This Company Grew 400% After China Banned Its Business
The company, formerly known as Koolearn, is a subsidiary of New Oriental Education and it underwent a spin-off into a separate listing in 2019.
Two years ago, China implemented a ban on private tutoring during weekends and holidays for students under the age of 16. The intention behind this move was to alleviate the immense academic pressure on Chinese students, as many parents had been pushing their children to excel in their studies.
This regulation forced Koolearn to cease its tutoring services for these school-age students, which had previously accounted for more than half of its revenue. This development was extremely distressing for the company and share price tanked.
However, Koolearn refused to succumb to the setback. Instead, it underwent a transformation and pivoted towards a live-streaming business model, ultimately surpassing its original business in terms of revenue and profitability.
Koolearn ventured into a new endeavor by establishing a private label known as East Buy, specializing in agricultural produce, home essentials, and books.
During the fiscal year 2023, the Company achieved a revenue of RMB 4,509 million, marking a remarkable 402% growth compared to the prior year. Notably, it returned to profitability, boasting a net profit margin of 22%, a significant turnaround from the previous fiscal year when it incurred losses.
The ecommerce business segment accounted for a substantial 86% of the overall revenue. As part of its strategic shift, Koolearn has rebranded itself as East Buy (SEHK:1797), symbolizing the company's new direction and focus.
East Buy peddles its products on Douyin, boasting an impressive following of 41.8 million followers and recording 136.3 million paid orders during FY23.
However, another setback occurred on July 26 when one of its Douyin accounts, along with associated East Buy online stores, suddenly faced a three-day suspension.