Event: the company announced its three-quarter 2018 report that in the first three quarters of 2018, its operating income reached 2.176 billion yuan, an increase of 37.24% over the same period last year; its net profit was 130 million yuan, an increase of 158.9% over the same period last year; and its non-net profit was 1.27 yuan, an increase of 202.2%. The company expects to achieve a net profit of 192 million yuan to 215 million yuan in 2018, an increase of 170% to 190% over the same period last year.

The growth of the traditional main business is stable, and the Martian era has thickened its performance: in the first three quarters of 2018, operating income reached 2.176 billion yuan, an increase of 37.24% over the same period last year; revenue achieved relatively rapid growth, mainly due to the steady growth of production and sales of the company's traditional feed sector and mergers and acquisitions of the Martian era, model visual comprehensive table, and sustained revenue growth. The company achieved a net profit of 130 million yuan in the first three quarters of 2018, an increase of 158.9% over the same period last year. The company's net profit increased significantly, and the growth rate was much higher than the growth rate of operating income, mainly due to the high level of gross profit margin in the Martian era. After the merger, the gross profit margin was significantly increased to 24.34% (an increase of 9.4pct over 2017H1) Among them, education and culture business (Martian era) H1 profit accounted for 55.2% in 2018, and the education industry has become the main growth point of the company's performance. For the whole of 2018, the traditional business is expected to grow steadily, while the educational and cultural business is expected to achieve a net profit of 1.92-215 million yuan in 2018 with the continued growth of the Martian era and the newly acquired Kaishi Vision income, a sharp increase of 170% over the same period last year.

The Martian era completed the amalgamation table, and the double-main industry pattern was established. In 2017, the company successfully completed the acquisition of the Mars era, and completed the merger in August 2017, establishing the dual main business operation pattern of "education + aquatic products". Mars era is the leader of digital art and design education, focusing on art and design education for more than 20 years, with a good market reputation. The target company covers 31 educational products in user interface, Internet and other industries, and 15 offline teaching centers have been set up in 13 cities across the country, with an employment rate of 97.83% in 2017, with a significant overall advantage. The performance commitments of the Mars era from 2017 to 2019 were 80 million yuan, 108 million yuan and 146 million yuan respectively; in 2015-2017, the net profit of the Mars era was 4,238 million yuan, with a compound growth rate of 39.5%, exceeding the 2017 performance commitment of 80 million yuan. 2018H1, Martian era achieved business income of 213 million yuan and net profit of 27.7944 million yuan; in 2018, the company promoted the development of new businesses such as online education, STEAM, university cooperation, art study abroad and art travel in Mars era, and with the advent of the second half of the peak season of art and design education, the Martian era is expected to continue to become a new net profit growth point of the company, with annual performance commitment of 108 million yuan likely to be completed.

The acquisition of Model Vision thickens the company's annual performance. In June 2018, the Martian Age completed the acquisition of Model Vision for 340 million yuan in cash. Model Vision is a leading film special effects company in China. So far, it has completed more than 20 domestic and foreign cinemas, such as "three dozen White Bone essence of Sun WuKong in Journey to the West", "Yunnan Bug Valley", "Legend of Demons" and so on. After the completion of the acquisition, Model Vision and Mars era can play a synergistic effect in personnel training, training content, brand promotion, industry resources and other aspects to promote rapid growth. In 2017, Model Vision achieved revenue / net profit of 57.65 million yuan / 25.61 million yuan respectively, with a net interest rate of 44%. According to the company's performance commitment, the net profit from 2018 to 2020 is not less than 3600, 4860, 65.61 million yuan, CAGR35%, respectively. By the end of June 2018, the company had signed but not yet completed 12 production projects that year, with a total contract value of 110 million yuan. it is expected that the implementation of the contract will guarantee the fulfillment of the annual performance commitment of 36 million yuan, which will further increase the company's annual performance level.

Plan to build a digital art college, layout higher education section: on October 8, the company announced that it intends to jointly open the Digital Art College of Guangxi Information Vocational and Technical College to jointly train digital art and design talents. at present, Guangxi Information Vocational and Technical College is under preparation and has obtained the qualification examination and approval of the people's Government of the Autonomous region. The enrollment target of the School of Digital Arts is 3000 (expected to start next year), with majors in digital media art design, interior art design, game design, film and television multimedia technology, film and television animation, and so on. Students will receive academic certificates issued by the state after graduation. This cooperation in running a school makes use of the existing curriculum system and teachers in the Martian era to explore a new mode of school-enterprise cooperation with partners, which is conducive to giving full play to the resource advantages of both enterprises and schools. expand the company's popularity and brand influence in the industry, and provide a new profit growth point for the company.

Profit forecast and rating. As the company's results in the first three quarters slightly exceeded our previous expectations, we raised our profit forecast. It is estimated that the EPS in 2018-2020 will be 0.88,1.29,1.50 yuan respectively, and the return net profit will maintain a compound growth rate of 30% in the next three years. Maintain a "buy" rating, taking into account the company's high growth and extension expectations.

Risk tips: the risk of intensified market competition, food safety risk, exchange rate risk, Martian era, model visual enrollment risk, less than expected risk of cooperation in running a school, business integration or less than expected risk.