Affected by the epidemic, net profit from 2020H1 fell 167% year on year to 2020H1. Impacted by the suspension of classes due to the pandemic, the company achieved revenue of 127 million yuan/ -54%, net profit loss of 22.82 million yuan/ -167%, net profit loss of 21.99 million yuan/ -161%, and EPS of -0.03 yuan. In Q2, in a single quarter, we achieved revenue of 69.39 million yuan/ -55%, net profit loss of 18.1 million yuan/ -204%, net profit loss of 18.45 million yuan/ -192% after deducting non-return net profit loss of 18.45 million yuan/ -192%. Under the impact of the epidemic, early education and study abroad training operations are under pressure. The manufacturing business changed from profit to loss 2020 H1. Operating data for various sectors: 1) Early education business: Tianjin Megem's revenue was 56.86 million yuan,/-68%, and net profit was 17.34 million yuan/ -81%. Affected by the domestic epidemic, stores were completely closed on January 24. By the end of June, more than 350 stores had resumed classes, with a resumption rate of 65%. However, considering the non-rigid nature of the business and the underage group of customers, the subsequent recovery in passenger flow still needs to be tracked. In terms of the number of stores, the number of centers signed by 2020H1 Megim was 535, an increase of 11 over the beginning of the year. Additionally, in response to the declining market, a new contract was signed to launch 8 sub-brand Little Jim centers. 2) Study abroad training: Kaide Education's revenue is 20.6 million yuan/ -3%, net profit is 3.99 million yuan/ -45%, and the spread of the overseas epidemic is under pressure on operations. 3) Manufacturing business: Third Base Technology achieved revenue of 48.69 million yuan/ -35%, and net profit loss of 2.4 million yuan/ -134%. The gross margin of 2020H1 was 47.37% /-19.29pct, and the gross margin of the early education/study abroad training/manufacturing business declined by 7.07/10.61/23.36 pct, respectively. The period rate also increased by 20.56 pct, and the management/sales rate increased by 17.53/4.38 pct. Related to the relative rigidity of employee remuneration and rent costs, the financial/sales rate decreased by 1.28/0.08 pct. The divestment of the manufacturing business focuses on the early education circuit. The leader is expected to lead the industry to increase concentration. The company has divested its manufacturing subsidiary, Third Base Technology. Recently, Chen Xin, the former chairman of the company, resigned, and Liu Junjun, the founder of Megem, will become the new chairman. In the future, it is quite clear that the strategic focus of listed companies will focus on early education business. Affected by the closure of the current epidemic, some small and medium-sized institutions in the early education industry closed down or ran away due to broken capital flows, and the company relied on brand awareness and the financial advantages of listed companies' platforms to take the opportunity to integrate high-quality property resources, which is expected to lead the industry to accelerate concentration. Risk warning: stricter policy supervision; slow recovery of store traffic; loss of education management team, etc. It is recommended to pay attention to the recovery in store traffic after the pandemic and maintain the “increase in holdings” rating. Without considering the fixed increase in the previous period and taking into account the impact of the epidemic, the company's EPS for 20-22 is expected to be -0.18/0.23/0.30 yuan, and the corresponding valuation level for 21-22 is 30/24x. It is recommended to pay attention to the recovery in store traffic. The central line focuses on the company's industry integration opportunities and maintains the “increase in holdings” rating.