The recent company valuation repair market is obvious. Prior to this, the company's share price fell sharply, on the one hand, due to the lifting of the ban on the increase of shareholders during September, and on the other hand, it was caused by systemic risk. With the policy pick-up and the company's performance in three quarters, market recognition has gradually improved, the recent company valuation repair market is more obvious, continue to be firmly optimistic about the company's medium-and long-term performance.

The policy dividend continues to be released, which is beneficial to the development of vocational education. There are frequent positive policies in the field of education in 2018. The "opinions of the State Council on the implementation of lifelong Vocational skills training system" proposes to establish and implement a vocational skills training system that covers a wide range and runs through labourers' study and work for life. The draft of the implementation regulations of the people's Promotion Law clearly defines the profitable nature of schools in the non-compulsory education stage and the market-oriented supervision of private vocational training institutions. the policy is the most positive for social capital to participate in vocational education for the purpose of profit; the interim measures for special additional deduction of individual income tax (draft for soliciting opinions) points out that the expenditure on continuing education can be deducted before tax, and vocational education continues to benefit from the policy.

Around the continuous layout of art education, the growth path is clear. The company's education business is mainly driven by the Martian era, and since 2018, the company has been expanding its educational layout around Mars: 1) the acquisition of demons to achieve the extension of the industrial chain, cut into the field of art and design, and remarkable synergy; 2) cooperate with vocational colleges to build a digital art college and cut into the field of academic education. At the same time, the company actively develops youth art education (STEAM), art study abroad and art travel, online vocational education and other business, the layout is clear, and constantly enhance the comprehensive strength in the field of art education.

The performance release is accelerated, and the annual performance in 2018 is expected to reach the forecast ceiling. The company's performance is solid and persistent, with a substantial increase in the third quarter. Due to the seasonal characteristics of the education industry, the fourth quarter performance will continue the trend of high growth. It is expected that the company's annual performance in 2018 is expected to reach the forecast upper limit of 215 million. At the same time, the company's pure education business is expected to contribute 180 million of profits in 2019, mainly due to: 1) under the expectation of extension layout, course price increase and increase in full capacity in the Martian era. There is plenty of stamina for performance growth. 2) Model Vision can achieve higher growth by benefiting from the industry demand in the later period of film and television; 3) Mars and Model Industry-University-Research fully cooperate to drive the steady growth of the company's endogenous performance; 4) the Institute of Digital Arts will continue to contribute profits from 2019.

Investment suggestion: the company takes art education as the core and actively expands the boundary of education business. it is expected that the company will continue to focus on the Martian era in the future, realize the extension of the industrial chain and full-age coverage, and the company's layout is clear. the comprehensive competitive strength continues to improve. It is estimated that the company's net profit from 2018 to 2020 will be 273 million yuan, corresponding to PE in 18-15-13. Taking into account the company's ability of endogenous and sustained growth and the potential for business extension, the company adopts the segment valuation method to give the target price 15 yuan and maintain the "buy-A" rating.

Risk hint: policy risk, Martian era expansion, enrollment is not as expected, the progress of cooperation in running a school is lower than expected.