I. Overview of events
The company released its third-quarter 2016 report. During the reporting period, the company realized operating income of 629 million yuan, an increase of 189.61% over the same period last year; net profit belonging to shareholders of listed companies was 42.1577 million yuan, up 27.70% from the same period last year; and earnings per share was 0.0665, an increase of 7.78% over the same period last year.
II. Analysis and judgment
Costs and expenses increased in the first three quarters, and the pre-layout is conducive to long-term development. In the first three quarters, the company's main business costs increased by 255.28%, sales expenses increased by 226.08%, and management expenses increased by 136.57%. This is mainly due to the promotion of EdSaaS business and the improvement of the management team since the beginning of this year.
We believe that Edsaas business is in a strategic layout in the early stage, and from the performance of a substantial turnaround in the third quarter, its profitability is gradually withdrawing; the improvement of the company's management team is to improve the performance of its assets under management, which is conducive to the long-term and healthy development of the company.
EdSaaS business expands rapidly and its development prospect is optimistic.
By the end of the reporting period, the company's EdSaaS business covers 2 municipalities directly under the Central Government of Chongqing and Tianjin, and 35 prefecture-level cities in 11 provinces. In the first three quarters of 2016, the operating income of EdSaaS business reached 234 million yuan, an increase of 231.06% over the same period last year. In view of the large initial investment of EdSaaS, its contribution to the overall net profit growth is limited, but with the gradual expansion and stability of the market share of this business, as well as the long-term sustained income brought by future operating services, the future development prospect is optimistic.
Reconsideration of the Law on the Promotion of civilian-run Education, which is beneficial to the informationization of education
The revision of the Law on the Promotion of civilian-run Education will enter the deliberation stage at the end of this month. We believe that if this review can be passed, the impact on educational information companies lies in two points: first, after private schools get more financial support, it will help to increase its investment in the construction of digital campus. Second, the determination of for-profit schools will attract more information companies to invest in private education, which is conducive to the industrial linkage of educational informatization online and offline. As the leader of A-share education information, the company will benefit directly.
Third, profit forecast and investment suggestions
Maintain the "highly recommended" rating. It is estimated that the EPS for 16-18 years will be 0.48,0.83,1.29 yuan. According to the range of 45-50 times PE of comparable listed companies in 2017, the valuation range of 37 yuan-42 yuan will be given in the next 6 months.
Fourth, risk tips:
1) the market expansion of online education business is not up to expectations; 2) risk management; 3) the policy is not up to expectations.
