Introduction to this report:

The leaders who were the first to complete compliance are expected to benefit from a sharp supply clearance. The company is rooted in Guangdong, Hong Kong and Macau, and is expected to recover its performance through the development of high school and quality education businesses.

Summary:

Covered for the first time, a “gain” rating was given. Considering the gradual clarification of policies and slow supply recovery, compliance leaders are expected to continue to benefit. The company's net profit for 2023-2025 is expected to be 0.85/1.21/156 million yuan, and EPS is 0.1/0.14/0.18 yuan respectively, increasing its holdings.

Supply was greatly cleared, and leaders in the education industry were the first to benefit. ① After the “double reduction”, the reduction rate of subject training institutions has reached 90%. It is difficult for small to medium players to transition, and most choose to directly cancel and shut down. The growth rate of fixed asset investment in the education industry has yet to be cleared; ② It is the first to complete the restart of the leading business in compliance, benefiting from the improved pattern, and the market share is expected to increase dramatically; ③ the education industry will show more remarkable resilience in the time window of obvious economic shocks, and it is expected that the education demand of domestic residents will continue to thrive. ④ The number of elementary, middle, and high school graduates in the Guangshen region is growing steadily, and the penetration rate is gradually increasing across the country. Currently, non-subject training institutions at the compulsory education level in Guangdong Province account for only 5% of the country, and there is still room for improvement.

Quality education is encouraged by policies, and high school business is being carried out normally. ① The “Regulations on the Administration of Out-of-School Training (Draft for Comments)” in February 2024 further clarified the definition of out-of-school training for primary and secondary school students and preschoolers aged 3 to 6, and was not clearly stipulated at the high school level; ② Considering the gradual clarification of policies and limited short-term supply recovery, the company has been rooted in Guangdong, Hong Kong and Macau for more than 27 years, and has rich management experience and a reputation in the region, which is expected to rapidly increase its market share.

The company has completed compliance transformation and is rooted in steady development in Guangdong, Hong Kong and Macao. ① After the “double reduction”, the company divested the K9 education and training business into four major modules for non-profit projects, adjusted the structure of subject education+quality education+vocational education+full-time training to full-time training+tutoring business+quality education to complete compliance transformation; ② The company's full-time business was affected by the 2022 epidemic and is expected to gradually pick up after registration resumes in 2023; ③ The high school business is divided into four major modules: high school tutoring business, personalized college entrance examination business, college entrance examination repeat business, and high school online business. The business is expected to grow rapidly; ④ The company is The quality education business focuses on Guoxue aesthetic education training and continuously consolidates teaching capabilities. The Quirky Reporter+Tick Literature+Literary Aesthetic Education matrix focuses on providing quality education and training services for children aged 6-16.

Risk warning: policy risks, increased industry competition, slow recovery in teacher supply.