GLMS SEC has released a research report stating that the education industry is experiencing a "three-dimensional resonance" of continuous marginal policy improvements, supply-side consolidation, and demand-side release. The investment logic for the sector has shifted from being policy-driven to being performance-driven. With relatively low valuations, the sector is poised for a potential "Davis double-click" on both earnings and valuations under supportive policies. Simultaneously, the education sector is a crucial application scenario for AI, making "AI + Education" the primary investment theme. Leading education companies are expected to benefit significantly from the development of "AI + Education." The firm maintains a "Recommended" rating for the sector. The main points from GLMS SEC are as follows:
Integration of Education, Technology, and Talent; "AI+Education" Leads Industry Development
Education is the foundation for building a strong nation and achieving national rejuvenation. The guidance for the education sector during the "15th Five-Year Plan" period has seen a strategic upgrade from "building a high-quality education system" to "integrating the development of education, technology, and talent" and "running education that satisfies the people." With the rapid development of the AI industry, "AI + Education" has become a major trend. The state has initiated the "AI+" action and introduced policies for science and technology education in primary and secondary schools. Industry leaders are actively deploying in the "AI + Education" space, increasing investments in educational smart hardware and the R&D of large educational models to quickly capture market share in both software and hardware. These leaders are poised to deeply benefit from the integrated development of "AI + Education."
Golden Decade for High School and College Entrance Exams; "Civil Service Exams" in High Demand
Due to the relaxation of the "two-child" policy and the arrival of "Dragon babies," China experienced a minor baby boom from 2011 to 2017. The scale of new births influences student enrollment numbers, and China is expected to usher in a "golden decade" for high school and college entrance exams, with the associated market poised for sustained growth. Concurrently, quality-oriented education has developed rapidly after the "double reduction" policy, with diverse offerings like arts and sports, STEAM, camps, and research-based learning flourishing. This market is expected to exceed a trillion-yuan scale by 2027. Furthermore, influenced by the continuous growth of university graduates and their employment preferences, "civil service exams are in high demand." The number of applicants repeatedly hits new highs, and the admission ratio continues to rise, presenting a development opportunity for the "civil service exam" sector.
Policy Improvement and Birth Encouragement to Unleash Education Demand
The main thrust of the regulations is "how to develop," "standardize development," and "healthy development." The measures have clarified and detailed the approval authority for existing compliant after-school academic tutoring institutions, indicating marginal improvements in education policy. Simultaneously, the state encourages childbirth by providing subsidies and aims to gradually make preschool education free. Additionally, education demand is inelastic. Driven by initiatives like "early cultivation" programs, top-tier talent cultivation such as Fudan University's "Dandan Camp," and the "Strong Foundation Plan," this demand is expected to be released.
Strong Q1 Foundation Sets Stage for Future Education Company Performance
The profit recovery trend for key education companies in 2025 is clear. In Q1 2026, influenced by a high base, seasonality, and intensified industry competition, revenue and net profit growth rates showed divergence. Leading companies, relying on their scale and compliance advantages, maintained operational resilience. Xueda Education saw steady growth in revenue and profit, while Only Education experienced a significant acceleration in performance release. Management training has bottomed out and rebounded; Action Education achieved a comprehensive performance reversal in the second half of 2025, with continued impressive results. The landscape for "civil service exams" has changed significantly, with the "new leader" Huatu Shanding posting high growth in 2025 performance. Although the study abroad sector is under pressure, high-quality international education is less affected, with Kaiwen Education achieving steady growth in revenue and profit. The education industry's prosperity is expected to continue, with promising future performance.
Key Risks to Consider
Risks include changes in industry policies, intensified industry competition, enrollment falling short of expectations, and slow performance release.