Event: the company issued a performance forecast, which is expected to achieve a net profit of 4.2 billion yuan in 2020, with a decrease of 450 million to 509%.

Comments:

In the context of the global epidemic, Mejem and Kaide are still making positive profits. Affected by the domestic epidemic, some early education centers of the Meijin brand gradually resumed business since H2, and the initial licensing fees, royalty collection and product sales of H1 decreased, while increasing investment in online product development, but still achieved positive profits for the whole year. Considering 70% of the equity ratio, it is expected to contribute 50 million yuan to 54 million yuan in net profit, a decrease of 65 percent. Kaide mainly focuses on the preparation courses for studying abroad. The domestic epidemic situation led to the suspension of classes, and the overseas epidemic led to the postponement of the examination for studying abroad, but it also made a positive profit for the whole year, contributing 80 million to 8.5 million yuan in net profit, with a reduction of 72 percent to 74 percent.

Mejem brand early education center is expanding against the trend. Seizing the clearing of property resources brought about by the clearance of small institutions, the company seized high-quality properties in the core business district, and did not suspend the pace of expansion because of the epidemic, but expanded against the trend, with 21 newly signed stores and 40 newly opened stores. sub-card "Little Jim" signed 10.

Mejem and Kaide plan to reduce the value of goodwill and travel light. Affected by the epidemic, Kaide is expected to provide for goodwill impairment of 230 to 250 million yuan, with a provision proportion of 800.87% (Kaide goodwill of 289 million yuan), which greatly reduces the worry about the future goodwill impairment of the business of preparing for studying abroad. Mejem will provide for a goodwill impairment of 210,280 million yuan, or 120.16% (Mayjam's goodwill is 1.797 billion yuan).

Investment advice: in the context of the global epidemic, Mejem and Kaide are still making positive profits, in which the Meijie brand early education center is still expanding against the trend, seizing high-quality property resources and laying the foundation for follow-up development.

Meijem and Kaide plan to mention goodwill impairment, one-time impact on performance, is expected to be light, ease market concerns about the future goodwill impairment, adjust the 2021 prime 22 net profit forecast to 175,000,000 yuan, corresponding to the valuation 24x/21x, optimistic about the company's leading position in the early education industry, maintain the "buy" rating.

Risk hint: after the epidemic, the recovery of early education business is not as expected, and the business of studying abroad and training continues to be affected by the overseas epidemic.