Investment Rating - The report maintains an "Outperform" rating for the social services sector [4][28]. Core Insights - Kevin Education has partnered with Zhizhu Huazhang to establish a joint venture focused on AI education, expanding its business into this new area while holding a 65% stake in the venture [2][14]. - In the first half of 2025, Kevin Education reported a revenue of 171 million CNY, reflecting a year-on-year growth of 12.51%, and successfully turned a profit [2][13]. - The joint venture aims to leverage Zhizhu's advanced model technology and Kevin Education's educational resources to provide intelligent products and solutions for schools and students [2][15]. Summary by Sections Industry Investment Rating - The report maintains an "Outperform" rating for the social services sector, indicating a positive outlook for the industry [4][28]. Company Dynamics - Kevin Education operates in three main segments: K12 school services, quality education services, and vocational education services, with a focus on enhancing educational quality and expanding its service offerings [2][13]. - The establishment of the joint venture with Zhizhu Huazhang is expected to enhance Kevin Education's capabilities in AI education, utilizing advanced technology to improve educational outcomes [2][14][15]. Market Performance - The consumer services sector experienced a decline of 3.42% during the reporting period, underperforming the broader market by 4.04 percentage points [3][16]. - Notable stocks within the sector included Xiabu Xiabu and Dongfang Zhenxuan, which saw significant gains, while stocks like Tianli International Holdings and Yuhua Education faced substantial declines [3][17]. Policy and Industry Trends - Recent government initiatives aim to stimulate service consumption, including measures to encourage non-academic training and optimize tourism experiences [21][22]. - The Ministry of Education has launched a plan to revitalize county-level high schools, focusing on resource expansion and balanced development [22].

Summary of Key Points from Conference Call Records Industry Overview - **New Consumption Sector**: The new consumption sector has experienced a significant adjustment, with valuations dropping to low levels. Mainstream companies have a PEG ratio close to 1, indicating potential opportunities around mid-year reports and into October. The growth rate of new consumption significantly outpaces traditional consumption, with leading companies maintaining over 30% growth, benefiting from online channels and expected improvements in GMV around the Double Eleven pre-sale period [1][2][4]. Core Insights and Arguments - **Market Trends**: The new consumption sector showed strong performance in Q1 2025, but faced volatility in March, leading to a rebound in April and May. Recent adjustments in the market have led to a stabilization and potential recovery [2][5]. - **Valuation and Pricing**: The PEG ratio for mainstream companies has reached around 1, reflecting previous pessimistic expectations. The paper industry is expected to transition from a left-side market to a right-side market, with price increases confirmed for black paper and cultural paper [2][14]. - **Investment Recommendations**: Companies with strong performance, ongoing category expansion, and innovative business models are recommended for investment, including Rui Chen, Bai Long Chuang Yuan, and others. The beverage and snack sectors are highlighted as the fastest-growing areas within the food and beverage industry [6][15]. Emerging Opportunities - **Technological Impact**: New technologies are reshaping consumer behavior, particularly in emerging fields like trendy toys and gold jewelry. Leading companies in these sectors are experiencing record growth, with a favorable chip structure and reasonable valuations [7][9]. - **AI Applications**: AI is widely applied in the consumer sector, with significant developments in smart glasses and AI education products. Companies like Tianli International Holdings are noted for their effective AI-driven educational programs [10][11]. Sector-Specific Insights - **Home Appliances**: The focus is on robotic vacuum cleaners, with leading companies like Roborock showing resilience against the weakening of national subsidies. The expected growth in the second half of the year is optimistic, with valuations remaining below 25 times [12]. - **Paper Industry**: The paper sector is transitioning to a price increase cycle, with clear buy signals for companies like Sun Paper and Jiulong Paper [13][14]. - **Pet Industry**: The upcoming Asia Pet Expo in August is expected to highlight the rapid rise of domestic brands in the pet food sector, with companies like Zhongchong and Guai Bao Pet showing strong potential [22]. - **Luxury Goods**: The luxury goods sector is experiencing a downturn, but high-net-worth customer loyalty is increasing. Brands like Prada and Coach are recommended for their potential resilience and growth [19][20]. Additional Noteworthy Points - **Investment in Apparel**: The new retail format in the apparel sector is showing significant breakthroughs, particularly with brands like Hailan Home collaborating with JD.com [16][17]. - **Livestock Sector**: The pig farming sector is seeing a slight increase in output, but prices may face pressure. Companies like Muyuan and Wen's are recommended for investment [23][24]. This summary encapsulates the key insights and trends discussed in the conference call, providing a comprehensive overview of the new consumption sector and related industries.

Summary of Key Points from Conference Call Records Industry Overview - The conference call discusses the transformation of the consumer industry driven by AI technology, highlighting opportunities in smart glasses, AI e-commerce, AI education, and AI personal services starting from 2025 [1][2][4]. Core Insights and Arguments 1. **AI Integration in Consumer Sector**: - AI will significantly impact the consumer industry, with smart glasses and AI-enhanced services expected to emerge as key areas of growth [2][5]. - Meta has successfully launched commercial smart glasses, prompting domestic companies like Xiaomi and ByteDance to follow suit, indicating a strong market potential for smart glasses [4][5]. 2. **Emotional Value Consumption**: - This includes IP content, addictive consumption (e.g., coffee, tea, new tobacco products), and self-indulgent consumption (e.g., gold jewelry, health and fitness) [1][6]. - Consumers are increasingly prioritizing emotional needs and personal preferences after basic needs are met, benefiting from the IP economy driven by a second baby boom and rising national confidence [1][6][16]. 3. **Cost-Performance Consumption**: - Expected to become a primary investment focus, with growth potential in discount retail stores (e.g., snack shops), functional brands, and second-hand trading platforms [1][6][9]. - Historical data from the US and Europe suggests that regardless of economic conditions, once material needs are satisfied, a shift to cost-performance consumption occurs [18]. 4. **Service Consumption Trends**: - Anticipated to see continued growth in both volume and price, potentially addressing employment issues and becoming a focus of policy support [1][6][23]. - The US service consumption share has reached 70%, while China remains predominantly goods-focused [23]. 5. **AI in E-commerce**: - AI e-commerce is enhancing cross-border trade efficiency through AI customer service and video editing translation, although profitability remains to be observed [3][7][10]. - AI tools have enabled international trade businesses to achieve 24/7 multilingual communication, significantly increasing transaction volumes [7]. 6. **AI Education**: - AI education can overcome traditional educational challenges, such as scalability, equity, and personalization [3][11]. - Companies like Tianli International Holdings have successfully launched AI education products, demonstrating positive outcomes [11]. Additional Important Insights - **Standardization in Service Industry**: - Standardization is crucial for scaling service consumption, with companies like Haidilao and Huazhu Group improving service quality through standardized practices [1][25]. - The online transition is seen as the best way to address marginal cost issues and achieve scale in the service sector [26][27]. - **Retail Channel Evolution**: - Japan's retail landscape has shifted towards high-cost performance channels, with discount stores rapidly growing and traditional pricing structures being disrupted [19][20]. - Retailers targeting low-income groups often report better profitability compared to those focused on the middle class [21]. - **Future of Service Consumption in China**: - With rising disposable income, service consumption in China is expected to grow, moving towards a balance of volume and price increases [23]. - The capital market has historically overlooked the service sector due to challenges in standardization and marginal cost issues, but successful companies can achieve significant growth once these challenges are addressed [24]. This summary encapsulates the key points discussed in the conference call, providing insights into the evolving consumer landscape influenced by AI technology and changing consumer preferences.