Incident: The company issued a positive profit forecast. 24H1, achieved revenue of more than 1.61 billion yuan, a decrease of less than 4.3%, achieved net profit of more than 0.255 billion yuan, a year-on-year increase of more than 212.9%, and achieved adjusted net profit of more than 0.327 billion yuan, and a same increase of more than 13.5%.

Comment:

Excluding the impact of incorrect examinations in public institutions, it is estimated that revenue will increase slightly. The written examination period for the joint examination of public institutions was brought forward from May of previous years to March 30. According to our statistics, a total of 20 provinces/regions participated; however, the schedule for this year's joint examination for the provincial civil service examination was from March 16 to 17. A total of 24 provinces participated. The two examinations were very close in time for 18 provinces/regions, which affected the receipt and revenue of the company's public institutions. We estimate that if the impact of the wrong period is removed, the company's revenue will increase slightly.

Profitability increased significantly. Based on Yingxi's revenue and the lower limit of adjusted net profit, the net interest rate reached 20.3%, an increase of 3.2 pct. Empowered by technology and AI, the company continues to improve teacher utilization efficiency and average teacher income, leading to a significant increase in profitability.

Investment advice: The company's interim results are in line with expectations. If the impact of incorrect examinations by public institutions is excluded, it is estimated that revenue will increase slightly, and profitability will be continuously improved through technological empowerment, and a steady increase in delivery profits. From an industry perspective, we believe that the demand side is still strong, and the supply side of small and medium-sized institutions may be slightly lower than our expectations, but the future will still show a trend of concentrated leaders. Based on prudential considerations, we adjusted the company's adjusted net profit forecast for 2024-26 to 0.558/0.684/0.822 billion yuan. The current stock price corresponds to a valuation of 10x/8x/6x, maintaining a “buy” rating.

Risk warning: macroeconomic risk; risk of changes in the competitive pattern of the industry; risk of changes in exam time.