Incident: The company released a performance forecast. The net profit for 2020H1 was 23 to 16 million yuan, and the net profit for the same period last year was 34.27 million yuan, changing from profit to loss. H1 has been affected by the pandemic, and H2 is expected to improve. Considering the factors of the epidemic, the company decided to waive the initial licensing fees for the 2020 H1 franchise center, direct management center and managed direct management center, affecting revenue of about 17.7 million yuan and net profit of about 9.3 million yuan. Excluding the impact of license fee exemptions and donations, the net profit of the mother is approximately -1170 to -4.7 million yuan. Early childhood education targets a younger customer base, and the resumption of work and classes is later than in other education segments. Megim has only resumed classes one after another since May. Currently, about 350 centers have resumed classes. It is expected that the progress of store operations and expansion will improve markedly in the second half of the year. The pandemic is expected to accelerate the clearance of small institutions in the industry and the process of industry integration. Megim may benefit as a leader in early childhood education. Divestment of the original main business and focus on the education industry. The company plans to transfer 100% of Sanlei Technology's shares to Mr. Yu Jianmo and Mr. Jin Bingduo for 249 million yuan. Mr. Yu Jianmo and Cooperative Actors were the actual controllers of the company (formerly known as Third Base Shares) until November 2016. Currently, Mr. Yu Jianmo and Cooperative Actors hold 22.31% of the shares, and Mr. Kim Byeong-duo holds 3.83% of the shares. After the company divests its original main business, it will become a pure education company, which is conducive to business focus. Investment advice: The performance in the first half of the year was affected by the pandemic, and the second half of the year is expected to improve. Although the pandemic has had an impact on short-term performance, it is expected to accelerate the process of industry integration and increase in the share of leading markets in the long run. Consider the investment income brought about by the transfer of Third Base Technology, maintain the profit forecast of net profit of 246/1.80/205 million yuan from 2020 to 22, with a corresponding valuation of 25x/35x/31x, and maintain the “buy” rating. Risk warning: After the early education network resumed classes, the willingness of parents and students to attend classes fell short of expectations, and the progress of branch expansion fell short of expectations. The study abroad business has not met expectations due to the impact of the overseas pandemic.