Incident: On January 20, the company signed a “Capital Increase and Acquisition Memorandum” with Bump Education to hold no less than 10% of Bump Education's shares by increasing the capital of Bubu Education and/or acquiring part of the shares of the original shareholders of Bubu Education; at the same time, it signed a “Capital Increase/Acquisition Memorandum” with Siqi Education to hold no less than 10% of Party B's shares by increasing the capital of Siqi Education and/or acquiring part of the shares of Siqi Education's former shareholders in cash. This capital increase bumps the pre-investment valuation for education of 260 million yuan, and the pre-investment valuation of Siqi Education is 600 million yuan. Comment: In-depth layout of K12 training, targeting high-quality targets, industry outlook: The acquisition of Bump and Siqi Education is the company's continuous in-depth layout in the K12 training field after the acquisition of Guangzhou Longwen Transformation Education, verifying the company's unique and efficient execution. Among them, the highlight of uneven education is its individualized education, and through the rich experience and resources it has accumulated, it has expanded in second- and third-tier cities where advanced education concepts are lacking. Siqi has a relatively complete education and training sector. It has significant advantages in the Hunan region, and will actively expand into the central and southern regions. It has obvious advantages in cultivating education and art education, and has an independent quality education content and curriculum system; it already has rich and comprehensive business sectors such as cultural excellence, personalized education, international education, music education, art education, full-time education, subject English education, and Chinese studies and national arts. By increasing some equity and locking in priority acquisition rights, it is shown that the company is deeply involved in the K12 field: targeting future second- and third-tier potential and rapidly growing market demand, while also targeting high-quality targets in the fields of art education and training education. With the revision of public promotion laws and regulations one after another, barriers to the securitization of K12 training assets have gradually weakened, and in the future, the company is expected to acquire remaining shares through stock issuance. The K12 training space is broad: the potential market for the second and third tier is large, and the demand for art (interest) education will rise: the K12 training market is the largest, the largest audience, and many segments. At the same time, the industry is naturally scattered. CR3 is less than 4%, national brands in third- and fourth-tier cities have few entry, and the large-scale effects of industry integration and increased concentration are intrinsic requirements for industrial development. In the future, leading enterprises are expected to take advantage of capital and standardized curriculum advantages and advanced education concepts to enhance industry concentration. Longwen Education, which was previously acquired by the company, is in the leading position in the field of one-on-one training, and is also actively expanding into small class teaching; this fixed increase and locking in uneven and congruent education means that the company has begun to gain strength in the second- and third-tier education and training markets, with advanced teaching concepts, rapidly breaking through and expanding in second- and third-tier cities, creating first-mover and scale advantages; at the same time, on the basis of strengthening the advantages of the original field of academic excellence, the acquisition of Siqi means that the company has settled in the field of K12 art education. We believe that as people's economic levels improve, on the one hand, K12 students are on the one hand, and the training market is growing rigidly on the other. parents The demand to focus on cultivating children's interests is increasing, and art education is facing a broad market space. Its K12 training targets are expected to complement each other's strengths and achieve collaboration in terms of student resources, teachers, content, and region. The “horse racing circle” establishes a first-mover advantage, integration and management are promoted collaboratively: in just one year, the company's management achieved a “horse racing circle” in the fields of preschool education, K12 training, and international schools with its firm transformation courage and financial advantages. Currently, its education assets rank among the leaders in education. At the same time, the company is also actively stepping up efforts around the collaborative and integrated management of its many education assets, and is committed to building a quality education management team and building a leading education group. It is expected that the second shareholder Huaxia Life Insurance will actively collaborate and integrate its many educational assets with high-quality resources in terms of teachers, ideas, content, and geography. The “horse racing circle” will continue to be strengthened, and collaboration and management will continue to advance. Profit forecast and valuation: We will not consider the preparation for the current fixed increase asset performance. Assuming the LED sector divestment in 2017, assuming that the performance of its existing education assets is taken into account, we expect the company's asset test preparation performance in 2016-2018 to be: 410 million yuan, 447 million yuan, and 544 million yuan, corresponding to the current valuations: 37×, 34×, and 28× PE, respectively. We believe that the company's leading position in education is prominent, that it will actively integrate and collaborate after racing, and that the scale effect and first-mover advantage will be highlighted. Maintain a highly recommended rating. Risk warning: The LED industry is recovering slowly, project progress is not meeting expectations, and integration is difficult.