Key elements of the report: The company announced major restructuring plans, purchasing 100% of Haiyuntian's shares, 100% of Changzheng Education's shares, 49% of Longxing Information's shares, and 40% of Chengchang Information's shares. The total transaction consideration was 1,868 billion yuan. The equity transaction valuations were 1,060 million yuan, 724 million yuan, 55 million yuan, and 29 million yuan respectively. The company's development strategy is quite clear. It will continue to deepen and improve the online education and mobile game business layout in the future. Under the two-wheel drive, the company will maintain rapid growth in the next two years. It is estimated that the company's EPS for 15 and 16 will be 0.54 yuan and 0.72 yuan respectively, and the PE corresponding to the latest closing price of 20.02 yuan will be 37 times and 28 times, respectively, giving the company a “buy” rating. According to the valuation of the company's online education and mobile game business, it is 11.3 billion yuan and 8 billion yuan respectively, with a corresponding total market value of 19.3 billion yuan. Currently, the market value is only 8.8 billion yuan. The company's valuation is still seriously underestimated. Incident: The company announced a major restructuring plan. It plans to purchase 100% of Haiyuntian's shares, 100% of Changzheng Education's shares, 49% of Longxing Information's shares, and 40% of Chengchang Information's shares in the form of issuing shares and paying cash. The total transaction consideration is 1,868 billion yuan. The transaction plan revealed that Haiyuntian, Changzheng Education, Longxing Information, and Chengchang Information's equity transactions were 1,060 million yuan, 724 million yuan, 55 million yuan, and 29 million yuan, respectively. Tuowei Information plans to issue a total of 87.2551 million shares to the shareholders of the four companies to purchase assets at an issue price of 16.40 yuan/share. In addition, the total consideration for cash payments was approximately $438 million. In addition, the company announced the employee stock ownership plan: this time, the subscription amount for the company's non-public shares will not exceed RMB 175 million, the subscription price will not exceed 10.65 million shares, the issue price will be 16.40 yuan/share, and the lockdown period will be 36 months. Comment: The company lays out the entire education industry chain with the intention of building a leading online education enterprise. In 2009, the company began entering the education industry and has successively acquired nearly ten education-related IT companies. This time, another major acquisition of four companies shows the firm determination of the company to transform online education in the future. After the acquisition, the entire education industry chain was improved: an education model integrating education informatization, Internet education, and offline innovative learning centers was formed. The offline channels covered more than 25,000 primary and secondary schools and 11,000 kindergartens (including Changzheng Education). It has formed a home co-education platform for preschool education with Long March education; an online paper reading platform with Haiyuntian; an online homework and big data platform with Qingyou Online Job Connect; and an online learning platform that cultivates excellence online with high energy 100. Ultimately, a “cloud campus” O2O platform with complete infrastructure and closed business loops based on cloud and big data will be formed, covering educators under 18, and is expected to become a leading enterprise in the field of online education in China in the future. Changzheng Education is a leading multimedia early childhood education enterprise. Established in 2001, Changzheng Education is a provincial high-tech enterprise specializing in R&D, production and promotion of high-tech multimedia teaching equipment and electronic textbooks for young children. It has the largest market share in the multimedia preschool education segment. Relying on the advantages of offline service network channels and rich early childhood education resources throughout the country, Long March Education has further upgraded the public service marketing model, initiated the implementation of the “Internet+China Preschool Education Action Plan”, and provided free smart preschool education informatization services to kindergartens and parents, thus transforming huge offline user resources into online resource advantages. The company has 187 national patents, 57 copyrights, and has independently developed animation video teaching resources with a duration of more than 10,000 minutes, and more than 3,000 educational software, covering various fields such as reading, mathematics, safety, etiquette, music, art, etc., and has been used by more than 10 million kindergartens nationwide. In 2013 and 2014, operating income was 103 million yuan and 109 million yuan, and net profit was 21.6853 million yuan and 24.4878 million yuan, respectively. Haiyuntian is a leading online assessment and education evaluation system company. Established in 1997, Haiyuntian is a leading provider of examination evaluation and education assessment services in China and a leading enterprise in the field of education informatization. It is a national high-tech enterprise, a key software enterprise within the national planning and layout, and a national torch program project unit. The market share reaches 55%, and the market share of the secondary school entrance examination exceeds 30%. It provides online evaluation systems and technical services for large-scale examinations such as college entrance examinations in more than 10 provinces and cities across the country, secondary examinations, general examinations, adult examinations, self-study examinations, national judicial examinations, national accounting qualification examinations, and national personnel examinations. The annual examination data processing volume is as high as 100 million, and it continues to rank first in the world. The company's operating income in 2013 and 2014 was 132 million yuan and 143 million yuan, and net profit was 1,0610 and 232,23,800 yuan respectively. Longxing Information and Chengchang Information School Communications have limited growth prospects. Tuowei Information is building an O2O platform based on the advantages of offline channels. Longxing Information is the earliest education industry SP in China, established in 2003. It is