Investment points: The strengthening of supervision of training institutions has no substantial impact on the company's business in the medium to long term, and the growth rate of the core business of K12 education and training is stable. Judging from the regulatory situation for out-of-school training institutions, the requirements for stock outlets in terms of space, decoration, fire protection, etc. are more stringent. The impact on procurement costs and repayment cycles, and the impact on the fee cycle requirements is mainly reflected in some preferential tuition policies and payment methods for customers. The impact of the rectification regulations is short-term and industry-level. In the medium to long term, there is no essential impact on the development of Onli's education business. Currently, among the company's four major business segments, K12 education and training is still the biggest contributor. Judging from the report in the 3rd quarter report, the revenue growth trend has not slowed down, and it is expected to maintain a 20-30% growth rate this year. As of the 2018 Mid-Year Report, the company has 199 offline outlets, including Onli Foreign Language, Intelligent Cube, Shanghai Children, and Dongshubang. The vast majority are located in the Shanghai region, and it is expected that the number of annual report outlets will increase. In terms of offsite expansion, the approach is to set up branches in various regions, find schools with cooperative relationships as flagships, and achieve local brand export and network expansion. Judging from the new school opening this year, there will still be some pressure on the cost side, and it is expected that there will be no significant increase in profit margins this year. The asset-light model actively lays out the preschool education, vocational education, and international education sectors, and positions itself as a comprehensive education and training service provider. The company's K12 education and training business is quite mature. Kindergartens use a proxy operation model, and the asset-light model of international education is still being explored, based on the principles of strict compliance requirements and steady expansion. In terms of business models, listed companies dispatch experienced school management to assist in school preparation and early enrollment, provide services including faculty and staff recruitment, publicity and enrollment work, school operation and management, etc., and charge fixed management fees. Since the costs related to school operations are not in listed companies, the international education sector is currently profitable. In terms of vocational schools, when it comes to academic education, a management export model is still used. Depending on the circumstances of each partner school, different agreements will agree on how fees are shared. Industrial capital continues to be maintained, and the company's control has not changed. As of the end of October 2018, CICC Investment (Group) and co-actors continued to increase their holdings to 8.14% of the total share capital of listed companies, with an increase in the price range of 23-29 yuan/share, and a shareholding ratio of 21.18% after completion of the increase plan. They continue to be optimistic about the education industry and the company's future development prospects. After the convertible bonds issued by the majority shareholder Jiaotong University Industrial Investment Management Group entered the stock exchange period in April and the Jiaotong University Enterprise Management Center reduced its holdings in September, the current shareholding ratio of Jiaotong University is 22.58%. The gap between the shareholding ratio of industrial capital and the actual controller has narrowed further, but as of now, the company's control has not changed, and it is uncertain whether industrial capital will continue to increase its holdings, so further communication is needed. Profit forecasting and investment ratings: Maintaining an increase in holdings ratings Taking into account the cost and cost pressure brought about by industry restructuring regulations and expansion, we appropriately lowered our assumptions about the company's short-term revenue growth rate, but still maintained the judgment that the education business revenue growth rate was in the 20%-30% range. At the same time, based on prudential principles, we did not consider the impact of the stock acquisition of Korean CDL companies for the time being. The company's net profit attributable to shareholders of listed companies in 2018-2020 is estimated to be 119 million yuan, 156 million yuan, and 225 million yuan respectively; EPS is 0.42 yuan, 0.54 yuan, and 0.78 yuan respectively; corresponding PE is 50.6 times, 38.7 times, and 26.8 times, respectively. As the market declines, the company's stock price has recently been adjusted by a certain margin. Considering that the company is one of the few businesses in the A-share market that is more pure education stock, there is a certain scarcity, and the valuation level is still within a reasonable range. The company is positioned as a comprehensive education and training service provider, and has been deeply involved in the core business of K12 education and training for many years. With the education resources of Jiaotong University, the company has formed a strong brand influence in the East China region. At the same time, preschool education, vocational education and international education are promoted in an asset-light model, continuously exploring more reasonable ways to intervene in new business fields, and is optimistic about the continued steady development of the company's K12 education business and growth space in other segments. Maintain the company's holdings increase rating. Risk warning: 1) policy risk; 2) industry competition and business expansion risk; 3) uncertainty in CDL company equity acquisition transactions; 4) risk of stock price fluctuations.