Event: the company announced its annual performance forecast for 2016. it is expected that the combined operating income of the company in 2016 is 921.9389 million yuan to 1.0536444 billion yuan, an increase of 110% to 140% over the same period last year, and the operating income continues to grow rapidly. the net profit of shareholders belonging to listed companies is expected to be 93.5956 million yuan to 12167.43 yuan, an increase of 0% and 30% over the same period last year. During the reporting period, the company continued to increase investment in brand influence, human resources construction, market expansion and research and development, and market expenses and personnel costs increased significantly compared with the same period last year.

The strategic layout is solid to promote the coordinated development of various businesses, and the influence of Quantong brand continues to improve. Hold on to the market, high-speed growth period costs a high proportion of investment, performance release still need to wait. During the reporting period, the company's business income is expected to increase by 110% mure 140% over the same period last year, and its profit growth is expected to be 0% Mui 30%. Educational informationization and online education are in a period of rapid development, education funds are maintained with a high ratio of investment, the construction of "three links and two platforms" is in the final stage, and the demand for intelligent campus, educational information platform and modern audio-visual education equipment has increased significantly. Taking advantage of the original operational advantages, the company continues to increase investment in brand influence promotion, human resources construction, market expansion and research and development, and market expenses and personnel costs have increased significantly compared with the same period last year. It is helpful for the company to gain market share and brand influence as soon as possible. On the one hand, the company's revenue has increased significantly, on the other hand, the expense rate has increased, and the performance growth rate is relatively slow.

With the release of Cloud 2.0, EdSaaS business has become the endogenous growth engine of the company. The company first launched To B-end EdSaaS service in August 2015. In 2016, the business changed from strategic layout to scale promotion period. As of 3 quarterly reports, the business has covered 2 municipalities directly under the Central Government of Chongqing and Tianjin and 35 prefecture-level cities in 11 provinces. The mobile campus portal has a total of more than 12000 registered schools, nearly 2 million monthly active users, more than 1 million page views per day, monthly activity rate is stable at more than 90%, weekly activity rate is stable at 70%. Operating income in the first three quarters of 2016 was 234 million yuan, an increase of 231.06% over the same period last year, and EdSaaS business showed rapid growth.

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 have leading 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 in the new year, and its profitability will be greatly improved. We estimate that the EPS of the company from 2016 to 2018 is 0.15,0.37 and 0.65 yuan respectively. Based on the high growth of the company's existing business, industry leadership and cooperation between business sectors, we give the company a valuation of 65 times in 2017, corresponding to the target price of 24.05 yuan per share, and maintain the purchase rating risk hint: transformation is less than expected risk; profitability decline risk; economic downside risk.