MAsia Pacific Insight China Education The View from 2030 We see significant long-term potential in new business initiatives for K12 after-school education players, but near-term uncertainty and volatility will be high. Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section , located at the end of this report. += Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. August 31, 2022 11:30 AM GMT每日免费获取报告 1、每日微信群内分享7+最新重磅报告； 2、每日分享当日华尔街日报、金融时报； 3、每周分享经济学人 4、行研报告均为公开版，权利归原作者 所有，起点财经仅分发做内部学习。 扫一扫二维码 关注公号 回复：研究报告 加入“起点财经”微信群。。 MAsia Pacific Insight 2 Morgan Stanley Asia Limited+ Elsie Sheng Equity Analyst +852 3963-0475 Elsie.Sheng@morganstanley.com Contributors Morgan Stanley Asia Limited+ Lillian Lou Equity Analyst +852 2848-6502 Lillian.Lou@morganstanley.comMAsia Pacific Insight Morgan Stanley Research 3Overseas models show new growth areas...: K12 after-school edu- cation demand persists in view of fierce competition to enter China's top universities, but it is becoming more diversified and fulfilled by different products. We analyzed business models in Korea, Japan and the US, and note that Korea (vs. Japan) has more diversified formats and higher penetration of home study programs, which evolved in the wake of Korea's 1980s-90s after-school tutoring (AST) ban. We identify opportunities in China outside academic tutoring, including: 1) home study content and service providers, 2) smart learning plat- forms/tools with advanced technology, 3) non-academic tutoring, and 4) deep cooperation with schools as in-school service providers. Industry View China Education | Asia Pacific In-Line...and long-term opportunities through 2030: We project that four subsegments – non-academic tutoring, learning devices, learning content, and education digitaliza- tion – will grow at 3%, 14%, 17%, and 6% CAGRs to reach Rmb685bn, Rmb106bn, Rmb102bn, and Rmb924bn by 2030, in our base case, which assumes that students and parents accept the new ways of learning, and that product offerings continue to be optimized over the next few years amid a stable regulatory envi- ronment with no unexpected headwinds. Our bull case suggests CAGRs of 6%, 17% 23% and 9%, respectively, and our bear case sug- gests 1%, 10%, 10% and 4%. Leading players have the edge in consolidation opportunities: We believe content and technology are the keys to success, and that leading players have both brand appeal and the ability to develop quality products given their understanding of what parents and stu- dents need. Assuming EDU and TAL continue to take share in the combined subsegments' Rmb1.8tn market, it implies 2-3 times poten- tial in long-term market cap by 2030. Discounting that back to now, at about a 10% annual rate, still implies 30-40% upside for TAL and EDU, and 100%+ for Youdao. We adopt an average of this long-term discounted valuation and SOTP valuation, based on our F24 esti- mates, to derive our price targets, with 10-30% upside, near term for EDU and TAL. Vocational training is sensitive to economic cycles: Travel restric- tions in April and May resulted in near-term disruptions to student recruitment and also course delivery, and therefore to revenue rec- ognition for CEE and Offcn. The delay in the civil service entry exam also had an impact on Offcn's revenue. While there has been a mar- ginal