On August 30th, Fenbi Co., LTD. (02469.HK, hereinafter referred to as "Fenbi") released its interim financial report for 2023. Driven by both offline and online channels, the company achieved double growth in revenue and profit. The report shows that in the first half of the year, Fenbi achieved a revenue of 1.682 billion yuan, representing a year-on-year increase of 15.9%. The adjusted profit was 288 million yuan, compared with 95.63 million yuan in the same period of the previous year, representing a year-on-year growth of 201.2%. The gross profit margins of the three major businesses all increased, with the overall gross profit margin reaching 50.9%, up from 47.5% in the same period of the previous year, an increase of 3.4 percentage points.
In the first half of 2023, as domestic economic activities continued to recover, the demand for non-academic vocational examination training also recovered simultaneously. However, the industry as a whole was still in an adjustment state.
The first interim results submitted by Fenbi after going public have given investors a strong boost. The robust performance is attributed to the company's commitment to doing the right thing since its establishment: with a dual-wheel drive of "online + offline", it has developed an OMO integrated model that can generate significant synergy effects and achieve the integration of a comprehensive portfolio of vocational examination training products and services.
Meanwhile, Fenbi, which has an inherent "Internet + technology" gene, is stepping up its layout in AI technology to fully empower its teaching and training services.On August 30th, Fenbi Co., LTD. (02469.HK, hereinafter referred to as "Fenbi") released its interim financial report for 2023. Driven by both offline and online channels, the company achieved double growth in revenue and profit. The report shows that in the first half of the year, Fenbi achieved a revenue of 1.682 billion yuan, representing a year-on-year increase of 15.9%. The adjusted profit was 288 million yuan, compared with 95.63 million yuan in the same period of the previous year, representing a year-on-year growth of 201.2%. The gross profit margins of the three major businesses all increased, with the overall gross profit margin reaching 50.9%, up from 47.5% in the same period of the previous year, an increase of 3.4 percentage points.
In the first half of 2023, as domestic economic activities continued to recover, the demand for non-academic vocational examination training also recovered simultaneously. However, the industry as a whole was still in an adjustment state.
The first interim results submitted by Fenbi after going public have given investors a strong boost. The robust performance is attributed to the company's commitment to doing the right thing since its establishment: with a dual-wheel drive of "online + offline", it has developed an OMO integrated model that can generate significant synergy effects and achieve the integration of a comprehensive portfolio of vocational examination training products and services.
Meanwhile, Fenbi, which has an inherent "Internet + technology" gene, is stepping up its layout in AI technology to fully empower its teaching and training services.
The mid-term net profit recorded a doubling growth, and the profitability continued to improve
Fenbi is the leading and pioneering provider of non-academic vocational education and training services in China. With online recruitment examination training as its driving force, it has made a vertical and horizontal layout both online and offline, opening up space for business growth.
Driven by multiple factors such as the improvement of external economic activities, the optimization of the company's business strategy, and the enhancement of operational efficiency, in the first half of 2023, Fenbi's online advantages were consolidated, and its offline business developed steadily through coordinated efforts. The implementation of the OMO model highlighted the synergy effect, driving the company's performance to achieve an unexpected growth.
During the reporting period, Fenbi recorded a revenue of 1.682 billion yuan, representing a year-on-year growth of 15.9% and achieving double-digit growth. The adjusted profit was recorded at 288 million yuan, compared with 95.63 million yuan in the same period of the previous year, representing a year-on-year increase of 201.2% and achieving a growth of more than two times.
Among them, the company's three major businesses advanced in parallel, and the gross profit margins increased simultaneously. A total gross profit of 856 million yuan was recorded, with a gross profit margin of 50.9%, compared with 47.5% in the same period of the previous year, an increase of 3.4 percentage points.
Looking at the performance of the three major businesses alone, in the first half of the year, the revenue of Fenbi's online training business was 730 million yuan, accounting for 43.4%, with a gross profit margin as high as 61%. The revenue from offline training business was 693 million yuan, accounting for 41.2%, with a year-on-year growth of 32.3%. The revenue from the teaching materials and tutorial materials business was 259 million yuan, accounting for 15.4% of the total revenue, with a year-on-year growth of 23.1%.
Online business is the core driving force for Fenbi's growth. In the first half of the year, the cumulative number of registered users on Fenbi's online platform steadily increased. As of June 30, 2023, Fenbi's online platform had a cumulative total of 56.2 million registered users.
It is understood that the number of paying students for the high-priced online premium classes of Fenbi has been continuously increasing, becoming a growth point for the online training business. Coupled with the OMO model's optimization of resource allocation, which avoids "internal friction", it can also efficiently convert paid students who have purchased online products into offline recruitment.
