Stock Analysis & Valuation Dalian My Gym Education Technology Co.,Ltd. (002621.SZ)

• Previous Close: $0.37
• Sector Valuation Confidence Level: Moderate

Valuation method	Value, $	Upside, %
Artificial intelligence (AI)	27.63	7368
Intrinsic value (DCF)	0.88	138
Graham-Dodd Method		n/a
Graham Formula	24.08	6408

Strategic Investment Analysis

Company Overview

Dalian My Gym Education Technology Co., Ltd. is a China-based education service provider that has undergone a significant transformation from its origins as Dalian Sunlight Machinery Co., Ltd. Founded in 1983 and now headquartered in Beijing, the company specializes in comprehensive educational programs targeting high school, junior high school, and senior elementary school students. My Gym Education offers a diverse portfolio including early education services, systematic training courses, professional examination preparation, and international standardized test training for SAT, SSAT, TOEFL, and ACT. The company's curriculum extends beyond academic subjects to include holistic development through joyous classes, music, art, and skill-building programs focusing on motor skills, cognitive development, language acquisition, and early social skills. Operating in China's competitive private education sector, the company faces both regulatory challenges and market opportunities as it navigates the post-pandemic educational landscape. Despite its industrial machinery sector classification, My Gym Education represents a unique play in China's education technology space, serving the growing demand for supplementary education services among Chinese families seeking competitive advantages for their children's academic and personal development.

Investment Summary

Dalian My Gym Education presents a highly speculative investment case with substantial financial challenges. The company reported a significant net loss of CNY 949.2 million for FY 2023, with negative operating cash flow of CNY 73.1 million, indicating severe operational difficulties. While the company maintains a cash position of CNY 145.2 million, it carries total debt of CNY 165.4 million, creating liquidity concerns. The education technology sector in China faces regulatory headwinds following recent government crackdowns on private tutoring, which may constrain growth prospects. The company's market capitalization of approximately CNY 304 million reflects investor skepticism about its turnaround potential. Positive factors include the company's diversified educational offerings and established presence in the Chinese education market, but these are overshadowed by fundamental financial weaknesses and sector-specific regulatory risks. Investors should approach with caution given the substantial losses and challenging industry environment.

Competitive Analysis

Dalian My Gym Education operates in China's highly fragmented and competitive private education market, which has undergone significant transformation due to regulatory changes. The company's competitive positioning is challenged by its financial distress and the broader industry shakeup following China's 2021 crackdown on for-profit tutoring. My Gym's competitive advantage appears limited compared to larger, better-capitalized players who have successfully pivoted to compliant business models. The company offers a broad curriculum spanning test preparation, early education, and enrichment activities, but this diversification may dilute focus and operational efficiency. Their transformation from industrial machinery to education technology suggests strategic repositioning, but the timing coincided with regulatory headwinds that have hampered execution. The company's scale is modest relative to market leaders, with revenue of CNY 107.4 million placing it in the small-to-mid tier of education providers. Competitive disadvantages include negative cash flow, substantial debt burden, and limited resources for technology investment compared to well-funded edtech competitors. The company's survival likely depends on its ability to streamline operations, reduce costs, and identify sustainable niches within the regulated education landscape. Their historical presence since 1983 provides some brand recognition, but this advantage is offset by financial constraints that limit marketing and expansion capabilities.

Major Competitors

• TAL Education Group (TAL): TAL Education is one of China's largest education service providers with significantly greater scale and resources than My Gym. The company successfully navigated regulatory changes by pivoting to non-academic tutoring and learning content development. TAL's strengths include strong brand recognition, technological capabilities, and substantial cash reserves. However, the company faces ongoing regulatory uncertainty and the challenge of rebuilding its business model post-crackdown. Compared to My Gym, TAL has demonstrated better adaptability but operates in a similarly constrained regulatory environment.
• New Oriental Education & Technology Group (EDU): New Oriental is a pioneer in China's private education sector with extensive experience and global recognition. The company has diversified into livestreaming e-commerce and overseas test preparation, showing remarkable resilience post-regulation. New Oriental's strengths include its strong brand, international presence, and innovative adaptation strategies. Weaknesses include reliance on new business models that are still proving their sustainability. Compared to My Gym, New Oriental has superior financial stability and brand equity, making it better positioned to withstand industry challenges.
• New Hope Service Holdings Limited (01797.HK): While not a direct competitor in education services, New Hope Service represents the type of company that My Gym transformed from - industrial/manufacturing businesses pivoting to new sectors. This comparison highlights the challenges of successful business model transitions. The company's strengths include stable cash flows from property management services, but it faces competitive pressures in its core market. The comparison illustrates the difficulties My Gym faces in establishing itself in an entirely new industry.
• Shanghai Xinzhuang Industry Co., Ltd. (600661.SS): As another Chinese company that has undergone business transformation, Shanghai Xinzhuang provides context for My Gym's strategic shift. The company's experience highlights the execution risks and timing challenges involved in major business model changes. While not an education sector peer, it demonstrates the broader trend of Chinese industrial companies seeking growth in consumer services sectors, with mixed success rates depending on management capability and market conditions.