Lixiang Education Holding’s FY2024 Earnings: Narrowing Losses Amid Structural Challenges

Lixiang Education Holding (NASDAQ: LXEH) reported its FY2024 results, marking a CN¥21.11 loss per share, a dramatic improvement from the CN¥131.00 loss per share in 2023. While the company narrowed its net loss by 80.6% to CN¥24.63 million, its revenue plummeted 35.4% to CN¥32.8 million, underscoring persistent headwinds in China’s education sector. Below, we dissect the financials, strategic shifts, and risks investors must weigh.

Revenue Decline and Cost Control

The CN¥18 million drop in revenue reflects declining enrollments at core operations, including the disposal of the underperforming Qingtian International School and reduced government grants for vocational programs. Meanwhile, operating expenses fell 17% to CN¥9.7 million, driven by:
- Labor cost cuts: Savings from closing underperforming schools offset by costs tied to new initiatives like Lishui International School.
- Legal dispute resolution: A RMB1.2 million reversal of credit losses from Beijing S.K. disputes.

Despite these measures, gross profit collapsed 94% to CN¥0.3 million, as fixed costs like property taxes rose sharply. The company’s cash reserves of CN¥230.6 million provide a liquidity buffer but highlight reliance on non-operational income, such as government grants.

Strategic Shifts and Regulatory Compliance

Management has prioritized survival amid regulatory crackdowns on private education in China. Key moves include:
1. Nasdaq Compliance: A 1-for-10 reverse stock split in September 2024 restored the stock price above $1.00, avoiding delisting.
2. Operational Realignment: Closing underperforming schools while expanding into Southeast Asia, where revenue rose 30% in FY2024 (if the earlier data about $500M revenue is accurate, though conflicting figures exist).
3. Diversification: Shifting focus to AI-driven education tools and partnerships with international institutions to enhance competitiveness.

Risks and Uncertainties

• Regulatory Uncertainty: China’s education policies remain a wildcard, with potential further restrictions on private institutions.
• Competitive Pressure: Giants like New Oriental Education (market cap: $8.2B) dominate the sector, squeezing smaller players.
• Execution Risks: Southeast Asia expansion and tech integration depend on uncertain student demand and regulatory environments abroad.

Investor Takeaways

While Lixiang’s reduced losses signal cost discipline, its 35% revenue drop and razor-thin margins raise concerns about long-term sustainability. The stock’s CN¥2.10 price (market cap: CN¥24 million) reflects investor skepticism, but its cash reserves and strategic pivots suggest a hold rating for now.

Conclusion

Lixiang Education’s FY2024 results are a mixed bag: operational resilience in cutting losses contrasts with strategic vulnerability in revenue generation. The company’s survival hinges on executing its Southeast Asia growth strategy, navigating regulatory hurdles, and rebuilding brand equity. While the stock’s low valuation offers a speculative opportunity, investors should remain cautious until clearer signs of revenue recovery emerge.

Final verdict: Hold for now, but monitor regulatory developments and international expansion progress closely.