Incident: Baiyang Co., Ltd. released the “2018 Third Quarter Report” on October 23, 2018:2018Q3 revenue of 1.03 billion yuan (+41.05%) and net profit of 79.52 million yuan (+123.30%). Our comments on this are as follows: Comment: Q3 net profit increased +123% year over year, and Q1-3 increased +159% year over year. Baiyang Co., Ltd. achieved total revenue of 1,003 billion yuan in the 2018 Q3 quarter, up 41.04% year on year and 50.37% month on month; net profit to mother was 79.52 million yuan, up 123.30% year on year and 116% month on month. 2018Q1-Q3 achieved total revenue of 2.76 billion yuan, up 37.24% year on year; net profit to mother was 130 million yuan, up 158.90% year on year. The sharp increase in revenue and profit was mainly due to the effects of the merger of the Martian era. 2018 full-year results are expected to increase by 170% to 190%. The company disclosed its 2018 full-year performance guidelines and is expected to achieve net profit of 192 to 215 million yuan for the full year, an increase of 170% to 190% over the previous year. The large increase was mainly due to (1) the company's active adjustment to the export market, and the revenue of the original main business increased significantly; (2) the Martian Era and Model Vision's performance increased. The share of vocational education business continued to rise, and endogenous outreach increased performance during the Martian era. 2018H1's vocational education business revenue was 212 million yuan, accounting for 18.12% of total revenue, up 4.45 pcts month-on-month (2017H2), and its share of revenue continued to increase. As of June 30, 2018, Mars Era has set up 15 offline teaching centers in 13 cities across the country. The number of offline campuses will increase to 20+ in the next three years. The number of students the company is expected to train 27,900 and 29,300 in 18-19. The Mars Era raised the average customer unit price for 15 courses by 16% in December 2017. After the increase, the average customer unit price for students was 4600-4700 yuan/month, or about 23,000 yuan/year. In the future, the Mars Era will use capital platforms to horizontally expand the original Martian business system around the field of art education, actively mergers and acquisitions to integrate IT education and digital art education for young people; vertically expand fields such as STEAM, art study abroad, and study tours. Endogenous + outreach will drive steady growth in the performance of the Mars Era. Mars Era collaborated with Kaimao Vision's business to lay out the field of vocational education in depth. In June 2018, the company acquired 80% of Kaimo Vision's shares through Mars Times Cash, with a transaction consideration of 341 million yuan. Kaimo Vision promised net profit of not less than 36 million yuan, 48.6 million yuan, and 65.61 million yuan respectively in 2018-2020. On July 10, 2018, Kaimo transferred 7.9 million shares from the controlling shareholder of Baiyang Co., Ltd., accounting for 2% of Baiyang's total share capital and a total price of 103 million yuan. Kaimo Vision's main business is film and television special effects production. The business chain covers the entire film and television special effects process. In 2017, revenue was 57.65 million yuan and net profit was 20.61 million yuan. As of June 26, Kaimo Vision has signed 12 production projects in 2018, with a total contract amount of about 110 million yuan. In the future, Kaimao Vision will form a good business synergy with the Mars Era in the four areas of talent development, training content, brand promotion, and industry resources. After Baiyang Co., Ltd. merges and acquires Kaimao Vision, it will continue to lay out the field of vocational education in depth and enhance the company's performance. Policy dividends promote school-enterprise cooperation and the integration of industry and education, and Baiyang shares explore business growth points. On February 5, 2018, the “Measures for Promoting School-Enterprise Cooperation in Vocational Schools” was officially released. The “Measures” focus on specific measures taken by the National Development and Reform Commission, the Ministry of Industry and Information Technology and other departments to jointly deepen school-enterprise cooperation. Together with “Certain Opinions on Deepening the Integration of Obstetrics and Education”, the two documents jointly lead the integration of industry and education and school-enterprise cooperation into a deep policy “combo punch”. Baiyang Co., Ltd. is now using the existing curriculum system and teaching staff in the Martian era to jointly explore a new model of school-enterprise cooperation in running schools with Guangxi Information Technology College, which is conducive to giving full play to the resource advantages of enterprises and schools and increasing the company's new revenue and profit growth points. Valuation analysis. We maintain Baiyang's net profit forecast for 18-20 million yuan, 263 million yuan, and 323 million yuan, corresponding to the 18-20 EPS forecast of 0.54, 0.67, and 0.82 yuan, and net profit of about 15% for 3 years. Currently, the company's stock price is about 7.75 yuan/share, and the corresponding 18/19/20 P/E is 14x, 12x, and 10x. We maintain a target price of 15.00 yuan for Baiyang shares and maintain a “buy” rating. Risk warning: acquisition and integration risk, education industry regulation, industrial policy change risk, etc.