Amid the surge in AI technology, fund managers are seeking new growth opportunities in undervalued sectors. The vocational education sector, which has long been at the bottom in terms of valuation and performance, is experiencing a turning point in allocation by mutual funds.
It has been noted that leading companies in the vocational education sector, heavily held by mutual funds—such as New Oriental, TAL Education Group, CHINA EAST EDU, and China Education Group—have collectively delivered strong financial results by integrating AI technologies, showing a significant surge in profitability. This has attracted a shift in institutional capital allocation. On one hand, funds are actively entering the vocational education sector by leveraging the booming AI industry to capture performance flexibility and valuation rotation opportunities. On the other hand, they are optimistic about vocational education's expansion into new formats such as service-oriented consumption and the self-indulgence economy. Amid the rotation between high and low valuation sectors, the vocational education segment, with its stable cash flow and dividend attributes, is becoming a key allocation direction for mutual funds.
Funds are optimistic about valuation rotation, with AI-driven education companies collectively releasing profits.
Driven by the wave of AI technology, the vocational education sector, where funds have heavy positions, is showing an overall improvement in performance. The industry is emerging from a prolonged period of adjustment, with several leading companies issuing密集 profit forecasts. AI has become the core force driving profitability recovery in the vocational education sector.
It has been observed that mutual funds have recently begun targeting the performance inflection point in the vocational education sector. Leading companies like New Oriental, TAL Education Group, CHINA EAST EDU, and China Education Group have successively disclosed better-than-expected profits. After years of decline, the industry is entering a new development cycle fueled by the AI technology boom. New Oriental, heavily held by Bosera Fund, recently announced its financial results for the second quarter of fiscal year 2026 (ending November 30, 2025), reporting revenue of $1.191 billion, a year-on-year increase of approximately 15%, and operating profit of $66.31 million for the quarter, surging 244.4% compared to the same period last year.
TAL Education Group, a major holding of Harvest Fund, also achieved high growth driven by the AI trend. The company reported its financial results for the third quarter of fiscal year 2026 (covering the period from September 1, 2025, to November 30, 2025), with net revenue of $770 million, up 27% year-on-year, operating profit of $93.123 million, and net income attributable to shareholders of $131 million, skyrocketing 466.1% year-on-year, fully demonstrating profit flexibility.
CHINA EAST EDU, which focuses on前沿 areas such as AI gaming education, AI animation and new media education, and AI drones, has achieved rapid revenue growth through AI technology. The company disclosed that its net profit for fiscal year 2025 is expected to exceed RMB 700 million, an increase of over 45% year-on-year. Additionally, the company is expanding into细分 vocational education sectors like hairdressing and pet care using AI, becoming a key target for A-share fund managers looking for new models and businesses in Hong Kong stocks. This has attracted mutual funds that are bullish on AI and prefer undervalued stocks. Ping An Fund, Yongying Fund, and China Asset Management have simultaneously included CHINA EAST EDU in their top ten holdings. According to持仓 information from Ping An Consumer Selection Fund, CHINA EAST EDU entered the fund's top ten holdings at the end of 2025.
Furthermore, China Education Group, a Hong Kong stock covered by mutual funds, also experienced an earnings surge in 2025. For fiscal year 2025 (September 1, 2024, to August 31, 2025), the company reported revenue of RMB 7.363 billion, an increase of 11.92% year-on-year, and net profit of RMB 977 million, a significant rise of 133.73% year-on-year. China Chunlai, a vocational education leader infused with U.S. AI blockchain assets, which has established four AI colleges, disclosed revenue of RMB 1.791 billion for fiscal year 2025, up 9.75% year-on-year, and net profit attributable to shareholders of RMB 836 million, reaching a record high. The growth logic under AI empowerment is gradually materializing.
Focusing on new growth in old sectors, mutual funds intensively research the vocational education track.
Against the global trend of AI technology proliferation, mutual funds conducted密集 research on the vocational education sector from late 2025 to early 2026, highlighting the new logic of demand expansion and business model upgrades in the education industry driven by AI. Institutional attention to the sector continues to heat up.
