China’s online vocational learning set for rapid growth in what analysts label ‘megatrend’
China’s online vocational education industry is about to blossom into a major new consumer sector, thanks to changes wrought by mobile internet, as well as consumer enthusiasm for the new medium, according to a report by Citic Securities.
Citic Securities analysts led by Guo Yi said the market for online vocational learning is currently worth about 150 billion yuan, but will balloon to around 585 billion yuan by 2020.
“Online education represents a megatrend as the internet and mobile internet infrastructures develop and the user habits change,” Guo said.
Among factors fuelling the rapid growth, mainland Chinese are finding online learning can help broaden their employability at a time of increasing competition in the job market. Structural changes in the economy are also fostering demand for more highly skilled workers as manufacturers downsize their operations in China in favour of setting up shop in neighbouring countries where labour costs are lower.
Online learning encompasses two main categories. These include a consumer model which is targeted towards individuals seeking to improve their employability.
Another segment includes corporate training and teacher training.
Guo says he has a favourable view on several companies geared for growth in the sector.
Nasdaq-listed Tarenta International and China Distance Education Holdings, which is listed on the New York Stock Exchange, are two companies that should benefit from the growing trend.
“We believe the occupational skills training will become the mainstay in the online vocational education market given the stable number of exam takers and the policy directions. Looking ahead, the consumer size will continue to expand as online education penetrates into the offline education group, and the average revenue per user will gradually increase as heavy training replaces light training,” Guo said.
Guo noted that corporate training in China remains in the very early stages of developement. The market size was around 1 billion yuan in 2014, up 53 per cent from a year. Estimates suggest China’s online corporate training market could eventually be worth 50 billion yuan.
Citic Securities said it was initiating coverage of a number of mainland listed companies specialising in online training.
“We believe the online vocational education market will gain rapid development in the future,” Guo said.
Citic said it was upbeat on the prospects for China All Digital Publishing Group as well as Changsha Kaiyuan Instruments, a company poised to acquire the Chinese accountant training leader Heng Qi Education and the online vocational education leader www.wangxiao.cn.
Citic also highlighted mainland-listed Qtone Education. The company operates the leading online teacher training platform www.teacher.com.cn. Citic also highlighted Huamei Holding, which recently made acquisitions to increase its presence in vocational training and the teacher training market.
However, Guo warned the potential risks in the industry including if there are negative changes in the online education policies, lower-than-expected profitability, and uncertainties tied to individual education projects.