Incident: The company began repurchasing on the open market on May 28. As of July 3, it had repurchased 39.5 million shares, and the repurchase amount reached 0.168 billion yuan.

Comment:

Actively buy back and show confidence. On May 13, the company announced plans to repurchase no more than HK$0.3 billion of common stock on the open market between May 13, 2024 and May 12, 2025.

Since the repurchase began on May 28, 39.5 million shares have been repurchased, and the repurchase amount has reached 0.168 billion yuan, with an average price of 4.26 yuan/share. The company actively repurchases, fully demonstrating confidence in the company's operations.

Recent stock price fluctuations may be due to short selling. We have observed that the company's short selling volume has been significantly high since May 22. Of the 29 trading days, the number of shorted shares/volume exceeded 30% on 18 trading days and 20-30% on 8 trading days, and the short selling volume was not significantly related to that day's stock price, or an important reason for recent fluctuations in the company's stock price.

The company is expected to present its alpha. Recruiting and training is a very high quality circuit for current consumption, and the enthusiasm of candidates continues to rise (the CAGR for the 21-24 national examination reached 24%, and the number of applicants for the provincial examination reached 8%). From an industry perspective, the first half of this year was special. According to our statistics, 20 provinces/regions participated in the joint examination schedule from May of previous years to March 30; according to our statistics, a total of 20 provinces/regions participated in the joint examination for the Civil Service Province. A total of 24 provinces participated in the two examinations. 18 provinces/regions participated in the two examinations in a very close time. We estimate or affect the training revenue of institutions in the entire industry. From the perspective of the company itself, the promotion of OMO classes and the ability of AI to answer questions and research are expected to improve operating efficiency, increase profit margins, and in turn bring excellent performance on the profit side.

Investment advice: From a financial perspective, the company's recent stock price fluctuations may stem from a surge in short selling, and the company has been actively buying back, demonstrating confidence in the company's operations. From a fundamental point of view, although the first half of the year changed the written examination schedule for public institutions or affected the training income of institutions in the entire industry, the company still has its own alpha and is expected to deliver excellent profit answers. We maintain an adjusted net profit forecast of 0.608/0.806/1.003 billion yuan for 24-26. The current stock price corresponds to PE of 13x/10x/8x. The investment value is outstanding, and we maintain a “buy” rating.

Risk warning: The impact of changes in recruitment examination time on student enrollment, which in turn affects industry receipts, revenue and profits; the impact of macroeconomics and spending intentions on the education industry; and the impact of changes in the industry competition pattern on company operations.