Event: the company released the third quarter report of 2023, the company achieved operating income of 191 million yuan in the first three quarters of 2023, an increase of 64.88% over the same period last year; net profit of-26 million yuan, an increase of 57.56% over the same period last year; and net profit of-28 million yuan, an increase of 55.42% over the same period last year.

Income from education services and training continues to grow, and performance is restored quarter by quarter waiting for the break-even point.

In the first three quarters of 2023, the company achieved operating income of 191.0775 million yuan, an increase of 64.88% over the same period last year, of which Q1, Q2 and Q3 achieved operating income of 6823.32 yuan, 5974.71 yuan and 63.0971 million yuan respectively, an increase of 550.92%, 21.23% and 12.43% respectively over the same period last year. The company's continued revenue growth is mainly due to the expansion of the size of school students and post-epidemic repair since the completion of the change of organizers at the end of March last year. Due to the increase in revenue from the company's education services and training business. In the first three quarters of 2023, the company made a net profit of-25.6284 million yuan, of which Q1, Q2 and Q3 made a net profit of-1061.37,-954.54 and-5.4694 million respectively in the single quarter, up 72.20%, 40.57% and 10.97% respectively over the same period last year. The company's performance loss narrowed quarter by quarter. The main reason for the company's loss is the heavy asset model of Chaoyang Kevin School and the lack of students, resulting in income unable to cover fixed costs.

In order to improve profitability, Chaoyang Kevin School continues to increase enrollment publicity, and launched a domestic college entrance examination direction of high-quality high school, in order to improve the utilization of Chaoyang Kevin school buildings. It is expected that with the continuous expansion of the scale of students and the rapid development of training business, the company is expected to turn losses into profits.

Profitability has been greatly improved, and the effect of cost control is remarkable. In terms of profitability, the company's overall gross profit margin / net profit margin in the first three quarters of 2023 was 24.44% and 13.26% respectively, significantly improved by 14.00 and 39.02 pct respectively compared with the same period last year, and profitability continued to be repaired. In terms of expense rate, the company's expense rate in the first three quarters of 2023 was 38.93%, which was significantly reduced by 33.40 pct compared with the same period last year, of which the management / sales / financial expense rate was 19.66%, 2.03% and 17.23%, respectively, and the year-on-year change was-11.77% and 1.18 pct, respectively. In terms of cash flow, the company achieved a net operating cash flow inflow of 70.3053 million yuan in the first three quarters of 2023, a decrease of 141.8696 million yuan compared with the same period last year. In terms of debt ratio, as of the end of September 2023, the company's asset-liability ratio was 29.95%, down 0.92 pct from the same period last year. In terms of asset quality, the company's assets are mainly composed of monetary funds (312 million yuan) and investment real estate (1.765 billion yuan), of which investment real estate is mainly Chaoyang Kevin school assets and three office buildings, with relatively high asset quality. and the revaluation value is larger (the company sold an office building in the fourth quarter of 2019, the transaction consideration was about 530 million yuan).

Quality education is expanded and accelerated, and vocational education contributes to the increment of performance. In terms of quality education, the company has made great efforts to develop quality education around sports, art and other business fields, and has set up two wholly-owned subsidiaries as the development platform of quality education. The company has made great efforts to develop ice and snow sports, especially after the company obtained the operation right of Xishan Ski Resort in 2022, the company also has hardware facilities such as ice rinks and ski resorts, which enriches the company's ice and snow sports education resources and enhances the competitiveness of quality education. The company's quality education is not only for students in Kevin's two schools, but also actively provides high-quality quality education to young people, including baseball, ice hockey, golf, rugby, tennis, swimming, skiing and many other projects. and through summer camps, winter camps, training teams and other ways to provide, the company's quality education is expected to usher in rapid development. In terms of vocational education, the company has made great efforts to expand the new track of vocational education. as the development platform of the company's vocational education business, Haike Vocational Education, a wholly-owned subsidiary of the company, has successively signed contracts and cooperation with leading enterprises in the industry, including Baidu, Inc. and Tencent. At the same time, it has established cooperative relations with partners in the field of industry-education integration, such as Xinmeier, Henan Kecheng, Beijing Juhua, and demonstrated the success of cooperation through the Industrial College. At present, the company has established industrial colleges in cooperation with 11 universities in Beijing, Shandong, Henan and other places, covering undergraduate, higher vocational and secondary vocational schools. it is expected that the number of industrial colleges will increase and the number of students will continue to expand in the next few years.

Valuation and profit forecast: with the continuous expansion of the scale of students and the steady growth of education service business, we have launched high-quality high schools with high quality for the domestic college entrance examination, focusing on improving the utilization rate of school buildings and helping basic education turn losses into profits. At the same time, the company is actively developing quality education and vocational education, and the two major business sectors have a bright future, which will help the company usher in a trend inflection point. It is estimated that the company's operating income will increase by 64.4%, 30.6% and 20.7% respectively from 2023 to 2025 compared with the same period last year. The net profit of returning home increased by 82.6%, turning losses into profits and 114.7% respectively. The dynamic PS is 9.0,6.9and 5.7times respectively, maintaining the "buy-A" rating of the company and giving it 11.86x PS in 2023, corresponding to the target price of 5.6yuan.

Risk tips: lower than expected enrollment, poor enrollment, slow growth of tuition fees, serious loss of students and other risks.