In 20 years, two Jugla cycles have changed. Who ever thought of the old old company, Shulang, who had just started working as a learning machine, has lived to this day, and stood on the intelligent education hardware track full of strangers, competing with ByteDance, Tencent Holdings, Homework, ape coaching, Netease Youdao, and iFLYTEK.
Fifteen words are enough to sum up the current scholar: the revenue is 700 million, the growth rate is a little bit, and the business is huge.
Some people go to the examination room at night, others resign and return to their hometown. Different choices create different circumstances. The 22-year-old scholar has a wide range of “interests”, but his 18 martial arts skills are sparse. At this moment, he must make the most important choice in life when he is sprinting for IPO. In the face of new era rivals like Tencent, ByteDance and iFLYTEK, survival or decline is only in the front line.
01 Healthy education tablet
In 2018-2020, the revenue of the bookseller was 630 million yuan, 670 million yuan and 730 million yuan respectively, while the proportion of the educational live tablet to the total revenue was 62%, 67% and 75% respectively. The robust educational live broadcast tablet holds up most of the sky of the bookboy. Its year-on-year growth rate is 23%, which is 13 pct higher than the total revenue growth rate.
Figure 1: Business revenue of Shulang, source: Brocade Research Institute, company prospectus
The key to the stable cash flow of Fupan Shulang Education’s live tablet business lies in the rich teaching content built in and the accumulation of brand reputation for many years. The rich teaching content is described in the prospectus. The bookseller has accumulated 2964 animation courseware. Online question bank 29.1 million people. Pre-recorded video lesson 6900 hours.
The hardware itself is only a layer of skin. The rich teaching content is the soul of the education live broadcast tablet, which is the essence of continuous hardware consumption.
In addition to the education content, the market education activities of more than 20 years are another reason why the live educational tablet of Reading Lang can grow old and healthy.
Chen Zhiyong, the founder of Shulang, was the vice president of marketing of Xiaobawang Learning Machine, a super popular product of the year, and worked with Duan Yongping, the current investment master. In the early days of the era, the simple and harsh advertising words of the bookman – “Little boy boy, use bookman for reading”, which are characteristic of the times, are really a lot of people after 80 and 90 who have become parents.
As an enterprise of the older generation, Shulang has deeply practiced the act of “one sound of machine, ten thousand liang of gold”. It also has two flat panel production lines with an annual capacity of 1.2 million units to ensure compliance and product quality control. In addition to the well-established education tablet business, the diversified business portfolio of Shulang can not see much else, more or less: businesses that need to be significantly improved or must be abandoned immediately.
02 Where is smart education without research and development?
The smart education business of Shulang is mainly to provide primary and secondary schools with teaching tablets (for classes, and the front education live tablet is for users at home) and supporting teaching software systems.
In 2018-2020, the number of teaching tablets shipped by Shulang was 4300, 7100 and 21300, respectively, with corresponding revenue of 4.1 million, 7.25 million and 20.42 million. The revenue of the teaching software system in the same period was 410000 yuan, 910000 yuan and 1.87 million yuan, almost negligible.
The data does not lie. The smart education business of Scholar is still the logic of selling tablets. At ordinary times, this logic is not impossible. After all, the bookman is serious about making tablets. But at this time point, there is a big problem. There is a regulatory problem in the enrollment of educational tablets.
At the end of 2020, the market broke news that some schools forced students to buy thousands of yuan of teaching tablets, and linked the purchase of teaching tablets to the division of classes, which caused parents’ dissatisfaction. At the beginning of 2021, the Ministry of Education organized the “tablet teaching” investigation and rectification, and some schools were punished and ordered to refund student fees. Since then, the teaching tablet has become the school’s prudent decision.
At the same time, the regulations of the Ministry of Education on eye protection for primary and middle school students (the restriction on the use time of electronic devices such as mobile phones/tablets) have made the teaching tablet go further and further.
The scholar must return to the essence, and smart education must give wisdom to education, rather than playing the Internet business model of “paying for the wool on the pig”.
So how to do it? We believe that the first step is to increase investment. Without affordable R&D investment, where is smart education.
Without comparison, there is no harm. The R&D investment of Shulang in 2020 is only 30 million yuan. The gross estimate of the R&D investment of iFLYTEK in the field of smart education is 680 million yuan (the proportion of segment income multiplied by R&D expenses), which is 22 times that of Shulang. The R&D investment of the same kind of enterprises is 110 million yuan (half a year R&D investment multiplied by 2), 3.7 times that of Shulang.
Figure 3: R&D investment, source: Brocade Research Institute, company prospectus
Whether the investment in research and development of smart education is actually increased after the listing can be a window to observe the IPO motivation of Shulang. Whether it is really doing education, or continuing life for the tablet, or is itself a cash-out game.
