260 million yuan strategically invests 35% of the shares of Kerry Alliance (Sesame Street English). On May 14, the company announced that it plans to use RMB 263 million to acquire 35% of Beijing Kerry Alliance's shares in Education Technology. The funding source is to raise capital or raise its own funds as part of the repurposed portion. The main business of Kerry Alliance is the English training business for children under the “Sesame Street English” brand. Kerry Alliance is the exclusive licensee of “Sesame Street English” in mainland China (excluding Taiwan and Fujian), Hong Kong and Macau. Kerry Alliance promised net profit of no less than 50 million yuan, 61 million yuan, and 74 million yuan respectively for 2018-20; investment income corresponding to 35% of Weichuang's equity was about 17.5 million yuan, 21.35 million yuan, and 25.9 million yuan. Based on a 35% equity acquisition of 260 million yuan, Kerry Alliance's 100% equity valuation is 750 million yuan, corresponding to 18 years of gambling performance of 15xPE. “Sesame Street English”: A high-end children's English training brand. It currently has 6 directly-managed stores, 348 contracted franchise schools, and has begun operating 197 member schools, covering 150 regions across the country, with a cumulative number of over 50,000 students. The “Sesame Street English” teaching system mainly consists of a three-stage main course plus an auxiliary beautiful character course. The course includes more than 200 interactive game content each year, and is taught in an interdisciplinary, fully immersive, and fully interactive manner. According to the company announcement, as of March 31, 2018, Kerry Union had total assets of 168 million yuan and net assets of 3.246 million yuan; January 2018 had revenue of 28.93 million yuan, net profit of 7.387 million yuan, revenue of 133 million yuan in '17, an increase of 52.4%; and net profit of 34.681 million yuan, an increase of 224% over the previous year. Collaborate with the company's “Child Development Strategy” and join forces with well-known preschool education IPs to enrich children's products and services. On the one hand, the acquisition achieved a deep strategic connection with the “Sesame Street English” brand through equity cooperation with Kerry Alliance. The company teamed up with Kerry Alliance to continue to expand Sesame Street's English business in China around the theme of child development, while also exploring product and service development in fields related to child development around this IP. On the other hand, Weichuang will share franchise customer resources with Kerry Alliance and introduce some high-quality franchisee customers within the listed company system to participate in the further layout of Sesame Street English across the country (according to the company's annual report, by the end of '17, Weichuang's four preschool education brands had a total of 60 direct-run parks and more than 4,000 franchise parks, firmly building a moat of scale), further enhancing the quantity and overall quality of the Sesame Street English franchise system, and developing the kindergarten+high-end English industry chain to open up a closed loop of children's education. Maintaining profit forecasts and giving a “buy” rating, the company continues to expand more schools through various means such as investment, mergers and acquisitions and brand operations, consolidates the company's leading edge and scale advantage in the field of preschool education. At the same time, by strengthening garden supervision and providing more types of products and services, it continues to enter school management and increase the customer unit price of preschool education operation and management services. According to the company's annual report, by the end of '17, Weichuang's four preschool education brands had a total of 60 direct-run parks and more than 4,000 franchise parks, firmly building a moat of scale. In the future, the company may further promote mergers, acquisitions and integration of direct-run parks, directly increase the number of parks and profit scale, and fully tap the value of education entry. Without considering the income from this investment for now, we maintain the company's profit forecast. EPS is expected to be 0.45 yuan/0.62 yuan/0.80 yuan for 18-20, respectively; PE is 20x/15x/11x, respectively. Risk warning: The integration results of the two parties fell short of expectations, and the progress of business development fell short of expectations