Incident: The company announced its three-quarter report: Operating revenue and net profit to mother for the first three quarters were 2.176 billion yuan and 130 million yuan respectively, up 37.24% and 158.90% year-on-year respectively. Among them, revenue and net profit to mother were 1.03 billion yuan and 79.52 million yuan in a single quarter, respectively, up 41.05% and 150.13% year-on-year, respectively. The company predicts the 2018 annual report and expects to achieve net profit of 192 million to 215 million yuan, an increase of 170%-190% over the previous year. Comment: The results of the three-quarter report were in line with expectations. The company's revenue and profit increased dramatically in the first three quarters of 2018, mainly due to: 1) in terms of traditional main business, the overall production capacity of the company's feed business sector continued to expand, and market share gradually expanded to achieve steady revenue growth; 2) In terms of education and culture business, benefiting from industry prosperity, the performance of its subsidiaries Mars Era and Magic Vision continued to grow, contributing to the main source of profit. Continuing the development trend of the above industry segments, and considering that the company's businesses contributed a lot of profit in the third and fourth quarter, we expect the company's 2018 performance to reach the forecast upper limit of 215 million, corresponding to a year-on-year growth rate of 190%. During the reporting period, net operating cash flow was 55.3 million yuan, a year-on-year decrease of 56.34%. Of these, net operating cash flow for the third quarter was 13.88 million yuan, a year-on-year decrease of 85.76%. This was due to the expansion of the sales scale of the company's feed business, which led to a marked increase in accounts receivable. There are frequent favorable policies in the education sector, and the company's education business continues to benefit. With the publication of the “Public Promotion Law” implementing regulations for review in August 2018 and the official implementation of a series of subsequent supporting rules, private education ushered in new opportunities for development. The recent “Implementation Plan for Improving the System and Mechanism to Promote Consumption (2018-2020)” focuses on training, preschool, and vocational education to further promote the opening of education to the public and industry; the “Interim Measures on Special Additional Deductions for Personal Income Tax (Draft for Comments)” regulates in detail the special additional deductions for children's education and continuing education under the Personal Income Tax Law, which favors segments such as preschool education, K12, and vocational education. The introduction of a series of policies in the field of education in 2018 directly benefits the long-term development of the education industry, and the company's education business will continue to benefit. Focus on art education and continue to expand the layout with the Martian era as the core. The company acquired Mars Era in 2017 to enter the digital art training field, and deepened the layout around Mars to expand the industrial chain vertically and horizontally. On the one hand, Mars's own product line has been extended from digital art training for adults to new fields such as youth art education (STEAM), art study abroad, and art study tours; on the other hand, the acquisition of Kaimao Vision extended the Martian industry chain downward to the production process, and full collaboration between industry, education and research has driven the firm and steady growth of the company's endogenous performance. In September 2018, the company plans to establish a digital art college in cooperation with vocational colleges to explore new models of school-enterprise cooperation and enter the field of vocational education. Investment proposal: The company takes art education as the core and actively expands the boundaries of the education business. It is expected that the company will continue to lay out around the Martian era, expand the industrial chain and cover all age groups, and further enhance the company's overall competitive strength. The company's net profit for 2018/2019 is estimated to be 220/273 million yuan. Considering the company's endogenous ability to continue growing and the potential for business expansion, a segmented valuation method was adopted, and a target price of 15 yuan was given to maintain the “buy-A” rating. Risk warning: Policy risks, expansion in the Martian era, enrollment falls short of expectations, and progress in cooperative schools falls short of expectations.