Diamond Equity Research, a leading equity research firm with a focus on small capitalization public companies has initiated coverage of QuantaSing Group Limited (NASDAQ: QSG). The in-depth initiation report includes detailed information on the QuantaSing Group’s business model, services, industry, valuation, management, and risks.
The full research report is available here. Highlights from the report include:
- Diversified Scalable Technology Platform Infrastructure Enabling Diversified Course Offerings – QuantaSing started its journey in July 2019 by launching its flagship online financial learning service, QiNiu. The company gained significant traction early on, making it the largest online financial literacy platform for adults in China. It then introduced enterprise-focused services in February 2020, followed by the launch of JiangZhen and QianChi as a part of the company’s other personal interest courses in August 2021 and June 2022, respectively. Building on its initial success in financial literacy and broadening the scope of its technology platform for adult learners, the company built “truly” diversified offerings, enabling it to scale, increase its revenue sources, and reduce its dependency on a single segment.
- Robust KPIs, Signifying Effective Strategy Implementation – QuantaSing has laid out a multifaceted growth strategy that leverages its core strengths in technology and educational content. The strategy focuses on increasing learners’ engagement and retention by continually enriching course offerings based on proven customer demand along with quality human capital and expanding the user base by using data-driven marketing approaches. Additionally, the company invests heavily in building proprietary technology and data analytics to optimize learner experience and operational efficiency. These efforts are being reflected in the company’s operating metrics and financial numbers. The total registered users grew from 17.0 million as of June 2021 to 94.3 million as of June 2023, while the total paying learners saw a healthy increase from 0.8 million for 2021 to 1.1 million for 2022. Moreover, the company has also extended its successful business model to other platforms and diversified by providing enterprise services. The enterprise services revenue has registered robust growth from RMB 144.31 million in 2021 to RMB 340.9 million in 2023. Finally, the company is eyeing overseas expansion and considering strategic collaborations, potentially through investments or acquisitions, to expand its market share. Recently, the company announced the acquisition of Kelly’s Education, an online language education platform, and forayed into the live e-commerce sector to further drive long-term growth.
- Leader in a Fragmented, Rapidly Growing Market – QuantaSing has secured a dominant role in China’s fragmented but rapidly expanding adult personal interest learning market. In a market characterized by the presence of many players, QuantaSing has held a leading position for two consecutive years. The adult personal interest learning market generated a revenue of RMB 153.5 billion in 2022 and is expected to grow at a CAGR of 14.1% from 2022 to 2027. While QuantaSing primarily focuses on the individual segments, there’s also burgeoning potential in the enterprise services segment, where businesses are increasingly investing in professional development programs for employees. QuantaSing’s growing brand recognition and customer loyalty allows it to leverage cross-selling and upselling opportunities, acting as a potential barrier to entry in a competitive market.
- The Need for Lifelong and Adult Learning – The rapid economic and technological growth in China has spurred an increasing demand for lifelong and adult learning as an economic imperative. Driven by advancements in automation and digitization and an aging workforce, the need for continuous upskilling and reskilling has never been greater. This urgency is further amplified by the deeply ingrained Chinese perspective that sees education as a holistic, lifelong endeavor, a view supported by overwhelming public opinion in recent surveys. In a society that highly values education for personal growth, workplace competence, and staying abreast with current times, adult learning programs and personal development are essential for sustained career paths and the overall economic vitality of the nation.
- Valuation – A blended discounted cash flow analysis and comparable company analysis approach, assuming a 13.0% discount rate, 1.5% terminal growth, and 1.95x EV/Sales multiple, yielded a valuation of $10.75 per share, contingent on successful execution by the company.
About QuantaSing Group Limited
QuantaSing Group Limited, founded in 2019 and based in Beijing, offers a variety of online courses for adult learners and enterprises services in China. Their educational brands include QiNiu, JiangZhen and, QianChi. For more information, visit https://ir.quantasing.com/
About Diamond Equity Research
Diamond Equity Research is a leading equity research and corporate access firm focused on small capitalization companies. Diamond Equity Research is an approved sell-side provider on major institutional investor platforms.
For more information, visit https://www.diamondequityresearch.com.
Diamond Equity Research LLC is being compensated by QuantaSing Group Limited for producing research materials regarding QuantaSing Group Limited, and its securities, which is meant to subsidize the high cost of creating the report and monitoring the security, however, the views in the report reflect that of Diamond Equity Research. All payments are received upfront and are billed for an annual or semi-annual research engagement. As of 10/04/2023, the issuer had paid us $60,000 for our company sponsored research services for coverage in English and Mandarin, which commenced 08/09/2023 and is billed annually. Diamond Equity Research LLC may be compensated for non-research related services, including presenting at Diamond Equity Research investment conferences, press releases and other additional services. The non-research related service cost is dependent on the company, but usually do not exceed $5,000. The issuer has paid us for non-research related services as of 10/04/2023 consisting of $3,000 for presenting at virtual investor conference. Issuers are not required to engage us for these additional services. Additional fees may have accrued since then. Although Diamond Equity Research company sponsored reports are based on publicly available information and although no investment recommendations are made within our company sponsored research reports, given the small capitalization nature of the companies we cover we have adopted an internal trading procedure around the public companies by whom we are engaged, with investors able to find such policy on our website public disclosures page. This report and press release do not consider individual circumstances and does not take into consideration individual investor preferences. Statements within this report may constitute forward-looking statements, these statements involve many risk factors and general uncertainties around the business, industry, and macroeconomic environment. Investors need to be aware of the high degree of risk in small capitalization equities, including the complete loss of their investment. Investors can find various risk factors in the initiation report and in the respective financial filings for QuantaSing Group Limited.
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