The company released a semi-annual report

24H1 revenue was 1.63 billion, -3.08% YoY, adjusted net profit 0.35 billion, +21% YoY. The decrease in revenue was due to a collision between the written examination of public institutions for the joint recruitment examination and the written examination of the provincial civil service joint examination in the first half of 2024. As a result, sales of the company's public institution recruitment examination training, textbooks and guidance materials declined.

As of 24H1, the total number of chalk employees was 7,564, +5% year-on-year; the average monthly activity was 9.2 million, the same as the previous year.

By service, the company's 24H1 training service revenue was 1.379 billion yuan (accounting for 84.6%), or -3.1%; of these, online learning products were 0.065 billion, large class training courses were 0.266 billion, small class training courses were 1.026 billion, and revenue from other training courses was 0.023 billion.

Book sales revenue was 0.252 billion (15.4%), -3.0% YoY.

24H1's gross profit margin was 54.2%, +3.3pct year over year. Among them, the gross profit margin for training services was 57.9%, or +4.0pct compared to the same period; the cost of 24H1 training services was 0.58 billion, -11.6% compared to the same period, mainly due to artificial intelligence and other online technologies improving the company's teaching efficiency and reducing teacher bonuses, which led to a decrease in employee welfare expenses. The gross margin of book sales was 33.6%, -0.8pct year over year.

24H1's management rate is 12.11%, -6.90pct; sales rate 19.65%, year-on-year +1.56pct; R&D expenses 0.108 billion, -24.4% year-on-year; R&D rate 6.64%, year-on-year -1.87pct.

24H1's net profit margin was 17.03%, +12.19pct year-on-year.

Using AI to Deeply Improve Operational Efficiency

2024H1 chalk R&D expenses were 0.11 billion; in June, the chalk AI teacher algorithm passed the sixth batch of deep synthesis service algorithm records by the State Internet Information Office. Continuous optimization of human efficiency: In February 2021, a tutor in a boutique chalk class can serve about 40 people. Currently, a teacher can serve up to 150 people during the same period, increasing efficiency by 275%.

The user experience continues to improve: With the help of the predictive score function, the 2022 provincial joint test run test will reach the 2024 provincial joint test, and the corresponding increase in points for premium full-course users can reach 40%.

Lock in development space ahead of schedule for performance growth in the second half of the year: In 2024, Chalk promoted the application of AI big models, pioneered the release of AI teacher products in the industry to meet the diverse learning needs of users, and share innovative development results with users as soon as possible.

OMO achieves a unique competitive advantage and brands small class course products

The company follows an integrated approach to develop a comprehensive portfolio of vocational examination training products and services that can have significant synergy effects, and provides omnichannel training services. Thanks to the company's stable online business and the huge synergy achieved through an innovative online and offline combination model, the company was able to operate an expandable business.

The company is the first recruitment testing and training service provider born on the Internet and integrating offline resources. It achieves economies of scale across all channels to create a unique competitive advantage.

The company uses online teaching or small-class training courses dominated by online and offline integration models to provide personalized training services to students. Through the Internet, the company can effectively control teacher quality and teaching quality, use stable teaching quality to drive stable and consistent teaching results between classes, thus gradually branding course products.

Relying on self-developed technology and massive learning behavior data, the company's online learning system can record full learning trajectory data and real-time feedback on students' weaknesses, greatly improving teachers' teaching efficiency.

Maintain profit forecasts and maintain “buy” ratings

We expect the company's revenue for 24-26 to be RMB 3.152 billion, RMB 3.501 billion, and RMB 3,901 billion, respectively.

Net profit after adjustment was RMB 0.551 billion, RMB 0.63 billion, RMB 0.73 billion, and EPS was RMB 0.25 per share, RMB 0.28 per share, RMB 0.33 per share, and corresponding PE was 10/9/7x, respectively.

Risk warning: risks such as exchange rate fluctuations, insufficient enrollment expectations, and fierce market competition.