The results of the three quarterly reports in 2018 are in line with expectations, and the release of results is accelerated.

The company released its three-quarter report of 2018 on October 23rd. The revenue in the first three quarters of 2018 was 2.176 billion yuan, and the net profit of YoY+37.24%; was 130 million yuan. YoY+158.90%, was within the range of the previous performance forecast (+ 140% income 170%). The net profit after deducting non-return was 127 million yuan. YoY+202.18%, expects the annual net profit of 18 years to be 1.92-215 million yuan, an increase of 70% over the same period last year. We believe that the training business of the Martian era has a solid foundation, and the extension of the industrial chain forms a synergistic effect, with both robustness and growth. We estimate that Baiyang's EPS for 2018-2020 will be 0.50 pound 0.68pm 0.84 yuan, maintaining the "overweight" rating.

The Martian era consolidated watch contributed to a significant improvement in results, and the fourth quarter is expected to accelerate the release of results in the first three quarters of 2018 compared with the same period last year, mainly due to the Martian era in August 2017. In a single quarter, the company achieved an income of 1.003 billion yuan in the third quarter, while YoY+41.05%; achieved a net profit of 79.52 million yuan, YoY+123.30%. And the revenue and profit scale in the third quarter are significantly higher than those in the first and second quarters. The company expects the annual net profit for 18 years to be 1.92-215 million yuan, mainly based on the growth of income from the original industry, the Martian era in the educational and cultural business and the continued growth of the newly acquired Kaidevil Vision income. Due to the seasonal nature of the education industry, the fourth quarter is usually the largest quarter in terms of revenue and profits, and we expect a greater degree of contribution from the Martian era in the fourth quarter.

Education business and table to improve profitability

In the first three quarters of 18 years, the company's comprehensive gross profit margin was 24.34%, and the net profit rate was 6.33%. The net profit rate was 6.33%, and the expense rate during the period was 16.92%. The expense rate was 5.18pct, mainly because the sales expense rate increased 3.04pct, the management expense rate increased 0.46pct, the financial expense rate decreased 1.29pct, and the R & D expense rate increased from 0 to 2.96%. The combination of educational business can significantly improve the profitability of the company.

Domestic CG training leader, endogenesis and extension complement each other

Mars era is a domestic CG training leader, with high-quality content as its core competitiveness, has established a good reputation in the field of digital art design, and established a solid foundation and high barriers for its training business. In June 2018, Mars Times acquired an 80% stake in Shenzhen Kai Magic Vision Workshop Digital Technology Co., Ltd with its own capital of 340.5 million yuan. Kai Meng Vision focuses on the high-end special effects production business of the head film market, and the epitaxial acquisition of the industrial chain will help to give full play to the advantages of the integration of industry and education, so that the company's endogenesis and extension complement each other.

CG training leader extends to comprehensive art education, maintaining "overweight" rating. Taking into account the three quarterly results and 2018 annual performance guidelines, we keep Baiyang's profit forecast unchanged, with an estimated EPS of 0.50 EPS 0.68x0.84 yuan in 2018-2020. Considering the downward shift of the market valuation center, combined with the 18-year average valuation of the comparable company, we adjust the reasonable price range of the company to 11.5-12.5 yuan, corresponding to 23-25 times PE in 18 years. Maintain the "overweight" rating.

Risk tips: the risk that the promised performance can not be realized; the risk of acquisition integration; the risk of national education law and policy; the risk of industry competition.