Incident: The company announced that it plans to transfer 100% of the shares of Third Base Technology to the original controllers Yu Jianmo and Jin Bingduo for 249 million yuan. After the transfer is completed, the company will no longer hold shares in Third Base Technology. Comment: Divestment of the non-education business and focus on the early education market. When the company was transforming and laying out the education industry, it transferred its original manufacturing business to its subsidiary Sanji Technology. After the transaction was completed, the company's main business focused on Megim in early childhood education and education consulting in the field of education consulting for young students, while also returning funds for the development of the main early education business. This year, due to the impact of the epidemic, new teaching contracts have been greatly affected, and are currently recovering rapidly. By the end of June, more than 70% of Megim's nearly 500 offline stores had resumed classes, and the attendance rate had steadily recovered, while by the end of May this figure was only 25%, and progress in the recent resumption of classes had improved markedly. At the same time, during the pandemic, the company increased the launch and promotion of online courses. Up to now, the total number of registered users online is 1 million, while the number of members of the original Megim offline center is 110,000. It is expected that it will continue to enrich the content of online courses and explore the launch of value-added services for social e-commerce and members to enhance the transformation of online users. 。 Launch new brands to accelerate the expansion of bottom-line cities while actively exploring new categories around children's training. Based on the original Megim curriculum system, the company's sub-brand “Little Jim”, which was launched in response to the declining fourth and fifth tier markets, has now signed 6 centers, and plans to continue to strengthen the empty market layout in third- and fourth-tier cities in the future; in terms of overseas layout, in the next 3-5 years, the company will focus on expanding overseas markets. Currently, Megim has set up new centers in Thailand and Vietnam and has begun healthy operations. In the future, it will focus on India, Russia, Indonesia, South Korea, Malaysia and other countries with a large population and economic development volume to accelerate deployment; in addition, it will actively explore new products around children's training For example, a framework agreement was signed with Beijing Cultural Center Construction and Development Fund Management Co., Ltd. to jointly establish the “Wenxin-Megim Education Fund” with a total scale of 10 billion yuan, focusing on children's English, children's art, children's sports and other industries. The fixed increase is progressing steadily, financial pressure is being carried out, and interests are tied together. The company issued a fixed increase plan in September '19. It plans to issue no more than 128 million shares and raise no more than 1.65 billion yuan. The fundraising targets include actual controllers and some executives. The funds raised will be used to repay the final purchase amount and bank loans (the company's other share transfers due to the company's other accounts payable) to achieve a combination of interests and reduce financial pressure; it is currently progressing steadily. Profit forecast and investment rating: The company has significant brand advantages in the high-end early education market, and has significant advantages in the curriculum system and teaching staff. At the same time, it has a very complete talent training system and franchise management service system. There is significant room for improvement in the participation rate and concentration of yellow sac in early childhood education, and there is plenty of room for future growth. It is expected that the EPS for 20-22 will be 0.11/0.26/0.34 yuan, and the closing price for July 8 will be 62/27/21 times the corresponding annual P/E, maintaining the “prudent increase in holdings” rating. Risk warning: strengthened industry supervision, risk of injury to students, brand promotion expansion falling short of expectations, etc.