1. Event Overview The company released its 2018 annual report and 2019 quarterly report. In 2018, the company achieved operating income of 1,454 billion yuan, an increase of 48.25% over the previous year, and realized net profit of 99 million yuan, a year-on-year decrease of 38.41%. In 2019Q1, the company achieved operating income of 356 million yuan, an increase of 50.94% over the previous year, and realized net profit of 22 million yuan, an increase of 32.31% over the previous year. 2. Analysis and judgment that vocational education is developing rapidly, and the income of large enterprises has maintained a high growth rate. In recent years, the national vocational education policy has been warm, and the company's vocational education business is developing well. By the end of 2018, Hengqi Education had opened a total of 397 terminal campuses of various types, an increase of 14.08% over the previous year; a total of 170,796 student registrations, an increase of 23.50% over the previous year; and the transaction price was 7,394 yuan/person, an increase of 11.86% over the previous year. In 2018, Hengqi Education achieved operating income of 1,087 billion yuan, an increase of 80.25% over the previous year, net profit of 121 million yuan, an increase of 10.35% over the previous year; 2019Q1 achieved operating income of 301 million yuan, an increase of 55.90% over the previous year, and realized net profit of 26 million yuan, an increase of 17.82% over the previous year. CUHK Talent added 2,725,400 new registered members in 2018, an increase of 76.16% over the previous year; achieved 398,900 online transactions, an increase of 25.83% over the previous year; and the transaction price was 249.7 yuan/person, an increase of 27.48% over the previous year. In 2018, CUHK Talent achieved operating income of 94.11 million yuan, an increase of 48.15% over the previous year, net profit of 27.48 million yuan, an increase of 17.50% over the previous year; 2019Q1 achieved operating income of 2121 million yuan, an increase of 58.99% over the previous year, and realized net profit of 2.39 million yuan, an increase of 18.81% over the previous year. Currently, the state strongly supports the development of vocational education, and the industry will enter a golden period of development. Hengqi Education and CUHK talents have taken a strong competitive position in the industry, relying on their own brand and product advantages. In the future, with the deep integration of the two online and offline, it is expected that the company's performance will continue to grow rapidly. The divestment of the traditional business was completed, and the focus was on the main business. On March 13, 2019, the company signed an agreement with controlling shareholder Luo Jianwen to transfer 100% of the shares held by Kaiyuan Limited to Luo Jianwen at a transaction price of 271 million yuan. The company officially transitioned from instrumentation manufacturing and vocational education to a pure vocational education company. The instrumentation business lost 18.95 million yuan in 2018, and 2019Q1 lost 5.49 million yuan. Starting in Q2, this business is no longer included in the scope of company mergers. The divestment of traditional businesses will not only help companies concentrate resources to develop vocational education, but will also reduce the impact of losses in traditional businesses on the company's performance. 3. Investment proposals were covered for the first time, and recommended ratings were given. In recent years, vocational education has received priority support from national policies. Since the company's merger and acquisition of Hengqi Education and CUHK talents in 2017, the vocational education business has developed rapidly. As the company divests its traditional manufacturing business, it will focus on the vocational education sector in the future, which is expected to continuously enhance its competitive advantage and drive rapid performance growth. We expect the company's EPS in 2019-2021 to be 0.55/0.73/0.91 yuan, respectively, and the corresponding PE price to be 21X/16X/13X, respectively. We chose China Public Education, Baiyang Co., Ltd. and Oriental Fashion as comparable companies. The average valuation of the industry in 2019 was 32X. The company had a clear valuation advantage, so we gave it a recommended rating. 4. Risk warning: the risk of increased competition in the vocational education industry; risk of impairment of company goodwill.