Event: the company announced its annual performance KuaiBao, with operating income of 838 million yuan, down 1.28% from the same period last year, net profit of 47.86 million yuan, up 114.09%, and basic earnings per share of 0.03 yuan, down 50% from the same period last year.

Comments:

The decrease in impairment plus a small portion of the education sector contributed to a rebound in performance: the slight decline in corporate revenue was mainly due to the slowdown in economic growth and the normalization of competition in the LED industry, while due to the adequate provision for impairment of assets in previous years (the proportion of impairment of assets in 2015 was more than 11% of income, while the proportion of impairment of 2016Q3 assets in income was 1.71%), coupled with the acquisition of Guangzhou Longwen completed the new listing of shares in December Therefore, Longwen's performance is only in December, so it has a low base + education and promotes the return of net profit to double compared with the same period last year.

The education sector promotes a fast and orderly pace, and education integration has outstanding first-mover advantages: last year, the company acquired Longwen into K12 training, increased cash in October to acquire 40% equity in British Education, and signed a framework agreement in November to acquire no less than 80% of Little Red Riding Hood to enter the field of preschool education. The cooperation framework agreement for the acquisition of Eddie Education Group in December further deepened the international education market, signed a cooperation agreement in January to acquire a stake of no less than 10% in Convex and Siqi Education, and further suspended trading to plan for major asset restructuring in February. A series of fast-paced initial circles occupy high-quality education assets, indicating that the company has made efficient decisions and is firmly focused on the deep layout of K12 education 3. In the post-era of the revision of the Civil Promotion Law and the adoption of the relevant rules, it is expected that the process of for-profit private education asset securitization will be accelerated, and the company is expected to accelerate the entry of assets into listed companies after the enclosure. In the context of the current high valuation of educational assets and the market is still worried about the lack of staying power of educational extension, the company's horse racing circle occupies a wealth of high-quality assets and the scarcity of efficient layout.

In the post-integration era, optimal management and integration will usher in the release of educational performance in 2017: the growth of educational assets depends on the rapid growth of schools and students and the increase of per capita ARPU value brought about by cross-regional expansion, and the steady and orderly pace of replication and expansion directly affects the growth of listed companies, which requires companies to make efforts in management, asset coordination and resource integration. The follow-up company will actively promote the collaborative integration of resources and targets and management optimization, promote around the brand, integrate many of its educational assets in teachers, ideas, content, geographical and other aspects of high-quality resources, "horse enclosure" efforts will not be reduced, coordination and management will also continue to promote. In addition, the two shareholders of the company enter through a fixed increase lock for three years, and their shares are still locked up, and they are still concerned about the release of educational assets in 2017.

Profit forecast and valuation: do not consider the preparation for the performance of the increased assets for the time being, assuming that the LED plate is spun off in 2016, and considering the performance preparation for the existing educational assets of the company, we expect the performance of the company's assets to be 48 million yuan, 427 million yuan and 522 million yuan in 2017-2018, and the corresponding pre-valuation is 285 ×, 32 × and 26 × times PE, respectively. We believe that the leading position of the company's education is prominent, integration and coordination will be actively carried out after the horse race enclosure, and the scale effect and first-mover advantages will be highlighted. Maintain a highly recommended rating.

Risk tips: the LED industry recovers slowly, the project does not meet expectations, and it is difficult to integrate.