mainly dedicated to the development and promotion of education informatization. It is an SP company that provides technical support and customer services for China Mobile and China Unicom. It is the founder of China's home-school interactive informatization platform and the founder of the “Zhuhai Model” of China Mobile Communications School Communications Business, serving nearly 3 million users. The company's operating income in 2013 and 2014 was 574.749 and 608.961 million yuan, and net profit was 705.72 million yuan and 1.0575 million yuan respectively. Established in 2009, Chengchang Information is an enterprise that has always been committed to family education consulting and education and training in primary and secondary schools, providing overall solutions for education consulting application products and education consulting services in various industries including government, education, medical care, military, armed police, etc. In 2013 and 2014, operating income was 177.2.06 and 180401 million yuan, and net profit was 474.45 and 6.1534 million yuan, respectively. Longxing Information and Chengchang Information are enterprises that focus on the School Communications business. We believe that there is limited room for future growth in this sector of business. On the one hand, the School Communications business is affected by school resources and other OTT software, so there is limited room for future growth; on the other hand, the clean-up and rectification of the School Communications business in Shaanxi and other provinces and cities will also have an adverse impact. However, Tuowei Information mainly values the offline channel advantages of Longxing Information and Chengchang Information. Among them, Longxing Information covered nearly 4,000 schools with 1.52 million users; in 2014, Chengchang Information was responsible for promoting and maintaining more than 1,500 schools, serving 24,000 teachers and 460,000 parents. It plays an irreplaceable role in building an O2O platform for Tuowei Information based on the advantages of offline channels, and promoting the three-dimensional education model of education informatization, Internet education, and offline innovative learning centers. The acquisition will significantly enhance the company's profitability. The performance promises for the four newly acquired companies in 2015 and 2016 were 118 million yuan and 151 million yuan respectively. Based on the equity of the new companies, the company's net profit in 2015 was increased by 107 million yuan (the company's net profit in 2014 was 56.3 million yuan), increasing the 2015 EPS by 0.19 yuan (estimated after issuance). The company's mobile game business will also maintain rapid growth. In 2014, the company's mobile game revenue was 197 million yuan, an increase of 75.89% over the previous year. As a result of the company's acquisition of 800 million yuan in 2014, Shanghai Huorong Information promised net profit commitments attributable to shareholders of the parent company not less than 60 million, 78 million, and 97.5 million, respectively, after deducting non-recurring profits and losses in the 2014, 2015, and 2016 consolidated statements. According to the company's 2015 quarterly report, the company's net profit for the first half of the year is estimated to be 115-125 million yuan, an increase of 230%-260% over the previous year. Among them, Huolong Information's investment income was 82 million yuan, accounting for 65.47-71.42% of the profit in the first half of the year. Among them, the three countries where Huolong Information was launched last year had outstanding performance in domestic and foreign markets: the highest monthly turnover was close to 50 million; it ranked second in the bestseller list in Hong Kong, Macao, and Taiwan for a long time; it received a boutique recommendation from Hanbok Apple, ranked first in the free list; and was recommended by the App Store in Japan. Therefore, the company's future mobile game business performance is expected to exceed expectations and maintain continuous rapid growth. The epitaxial expansion of the company's capital operations will continue. When the company was listed in 2008, it had only 4 holding subsidiaries; at its peak at the end of 2013, it had participated in 43 holding companies. As of the end of 2014, there were still 15. Judging from this acquisition situation, on the one hand, the company focused more on the development of the online education and mobile game fields; on the other hand, the company's acquisition targets ranged from quantity to quality. In the future, it is still not ruled out that the company will expand in an extended manner through capital operations. Furthermore, the participation of Yao Jinbo, chairman of Zengfa 58 Tongcheng, also shows that the company is not only starting with epitaxial expansion, but also does not rule out considering introducing strategic investors. This move provides unlimited imagination for the company's future business integration and O2O development. Investment suggestions: The company's EPS for 15 and 16 is expected to be 0.54 yuan and 0.72 yuan respectively, and the PE corresponding to the latest closing price of 20.02 yuan will be 37 times and 28 times, respectively, giving the company a “buy” rating. The corresponding market value of the company is still seriously underestimated. The company's education and training business: In 2015, the company conservatively predicted that the original education and training revenue would increase by 20%, with a profit of about 033 million yuan, and an additional education and training profit of 107 million yuan after the acquisition, with a total profit of 141 million yuan, a corresponding market value of 11.3 billion yuan; mobile game business: the company's original mobile game business is expected to grow by 50% in 2015 to reach 35 million yuan, and Huolong Information's 2015 performance promise is 78 million yuan. The estimated revenue for the first half of the year is 82 million yuan. The estimated profit for the whole year is 125 million yuan, total profit of 160 million yuan, according to mobile games The industry is valued 50 times, corresponding to a market value of 8 billion yuan, and a corresponding total market value of 19.3 billion yuan. The current market value is 8.8 billion yuan. Risk warning: 1. The acquisition failed; 2. The company's education industry chain integration failed; 3. Mobile game performance in the second half of the year fell short of expectations.