With socio-economic development, the increasing demand for career development and lifelong learning Xi has led to the rise of the adult education industry. According to Frost & Sullivan data, the market size of the adult education industry has increased from 748.9 billion yuan (RMB) in 2017 to 1.35 trillion yuan in 2022, with a compound annual growth rate of 12.6% during the period. This value is expected to further increase to 2.12 trillion yuan by 2027.
It can be seen that the adult education market in the mainland has reached the trillion level, which has naturally attracted the attention of the capital market.
Recently, JIADE LIMITED (hereinafter referred to as "JIADE Technology"), which provides support services for adult education institutions in China, publicly disclosed its prospectus to be listed on the NASDAQ under the symbol "JDZG" in the United States and raise up to US$10 million through an initial public offering. The Company plans to issue 2.2 million shares at an issue price of $4 to $5 per share. Based on the median of the proposed pricing range, the market capitalization of CourseStandard Technology would reach US$110 million.
What are the highlights of the curriculum standard technology that is deeply engaged in the informatization of adult education? Looking forward to the future market, what can investors expect from it?
Technology research and development has been highly valued, and revenue and net profit have continued to improve
According to Zhitong Financial APP, the listed entity of Lesson Standard Technology is JIADE Limited, an offshore holding parent company, registered in the Cayman Islands, and its business is carried out through subsidiaries operating in China.
Founded in 2020, as its subsidiary in China, Curriculum Standard Technology mainly provides comprehensive education support services for adult education institutions in China, including teaching support services and related examination management services throughout the teaching cycle, providing one-stop comprehensive education support services for adult education institutions to meet the changing needs of customers in the rapidly changing adult education industry.
Specifically, the company's services are mainly provided through the KB platform, which facilitates information simplification and data management throughout the teaching cycle from pre-enrollment to post-graduation. In addition to this, as part of its one-stop comprehensive educational support services, the company also provides ancillary solutions for adult education institutions, which include instructional support services and related exam administration services throughout the teaching and learning cycle.
It is worth mentioning that since its establishment, the company has attached great importance to technology research and development, and the company has successively developed and upgraded various software systems or platforms, including KB platform, registration information automation management system, academic administration back-end management system and education service management system. Up to now, the company has obtained 31 software copyrights, with a cumulative investment of 3.483 million yuan. In 2022, the company was recognized as a high-tech enterprise.
Benefiting from the continuous deepening of technical capabilities, the company's revenue performance has also improved. According to the prospectus, in 2021 and 2022, the revenue of Curriculum Standard Technology will be 5.0263 million and 10.2389 million respectively. In the first nine months of 2023, this value has further increased to 11.6785 million yuan, which has exceeded the annual revenue of 2022. In this regard, the company explained that the rapid growth of revenue was mainly due to the lifting of COVID-related restrictions. In the first nine months of 2021, 2022 and 2023, the company's net profit was 395,300 yuan, 5,360,200 yuan and 7,268,500 yuan, respectively.
Divided by type, the company's revenue mainly comes from the four major categories of the National Adult University Admissions Unified Examination, the Open University of China, the Self-taught Higher Education Examination and online education. Among them, the revenue from the National Adult University Admissions Unified Examination and the Open University of China is the company's core business, contributing more than eighty percent of the company's revenue.
Zhitong Finance APP noticed that in recent years, the income from the Open University of China has shown an upward trend. During the reporting period, the revenue contributed by this business reached 1.5257 million yuan, 4.7551 million yuan and 7.0804 million yuan respectively, accounting for 30%, 46% and 61% of the revenue respectively, which shows that the proportion of revenue of this business is also rising. In this regard, the company said that this was mainly due to the strengthening of business relationships with adult education institutions and the increase in enrollment.
Although the income from the National Unified Examination for Adult University Admissions has maintained a steady increase, its share of income has continued to decline. During the reporting period, the revenue of this business was 3.1843 million yuan, 3.8411 million yuan and 3.7858 million yuan respectively, and the proportion of revenue decreased significantly from 63% in 2021 to 32% in the first nine months of 2023.
Multiple "hidden concerns" behind high growth
However, according to the observation of Zhitong Financial APP, there are many hidden worries behind the high-growth performance of course standard technology.
First of all, the company has a relatively serious dependence on large customers. The company admitted in the prospectus that most of the company's revenue during the reporting period came from a small number of adult education institution customers. During the reporting period, the company's revenue from the three major customers accounted for 89%, 77% and 87% of the current revenue respectively, of which the revenue from the company's largest customers accounted for 59%, 50% and 40% respectively.
The company will continue to generate a significant portion of its revenue from a limited number of major customers for the foreseeable future, and the company's revenue and results of operations could be materially and adversely affected if major customers fail to pay, fail to meet contractual commitments, or if business declines.
At the same time, there is a risk that the company will be more dependent on a single region. In 2021 and 2022, the revenue from Sichuan Province accounted for 80.2% and 91.7% respectively, and in the first nine months of 2023, this value has soared to 100.0%, and in terms of breakdown, Chengdu accounted for the highest proportion, with revenue from Chengdu accounting for 77.5%, 90.7% and 98.1% respectively during the reporting period. The company said bluntly that it expects Sichuan Province to continue to be an important source of revenue for it.
However, the growth rate of the adult education support services market in Sichuan Province is slowing. Zhitong Financial APP noted that Sichuan Province is one of the provinces with the largest Chinese population and relatively low education level, so job seekers and employees face fierce competition in the job market, and there is a higher demand for adult education to acquire new skills and improve academic qualifications. In terms of sales revenue, the market size of adult education support services in Sichuan Province increased from 1.8 billion yuan in 2017 to 3.6 billion yuan in 2022, with a compound annual growth rate of 14.7%. Sales revenue in Sichuan Province is expected to reach 5.8 billion yuan in 2027, but the compound annual growth rate will decline to 10%. Among them, the company only accounts for 0.286% of the market.
Under multiple risks, the company strengthened its market competitiveness by offering discounts, which affected the average order value of the company's business. Among them, the average service price per student from the Open University of China has dropped from 572 yuan in 2021 to 242 yuan in the first nine months of 2023, and the average service price per student from the national adult university admissions unified examination business has dropped from 1,097 yuan in 2021 to only 220 yuan in the first nine months of 2023.
At the same time, the company's cash flow performance has been volatile. As of the full year of 2021 and 2022 and as of the end of September 2023, the company's cash on hand was 6,000 yuan, 2.604 million yuan and 3.789 million yuan, respectively. It is worth noting that working capital was negative in 2021, which means that the company's short-term debt is beyond its capacity.
It can be seen that under the fluctuating cash flow situation, the company is facing certain financial pressure, which may be one of the important reasons why the company actively goes to the capital market.
On the whole, the double increase in the revenue and net profit of the course standard technology is inseparable from the company's emphasis on research and development and the growth of industry demand. Although facing a market size of 100 billion yuan, the business of Curriculum Standard Technology is limited to Sichuan Province, and its market share is also low. With the intensification of competition in the industry in the future, if the company wants to fully enjoy the industry dividends and further stand out from the scattered competition pattern, the main problems that the company needs to solve are the problems that rely too much on a single province and large customers for income, and financial pressure.