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The crowded and competitive online education track may usher in a powerful new entrant.

Recently, the A-share listed company Huichang Communications (300578.SZ) announced that its newly established wholly-owned subsidiary, Beijing Huichang Education Technology Co., Ltd. (“Huichang Education”), has completed the registration procedure for the establishment of industry and Commerce and has obtained the “Business License” issued by the Chaoyang District Market Supervision Bureau of Beijing.

According to official information, Huichang Communication set up Huichang Education in order to speed up the layout of the education industry, promote the company’s development strategy of “using audio and video technology platform as the bottom capability, enabling vertical industry applications”, mainly providing cloud and video application solutions to the education industry. The registered capital of the new company is 50 million yuan, and the legal representative is Ms. Lu. She is currently the director, general manager and Secretary of the board of directors of Huichang Communications.

Current Chairman Huang Yuangeng (left) and General Manager and Dong Milu (right)

Nevertheless, the stunned companions are that although they are senior executives of Shanghai A-share listed companies and hold many important positions, Ms. Lu’s average salary in 2015-2018 is only 250,000 yuan, and her salary income is only about 35% of the company’s two independent directors, which is only a blue-collar level in Shanghai Beach and in my large A-share company. However, Lu Lu Lu currently holds 90,000 shares of company stock, and acquired 50,000 shares and 40,000 shares in 2017 and the first half of 2018, respectively. The latest market value is about 2.4 million yuan.

Two successive jumps in business transformation

Back to the truth.

Huichang Communications (300578.SZ), founded in 2006, is one of the largest multi-party communication service providers in China, mainly providing voice conference services to customers. On January 25, 2017, Huichang Communications was listed on the A-share GEM and became the first listed company in the field of cloud video conference in China. In 2018, the company’s strategic adjustment, the main business from the original voice conference to video conference, but also led to a significant decline in performance.

Freezing three feet is not a day’s cold. Huichang Communication’s performance declined dramatically in 2018, which is actually the result of both internal and external factors: with the development of technology and the popularization of video conferencing system, the traditional voice conferencing service is declining day by day. The internal reason is the weak growth of the company’s business. Its performance has been declining since the first two years of listing, and its profit has even reversed. A cliff-like fall occurred within 2018.

Poverty leads to change, change leads to flexibility, and generality leads to accessibility.

Huichang Communications switched from voice conference services to video conferencing. It also completed two acquisitions in succession and saved its first quarter of 2019.

In 2018, Huichang Communications acquired 85.0006% of Beijing Shuzhiyuan Science and Technology Co., Ltd. (“Shuzhiyuan”) and 100% of Shenzhen Tomorrow Industry Co., Ltd. (“Tomorrow Industry”) in the form of “cash + shares” with 390 million yuan and 650 million yuan respectively.

Through these two acquisitions, Huichang Communications has added research and development of video surveillance software technology, integrated sales of video surveillance system, and research, development, production and sales of information and communication cameras, broadcasting cameras and industrial application cameras. Frequently, the layout of business transformation has fallen into a solid hammer.

Huichang Communications 2019Q1 Main Accounting Data and Financial Indicators

Business strategy adjustment and mergers and acquisitions can boost performance immediately.

Q1 in 2019, Huichang Telecom’s revenue rose 119.26% year-on-year, non-net profit increased 499.65% year-on-year, asset size, key ratio and per share index improved significantly, and its share price rose 121.29% from the low of 14 yuan at the beginning of the year to 30.98 yuan at most. In this regard, the company’s explanation is: (1) the completion of major asset restructuring in the current period, the target company is included in the consolidated statement; (2) the non-recurring profit and loss items are defined as recurring gains and losses, and the impact on net profit is about 6 million yuan.

On April 26 this year, the board of directors of Huichang Communications passed a bill and decided to set up Huichang Education with its own fund of 50 million yuan. Two months later, Huichang Education was formally established.

Crowded crowds, how to kill a bloodstream?

Regarding the establishment of Huichang Education, Huichang Communications said that this is the company’s further promotion of the bottom capabilities of audio and video technology platform, enabling vertical industry applications and providing cloud video application solutions business to the education industry, through the establishment of Huichang Education as an investment management platform for the education industry, in order to speed up public service. The company’s related layout of the education industry, faster and better expand the relevant business of the education industry, improve the overall profit level and enhance the core competitiveness.

There is no doubt that China’s education market is big enough, the track is long enough and the opportunities are plentiful. Online education technology and means enrich and expand the depth and breadth of the education industry, which makes the rapid and sustainable growth of online education track full of expectations.

According to the “Research Report on Market Prospects and Investment Opportunities of Online Education Industry in China from 2019 to 2024” issued by the China Business Industry Research Institute, in recent years, with the joint promotion of technology, market and policy, the online education market in China has become more and more active. In 2015, the number of online education users in China was only 110 million, and in 2017, the number of online education users reached 1.7 billion. To 155 million people, preliminary estimates reached 201 million users in 2018, which is expected to exceed 220 million by 2019.

(Photo Source: China Business Industry Research Institute Report)

The report also shows that China’s online education market is still less than 90 billion yuan in 2014, breaking through 100 billion yuan in 2015, reaching 219.4 billion yuan in 2017 and exceeding 300 billion yuan in 2018, and is expected to break through 360 billion yuan in 2019.

Raising big fish in big rivers and rivers is full of ideals but skeletal in reality. You know, online education is a track in which lions, wolves, tigers and leopards gather, a start-up board company transforming from voice conference business to video conference business. Why dare cross-border online education become popular for several years?

Challenges exist objectively, but opportunities are created by oneself. Long before Huichang Education was established, Huichang Communication had strengthened its cross-border weight through acquisition.

Huichang Communications acquired the R&D and production capacity of monitoring products and multimedia conference video cameras through the acquisition of Shenzhen Tomorrow Industries, and acquired a series of patent rights and interests through the acquisition of Digital Intelligence Sources, including micro-class teaching platform, synchronous evaluation classroom platform and its methods, education resource management platform, teacher training management platform, cloud. Classroom platform, as well as other multimedia control, video management, video surveillance, intelligent video analysis technology and platforms.

In the future, with technological innovation and new technology application, including “AI + education”, face recognition technology, big data cloud computing, VR technology, 5G technology, etc., will gradually be applied to the scene of online education and constantly improve the teaching efficiency, athletes with relevant technical reserves will have more advantages.

But challenges and risks are also potential.

First, there are policy factors, such as the Opinions on Regulating the Development of Off-campus Training Institutions issued by the General Office of the State Council in August 2018, and the national regulatory documents on the development and standardization of the online education industry.

The second is the collision between fast science and technology and slow education. At present, online education is still in the exploratory stage. The continuous investment in the early stage, coupled with the long profit cycle of online education companies, will continue to invest in teaching and research, products, technology, marketing and so on. As a result, most online education enterprises are in the stage of money-burning and generally lose money.

Thirdly, how to coordinate the main business and empower the education business to achieve cross-border integration and development is also facing a test for the smooth communication of voice conference business. After all, the case of Xiuqiang’s five-year cross-border education disappointed in hope is at hand.

Fourthly, cross-border education requires large and long-term sustained investment, which will lead to pressure on the operation and performance of smooth communication, especially to test the cash flow of listed companies.

In short, the future of online education is bright, but the road to smooth education is bound to be tortuous.