Good News on Listing | Frost & Sullivan Assists China Tongcai Education Group Co., Ltd. to Successfully List on the Hong Kong Stock Exchange (2175.HK)

China Tongcai Education Group Co., Ltd. (hereinafter referred to as 'Tongcai Education') successfully went public on July 16, 2021, issuing 125 million shares globally at a subscription price of HK$3.69 per share. The net proceeds from the global offering amounted to approximately HK$410 million. Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') provided exclusive industry advisory services for Tongcai Education's listing, and we hereby extend our warmest congratulations on its successful listing.

During the Hong Kong listing process, Frost & Sullivan mainly undertook the following tasks: helping the company accurately and objectively understand its positioning in the target market, using objective market data to discover, support, and highlight the company's competitive advantages, assisting the company, investment banks, and other intermediaries in completing the relevant parts of the prospectus (such as the overview, competitive advantages and strategy, industry overview, business, and other important sections), facilitating communication with the Hong Kong Stock Exchange and investors, helping investors quickly understand the market ecosystem and competitive landscape, and assisting the company in completing feedback on various industry-related issues from the Hong Kong Stock Exchange.

Generally speaking, China's general education system can be divided into academic and non-academic education. Academic education includes basic education (including preschool to high school education), secondary vocational education, and higher education. Academic higher education can be provided by specialized colleges or universities. The academic education system offers students the opportunity to obtain official certificates issued by the Chinese government, while the non-academic education system only allows students to obtain completion certificates that are not officially recognized by the Chinese government for their training and study courses. The following diagram illustrates China's education system.

Higher education in China can be divided into public higher education institutions (established and operated by the Chinese state or local governments) and private higher education institutions (usually established by individuals or private entities). Most funds for public higher education institutions come from government appropriations, with only a small portion coming from tuition fees and other miscellaneous expenses. In contrast, most funds for private higher education institutions come from school operating income, such as tuition fees and other miscellaneous expenses.

According to a Frost & Sullivan report, the private higher education industry in China has developed rapidly since early 1990 due to the efforts of relevant government agencies to establish regulatory frameworks for private higher education. Private higher education institutions in China include private general junior colleges (which provide diplomas to graduates), private general universities or colleges (which offer bachelor's degrees or above in addition to junior college diplomas), and independent colleges (which are jointly run by non-governmental institutions or individuals with public universities and colleges, offering undergraduate programs).

According to the Frost & Sullivan report, the total revenue of the private higher education industry has been steadily growing, increasing from RMB 925 billion in 2015 to RMB 1356 billion in 2019, with a compound annual growth rate of 10.0%. It is expected that this will continue to grow to RMB 1984 billion by 2024, representing a compound annual growth rate of 7.9% from 2019 to 2024. The following chart illustrates the past and forecasted total revenue of China's private higher education industry from 2015 to 2024.

According to the Frost & Sullivan report, Shanxi Province is one of China's less developed provinces, but it is now growing rapidly. Its nominal GDP increased from 1.2 trillion yuan in 2015 to 1.7 trillion yuan in 2019, with a compound annual growth rate of 9.7%. Resources for higher education are relatively scarce across the province. In 2019, there were a total of 2,688 higher education institutions in China, including 768 private higher education institutions. In 2019, Shanxi Province had only 82 higher education institutions, among which only 15 were private. In 2019, Shanxi ranked 16th and 22nd in terms of the number of higher education institutions and private higher education institutions respectively. The number of private higher education institutions in Shanxi Province is less than that in neighboring provinces such as Shaanxi Province and Henan Province (with 95 and 141 private higher education institutions respectively). In 2019, the total number of higher education institutions in North China was 258, including 69 private higher education institutions. In 2019, the total enrollment of the 15 private higher education institutions in Shanxi Province was 138,800 students, accounting for only 17.3% of the province's total enrollment of 802,000 students in higher education. In 2019, the number of enrollments and total revenue of private higher education in Shanxi Province accounted for 2.0% and 1.7% of China's private higher education market respectively. According to the Frost & Sullivan report, there is vast exploration space and potential for the development of private higher education in Shanxi Province.

The total revenue of the private higher education industry in Shanxi Province increased rapidly from 1.6 billion yuan in 2015 to 2.3 billion yuan in 2019, with a compound annual growth rate of 8.9%. In 2020, two independent colleges in Shanxi Province were transformed into private higher education institutions, resulting in a decline in the total revenue of private higher education for that year. In addition, according to the 'Report on the Transformation of Independent Colleges in Shanxi Province', another independent college is expected to transform into a private higher education institution in 2021. After the adjustment period following this transformation of independent colleges, the total revenue of private higher education in Shanxi Province is expected to maintain stable growth and increase to 24 billion yuan by 2024, representing a compound annual growth rate of 0.4% from 2019 to 2024. Based on the revenue in 2019, private higher education accounts for 9.9% of the overall higher education industry in Shanxi Province. The table below illustrates the total revenue of the private higher education industry in Shanxi Province from 2015 to 2024.

According to the Frost & Sullivan report, in the 2020/2021 academic year, there were 13 private higher education institutions in Shanxi Province. The private higher education market in Shanxi is relatively concentrated, with the five major operators accounting for about 60.2% of the market share based on the number of full-time students enrolled in the 2020/2021 academic year. According to the Frost & Sullivan report, in the 2020/2021 academic year, based on the number of full-time students enrolled in Shanxi Province, the group was the largest private higher education institution, with a market share of about 15.6%. The following table illustrates the number of students enrolled and respective market shares of the five major private higher education institutions in Shanxi Province for the 2020/2021 academic year.

In addition, in 2019, the Group ranked first among all private higher education institutions in Shanxi Province by graduate initial employment rate, with an initial employment rate of about 90.8%, while the average initial employment rate of private higher education institutions in Shanxi Province was about 73.5%.

Frost & Sullivan has extensive research experience in the education industry, assisting well-known enterprises in successfully listing on the capital market. Successful listings include South China Vocational Education (6913.HK), YQ Education (YQ.NASDAQ), New Oriental (9901.HK), LXEH Education (LXEH.NASDAQ), Hongen Education (IH.NYSE), LXEH Education (LXEH.NASDAQ), Neusoft Education (9616.HK), Lide Education (1449.HK), Huaxia Audio-Visual (1981.HK), Dashan Education (9986.HK), Huaxia Boya (CLEU.NASDAQ), METX English (METX.NASDAQ), Jianqiao Education (1525.HK), Chenlin Education (1593.HK), Huali University Group (1756.HK), Youdao (DAO.NYSE), Xiang China International (1871.HK), Zhonghui Group (0382.HK), Think Learning Education (1769.HK), Jiahong Education (1935.HK), China Oriental Education (0667.HK), Genshuixue (GSX.NYSE), New Oriental Online (1797.HK), Kepai Education (1890.HK), Ginkgo Education (1851.HK), Excellence Education (3978.HK), Chunlai Education (1969.HK), Hope Education (1765.HK), Bujun Education (1758.HK), Tianli Education (1773.HK), Puxin Education (NEW.NYSE), 21st Century Education (1598.HK), Huanggang Education (8105.HK), Jingrui Education (ONE.NYSE), Xinhua Education (2779.HK), China Education Holdings (0839.HK), FEDU Education (FEDU.NYSE), REDU English (REDU.NASDAQ), BEDU Education (BEDU.NYSE), New Higher Education Group (2001.HK), Minsheng Education (1569.HK), Yuhua Education (6169.HK), Ruijian Education (6068.HK), 51Talk (COE.NYSE), Chengshi Foreign Language Education (1565.HK), Maple Leaf Education (1317.HK), and others.