I. Overview of events

The company released its 2018 annual report on April 18, with operating income of 1.17 billion yuan, an increase of 2.82% over the same period last year, with education accounting for 49.68%, and net profit of 158 million yuan, down 16.57% from the same period last year.

II. Analysis and judgment

Promote R & D and investment, and comprehensively lay out the platform for children's growth.

By the end of 2018, the company's child growth education brand provides services to 5513 kindergartens, an increase of more than 500 compared with the same period last year, and the city occupies the forefront of the industry. In addition, the company's Victronic potential Research Institute started its full work in 2018, realizing the comprehensive upgrading of the course content of the Golden Cradle brand. Over the past 18 years, the unit price of kindergarten commodity sellers has achieved rapid growth, with a year-on-year growth rate of 45.95%. Thanks to the curriculum upgrading and the gradual enrollment of the cooperative park, the subsequent customer unit price still has great potential to improve. By investing in Kerry Alliance (Sesame Street English), the company has established a strategic connection with the world-renowned education IP. The company will actively promote cooperation and exploration with Carey Group in other areas of children's education to further meet the diversified needs of families in children's growth and education.

VW has optimized its product structure and achieved initial results in strategic transformation.

In 2018, the overall market scale of the large screen splicing industry has grown steadily, and the competition in the industry has intensified day by day. With the decline of the market scale, the demand of the company's DLP product line decreased, and the sales revenue decreased compared with the same period last year, but still maintained a market share of more than 30%; the sales volume of small spacing LED products continued to grow at a high speed, with an increase of more than 70% over the same period last year, comprehensively seizing the middle and high-end markets, in which COB began to win market recognition; LCD products grew steadily and won most of the low-end markets The breadth and depth of the application of information visualization solutions in the large screen splicing market has been gradually improved. The company is expected to complete the transformation of the new and old momentum of VW business in 2019, gradually transforming from a single product-driven business to an overall solution provider.

III. Investment suggestions

Cover for the first time and give recommended rating. The company will continue to implement the two-wheel drive development strategy of ultra-high resolution digital splicing wall business and child growth platform business. We believe that with the optimization of the company's VW product structure and the continuous expansion of the children's growth platform business, it is estimated that the EPS will be 0.22 and 0.26 in 19-21, respectively, and the corresponding current price PE will be 30X/25X/21X.

Fourth, risk tips:

The procurement demand of cooperative kindergartens is lower than expected; the business development and operation results of multiple children scenarios are not as good as expected.