Offline business is another core business segment of Fenbi. According to Fenbi's interim performance report for 2023, in the first half of 2023, the revenue from offline business accounted for 41.2% of the total revenue, with a year-on-year growth of 32.3% in revenue and a year-on-year increase of 68.7% in gross profit. As of June 30, 2023, the company's offline training business has successfully covered the entire country and established 186 operation centers in strategic locations, with a slight reduction in the number compared to the end of 2022.
After three years of the pandemic, for the future development strategy of offline business, Fenbi has once again made it clear that it will not blindly expand. For regions without set up branches, it will make overall arrangements for the pre-registered students and centrally offer offline courses.
In early January this year, Fenbi was listed on the main board of the Hong Kong Stock Exchange at an issue price of HK $9.9 per share, raising a total of HK $120 million. As of June 30, 2023, the company's total liabilities were 890 million yuan, a significant decrease from 12.5 billion yuan before its listing. Net current assets reached 1.045 billion yuan, an increase of 84.9% compared with 565 million yuan as of December 31, 2022, further enhancing the financial health level.
The OMO model has a significant synergy effect and is enhancing the empowerment of teaching and research with AI technology.
Since its establishment in 2015, every innovation of Fenbi has been aimed at meeting the increasingly diverse learning needs of users. Technological innovation has been the foundation for Fenbi's continuous breakthroughs in the professional examination training industry and has created entry barriers. This is also an important reason why the company can attract investments from Tencent, IDG, Matrix and Hillhouse Capital.
Based on its strong product capabilities online, Fenbi has established a powerful and centralized operation system to ensure the synergy and operational efficiency of the integration of online and offline (OMO). In May 2020, Fenbi launched offline training to meet the diverse learning habits of students, expand the target market and serve a wider range of student groups. With the huge user base and good reputation accumulated through online business, it is capable of identifying users with offline education needs and converting them into offline students, effectively expanding offline business.
By actively promoting the OMO teaching model, Fenbi has not only met the demands of some students for classroom teaching forms, but also effectively integrated the high efficiency and strong targeting of online products into its products, solving the pain points of low utilization of teachers and venues in the traditional offline model.
Looking ahead, according to Frost & Sullivan's forecast, the market size of China's academic vocational education and training and non-academic vocational education and training is expected to reach 766.2 billion yuan and 331.7 billion yuan respectively in 2026, with compound annual growth rates of 6.5% and 8.4% from 2021 to 2026.
With the strong demand for non-academic vocational training in China, Fenbi is expected to leverage the OMO integrated model effect to further achieve economies of scale across all channels, create unique competitive value, and gain a higher market share.
Meanwhile, 2023 is a significant year for the development of AI technology. AI can be applied in multiple fields within the education sector, such as student learning, examinations, teacher teaching, and educational management. From the perspective of terminals and application scenarios, it can be said that education is one of the most direct and logically coherent application scenarios where the AI wave is taking root.
Institutional analysis indicates that AI+ education is an important application direction for AIGC. The education industry has a mature foundation for industrial informatization, a user base, and underlying data resources. The AIGC industrial chain has taken shape initially, and its application direction is scenarios of "high-frequency iteration" + "personalized demands".
In fact, AI+ education is also one of the core highlights and driving forces for the future growth of Fenbi. Its feature of "OMO integration + a huge online customer base" is precisely the natural and unique advantage for carrying out AI+ education, which will also become the company's differentiated core competitiveness in the AI era.
In the era of artificial intelligence, Fenbi has made forward-looking plans for AI technology. The company has successively developed and put into use RTC interactive live streaming systems, integrated data platforms, intelligent marking systems, optical character recognition and other technical facilities, and has taken the lead in realizing the application of artificial intelligence in the field of education.
According to the financial report, in the first half of this year, Fenbi's research and development expenditure was 143 million yuan, an increase of 67.7% compared with the same period last year. This was mainly due to the growth in related expenses paid to content and technical developers.
Fenbi disclosed that since the development of the intelligent marking system, a total of 150 million questions have been marked. In 2022 alone, the system served over 2.2 million people and corrected a total of 64.67 million questions. From understanding the examinees' answers to matching different approximate descriptions of the examinees based on the standard answers and determining the scores, this process takes less than half a second.
According to the internal calculation of Fenbi, it takes teachers about 5 to 10 minutes to grade each question of the same quality. Based on this, the cost of manual marking by teachers is approximately 10 yuan per question. Assuming that manual work can handle the same amount of workload as the system, the labor cost would exceed 600 million yuan. Obviously, the intelligent correction system not only helps Fenbi reach more users, but also saves labor costs, improves correction efficiency, and thereby enhances the company's cost management capabilities and increases its profit level.
With the release of Fenbi's unexpected interim report, multiple institutions including Huaxi Securities, CITIC Securities, Cinda Securities, and Guosheng Securities have provided comments on the company's interim report, all giving it a "buy" rating. Institutions point out that as the demand for non-academic vocational education and training continues to grow, Fenbi will fully benefit from the recovery of its offline business in the future, and its profit level is expected to be further enhanced.