The main investment points were affected by the rapid increase in operating costs, and the performance performance fell short of expectations. In the first three quarters of 2016, the company achieved operating income of 629 million yuan, an increase of 189.61% over the previous year; net profit attributable to the owners of the parent company was 42.1577 million yuan, an increase of 27.79% over the previous year, and net profit after deducting 31.2487 million yuan, a decrease of 5.9% over the previous year. The company's performance fell short of our previous expectations. The main reason is the increase in operating costs due to cloud equipment and personnel expenses for the entire course. e-SaaS has entered a period of large-scale promotion, and the layout of education services continues to advance. During the reporting period, the company's E-Saas business achieved revenue of 234 million yuan, an increase of 231.06% over the previous year. There was a huge breakthrough in product coverage and variety. In terms of product variety, the company has now formed a full curriculum network 2.0 with functions such as campus communication, smart education, smart teaching, resource centers, campus offices, and campus payment; in terms of coverage, the business has covered 2 municipalities directly under the Central Government and 35 prefecture-level cities in 11 provinces. By the end of the reporting period, there were more than 12,000 new registered schools on the company's mobile campus portal, with nearly 2 million monthly active users and an average daily PV volume of more than 1 million. E-Saas services are a key area of the company's future deployment, which is worth looking forward to. The home-school-communication business has maintained rapid growth, and K12 teacher training is in a leading position. During the reporting period, the company's home-school-communication business achieved revenue of 196 million yuan, an increase of 43.44% over the previous year. Its “Growth Helper” has developed rapidly. Currently, it has covered 14 provinces, 9 million registered users, and 1 million paid users; the subject education product “Full Course Pass” was launched in February 2016. Currently, it has 3 million registered users, 298,000 paid users, introduced more than 1.1 million sets of topics, 6,219 sets of videos with famous teachers, and 245 micro-courses. Furthermore, Quantong Continuing Education has won bids for the “National Training Program” in 14 provinces, and has already won bids for local training programs within 27 provinces and regions, and is in a leading position in the industry. With a two-pronged approach of endogenous and epitaxial extension, the Internet education platform is worth looking forward to. We believe that in the next stage, the company will continue to adopt a balanced development model based on campus and family through a balanced development model of endogenesis and extension, adhere to the campus-based and family-oriented industrial positioning, stick to product market expansion on the one hand, and focus on the service quality of education service products on the other, continuously enhance its ability to integrate the entire business of “platform service+business development+content service”, deepen the K12 field, and build an Internet education platform company. Risk warning. The progress of new businesses such as online education has fallen short of expectations; traditional businesses have been impacted by new media; progress in expanding new customers has fallen short of expectations; and there have been drastic changes in the share ratio with operators. Earnings forecasts, valuations and investment ratings. Taking into account the company's industry development environment and its own business development status, we maintain the company's 2016-2018 EPS forecast of 0.26/0.36/0.47 yuan. The current stock price is 26.02 yuan, corresponding to 2016-2018 PE of 102/73/55 times, respectively. Considering the unique layout of the company's Internet education platform and the progress of later business expectations, we maintain the company's “increase in holdings” rating.