Overview of FY20 performance: as of August 30, 2020, the company's revenue dropped 2.7% to 1.53 billion yuan compared with the same period last year, of which tuition and accommodation fees were 1.38 billion yuan / + 4.4%YOY, and other income was 150 million yuan /-39.7%YOY (winter and summer camps were cancelled due to the epidemic and other service income was reduced due to campus closure). The company's gross profit margin fell 0.1 percentage points year-on-year to 46.7%, profit attributable to company owners was about 5005 million yuan /-23.1% YOY, and profit margin fell 8.8 percentage points year-on-year to 33.1%. Adjusted net profit of 524 million yuan /-24.0% YOY; earnings per share of 17.0 cents, no dividend. As a result of the acquisition of Emperor International Education and Singapore CIS, the company's cash on hand decreased to-730 million yuan from 2.61 billion at the end of 19.

Short-term enrollment is under pressure, and the growth is weak: as of August 30, 2020, there are 109 Maple Leaf Education schools, of which there are 3 schools for senior high school / junior middle school / primary school / kindergarten / foreign children respectively. The number of students enrolled reached 45600 / + 10.6%YOY, the school can accommodate up to 71300, and the utilization rate of the campus is 63.9%. However, the number of new students in the company's 21 fiscal year is only 44300 (+ 6.8% compared with the same period last year, including the number of Singapore CIS). Short-term enrollment in the new school year is under pressure and growth is weak. There are 3976 teachers in the school, and the ratio of students to teachers is 11.5.

In the first year of the world curriculum system of Maple Leaf High School, the pyramid structure began to take shape: 2265 students graduated from Maple Leaf High School in fiscal year 20, 78.5% of the students entered the top 100 Maple Leaf universities, and another 216 entered the top 10 universities in the world. Fiscal year 21 is the first year of enrollment in the World course of Maple Leaf High School. at present, the enrollment of Maple Leaf High School is about 2000. We expect that Maple Leaf High School may have to show excellent admission results in the World course before there will be a big improvement in enrollment. In fiscal year 20, the number of Maple Leaf Junior Middle School reached 10121, and the pyramid structure of Maple Leaf is beginning to take shape. Competition for international schools has also become increasingly fierce, with a net increase of 40 international schools in 2019 (of which 479 are private international schools, accounting for 56 per cent). In 19 years, the total number of Chinese studying abroad was 740000.

65 Planning goal: although the performance is under short-term pressure, the company still maintains the 65 planning target, that is, in fiscal year 25, the company will build 10 education zones in China, with 100000 students, 2 overseas regions (North America and Asia-Pacific), and 10,000 students. the total number of students has increased from the current 44000 to 110000. The average tuition fee for Xiao Chugao will be raised from the current 22000 yuan, 29000 yuan and 64000 yuan to 50,000 yuan, 60,000 yuan and 100000 yuan.

Target price of HK $2.92, maintain buy rating: due to short-term enrollment pressure, we adopt a conservative forecast for the company's endogenous growth, using the DCF model to get the target price of HK $2.92, which is 33.0% higher than yesterday's closing price, equivalent to 12.9 and 11.4 times PE for fiscal years 21 and 22.