in public schools, the company acquired the channel team of intelligent music learning solutions for primary and secondary schools, and with the extension of the music learning ecology, the company is expected to achieve long-term high-quality growth.

epilogue

There is no doubt about the growth space of the music learning track, and Cook Music has obvious intelligent advantages, copyright resource base and in-depth understanding of classical music, and also accesses the quality education curriculum of public schools, which is obviously a rare high-quality target in the field of music learning.

At the same time, Cook Music is still through continuous investment in copyright, for the development of the bottom of the business, I believe that the expansion of copyright resources can provide long-term development momentum for the company, the future with the company's fundamentals continue to optimize, Cook Music's profitability and valuation level is bound to usher in long-term and sustainable growth.