Excellent education: Deeply involved in South China, providing comprehensive education service products. The company was established in October 1997 and listed on the main board of the Hong Kong Stock Exchange on December 27, 2018. The company has always adhered to the original intention of “everything for the healthy growth of children”, adheres to the “grow into the future” brand strategy, and is committed to providing students and parents with high-quality and diversified educational products and services. The company is deeply involved in the South China region and covers the whole country. Through 27 years of hard work and development, its brand and reputation have been recognized by students, parents and all sectors of society. It has now become a leading education service provider in South China, with revenue of 506 million yuan in 2023.

The Guangdong K12 education and training market space is vast, and subject training was significantly reduced after the “double reduction”: in 2013-2022, the number of K12 people in Guangdong Province and Guangzhou both showed an upward trend. In 2022, the number of K12 people in Guangdong Province was 17.4943 million, an increase of 2.37% over the previous year. In terms of the new population, the last wave of births in Guangdong Province (those born in 2017-2019) is about to enter compulsory education. According to Frost & Sullivan data, the average annual cost of K12 extracurricular education for consumers in South China increased from 5,800 yuan in 2013 to 8,200 yuan in 2017, with a compound annual growth rate of 9.0%. On January 15, 2022, at the “Double Reduction” work press briefing, the Guangdong Provincial Department of Education stated that training institutions in Guangdong Province are gradually returning to the normal path of educating people, and that the reduction rates of offline and online training institutions in compulsory education subjects across the province have reached 96% and 86% respectively.

Adhering to compliance transformation, excellence is expected to benefit as a regional leader. As a leading education service provider in South China, the company has been laying out a quality track since 2014. As of July 2023, the company has passed the education department's non-disciplinary product certification for nine major products, including Excellent Programming, Funny Reporter, Thinking Planet, Tick Tick Literature, Literature and Aesthetic Education, and Diverse Thinking. In the future, under normalized supervision, the company will continue to focus on the core strategic system of “quality education+full-time review+vocational education”, accelerate the development of the quality education business, strengthen exploration in the field of vocational education, accelerate the development of a second growth curve, promote a diversified field layout, and provide students with richer and better education services and products.

Investment advice: As a leader in education and training in South China, the company will accelerate business compliance transformation after the “double reduction” and build a “quality education+full-time review+vocational education” business system. The number of K12 students in the Guangdong region continues to rise, and demand for non-subject training and high school repetition is strong; at the same time, many places have made it clear that all non-subject licenses should be approved, and the company is expected to accelerate the expansion of the quality education business. We expect the company's net profit for 2024-2026 to be 122/1.61/200 million yuan, respectively, and the corresponding PE is 22x/17x/14x, respectively. For the first time, coverage is given an “increase in wealth” rating.

Risk warning: Industry competition increases risk, risk of regulatory policy changes, and risk of a decline in the number of industry participants.