Incident: The company released its semi-annual report. The company's 24H1 achieved revenue of 1.63 billion yuan (the performance forecast was no less than 1.61 billion yuan), a year-on-year decrease of 3%; net profit was 0.28 billion yuan, up 240.9% year on year; adjusted net profit was 0.35 billion yuan (the performance forecast was not less than 0.327 billion yuan), an increase of 21.2% year on year.

Public institutions and civil service examinations collided, leading to a decline in sales of public institutions recruiting examination training courses and related teaching aids. The 2024H1 company's revenue from training services/book sales was 1.38/0.25 billion yuan, a year-on-year decrease of 3.1%/3%, mainly due to the collision between the written recruitment examination for public institutions and the provincial civil service joint examination in the first half of 2024, which led to a decline in sales of the company's public institution personnel recruitment training courses, related examination materials and guidance materials.

AI empowers efficiency, and the company's profitability has increased significantly. 2024H1's gross profit margin was 54.2%, up 3.3 pct year on year. Among them, the gross margin of training services/book sales was 57.9%/33.6%, respectively, +4/-0.8 pct. The increase in gross margin of training services was mainly due to a reduction in employee welfare expenses and an increase in operational efficiency. By the end of June 2024, the number of teachers in the company was 3,145, a decrease of 391 compared with the same period last year, and the average teacher income increased year-on-year.

Contract debt increased year on year and refund debt decreased year on year, providing a guarantee for subsequent development. By the end of June 2024, the company's contract debt was 0.212 billion yuan, up 13% year on year, mainly due to an increase in sales of prepaid courses; the company's refund debt was 0.19 billion yuan, a decrease of 15% year over year, mainly due to the reduction in course fees for courses that did not pass the refund agreement after the company adjusted its strategy.

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. Although the speed of clearance of small and medium-sized enterprises is slightly lower than expected, we are still optimistic about the development trend of leading enterprises; the company is a leading online recruitment test training leader in China, with significant advantages in teaching, research, products, etc., and has a huge user traffic pool. We are optimistic that industry sentiment resonates with the company's business development. We expect the adjusted net profit of the company to be 0.55/0.68/0.82 billion yuan in 2024-2026, maintaining the “recommended” rating.

Risk warning: Risks such as demand falling short of expectations, increased industry competition, and changes in recruitment and examination times.