2020H1 revenue also fell 54.1%, and net profit was changed from profit to loss year over year. The revenue of the 2020H1 company also fell 54.1% to 127 million yuan, net loss of 22.82 million yuan, net loss of 22.82 million yuan, non-net loss of 21.99 million yuan, which was converted from the previous year to loss; corresponding to 2020 Q2, the company's revenue also fell 54.6% to 69.39 million yuan, and net loss was 18.1 million yuan, mainly due to the inability of the company affected by the epidemic to develop various businesses normally. In 2020H1, the gross margin of the company decreased by 19.3 pcTS to 47.4%, the sales/management expense ratio increased by 4.4/17.5 pcTS to 12.3%/40.0%, and the R&D expense ratio decreased slightly by 0.1 pcTS to 3.9%. Overall, the company's net profit margin fell by 30.4pcTS to 18.0% during the reporting period. Offline outlets in the early education business continued to resume classes, and the store layout bucked the trend. 2020H1 Tianjin Megem's revenue also fell 67.9% to 56.86 million yuan, and net profit fell 81.2% to 17.34 million yuan. The early education business was greatly affected by the epidemic. The company exempted all domestic franchise, direct-run and trusteeship centers from initial licensing fees for 2020H1. The company promptly launched “Megim Online” at the end of January 2020 to hedge against the impact of the epidemic. As of 2020 H1, the total number of users was nearly one million, of which more than 80% were newly registered users. The company has actively resumed offline store operations since Q2. As of August 28, 2020, a total of 418 offline centers have resumed classes, accounting for 78.1% of stores that have resumed classes. The company bucked the trend and expanded its stores in the context of the pandemic. 2020H1 added 11 contract centers to 535, covering 30 provincial divisions across the country. It is hoped that after the epidemic is brought under control, market integration opportunities will be seized to increase market share. Complete the divestment of 100% of the shares of Third Base Technology and the change of chairman, and focus on education business in the future. The company announced on July 7, 2020 that it intends to transfer its subsidiary Sanbi Technology to Yu Jianmo (the company's shareholders holding more than 5% of the company's shares) and Kim Byeong-duo at a consideration of 249 million yuan. On August 22, both parties to the transaction completed the business change procedures for Third Base Technology, and the listed company no longer holds shares in Third Base Technology. Furthermore, on August 11, the company announced that Chen Xin, the former chairman, had resigned as chairman for personal reasons and would no longer serve in the company after resigning. Liu Junjun, founder of Megem, became the company's chairman. After completing the sale of the machinery manufacturing business subsidiary and the change of the company's chairman, it is expected that the company will focus on early education business in the future to meet the needs of the company's development strategy. Investment advice: 2020H1 has been affected by the pandemic, and Megim's offline store operations have been blocked. Currently, classes are continuing to resume, and the performance is expected to be under pressure throughout the year. Looking at the long term, Megim's brand and channel advantages are outstanding. The early education industry is currently in a stage of continuous growth. The scale and market share of the industry are expected to accelerate. After completing the 100% equity divestment of Third Base Technology and the change of chairman, the future development strategy has become more clear. Based on the 2020 interim report, we adjusted the company's net profit forecast for 2020-2022 to 0.35/1.78/226 million yuan (previously 0.26/1.90/238 million yuan), an increase of -71.1%/413.2%/27.1%, corresponding to EPS 0.04/0.21/0.27 yuan, maintaining the “increase in holdings” rating. Risk warning: The performance of companies affected by the pandemic falls short of expectations; the effectiveness of the comprehensive two-child policy falls short of expectations; competition in the early childhood education industry is fierce; policy regulation is becoming stricter; the expansion rate of third- and fourth-tier cities is falling short of expectations; Megem's acquisition brought about borrowing and financial costs, which may affect the company's performance; Megem did not meet promised performance, and there is a risk of impairment of goodwill.