Incident: The company released its 2023 interim report. During the reporting period, the company achieved operating income of 127.98 million yuan, up 114.13% year on year; net profit attributable to shareholders of the parent company - 2016 million yuan, up 62.83% year on year; earnings per share - 0.034 yuan, up 61.47% year on year.

Education services resonate with education and training, and various financial indicators have improved markedly. Benefiting from the expansion of the number of students enrolled and the normal development of post-epidemic education services and training services, the company's revenue increased dramatically. During the reporting period, the company achieved revenue of 127.98 million yuan, an increase of 114.13% over the previous year; of these, education services amounted to 89.63 million yuan, an increase of 90.45%, and education and training of 36.24 million yuan, an increase of 227.40% over the previous year. At the same time, the company's profitability has increased markedly, and various financial indicators have improved markedly. During the reporting period, the company's overall gross profit margin was 22.09%, an increase of 34.05 percentage points. Among them, the gross profit margin of the education service business was 22.70%, an increase of 33.07 percentage points; the gross profit margin of the education and training business was 9.65%, an increase of 17.77 percentage points.

Affected by this, the company's losses narrowed sharply. Net profit during the reporting period was 2016 million yuan, an increase of 62.83% over the previous year. It is expected that with the continuous expansion of the number of students enrolled and the rapid development of the training business, the company's trend of turning losses into profits will be determined.

Haidian Kevin is almost fully staffed, and Chaoyang Kevin operates on a dual track. Kevin in Haidian is doing well in running schools. The 51 2023 graduates received 219 offers from world-renowned universities such as Rice University, New York University, University College London, and the University of Hong Kong, which were recognized by the community.

At the same time, Haidian Kevin is basically operating at full capacity, and Kevin Zhixin has achieved profit. During the reporting period, Kevin Zhixin achieved operating income of 39.37 million yuan and net profit of 9.65 million yuan. The occupancy rate of the Kevin school building in Chaoyang is not high. The number of students enrolled is expected to be within 1,000, and the income scale is relatively small. At the same time, Chaoyang Kevin's assets are heavy, and depreciation and amortization are dragging down performance. During the reporting period, Chaoyang Kevin's operator Wen Kaixing achieved operating income of 29.01 million yuan and net profit of 23.1 million yuan, exceeding the company's losses. In order to increase the utilization rate of the Chaoyang Kevin campus and improve profitability, in 2023, Chaoyang Kevin made every effort to launch a high-quality high school for domestic college entrance examinations, and achieved the first enrollment of 120 students. It is expected that school will officially begin in the fall.

Quality education Yang Fan set sail, and summer camps are growing rapidly. The company has vigorously developed quality education, set up international art classes (KAP) and international music classes (KMP), and has achieved good results in running schools. The 5 2023 KAP graduates received a total of 19 offers from prestigious universities such as Parsons School of Design and University of the Arts London. Seventeen KMP graduates received a total of 52 offers from top universities such as Berklee College of Music and Hopkins University, with an acceptance rate of 100%. At the same time, the quality education subsidiary's offline training business fully resumed, with training revenue reaching 36.24 million yuan during the reporting period; vigorously developing snow and ice sports. In 2022, the company obtained the right to operate Xishan Ski Resort, improved hardware facilities for snow and ice sports, and increased snow and ice sports education and training during the reporting period. In addition, the company is actively developing camp activities. The sports sector has set up camps for 9 types of sports, including swimming, baseball, and fencing; the art direction has set up camps for art museum research and sketching research courses. The number of participants in the summer camp has exceeded 1,000, a record high.

Actively lay out vocational education and cultivate new performance growth points. In response to national policy calls, the company continues to lay out vocational education business, and has made the field of integrated maternity education a key development goal. The company established Haike Vocational Education as a platform for vocational education business development. It is based on deepening the integration of industry and education, school-enterprise cooperation, and subject co-building. It aims to cultivate talents with applied skills and promote employment in the market. At present, Marine Science Vocational Education has signed contracts with industry-leading enterprises such as Baidu, Tencent, etc., and has established cooperative relationships with partners in the field of industry-education integration such as Henan Kecheng and Beijing Juhua. It has cooperated with 11 institutions in Beijing, Shandong, Henan, Hunan, Inner Mongolia, Sichuan, and Shanxi to establish industrial colleges, covering undergraduate, senior and middle level positions. At the same time, marine science vocational education will also rely on the company's hardware facilities to build the first phase of a 2,300-square-meter public training base in Kevin, Chaoyang. Short-term training services will gradually be launched in the second half of the year, and vocational education is expected to become a new performance growth point.

Valuation and profit forecast: The number of students enrolled in the company continued to expand in the first half of the year, the education service business grew rapidly, and made every effort to launch quality high schools for domestic college entrance examinations. Furthermore, the company is actively developing off-campus training and vocational education services. It is expected that the company's annual profit forecast will be raised. The company's annual profit forecast is expected to be 28.235 million yuan, 36.64 million yuan, and 44.06 million yuan, respectively, with year-on-year increases of 64.4%, 30.6% and 20.7%; net profit for the return mother was -16.85 million yuan, 642.42 million yuan, respectively 10,000 yuan and 13.8 million yuan, respectively, increased by 82.6% year on year, turned loss into profit and 114.7%; EPS was -0.03 yuan, 0.01 yuan, and 0.02 yuan, respectively. Maintain the “buy-A” rating and give 1.5 times PB in 2023, corresponding to a target price of 5.6 yuan.

Risk warning: There are risks such as falling short of expectations in enrollment, poor promotion conditions, slow increase in tuition fees, and serious student turnover.