In recent years, with the continuous growth of students' consumption expenditure, the market size of teaching aids, as one of the important special products for students, has continued to expand.
According to the Frost & Sullivan report, the size of China's supplementary book market (in terms of total value) reached 75.1 billion yuan in 2022, and the market is expected to grow to 129.3 billion yuan at a compound annual growth rate of 11.5% from 2022 to 2027. In 2022, the size of the compulsory education supplementary book market contributed by independent planners and distributors (the total amount of the label price of books multiplied by the total sales volume of books) was 19.9 billion yuan, accounting for 43.6% of the overall market size of the compulsory education supplementary book market.
In the compulsory education stage, the market share of the top five independent textbook curators and publishers in 2022 is 43.9%. Among them, Quanpin Culture and Education Holdings Co., Ltd. (Quanpin Culture and Education), which submitted a listing application to the main board of the Hong Kong Stock Exchange on April 22, 2024, ranked third in 2022 with a scale of 1.525 billion yuan, with a market share of 7.7%.
The business relies on supplementary books
According to the prospectus, as an independent planning and distributor of teaching and auxiliary books in China, Quanpin Culture and Education is committed to producing and providing high-quality teaching and auxiliary books, student supplies and related services.
Zhitong Financial APP learned that teaching and auxiliary books are the core products of the whole product of culture and education, and the main teaching and auxiliary book series include: the "Full Product Review Program" launched in 2003, with a total revenue of about 534 million yuan during the track record period; In 2008, the "Whole Product Learning and Practice Examination" was launched, and the total revenue during the track record period was 522 million yuan, and the "All Product Workbook" launched in 2008 achieved a total revenue of 423 million yuan during the track record period. In 2023, the revenue of all products of cultural, educational, teaching and auxiliary books will be 606 million yuan, accounting for 97.4%.
In addition, Quanpin Culture & Education has successfully led to a diversified range of student products, opening up a second growth curve for its business. As of December 31, 2023, the company's student supplies cover multiple categories, with a total of 357 SKUs. The revenue generated by the company's student supplies grew at a CAGR of 390.4% from 2021 to 2023. In 2023, the revenue of student supplies will be 8.61 million yuan, accounting for 1.4%.
At the same time, Quanpin Culture and Education has built a nationwide sales and distribution network, including a wide range of distribution networks and direct sales channels. As of December 31, 2023, the company's sales network covers 31 provincial-level administrative regions across the country, and has cooperated with 982 dealers. In 2021, 2022 and 2023, the revenue from the Company's distribution network accounted for 93.1%, 93.7% and 90.3% of its total revenue, respectively.
In terms of performance, in 2021, 2022 and 2023, the company's revenue will be about 514 million yuan, 496 million yuan and 622 million yuan respectively. During the same period, the company's annual profit and total comprehensive income were about 34.908 million yuan, 34.447 million yuan and 64.331 million yuan respectively. During the period, the company's gross profit margin increased from 36.7% to 42.4%, and the net profit margin increased from 6.8% to 10.3%.
The industry is highly competitive, and marketing spending is growing at a high rate
Zhitong Financial APP noticed that one of the main reasons why Quanpin Culture and Education will penetrate the business into the student supplies market may be that with the slowdown in the growth of the user group, the competition in the teaching and auxiliary book market will become more and more fierce.
According to data released by the National Bureau of Statistics, the total number of students in school in China increased from about 174 million in 2018 to about 186 million in 2022, with a compound annual growth rate of 1.7% from 2018 to 2022. The total number of students enrolled in China is expected to reach about 188 million in 2027, growing at a CAGR of 0.3% from 2022 to 2027.
The size of the user group tends to be stable, coupled with the relatively fragmented competition pattern of the industry, the competition in the Chinese student supplementary book market will tend to be fierce.
In the prospectus, Quanpin Culture and Education said that the company is committed to developing new products and services to adapt to changing learning needs and preferences. Due to fierce competition and an ever-changing environment, the company's future growth depends on its ability to continue to launch a portfolio of products and services that are popular in the market. Introducing new products or developing new digital products and services requires significant R&D costs and involves inherent risks such as overestimating market demand, unsatisfactory product quality and unsuccessful pricing strategies.
From a financial point of view, the performance growth of Quanpin Culture and Education in 2023 will rely more on marketing expenses. During the period, the company's R&D expenditure amounted to 55.739 million yuan, a year-on-year increase of 4%, and the proportion of R&D expenditure in revenue was 9%, a year-on-year decrease of 1.8 percentage points. In addition, the company's sales and marketing expenses in 2023 will reach 88.914 million yuan, a year-on-year increase of 72.6%, accounting for 14.3% of revenue, an increase of 2.9 percentage points year-on-year.
Quanpin Culture and Education said that as the company continues to build its online presence, it may further incur marketing expenses related to online channel cooperation. However, there is no guarantee that the marketing campaign will be well received by the target customers and the sales volume will increase. In addition, as marketing trends and strategies in the industry are constantly evolving, companies need to adopt new marketing methods to enhance their marketing strategies and experiences to keep abreast of industry developments and consumer preferences. If the Company does not improve its marketing strategy or adopt new technologies that are more cost-effective, it may adversely affect the Company's business, growth prospects and results of operations.