Net profit returned to the mother in 2016 was $0.94 to 122 million, an increase of 0-30% over the previous year. On January 23, the company announced that the company's 16-year revenue was 922 million to 1,054 million yuan, an increase of 110%-140% over the previous year, and the return mother's net profit was 93.5956 million yuan - 122 million yuan (of which non-recurring profit and loss was 15%-21 million yuan), an increase of 0%-30% over the previous year. Revenue growth is mainly due to the rapid development of the EDSaaS business, which currently covers about 16,000 K12 schools. The original main business, the home-school interactive upgrade business, and the continuing education business of the Continuing Education Network, are growing steadily. The company's “Full Course Cloud + and Education” dual platform strategy is clear, and implementation is progressing steadily, and the value of business collaboration needs to be gradually released; profit growth is less than revenue growth mainly due to the company's continued increased investment in team building, market expansion, and R&D. Various expenses have increased markedly compared to the same period last year. It is expected that 2017 will see an inflection point in performance.

The acquisition of Shanghai Wenxi collaborated with the EDSaaS business to give full play to Shanghai's demonstration effect. Previously, the company planned to buy 47.33% of Shanghai Wenxi's shares in cash; after the acquisition is completed, the company will hold 75% of Shanghai Wenxi's shares. Shanghai Wenxi is committed to providing consulting services for the implementation of digital teaching and education informatization projects for schools and education administration institutions. It has accumulated rich experience in education informatization projects and has a full-process integrated digital campus service model. Based in Shanghai, Wenxi from Shanghai covers East China and South China, and serves nearly 1,000 schools, including more than 200,000 students in more than 120 schools, including Rose Elementary School and Luoyang Elementary School in Shanghai. First, this acquisition will promote deeper EDSaaS business collaboration between the company and Shanghai Wenxi, help advance the company's core strategy steadily, and provide mature experience and strong support for Quantong's large-scale promotion and operation of EDSaaS; second, it will help the company deepen its layout and operation in the Shanghai regional market, further strengthen the brand, and play an exemplary role; third, it will further strengthen the company's R&D capabilities (Shanghai Wenxi has nearly 100 R&D personnel and strong software development and technological innovation capabilities), which will help actively explore new technologies and products to bring users a better experience and service .

Strong multi-dimensional traffic entry points, bound resources to improve integrated service capabilities. The four major sectors of the company's home-school interaction upgrade, e-SaaS, continuing education, and subject advancement services developed in an orderly manner, and actively built an education ecosystem around e-SaaS. The core of K12 level online education is how to use the Internet to improve the efficiency and effectiveness of in-school education. The informatization of Quantong Education is being promoted simultaneously with the government tender pass project+ED-SaaS project, grasping K12 students' in-school data through academic assessments, targeting teacher resources using the Continuing Education Network/China Education Online, actively constructing an education ecosystem, developing educational content independently while opening up standardized third-party product interfaces. Furthermore, the company will have a continuing education network covering education practitioners and a Chinese education online covering all people in all fields, gradually binding teachers, thereby improving future subject advancement service capabilities. As a late-stage promotion sector, subject advancement services will be developed in a more customized manner based on big teaching data after strengthening the stickiness between schools and users.

Maintain a “buy” rating. Quantong Education is a high-quality enterprise operating the full business of “platform application+service expansion+content value addition” under the reform of the education industry. The company has already entered the stage of gradual monetization of traffic. In the future, on the one hand, the company will continue to expand and maintain traffic entry and increase user traffic, and on the other hand, it will improve the product structure, develop more products with high ARPU value, create reasonable channels for monetizing user traffic, and provide strong support for the company's long-term profitability. We expect the EPS for 16-18 to be 0.19 yuan, 0.32 yuan, and 0.41 yuan respectively. The current stock price corresponds to the 16-18 PE of 95 times, 56 times, and 43 times, respectively. Maintain a “buy” rating. Risk warning: Performance growth fell short of expectations.