Since the first quarter of this year, the U.S. stock IPO market has performed eye-catchingly, with an average increase of 23% in the overall IPO.
Entering May, the IPO of Chinese concept stocks continued to be hot, in terms of the recent IPO listing of the standard technology, on May 16, on the second day of its listing, the stock price of the standard technology rose sharply, with the highest increase of 183.05%, and finally closed up 104.42%.
According to Zhitong Financial APP, the listed entity of the company is JIADE Limited, the offshore holding parent company, which is registered in the Cayman Islands and conducts business through subsidiaries operating in China. Founded in 2020, as its subsidiary in China, Curriculum Standard Technology mainly provides one-stop education support services for adult education institutions in China, including teaching support services for the whole teaching cycle and related test management services.
The reason why the company was able to double its valuation after its IPO listing is not only the IPO boom of Chinese concept stocks since the beginning of the year, but also related to its business. From the business side, Curriculum Standard Technology is more like an educational technology company than an educational institution. In particular, it mentioned in the prospectus that it can use big data, cloud computing and artificial intelligence to provide comprehensive education supporting services, which conforms to the current AI boom in the U.S. stock market. This may be one of the reasons why it is popular, but it is not a perfect investment target, and it still has a lot of flaws in its business and finance, which may become a stumbling block to its subsequent valuation to maintain high growth.
Riding on the IPO boom of Chinese concept stocks
In fact, the overseas IPO market used to be a popular exit channel for US dollar funds in the domestic primary market, but in recent years, due to a variety of factors, the overseas listing of Chinese enterprises was once cold, but since the end of last year, the regulator has continued to encourage mainland enterprises to list overseas, and support eligible enterprises to list overseas in terms of policy.
Zhitong Financial APP learned that in November last year, multiple domestic departments jointly issued the "Notice on Strengthening Financial Support Measures to Help the Development and Growth of the Private Economy", which specifically mentioned "supporting qualified private enterprises to go overseas and make good use of two markets and two resources"; On April 12 this year, the "National Nine Articles" once again mentioned "broadening the financing channels for overseas listing of enterprises and improving the quality and efficiency of overseas listing filing management." Strengthen regulatory capacity building under open conditions. Deepen international cooperation in securities regulation. ”
The above documents clearly express the attitude of domestic regulators to support enterprises to go out for financing from the policy side.
In addition to the frequent issuance of supporting documents on the policy side, in terms of policy implementation, the efficiency of filing and review by the domestic CSRC has also been significantly improved in recent years. According to the data, among the 362 U.S. stock companies to be listed, 84 companies have been approved for overseas listing, accounting for 23%. Compared with the number of approvals of 80 in 2023, it is a significant increase, which is one of the main reasons why the IPO of Chinese concept stocks and U.S. stocks has continued to heat up since the beginning of this year.
According to the statistics of Zhitong Financial APP, in the first quarter of this year, a total of 23 Chinese concept stock companies were listed on the US stock market, raising a total of about 2.344 billion US dollars. Among them, 1 company was transferred to the OTC board, 2 SPACs were listed, and the remaining 20 companies were listed on the main board of the NASDAQ by way of IPO. As of May 14 this year, there are also 3 Chinese concept stock companies successfully listed on the NASDAQ, and Lesson Standard Technology is one of them.
There are also multiple "hidden concerns" behind high growth
As mentioned above, Curriculum Standard Technology is not a pure educational institution, but a technology platform that is more inclined to educational services, which can be seen from its business and financial structure.
From the business side, 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 in 2022, and the company's annual revenue in 2023 will reach 15.571 million yuan; During the reporting period, 395,000 yuan, 5.36 million yuan and 9.562 million yuan. In this regard, the company explained that the rapid growth of revenue was mainly due to the lifting of new crown-related restrictions, and the growth of revenue also led to the growth of the company's net profit.
In addition, it is worth mentioning that during the reporting period, the net profit margin of the course standard technology was as high as more than 60%, which was much higher than the average level of the same industry. The reason for this is that the company, as a technology-biased enterprise, does not need to carry out C-end marketing like other online educational institutions. From the perspective of expenses, its sales expenses in 2023 will only account for 11.3% of the company's total costs and expenses in the current period, which is far lower than the cost of revenue and management expenses, and also lower than the R&D expenses in the same period, indicating that the company's investment in technology is greater.
However, there are also many hidden concerns behind the high-growth performance of Curriculum Standard Technology. In terms of revenue, the company's revenue mainly comes from the four categories of national adult college admissions unified examination, China Open University, self-study 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.
In recent years, the revenue of Curriculum Standard Technology 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 9.4406 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.
But behind the change in revenue structure, in fact, it is too dependent on large customers. In the risk factors of the company's prospectus, it is admitted 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.
In addition, the company also has the problem of regional revenue uniformity. In 2022 and 2023, 91.7% and 100.0% of the revenue of the company will come from Sichuan Province, and from the perspective of segmentation, Chengdu will account for the highest proportion. During the reporting period, revenue from Chengdu accounted for 90.7% and 98.1% respectively. Among the risk factors, the Company expects Sichuan Province to continue to be a significant source of its revenue.
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 0.29% 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 358 yuan in 2022 to 323 yuan in 2023. The average service price per student from the adult college entrance examination business has dropped from 334 yuan in 2021 to only 294 yuan in the first nine months of 2023.
To sum up, the reason why the market value of the company can quickly double after listing is more because of the recent boom in Chinese concept stocks and the "free ride" of U.S. technology stocks, but for itself, there are still certain hidden concerns at the business level, which may make it difficult to find a support point to stabilize the subsequent valuation growth after this wave of market speculation.