CMSC International: 51Talk Online Education Group Sponsored ADR Online Education Group Sponsored ADR(COE.US) AI innovation unleashes growth potential with very attractive valuation.

CMSC International released a research report stating that 51Talk Online Education Group Sponsored ADR is a rising star in the vast English training market, currently holding a market share of approximately 0.5% (according to third-party reports, the total potential market size for the global non-China region market is around 16.9 billion USD). Its rapid growth is driven by market expansion and AI innovation. Currently, the forward P/S ratio for 51Talk Online Education Group Sponsored ADR in 2026 is 1.6 times, lower than the industry average of 2.0 times, and the PSG is 0.03 times (based on a 57% annual compound growth rate from 2025-2027 market consensus expectations), significantly lower than the industry average of 0.1 times. The firm believes the valuation is very attractive. The main points of view of CMSC International are as follows: Replicating the successful experience in China overseas, outstanding growth trajectory 51Talk Online Education Group Sponsored ADR is a global leading 1-on-1 online English education platform targeting K12 students, founded in 2011 and went public in 2016. Due to changes in Chinese regulatory policies, 51Talk strategically shifted its focus to overseas markets and completely divested its Mainland China business, currently operating in Hong Kong, the Middle East and North Africa, and Southeast Asia markets. Prior to the dual reduction policy, 51Talk had reached a peak total cash income of 2.7 billion RMB in 2020, with a net profit margin in the high single digits. The company is now replicating its successful domestic operating experience in new overseas markets, with a compound annual growth rate exceeding 80% for overseas total revenue from 2022 to 2024. AI and localized operations empower bright prospects In the second quarter of 2025, total cash income was 28.5 million USD, a 79% year-on-year increase, with active student numbers growing by 68% to reach 91,300. Group revenue was 20.4 million USD, an 86% year-on-year increase, with a gross profit margin of 75%. The company projects that total cash income for the third quarter of 2025 will grow by 85-90% year-on-year, showing accelerated growth, driven by continued market expansion and penetration, as well as brand promotion activities (such as Riyadh promotional activities). The firm believes two key drivers will continue to support its rapid and sustainable growth: 1) AI efficiency improvement, including AI tools for content/marketing material development, AI teachers, AI tools for teacher recruitment and training, AI free trial lessons, real-time translation, and teacher-student operational management. 2) Localized operations: 51Talk has established local offices in multiple regions, offering customized course packages to meet personalized needs, as well as launching localized marketing content and offline activities to enhance brand awareness and user engagement.