Performance review Baiyang Co., Ltd. achieved revenue of 2.176 billion yuan, +37% YOY, net profit to mother of 130 million yuan, and +159% YOY in Q1-Q3 in 2018, in line with expectations (performance expectations of 140%-170%). Among them, the 2018Q3 quarter achieved revenue of 1.03 billion yuan, +41% YOY, net profit to mother of 79.52 million yuan, and +123% YOY. Business analysis: At the end of June 2018, it completed the acquisition of 80% of the shares of the leading film and television special effects production company Kaimo Vision, which is expected to become a new profit growth point for the company. The company acquired 80% of Kaimo Vision's shares with 340 million dollars in cash through Mars Era. The main business of Kaimo Vision is the production of post-film and television special effects. Mars and Kaimo are expected to achieve organic integration, effectively extend downstream of the industrial chain, strengthen the practicality of teaching, achieve integration of industry, education and research, enhance teaching effectiveness, and expand brand influence. As agreed in the agreement, Kaimo Real Controller increased its holdings of Baiyang shares by no less than 100 million yuan. The lockdown period was 24 months. As of the end of the 2018 Q3 period, Kaimo Vision Management Consulting Co., Ltd. held 2% of Baiyang shares, further deepening interest binding. Baiyang Co., Ltd. plans to establish a vocational digital art college to deepen the integration of industry and education, and enter vocational school education. It is hoped that by exporting high-quality courses, it will develop campus channels at low cost and establish a reputation. In October 2018, Baiyang Co., Ltd. signed a cooperative agreement with Guangxi College of Information Technology to jointly establish the Guangxi College of Information Technology Digital Art School, with an enrollment target of 3,000 students. It is proposed to set up majors in digital media art design, interior art design, game design, film and television multimedia technology, film and television animation, etc. After graduation, students will obtain college degree certificates. According to the agreement, Baiyang provides 55% of working capital and school space, and is entitled to receive balance allocations according to the working capital investment ratio in the future. In line with the general trend of the country encouraging enterprises to organize vocational education, deepening the integration of industry and education, and encouraging school-enterprise cooperation, Baiyang Co., Ltd. is expected to use the existing curriculum system and teachers in the Martian era to jointly explore new models of school-enterprise cooperation with partners, which is conducive to giving full play to the resource advantages of enterprises and schools, expanding the company's popularity and brand influence in the industry, and increasing the company's new revenue and profit growth points. Performance guidance: The company expects to achieve net profit of 1.9 to 215 million yuan for the full year of 2018, an increase of 70%-90% over the previous year. The main education and culture business will contribute greatly to the company's performance as the revenue of the Mars Era and the newly acquired Kaimo Vision continues to grow (Mars Era began in August 2017, and Kaima Vision began and reported in July 2018). Investment recommendations We expect the company's net profit to be 2.01/263 million yuan in 18/19, corresponding to PE of 15x/12x, maintaining a purchase rating, and a target price of 13 yuan. Risk warning: The acquisition and integration process is still uncertain; the expansion of the education business may fall short of expectations; the host college partners are still uncertain in the preparation stage; and there are risks such as fluctuations in the price of raw materials in the original main business.