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Chinese education groups prove their worth in coronavirus lockdown scenarios

Credit Suisse recently highlighted the growth spurt the Chinese education sector has seen

EdtechX Holdings -

China’s rapidly growing online education sector has come into the spotlight with the lockdown in the country sparked by coronavirus.

Chinese click and brick ‘edutechnology’ groups listed in the US have outperformed the rest of the market by 11.5% since the start of the year, with pure online tutoring companies doing even better with a 47.5% rise.

In a recent report, Credit Suisse highlighted the growth spurt the Chinese education sector has seen in recent years.

After-school tutoring especially has seen demand surge, says the bank, with China’s two market leaders – New Oriental Education and TAL Education increasing revenues rise by 3 times and 8 times respectively over the last 5 years.

Online specialists have been growing even faster with listed Chinese firms GSX Techedu and YouDao currently increasing revenues by more than 100% per year.

Digital technologies advances mean school tutoring services can be delivered to the most remote areas at an affordable price and deal with large numbers of students, said Credit Suisse.

Another deal expected to conclude shortly is the merger between Nasdaq-listed SPAC EdtechX Holdings (NASDAQ:EDTX) and Chinese omnichannel education group Meten.

EdTechX, which recently received a US$20mln cash commitment from Italian fund manager Azimut Holdings (BIT:AZM), is paying US$535mln for Meten, a deal it unveiled just at the start of the coronavirus outbreak in December.

Based on 2019 earnings, the price of the deal values Meten at a 68% discount to the value of China’s listed omnichannel groups and an 82% discount to the pure online groups.

Credit Suisse added the sector looks set to grow strongly over the long term as on a per capita basis China spends less than US$500 on education, compared to more than US$3,000 in the US and UK.

Consultant Mckinsey, meanwhile, predicts that online learning combined with artificial intelligence will drive US$13trn of global economic growth by 2030.

Quick facts: Meten EdtechX Education Group Ltd

Price: 11.2 USD

Market: NASDAQ
Market Cap: $596.88 m

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