Company Overview: In the benchmarking industry, there is still plenty of room for growth in the number of undergraduates Huali University Group is a large private higher education and vocational education group in Guangdong Province. Currently, it has 3 schools: Huali College (independent college), Huali Vocational College (college), and Huali Technician College. As of October 31, 2019, the number of students enrolled in the Group was 40,627, of which the number of Huali University students was 17,794 (that is, 44% of undergraduate students). Compared to Baiyun University owned by China Education Holdings, Guangdong Institute of Technology under China Science and Technology, and Huashang School under Zhonghui Group, which has 24,000 to 27,000 undergraduate students, Huali University has great potential for future growth. The gross enrolment ratio of higher education in Guangdong Province is low, and policy dividends are intensively promoting the expansion of enrolment in Guangdong Province. The gross enrolment ratio of higher education in Guangdong Province in 2018/2019 was 42.43%/46%, respectively, and future plans were raised to 50%/55% in 2020/2021; policy promotion includes higher vocational expansion plans, full opening of offsite college entrance examination policies, liberalization of settlement restrictions, and measures such as land use, tax incentives, subsidies, and voluntary fees. Company advantages: The admission score line is high, and the employment rate is competitive (1) In the 2018/2019 academic year, Huali University's liberal arts and science admission score lines were 27 and 19 points higher than the Guangdong undergraduate score line, respectively. Their average score was 30-40 points higher than the undergraduate score line, controlling the better quality of students from the entry threshold. Meanwhile, Huali University's undergraduate registration rate is around 90%, and Huali Vocational and Technical College's registration rate is 75-80%, all of which rank among the highest in Guangdong Province. (2) Judging from the 2017/2018 academic year, the employment rates of Huali College, Huali Vocational College and Huali Technician College reached 95.9%, 93.5% and 98.4% respectively; in terms of remuneration, the average salary of Huali University's undergraduate graduates ranked high among private colleges and universities in Guangdong Province, reaching 4000-5000 yuan. Company growth: Multiple rounds of expansion, new establishment, price increases, and mergers and acquisitions drive future company growth: (1) enrollment growth following the expansion of Zengcheng and Yunfu campuses, and the Jiangmen campus plans to apply for a new college license; (2) Tuition fees increase by 10% every two years, expecting vocational colleges to upgrade undergraduate programs; (3) the transition to independent colleges accelerates, and performance is expected to increase after decoupling; (4) there is plenty of cash in hand, and future mergers and acquisitions are expected; (5) net interest rates will improve. Profit forecasts and investment recommendations expect FY2020/2021/2022 EPS to be 0.27/0.35/0.44 yuan, corresponding to PE 10/8/6X, respectively; currently, the average valuation of the private higher education industry is PE13/11X in 2020/2021, considering that the company's CAGR of 34% in the next 3 years, there is a lot of room for increase in gross enrolment rate in Guangdong Province, there is plenty of room for growth in the number of undergraduate students in the future, and there is room for improvement in net interest rates. First coverage, giving a “buy” rating. Risks indicate the risk that the enrollment situation does not meet expectations, that the transition progress falls short of expectations, policy risk, risk of the initial launch ban, and systemic risks.