Main points of investment:
Event: the company disclosed that the revenue of Q1-Q3 in 2018 was 2.18 billion yuan, an increase of 37.2% over the same period last year, the net profit of 130 million yuan, up 158.9%, and the net profit of 127 million yuan, an increase of 202.2% over the same period last year. The net cash flow generated by operating activities was 55.3 million yuan, a decrease of 56.3% compared with the same period last year.
2018Q3's single-quarter revenue / net profit increased by 41% / 123% respectively, in line with expectations. The company's Q1-Q3 net profit growth rate of 158.9% is in line with the previous performance forecast. Q3 achieved revenue of 1 billion yuan in a single quarter, an increase of 41.05% over the same period last year, and net profit of 79.52 million yuan, an increase of 123.3% over the same period last year. We believe that the high growth of the company's performance is mainly driven by the following factors: (1) the continued high growth of the digital art training business in the Martian era; (2) the year-on-year growth of the feed business; (3) the financial expenses decreased by 19.02 million yuan compared with the same period last year due to exchange rate changes; (4) the scope of the merger increased as a result of the new acquisition in the reporting period.
The Martian era drives performance growth. Q3 is the peak season of the digital art training business in the Martian era, and the company's single-quarter revenue and net profit have achieved high growth, which is mainly driven by the education and training business in the Martian era. The balance of other receivables at the end of Q3 was 42.15 million yuan, an increase of 27.02 million yuan over the end of last year and 15.96 million yuan over the 2018 semi-annual report, mainly due to the increase in discounted interest on prepaid student loans. The advance payment on the balance sheet at the end of Q3 was 130 million yuan, a slight increase compared with the 2018 semi-annual report of 110 million yuan. Two indicators may be related to the growth of Martian-era training business.
Cut into digital art education, a comprehensive layout of digital art training upstream and downstream. The early announcement of the company signed a school-running agreement with Guangxi Information Vocational and Technical College, and the two sides intend to jointly set up the Digital Art College of Guangxi Information Vocational and Technical College. The company provides 55% of the school working capital and allocates the school balance according to proportion. The college plans to offer majors such as digital media art design, interior art design and game design, with an enrollment target of 3000 people. After the landing of the cooperation in running a school, the company is expected to cover all aspects of academic and non-academic vocational training, and further enrich the category of educational business.
To further promote the transformation of the education industry, the reduction of personal income tax is beneficial to the leader of vocational education and maintain the "buy" rating. This year, the company has completed the acquisition of Kai Devil Vision, a film and television post-production company, fully meeting the diversified needs of digital art talents in the upper and lower reaches of the industrial chain. The interim measures for personal income tax deduction clearly include vocational education / continuing education related to qualification certificates into the scope of deduction, which is beneficial to the development of vocational education industry. We maintain the company's profit forecast of 191 million / 230 million / 272 million yuan for 2018-2020 homing net profit, corresponding to 0.48 EPS 0.58 pound 0.69 yuan, and the current share price corresponds to 17-14-12 times PE, which belongs to the bottom of the valuation and maintains the "buy" rating.