03 7 core points of wearable devices
The wearable business of Shulang has seen a sharp decline in revenue in recent years, reaching 150 million yuan, 110 million yuan and 30 million yuan in 2018-2020.
Wearable devices focusing on watches and bracelets are very difficult to occupy a place in the market. There is not much difference between wearable devices, and the competitors are Huawei, Xiaomi and other companies with strong hardware capabilities.
Of course, we also need to know why. We can summarize seven core points of wearable devices: 1. Industrial design, whether the design of products can break the past rules and create a unique style; 2. Brand intelligence is the user’s first thought when buying related products; 3. BOM cost, which is mainly related to the scale of procurement; 4. User base, whether the existing users are the main consumer group or the guardian of the consumer group; 5. IoT ecosystem, the connection between multiple intelligent hardware to improve the user experience; 6. The product price is 299? I’m stubborn and only sell 69 to make friends.
At every level, compared with Xiaomi and Huawei, Shulang has no advantage of half a dime, and its overall competitive disadvantage is like that of a quail’s egghead hitting a diamond.
In addition to children’s watches and bracelets, which are two main wearable devices, the bookman also involves reading pens, intelligent scanning pens, intelligent learning lights and other devices. However, there are basically hot selling products in the market. The point reading pen has been popular for many years. The intelligent scanning pen is a popular product of NetEase, and the intelligent learning lamp is a product of ByteDance’s vigorous education campaign. The scholar who is following the strategy can’t see any breaking point.
04 Can online education in the dead end still crawl out?
Let’s look at the online education business of Shulang. The income is only 110 million yuan. Based on the annual contribution of 1500 yuan per student, there are about 76000 people who should pay fees. This is far from the head platform of online education.
XRS Online School+Monkey AI. In 2020, the revenue will be about 10 billion, and the number of people paying for the positive price courses will be nearly 8 million.
With Gaotu Classroom (who originally learned from), the revenue of K12 segment was 6.23 billion yuan in fiscal year 2020, and the number of people paying for the regular price class reached 5.87 million.
Together with education, the revenue of K12 business will be 1.219 billion yuan in 2020, and the number of people paying for regular courses will reach 2.018 million.
Ape counseling. In 2020, the revenue will exceed 20 billion yuan and the number of paying users will exceed 5 million.
In the past, the strategy of pre-installing the live course APP on the educational tablet had little effect. Now it is not realistic to take the growth path of mainstream online education (mainly relying on the overwhelming advertising to win customers). First, the funds are not supported. The mainstream companies burn money in the unit of 1 billion, the income of the bookman is only 700 million, and the net profit is 100 million. I really can’t afford it.
The second is that the regulatory environment is not supportive. On June 4, we released a report, “The road to self-destruction of online education begins with forgetting one’s surname” education “, which said:” Online education has not done education seriously, just like the Internet finance in the past decade has not done finance seriously, what about the said inclusive benefits? Finally, it all evolved into a capital game, which can be said to be “education on both sides, with the word” benefit “in the middle”. The whole industry ignores the most basic first principle: education quality. So it is subject to strict supervision. ” From these two points of view, the online education business of Shulang may not play a big role in the future.
05 Scholar needs to make a choice
We can use the Boston Matrix to distinguish several businesses of Shulang. According to the growth rate of the market and the market share of specific businesses, star products, problem products, Taurus products and thin dog products are distinguished.
Figure 5: Business analysis of Shulang, source: Brocade Research Institute
There are no star products for the time being. Taurus products and the educational tablet of Scholar are good. They can provide stable cash flow for the company to develop other businesses. This business can only be maintained.
Problem products, including smart education and online education. Smart education may not have no opportunity to increase investment in R&D and talent introduction. The scale effect of this industry is not so significant, and the education level in different regions is not consistent, and specific problems need to be solved. Online education should be given up selectively, 1 because it is too far away from mainstream companies, 2 because the bookseller can’t afford to play the money-burning advertising model, and 3 because of the regulatory adjustment of online education industry. Thin dog products and ready-to-wear devices are on the decline, and it is impossible to seize the top of the seven key competitive points in a short time, so this should also be given up immediately and concentrate on what should be done.
“The Innovator’s Dilemma” mentioned that “when facing the endless technological changes, enterprises are like seeking survival in the mud stream, and must always keep moving in the mud stream. If they pause a little, they will encounter the fate of extinction”. What the scholar should do most is to make up for the lack of R&D investment while moving on the mud flow.
Based on this criterion, we can see that the current Shulang is an educational tablet company with limited space, and the valuation can only be based on this qualitative anchor. The most ideal situation is to increase the investment in research and development. In the future, we can upgrade the problem product of smart education to a star product. At that time, we can advance, attack and retreat. Only in this way can we break away from the label of educational intelligent hardware and survive under the iron hooves of ByteDance and Tencent.