It was learned that on December 26, 2025, DouShen Education received concentrated research from leading mutual funds such as Fullgoal Fund, Yinhua Fund, Bank of China Fund, and ICBC Credit Suisse Fund. Institutions focused on the company's AI education applications, which have progressed from tool assistance to deep companionship. DouShen Education has enriched its "AI + education" product matrix through smart hardware products, creating new profit growth points. At the same time, it has built a closed loop of learning data with educational robots as the core. Under the tripartite model of "hardware + software + service," the company is gradually establishing a sustainable AI education ecosystem, with growth potential gaining institutional recognition.
Stocks such as Xueda Education, Jiafa Education, Only Education, Talkweb Information, and Code Education have also been frequently researched by mutual funds like Rongtong Fund, Western Lead Fund, Guofu Fund, and HTI Fund. In the vocational education field, Xueda Education focuses on前沿 areas such as artificial intelligence, big data and cloud computing, virtual reality, integrated circuits, health management, and elderly care. It collaborates with various parties to develop high-end applied talent training and curriculum研发, which became a key reason for the stock's inclusion in Rongtong Tonggan Research Selected Fund's heavy holdings at the end of 2025. Code Education clearly focuses on its main vocational education business, seizing opportunities from vocational education college entrance exam policies, and deepening the研发 and application of AI technology in teaching scenarios. AI education is gradually becoming the company's second growth curve.
Another core reason for funds' intensive research in the vocational education sector is that the industry is generally under-allocated by institutions, with limited selling pressure. Previously, most education-themed funds in the market were liquidated during the industry's downturn, with only a handful of surviving products remaining. Against this backdrop, the rapid recovery in demand for the vocational education industry stimulated by AI technology, combined with historically low valuations and holdings, has become a key reason for various capital to focus on the sector. Bosera Fund previously issued a premium risk warning for its education-themed fund. The Bosera CSI Global China Education Theme ETF showed significant premiums in the secondary market, with prices deviating substantially from the fund's net asset value per share. Since hitting a bottom of RMB 0.284 at the end of May 2022, this education ETF has gradually risen to the current RMB 0.558, indicating a clear rebound trend from the bottom.
Vocational education embraces emotional value, funds optimistic about service-oriented consumption.
As an important细分 segment of service-oriented consumption, vocational education is rapidly expanding into new consumption areas such as pet care, cosmetics and hairdressing, yoga and wellness, and gaming and animation, enhancing its self-indulgence attributes and emotional value. This has garnered optimistic assessments from fund managers.
Star fund manager Chen Jinwei, Deputy Director of the Second Equity Investment Department at Penghua Fund, stated that as economic development shifts from an era of增量 to存量, growth opportunities in most traditional industries are narrowing. The increase in residents' leisure and entertainment time has become a long-term trend. China's average working hours peaked in 2023, stabilized in 2024, and have seen a significant decline since 2025. Limited by past discretionary time constraints, the base for service consumption demand was low, leaving vast room for future penetration rate increases. Demand growth is expected to show explosive trends.
Chen Jinwei predicts that 2026 could become the first year of "true consumption," where the core of consumption shifts from "spending for others" to "spending for oneself." Service consumption that占用 discretionary time and possesses self-indulgence attributes, including sectors like gaming, tourism, sports, and film and television, will become high-quality, long-term growth areas. The growth potential of some service-oriented consumption companies may be comparable to that of the liquor sector in the previous consumer bull market.
Service-oriented consumption targets like vocational education, which have stable cash flows and dividend characteristics, also benefit from institutional capital rotating between high and low valuation sectors. Many fund companies believe domestic demand品种 opportunities are promising.
Wang Li of Great Wall Fund believes that while emerging technology sectors may still maintain their leading position after the holiday, value-oriented domestic demand targets also present allocation opportunities. Given the extreme level of current market valuation dispersion and the need for capital rotation between high and low valuation areas, short-term market style shifts are possible. Focus should be placed on high-quality targets with excellent free cash flow and solid fundamentals. Wang Li further pointed out that domestic demand sectors have a high probability of achieving excess returns after the Spring Festival. Against the backdrop of expanding domestic demand as a key driver of economic growth, market expectations and holdings for domestic demand-related sectors remain at bottom levels, suggesting significant room for subsequent recovery.
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