Event

On December 07, 2017, the company announced that it signed a "Cooperation Agreement" with Huawei and reached a partnership of helping each other in the same boat. Based on Huawei Cloud, the two sides will cooperate deeply in solution building, services, ecological construction, etc., to provide a leading public cloud for governments and enterprises.

Brief comment

Cooperation with Huawei to promote the digital development of the main industry and expand cloud services, the new growth space is worth looking forward to.

The main impact of this cooperation on Huawei is as follows: 1) promote the digital development of the main industry. The company's main business is online education, focusing on the field of K15 (usually referred to as K15 for preschool education, primary school, junior high school and high school), as well as agent and self-developed mobile game business. This time, in cooperation with Huawei, in the field of online education, the two sides will jointly create an intelligent education cloud and promote the cloud upgrading of applications such as educational information system, examination service, educational evaluation system, and interactive classroom for young children, so as to meet the digital needs of the education industry. At the same time, the game business issued by the company's domestic agents is gradually migrated and deployed to Huawei Public Cloud. Huawei recommends that game content providers in the ecological cooperation circle give priority to using the company's distribution channels for distribution, and the two sides work together to build game cloud ecology. 2) complement each other with Huawei and expand cloud services. Based on the advantages of the company's solutions in the areas of education, government affairs and enterprises, and superimposing Huawei's technological and brand advantages in the public cloud, the company will expand its public cloud service business. Specifically, it provides education cloud services for the digital development of the education industry, intelligent manufacturing clouds for the needs of manufacturing enterprises, and smart city construction and public service needs for the government. provide services such as smart government cloud, smart legal cloud, intelligent traffic cloud, smart park cloud, smart community cloud and intelligent agricultural cloud solution. At the same time, provide supporting services around all aspects of public cloud services. 3) relying on the giant Huawei, taking advantage of the great development of computing, the new growth space is worth looking forward to. There is no doubt about the space of the cloud computing market. According to Bain&Company, the global cloud computing market is worth US $180 billion in 2015 and is expected to reach US $390 billion in 2020. However, because of its technical barriers and industry characteristics, the whole cloud infrastructure link will eventually be implemented in the competition among giants, such as Amazon.Com Inc, Aliyun, and so on, while Huawei, as a global communications giant, is undoubtedly qualified to compete in terms of technology, capital, channels and other strength. In terms of upper-layer cloud computing applications, Huawei intends to unite no more than 20 top partners in the industry or field. And the company as one of them, relying on the strength of Huawei giant, in the wave of cloud computing development, the future growth space of cloud services business is worth looking forward to.

Education sector business steady development, continue to increase investment to build the core competitiveness of the company in the field of education layout, mainly around K12 and early childhood education two core business. 1) in the field of K12, Haiyantian Technology, a wholly-owned subsidiary, has established a leading position in the industry, while actively building an one-stop learning platform "Tuowei School". Haiyuntian Science and Technology, a wholly-owned subsidiary, is the first examination service and education evaluation provider in China, serving 18 provincial education departments (college entrance examination) and more than 140 municipal education bureaus (senior high school entrance examination). The market share of the college entrance examination is over 58%, and the market share of the high school entrance examination is more than 40%. The data processing capacity of examination and evaluation is more than 200 million person-times. At the same time, the company is actively building an one-stop learning platform for K12 education, "Tuowei School", to open up on-campus, off-campus, online and offline, and to provide regional high-quality content and local intimate services around pre-class, mid-class and after-class. achieve differential positioning 2) the field of early childhood education Long March Education is a modern early childhood education solution provider dedicated to high-tech multimedia early childhood education environment and early childhood education product development, production, promotion and training. Offline channels are rich in resources. The Child growth Research Institute, established in Shanghai in 2016, is committed to the research and development of integrated theme courses and the construction of a database of preschool education resources, so as to provide important support for the company's early childhood education strategy and realize the integration of domestic and international preschool education resources. On the whole, the company is the first kindergarten multimedia interactive classroom provider in China in the field of early childhood education. As of the first half of the year, the 500-member service operation team served nearly 20,000 kindergartens.

From the development point of view, the steady development of business, continue to increase investment to build core competitiveness. 1) from the latest three quarterly reports, revenue in the first three quarters of 2017 was 801 million yuan, a year-on-year growth rate of 11.77% and a steady growth. Because there is no business split in the three quarterly reports, according to the split data of the China National News, K12 education business grew by about 10.43% in the first half of the year, and early childhood education business grew by 9.46% in the first half of the year. Therefore, on the whole, online education develops steadily.

2) the company continues to strengthen the research and development of education-related products, continue to invest in manpower and brand building costs, and build core competitiveness. According to the relevant data indicators of the latest quarterly report, development expenditure increased by 42.58% year-on-year, mainly due to the capitalization of new R & D investment; sales expenses increased by 37.78% year-on-year, mainly due to the increase in the number of educational marketing team personnel.

Profit forecast and rating

The company's main business of online education is developing steadily, the market continues to open up, and its competitiveness is gradually rising; cooperation with Huawei, on the one hand, promotes the digital development of the main industry, while the other side expands the cloud service business, relying on giants, riding on the development wave of wind and cloud computing, the future growth space is worth looking forward to. It is predicted that the net profit of the company from 2017 to 2018 is 2.0 yuan and 260 million yuan, and the corresponding PE is 41 and 32 times respectively.