FY18H1's revenue was 521 million yuan, up 9.7% from the same period last year, and its net profit was 96.067 million yuan, down 7.41% from the same period last year. On August 29, the company released FY18 semi-annual report, with revenue of 521 million yuan for the reporting period, an increase of 9.7% over the same period last year; net profit of 96.067 million yuan, a decrease of 7.41% over the same period last year; and net profit of 69.812 million yuan, a decrease of 21.30% compared with the same period last year. In terms of different industries, the income of the original spliced screen business was 279 million yuan, down 2.51% from the same period last year, while the revenue from preschool education business was 242 million yuan, up 28.27% from the same period last year.

Hongying Education: 18H1's revenue is 93 million yuan; net profit is 12.4952 million, down 54.38% from the same period last year; by the end of the first half of 18 years, there were 6 chain kindergartens, 1338 brand franchise parks (including 475 flagship parks), 3162 Hongying long-term alliance parks, and 3162 Hongying long-brand agents.

Golden cradle: by the first half of 18 years, there are 24 kindergartens, 598 kindergartens, 2 primary schools, 3 brand primary schools, 1 early education center, 173 early education centers, 113 characteristic courses and 406 Antek courses. The revenue of FY18H1 cradle was 110 million yuan, up 24.28% from the same period last year, while the net profit was 51.5958 million yuan, down 8.19% from the same period last year.

Keer Education: the company acquired a 70% stake in Beijing Keer Education with 385 million in August 17, which represents the company's important layout in middle and high-end kindergartens and further strengthens the barriers to offline kindergartens in Beijing. As of the first half of 2018, Kerr has a total of 19 kindergartens, which are mainly distributed in Beijing, Dalian and Guiyang, of which 13 are in Beijing. 18H1 realized revenue of 29.0786 million and net profit of 21.1054 million.

Dingqi Education: the company acquired 70% equity in Inner Mongolia Dingqi early Childhood Education for 106 million yuan in July 17. Dingqi was founded in 2003 to combine the advantages of Chinese traditional culture and collective cognitive education with the advanced scientific research achievements and individualization of American preschool education. after nearly 15 years of accumulation, the company has established a standardized operation management and control system, and has a sound and stable teachers and teaching R & D team. It has gradually developed into a leading enterprise of early childhood education in Inner Mongolia. By the first half of 18 years, Dingqi has served a total of 19 kindergartens, including 11 trusteeship, 3 cooperative parks and 5 brands. Achieve revenue of 13.0012 million, net profit of 7.3661 million.

The gross profit margin decreased by 3.04pct to 53.10% compared with the same period last year, while the gross profit margin decreased slightly; the net profit margin decreased by 2.17pct to 19.47% compared with the same period last year, and the net profit margin decreased slightly.

The company has lowered its profit forecast, and the company continues to expand more parks through investment, mergers and acquisitions, brand operation and other means, so as to consolidate the company's leading advantage and scale advantage in the field of preschool education. at the same time, by strengthening the supervision of the park and providing more types of products and services to continuously cut into the park management, improve the guest unit price of preschool education operation and management services. With the company's non-public offering to raise funds in place, it may further promote the merger and integration of direct operation parks in the future, directly increase the number and profit scale of parks, and fully tap the value of education entrance. But considering some factors, we adjust the company's profit forecast, EPS from 0.45 yuan / 0.62 yuan / 0.80 yuan in 18-20 years to 0.33 yuan / 0.43 yuan / 0.54 yuan, corresponding to PE is 25x/19x/15x respectively.

Risk hints: policy risk; increased risk of market competition; risk of shortage of preschool education talents; risk of acquisition and integration; kindergarten operation and security risk