Incident: Megim plans to transfer 100% of its shares held in Dalian Sanlei Technology Co., Ltd. to Yu Jianmo and Jin Bingduo for RMB 249 million. Divestment the manufacturing industry and focus on the early childhood education circuit. The third base technology sold this time was 100% owned by Megim before the transaction, and after this transaction, Yu Jianmo, founder and shareholders of Third Base, and Kim Byeong-duo held 100% of the shares. In 2019, the company's machinery manufacturing industry accounted for 21.5% of revenue and a gross profit margin of 45.46%. The gross margin was lower than that of the company's education sector business. After divesting the manufacturing sector, Megim will focus more on the early education circuit, which is beneficial to the company's internal management and long-term development plans, and at the same time will drive up the company's overall gross margin. The epidemic has impacted the early education industry, but the concentration of the industry may increase in the future. Due to the COVID-19 pandemic, early education institutions and parent-child homes for infants under 3 years of age have suspended offline training since January 29. Various early education institutions in the industry are offering online courses one after another, but since computer-based classes are not suitable for young children, and online early education courses are difficult to make up for the lack of offline courses, the number of new enrollees has plummeted, and the overall industry has been greatly impacted. The pandemic has posed challenges to the cash flow of small and medium-sized enterprises, speeding up the supply end of the industry. As the only listed early education company in China, Megim has a strong advantage in terms of cash flow and brand power. The company launched an online business during the pandemic. At the same time, the company made it clear that offline is the foundation for early education business development. The online business aims to complement offline, increase market coverage, and increase offline customer stickiness and customer acquisition channels. In the context of this industry integration, the company focuses on the development of early childhood education and has a clear position, which is expected to revitalize. Policies promote the accelerated development of the early childhood education industry, and Megim is expected to continue to expand rapidly as a leading brand. In recent years, the state has introduced a series of policies to support the development of the early childhood education industry. At the preschool education stage, the early education industry is in a period of accelerated development and has become the field of optimal use of private capital, and major early education institutions have begun to accelerate their layout to seize the market. In 2015, China's early childhood education market was less than 150 billion yuan, and is expected to exceed 300 billion yuan in 2020, with a CAGR of about 20%. Relying on brand advantages, the company is expected to win in rapid development and fierce market competition. Over the past three years, the company has added more than 90 centers every year. We expect the company's first-tier cities to achieve a 50% increase in the number of stores in the next 3-5 years. Second-tier cities may double the number of stores due to low rent, sufficient talent, and strong shopping demand, and large room for development. In three or four years, the city also has room for further decline in coverage, and the company will continue to expand rapidly in the next few years. Company profit forecast and investment rating: As of late May, the company's 95 MGM centers in Jiangsu, Hainan, Sichuan and other places have resumed classes. Since then, centers other than Beijing have continued to recover. Considering the asset disposal income of $249 million in 2020 and the complete divestment of the manufacturing industry in 2021, we expect the company's net profit in 2020-2022 to be $2.4/21/260 million, corresponding to EPS of $0.29/0.26/0.31. The current stock price corresponding to the 2020-2022 PE value is 24/27/23 times, respectively. Maintain a “Recommended” rating. Risk warning: Store expansion falls short of expectations, franchise store operations fall short of expectations, and vicious educational events.