Main points of investment:
Event: the company released its first-quarter 2017 report, with operating income of 221.6881 million yuan during the reporting period, an increase of 16.45% over the same period last year, and a net profit loss of 6.4067 million yuan belonging to shareholders of listed companies, down 148.97% from the same period last year. The company's operating revenue continued to grow, and the main factors leading to the decline in profits included the annual difference in revenue and costs caused by seasonal factors, the rapid layout of business and the increase in costs brought about by new project research and development.
Multi-dimensional expansion layout, increased comprehensive investment, upward operation data: in order to comply with the country's 13th five-year Education Plan
General trend, seize the opportunities for the development of the industry, the company has actively strengthened its national layout since 2016, and its business coverage has increased rapidly, resulting in an increase in operating costs compared with the same period last year. During the reporting period, the company strengthened its customer-centered business-oriented company and continued to increase EdSaaS business development and business coverage. By the end of the reporting period, the cumulative number of registered schools through the mobile campus portal as the cloud entrance for the whole course reached 16,357, with 3.72 million teachers and parents following. In terms of continuing education business, the "National training Program" project was launched one after another during the reporting period, which made the professional requirements for the training of primary and secondary school teachers more accurate and detailed. At the same time, the company has actively expanded the regional integrated research and development projects, and carried out independent curriculum research and development and product design according to the new regional training needs of prefectures, cities and counties. During the reporting period, the home-school interactive upgrade business has also been sustained innovative development and deepening operation, growing helpers, all-class pass, power plus one card and other product content has been continuously enriched, service forms have been iteratively upgraded, business coverage and the number of users have continued to grow.
Undertake new national education information technology research and development projects, core technology to enhance competitiveness. The company continues to strengthen the research and development and reserve of core technology in the field of education and technology, gather high-end R & D talents, and gradually make breakthroughs in some core technologies. In the first quarter of 2017, the company formally obtained the approval document of the National Development and Reform Commission, and agreed to take Quantong Education as the undertaking unit, jointly with relevant units to prepare for the establishment of the "National Engineering Laboratory of Internet Education system Technology and Application". To undertake the core technology research and development and industrial scale transformation of national Internet education.
Investment advice and performance forecast: the company is the domestic K12 online education service leader, business focus on "full class cloud + and education" dual platform strategy, ToB and ToC both have first-mover advantages. In 2016, the company's strategy to develop EdSaaS business, quickly become bigger and stronger. With the steady growth of home-school interactive upgrading business and continuing education business, the company's income scale, market share and brand influence are growing rapidly, and the synergy effect is emerging. We expect that by further deepening the depth and breadth of business coverage, combined with endogenous extension, the company will continue to grow rapidly in the new year, and revenue will maintain a high growth rate while looking forward to a rebound in profit margins. We estimate that the EPS of the company from 2017 to 2019 is 0.33,0.44 and 0.60 yuan respectively. Based on the high growth of the company's existing business, industry leadership and cooperation between business sectors, we value the company 65 times in 2017 and maintain the buy rating corresponding to the target price of 21.45 yuan per share.
Risk tips: transformation is less than expected, profitability decline, economic downturn, market risk and so on.
