I. Overview of events

The company reported revenue of 2.095 billion yuan in 2018, up 21.58% from the same period last year, and net profit loss of 267 million yuan, down 316.68% from the same period last year. Among them, the revenue of education and training business reached 1.827 billion yuan, an increase of 22.31% over the same period last year, accounting for 87.19% of business income. The company's loss in 2018 was mainly due to the poor performance of the London Astrum Education Group limtied Group project acquired by the racing Education Fund, which the company invested in in 2015, which included a loss of about 68.458 million of the investment and an increase in the cost of K12 expansion in proportion to its shareholding.

II. Analysis and judgment

Further consolidate the K12 education industry and accelerate the pace of expansion in other places

The company will continue to optimize the layout of K12 education business, strengthen content construction, and maintain a good business development trend. Among them, the company's K12 business achieved business income of 1.565 billion yuan in the past 18 years, an increase of 24.71% over the same period last year. A total of 77 new teaching centers were added, 26 were expanded and relocated, and the number of directly operated teaching centers increased to 249, covering Shanghai, Jiangsu and Zhejiang and other regions, achieving great-leap-forward development. The number of students enrolled in the year was 172400, an increase of 25% over the same period last year. In the future, K12 education business will actively promote the establishment of national branches, including Onli Foreign language, Onli STEM and so on. In addition, the company continues to expand the K12 education industry chain and carries out in-depth strategic cooperation with South Korea's CDL company to focus on high-end children's American English training, which is expected to further consolidate the advantages of K12 industry.

Actively promote vocational education business and improve the education industry of other age groups

The company continues to integrate its own and domestic and foreign resources to meet the market demand and develop the full-age education industry. During the reporting period, the company's vocational education business achieved revenue of 235 million yuan, basically the same as the previous year. Shandong Shenquan College, a company fund-raising project in the vocational education sector, is progressing smoothly, with the official opening of the new campus; the annual enrollment of Nanyang Vocational College in Jiaxing has increased by 1700. At the same time, the company will actively expand the business of international education and early childhood education, such as International Education will continue to promote Fengpu Modern Education demonstration Park and Zhengzhou Kensington Bilingual School Project; early childhood education will take the nursery early childhood education center as the core business, build early childhood education service platform, output high-quality early childhood education content.

III. Investment suggestions

Maintain the recommended rating. The company has been ploughing education for many years, the ownership structure has been continuously optimized, and the content and layout of the education industry have been continuously strengthened. in the future, it is expected to broaden the education industry chain and thicken the performance while consolidating the education and training business. Therefore, the EPS given to the company from 2019 to 2021 is 0.43, 0.50, 0.60, and the PE corresponding to the current price is 48X/41X/34X.

Fourth, risk tips:

Business expansion is less than expected, and competition in the education and training industry intensifies.