Main points of investment
Events: (1) the company released its annual report on April 26, 2017 and quarterly report in 2017: in 2016, the company achieved operating income of 618 million yuan, an increase of 17.07%, a net profit of 38.5362 million yuan, a decrease of 28.86%, and a net profit of 29.7399 million yuan after deducting non-profit, an increase of 15.81% and 0.12 yuan. (2) 2017Q1, the company realized operating income of 117 million yuan, an increase of 19.63%, a net profit of 4.8672 million yuan, an increase of 10.45%, a net profit of 4.7227 million yuan after deducting non-profit, and an increase of 19.06% EPS0.02 yuan.
(3) Fengyu Optimum Fund plans to acquire 51% stake in Xizhou Education for 20 million yuan. (4) the Fengyu Select Fund intends to participate in the establishment of Douyu Culture with an equity ratio of 25.6 million yuan.
Yali Technology fulfills its performance commitment and has strong profitability in its education business. Yali Technology has been consolidated since September 2016, with a monthly income of 24.1128 million yuan, a net profit of 11.0171 million yuan, a net interest rate of 45.69%, and a net profit of 10.7596 million yuan after deducting non-profit, fulfilling the performance commitment of 10 million yuan. Jiawei Culture has been consolidated since December 2016, with a monthly income of 1.7162 million yuan, a net profit of 1.0991 million yuan and a net interest rate of 64.04%.
The growth of power equipment in the original business is strong. Excluding the combination of Yali Technology and Jiali Culture in the education industry, the original business income was 593 million yuan, an increase of 12.18%, and a net profit of 30.8146 million yuan, a decrease of about 43%, mainly due to a non-recurrent profit and loss of 2231.9 yuan in 2015. Profitability improved slightly, and gross profit margin increased by 0.36pct to 33.25%.
17Q1's education business is in the off-season and its net profit contribution is limited. Considering that the first half of the year is generally the off-season of the education business, it is expected that 2017Q1 Yali will suffer a slight loss in science and technology, a slight profit in Jiaxi culture, and a slight loss in the education business as a whole. Therefore, the net profit of 2017Q1 is mainly contributed by the original business.
Investment suggestion: the growth of power equipment in the company's original business is strong; in the field of education, the layout with international education and high-end preschool education as the main line is gradually improved. There is a strong driving force for management transformation, and it is expected that endogenous steady growth and extension actions in the field of education will continue to improve the contribution of education business performance and the overall profitability of the company. It is estimated that the annual net profit of 2017-18-19 is 0.60x0.71 billion yuan, of which the original business contribution is 0.41 / 45 million yuan, and that of education business contribution is 0.30x33 million yuan. Corresponding to EPS0.19/0.22/0.24 yuan, the current stock price corresponds to the valuation 85x/72x/66x, lowering the target price to 17.71 yuan, maintaining the "overweight" rating.
Risk hint: the growth rate of the original explosion-proof business and power equipment business is not as expected, and the endogenous growth rate of the education industry is not as expected.
