Chalk: It started as an online question bank and gradually grew into a leader in online public examination training. Chalk was born out of the online education leader in online education, and launched an online training business in 2013. After experiencing rapid offline expansion to seize share, but performance was dragged down, it actively changed, prioritized healthy expansion, explored the OMO teaching model, and combined with AI to improve efficiency. The company's adjusted net profit improved significantly in 2022, and adjusted net profit increased significantly by 134% to 450 million yuan over the same period last year. Currently, small classes account for more than 50% of the company's revenue. In the future, they are still the focus of development and exploration scale growth.

Industry: Enthusiasm for public sector examinations continues to rise, the willingness to participate in the training is expected to increase further, and industry leaders are expected to benefit. ① Demand side: The wave of civil servants' retirements has released a large demand for jobs, and delays in retirement have little impact on this, and there is great potential for employment growth in the public sector. ② Supply side: The scale of registration and recruitment for the national examination continues to expand, and the willingness of candidates to participate in the training is steadily increasing. The number of applicants and recruits for the 2024 national examination was 303.3 to 39,600, respectively, an increase of 17%/7% over the previous year, reaching a record high.

Pass rate prioritizes healthy expansion, and the OMO model superimposes AI to improve quality and efficiency. The company provides high-quality teaching services with pass rate as the core, and relies on its advantages in teaching, research, products, etc., to fully meet the needs of students to participate in online and offline training. The advantage of the OMO model compared to the traditional offline model is that in the early stages, learning through the online large class live streaming model breaks through geographical restrictions and has a better teacher-student ratio. In the later advanced stage, AI empowers teachers to improve teaching efficiency, and while human efficiency is improved, teaching quality can still be guaranteed.

Profit forecast and investment suggestions: In the context of weak macroeconomic recovery, demand for public sector job training is strong, and the increase in the number of applicants and participation rates is expected to continue to drive the scale of the industry; the company is a leading online recruitment test training leader in China, has significant advantages in teaching, research, products, etc., and has a huge user traffic pool. We are optimistic that the industry's sentiment resonates with the company's business development. We expect the company's net profit to be 5.7/7.5/92 billion yuan in 2024-2026, respectively, and adjusted net profit of 6.2/7.8/940 million yuan, respectively, maintaining the “recommended” rating.

Risk warning: Risks such as increased competition in the industry, falling short of expectations in recruitment and training requirements, and uncertain policies.