The net profit of 2023Q3 homing increased by 135%, and the net operating cash flow changed from negative to positive. 2023Q1-3, the company achieved revenue of 2.666 billion yuan /-31.54%; net profit of 242 million yuan / turnround increase of + 129.42%; deduction of non-return net profit of 242 million yuan / + 128.78% X 2023Q3, company revenue of 938 million yuan /-43.77%, net profit of 160 million yuan / + 134.55%, net profit of 159 million yuan / + 153.31%. The decline in company revenue is the combined effect of the reduction of the proportion of high refund classes and the decline in the number of campus students, while the improvement of profits is the result of reducing costs and increasing efficiency. The cash received in the first three quarters of selling goods and providing services was 1.928 billion yuan /-66.35%, and the amount of contract liabilities at the end of the reporting period was 31.59 billion yuan /-33.29%. At the same time, the company's 2023Q3 achieved a net operating cash flow of 140 million yuan in a single quarter, becoming a regular employee for the first time since the third quarter.

The gross profit margin has returned to exceed the 2019 level, and the rate has been continuously optimized during the period of reducing cost and increasing efficiency. In terms of profit, the gross profit margin of public education in the first three quarters was 57.9%/+20pcts, which exceeded the level of 0.3pct in the same period of 19 years; the net profit rate of return to mother was 9.1%/+30.2pct, deducting the net profit rate of non-return to mother was 9.1%/+30.7pct. The expense rate during the period is 45.7%/-17.1pct, in which the sales / management / R & D / financial rates are respectively year-on-year-7.5/-3.3/-4.2/-2.2pct. The decrease in sales / management / R & D expenses is mainly due to the reduction of cost and efficiency of the company and the reduction of sales / management / non-core business R & D personnel. The decrease in financial expenses is due to the reduction of interest on bank loans and handling fees of financial institutions in the current period.

Enrollment track to maintain a high boom, borrowing financing to ease financial pressure. The national examination in 2024 plans to enroll 39600 people / + 6.7%. As of October 24, data from the Beijing News showed that the total number of applicants for the 2024 national exam reached another all-time high of 2.91 million. The average competition ratio is 66:1, higher than 60:1 last year, the competition to pass the exam is more fierce, we analyze that offline public examination training institutions will continue to benefit. During the reporting period, the company borrowed no more than 1.8 billion yuan (9.5% annual interest rate) from Caixin Trust to supplement the company's working capital and solve the problem of stock refund. Subsequent loans are expected to further ease the company's financial pressure.

Risk tips: reduction of shareholders' holdings; recruitment fluctuations, slowdown in business development; intensified competition in the industry Policy stricter Investment suggestion: taking into account the introduction of high-end-of-shift models and the closure of some loss-making outlets, we reduce the company's 2023-2024 revenue to 40.87 billion yuan (the original forecast is 68.45 billion yuan 8.596 billion yuan), and increase the revenue forecast for 2025 by 6.743 billion yuan, year-on-year-15%, 31%, 26%, and 2023-24 net profit to 547,1.70 billion yuan (originally forecast is 5471.70 billion yuan). The reduction of the 2024 forecast is due to an increase in financial expenses), adding 1.468 billion yuan to the 2025 profit forecast, and the EPS is 0.09 to 0.17), corresponding to the PE valuation of 46 to 23 to 17x. The company has achieved remarkable results in reducing costs and increasing efficiency, and the operating data have entered the channel of month-on-month improvement. The number of applicants for the national examination in 2024 has reached a new high, and the company's training business is expected to benefit directly in the context of the current employment situation. However, the company still faces some financial pressure in the short term, and the growth center of the company's business still needs time to reconfirm that we maintain the company's midline "buy" rating.