GLMS SEC released a research report stating that the education industry is experiencing a "three-dimensional resonance" from marginal policy improvements, industry supply consolidation, and the release of pent-up demand. First-quarter performance is highly anticipated, with valuation advantages becoming increasingly prominent, suggesting a potential "Davis double play" for both earnings and valuations. Furthermore, the education sector is a crucial application scenario for artificial intelligence, and the rise of AI+education is expected to enhance the industry's valuation potential. The firm believes now is an opportune time to allocate to the education sector and maintains its "Recommended" rating.
Key views from GLMS SEC are as follows:
Accelerated Commercialization of "AI+Education" to Deeply Benefit Industry Leaders The "15th Five-Year Plan" emphasizes coordinated development to build China into an education, sci-tech, and talent powerhouse, aiming to form an integrated development pattern for education, technology, and talent. It calls for the comprehensive implementation of the "AI+" initiative, promoting innovative teaching models such as intelligent learning companions and AI teachers, and deepening applications like precision teaching, personalized learning, and intelligent tutoring assistance. With the rapid advancement of the AI industry, "AI+education" has become a prevailing trend. The national "AI+" action and policies supporting technological education in primary and secondary schools are aiding the construction of an education powerhouse. Industry leaders are actively deploying in "AI+education," increasing investments in educational smart hardware and the development of large educational models to quickly capture market share in both software and hardware, positioning them to benefit significantly from the integrated development of AI and education.
Sustained High Growth in Education Sector Driven by "Three-Dimensional Resonance," Momentum Expected to Rise in Q1 2026 In recent years, the education sector has benefited from a "three-dimensional resonance" of marginal policy improvements, industry supply consolidation, and sustained demand release. Education policies have shown marginal improvements under the backdrop of building an education powerhouse, providing a relatively favorable environment for industry development. The sector has undergone policy-driven supply-side consolidation, with leading companies adopting contraction strategies and many small and medium-sized institutions closing or merging, leading to a clearing of industry supply. Factors such as school selection and further education are stimulating the release of educational demand, accompanied by an increase in average customer spending. Additionally, with the relaxation of the "two-child" policy and the arrival of "dragon babies," China experienced a minor baby boom between 2011 and 2017, suggesting a "golden decade" for middle school and college entrance exams and promising sustained growth.
Four Key Variables Support Earnings, Q1 Performance Highly Anticipated Four major variables—new student enrollments, renewal rates, average customer spending, and course scheduling and registration rates—determine the profitability of education companies. The current market environment is favorable for listed education companies, with rapid growth in contract liabilities and a relatively high order-to-revenue ratio, making first-quarter performance highly anticipated. After-school tutoring shows significant elasticity, with Xueda Education experiencing rapid growth in contract liabilities and Only Education accelerating its earnings release. International schools are developing steadily, with Kaiwen Education expected to reach an inflection point in its operational trends. The public examination sector is undergoing major changes, with Huatu Shanding emerging as the new leader, and its Q1 performance is anticipated to accelerate. Management training is seeing a strong recovery, with Act Education's Q1 performance highly anticipated. Higher education is developing well, with Botong's earnings release accelerating.
Risk warnings include changes in industry policies, intensified competition, enrollment falling short of expectations, and slow earnings release.