1. Overview of the incident Recently, we had exchanges with the company management on the company's business situation and future development direction. 2. Analysis and judgment: The decline in 17Q1 performance is slowing down. Sufficient orders from the main decoration industry will help improve performance. The company achieved revenue of 2,877 billion yuan (YoY -4.30%), net profit of 131 million yuan (YoY +63.4%), net profit of 131 million yuan (YoY +63.4%), 17Q1 revenue of 730 million yuan (YoY -23.9%), and net profit of 50 million yuan (YoY -38.7%). Benefiting from the upstream recovery of the main decoration industry and the improvement of the company's business control level, the decline in the company's performance in the first quarter of '17 gradually slowed down. As of 17Q1, the company has signed new decoration orders worth 1.1 billion yuan and ongoing orders of 3.3 billion yuan, 1.27 times the revenue of the decoration business in 2016. Sufficient orders will help the company's performance continue to rise in 2017. The vocational education business continues to advance, and future performance growth can be expected. The company will continue to promote the development of the vocational education business, actively promote industrial transformation and upgrading, and create four business segments: a platform for cross-examination education, a platform for the construction engineering field, a platform for studying at the Chinese National University of Arts, and a platform for studying at the Chinese Academy of Arts, and Kim Ying-jie's medical vocational education platform. In 2016, cross-examination education achieved a net profit of 46.275 million yuan and fulfilled its performance promise (46 million). Xuelson Education experienced a loss in performance due to the suspension of practical examinations such as builders. With the completion of the company's product upgrades and the resumption of relevant practice qualification examinations, Xuelson's performance is expected to pick up sharply in the future. In 2017, interdisciplinary education and Xuelson promised to achieve net profit of 60 million yuan each. We believe that the company's vocational education business has broad prospects, and future performance growth can be expected. Equity incentives stimulate employee motivation, and the increase in shareholders' holdings shows confidence in future development. On May 8, the company completed the restricted stock grants of the third phase of the restricted stock incentive plan. A total of 42.652 million shares were granted, accounting for 3.55% of the company's total share capital before being granted, reaching 261 people. The unlocking conditions were that the company's revenue in 17/18/19 increased 12%/24%/36%, respectively, over 16 years. The extensive coverage of this incentive plan will fully stimulate the motivation of employees and facilitate the company's sustainable development. In addition, Liu Nianxin, the controlling shareholder of the company, and his spouse increased their holdings of the company by 67.79 million yuan from May 11-12 to 9.73 million shares. After the increase in holdings was completed, Liu Nianxin and his spouse directly held 30% of the company's shares and promised not to reduce their holdings for the next 12 months, demonstrating the majority shareholders' confidence in the future development of the company. 3. Profit forecasts and investment recommendations The company has sufficient orders for the main decoration business to help improve performance. The vocational education business continues to advance, and future performance growth can be expected. The company's implementation of equity incentives stimulates employee motivation, and the increase in shareholders' holdings shows confidence in future development. Net profit attributable to shareholders of the parent company in 2017-2019 is estimated to be 210 million yuan, 300 million yuan and 400 million yuan respectively, and EPS is 0.17 yuan, 0.24 yuan and 0.32 yuan respectively, corresponding to the current stock price PE of 38 times, 26 times and 20 times, respectively, maintaining the “highly recommended” rating. 4. Risk warning: Macroeconomic growth is slowing, investment in the real estate industry is declining, and the progress of vocational education business falls short of expectations.