Incident: Kaiyuan Co., Ltd. announced on June 3, 2019: Kaiyuan Co., Ltd. plans to acquire 30% of the shares of Zhongda Talent with 144 million yuan in cash. Zhao Jun, founder of CUHK Yingcai, promised to increase his holdings of Kaiyuan shares through market collective bidding, bulk transactions, or agreement transfers within 6 months after obtaining the target asset transfer payment, with a total increase of not less than 115.2 million yuan. Our comments on this are as follows: CUHK talents will achieve 100% equity merger. The main business of CUHK's talents is online vocational examination education on the Internet. The courses cover 10 fields such as construction engineering, finance, and vocational qualifications, including 134 subdivided courses and 8,450 online courses. In 2018, Zhongda Talent added 2.73 million new registered members (+76%), order repayment of 99.63 million yuan (+60%), and customer unit price of 250 yuan/person (+27%). In 2018, CUHK talents achieved revenue of $94.11 million (+48%) and net profit of $27.48 million (+18%). In 2016-2018, non-net profit deducted was 1603, 2,306 and 27.07 million yuan respectively, achieving a total non-net profit deduction of 66.16 million yuan, fulfilling 102% of the performance commitment. Kaiyuan Co., Ltd. is a giant enterprise in the vocational education and training industry in China. Kaiyuan Co., Ltd.'s two major players in the vocational education business, “Hengqie+Zhongda”, rank among the top five in the Chinese vocational training industry in terms of revenue volume. About 5,000 employees are expected to support revenue exceeding 1.7 billion yuan in 2019. The company formulated the long-term layout of the three “financial+IT design+self-examination” tracks and 4 major derivative tracks, and built core competitiveness with 400 store channels, O2O marketing systems, and multi-track education and research reserves. The increase in the stock holdings of Kaiyuan Shares by the talented founder of CUHK is an important sign of the improvement of the corporate governance structure. In 2018, the manufacturing business lost 41.59 million yuan in net profit, and the vocational education business net profit was 140 million yuan. The manufacturing business of Kaiyuan Co., Ltd. was divested in the second quarter, and will focus on the main business of vocational education in the future. As of May 10, 2019, the Roche family, the founder of Kaiyuan Co., Ltd., held a total shareholding ratio of about 29.12%. From the perspective of corporate governance structure, the education business founding team, as the core contributor to the performance of listed companies, holds only 18.25% of the shares. Zhao Jun, the talented founder of CUHK, increased his holdings of Kaiyuan shares by no less than 115 million yuan, which means that substantial steps have been taken in improving the corporate governance structure. As the interests of education business executives and listed companies are gradually bound, we believe that Kaiyuan is expected to return to the rapid growth trend. The 19Q1 vocational education business revenue was 320 million yuan, up 56% year on year; 19Q1 advance payment was 313 million yuan, up 60% year on year. Performance exceeding expectations is an important sign of a clear corporate governance structure. Investment advice: The restructuring of the valuation system brought about by improvements in corporate governance structures. We maintain the company's net profit forecast of 183/2.73/354 million yuan for 19-21. Currently, the market value of 3.6 billion yuan corresponds to PE 19 in '19, which is only 19. There is still plenty of room for valuation improvement compared to 19PE, which is more than 40x higher than 19PE, a leader in vocational education. Maintain a “buy” rating. Risk warning: The risk that business management and the opening of a new campus fall short of expectations.