Event: The company released its 2024 semi-annual report. With 2024H1, the company achieved operating income of 1.506 billion yuan, +4601.26% year over year; net profit to mother 0.122 billion yuan, +3224.57% year over year; net profit without return to mother 0.098 billion yuan, +2002.31% year over year.

The non-academic training business was fully developed: 2024H1, the company's gross margin was 56.57%, +37.82pct; sales/management/R&D expenses were 29.48%/16.47%/1.53%, respectively, and +26.36/-2.28/+1.53pct. By business, 2024H1's revenue from non-academic training business/construction engineering design and related consulting services was 1.488/0.018 billion yuan respectively, while in-person training/online training and other revenue from non-academic training businesses was 1.242/0.074 billion yuan, respectively. National and local civil service recruitment examinations and training are an important source of the company's revenue. In particular, revenue contributions from Henan, Shandong, Guangdong and other provinces are the most prominent.

The scale of contract debt grew rapidly: 2024H1, and the company's revenue reached 2.036 billion yuan, of which 2.007 billion yuan was collected for trainee training. As of the end of June 2024, the company's non-academic training business contract debt balance was 0.756 billion yuan (excluding tax), of which the balance of course delivery/test pass-related and online course contract liabilities were 0.382/0.364/0.01 billion yuan, respectively. It is expected that in the future, as the course delivery is completed, the revenue recognition requirements will be gradually converted into revenue. At the same time, the company launched a “tiered payment” course, and the maximum amount of training fees that can be collected after the test results are obtained is 0.493 billion yuan.

Investment proposal: Huatu Mountain Ding (300492.SZ) is a listed company under Huatu Hongyang Education. Huatu Hongyang Education Department is one of the leading domestic and offline non-academic training companies. The company's wholly-owned subsidiary Huatu Education Technology's non-academic training business is progressing smoothly, and 2024H1 cash flow etc. have increased rapidly. Considering that the number of applicants for the public service category continues to rise this year and the industry is booming, the company's performance is expected to grow rapidly. We expect the company's net profit to be 0.349/0.622/0.802 billion yuan in 2024-2026, respectively, and the corresponding PE valuations are 27x/15x/12x, respectively, maintaining the “incremental” rating.

Risk warning: Fluctuating demand for public service examinations; intensification of industry competition; changes in policy regulation.