Minsheng Securities·2025-05-31 04:15Investment Rating - The report maintains an "Overweight" rating for the education industry, highlighting the potential for recovery and growth in the sector driven by policy improvements and demand release [4]. Core Insights - The education industry is experiencing a "three-dimensional resonance" with policy improvements, supply-side clearing, and demand release, which is expected to enhance valuation [4]. - The industry is entering a phase of "survival of the fittest," where companies that have survived the "double reduction" policy are likely to benefit from market recovery [2][3]. Summary by Sections 1. Supply-Side Clearing and Securities Issues - The "double reduction" policy has accelerated the clearing of supply in the education sector, with offline institutions reduced by 92.14% and online institutions by 87.07% by February 2022 [10]. - The revised Private Education Promotion Law has hindered the securitization of education companies, limiting their ability to raise capital through traditional means [12][15]. - There is a growing trend towards vocational education supported by government policies, indicating a shift in focus within the industry [17]. 2. Opportunities in Secondary and Quality Education - The relaxation of the two-child policy has led to a demographic increase, forecasting a "golden decade" for secondary education with a significant rise in enrollment numbers [27]. - Quality education is rapidly developing post-"double reduction," with a projected market size exceeding 1 trillion yuan by 2027 [2]. - The competitive landscape is shifting towards a focus on established players and those with strong educational pathways, as smaller institutions struggle to survive [2][3]. 3. Policy Improvements and Demand Release - Since 2024, there have been marginal improvements in education policies, allowing for more flexibility in high school subject training and the establishment of profit-oriented institutions [3]. - The demand for education remains rigid, with various programs driving rapid demand release, particularly in elite talent cultivation [3]. - Publicly listed education companies are expected to be the primary beneficiaries of the market recovery, with significant improvements in financial metrics [3]. 4. Future Prospects and AI Integration - The report emphasizes the potential for valuation enhancement through AI applications in education, as the sector aligns with technological advancements [4]. - Key companies are recommended for investment based on their strategic positioning and ability to leverage AI in education [4]. - The overall valuation of the education sector is considered to be at a low level, presenting a timely investment opportunity [4].