Key investment points: Acquire Eddy Education at a price of 2.9 billion yuan. Hong Kong Qinshang, a wholly-owned subsidiary of the company, signed the “Memorandum of Understanding on Key Terms” and “Memorandum Amendment Agreements” with AIDIeducationAcquisition (Cayman Islands) Limited (Cayman Islands) and the Beijing Australian Exhibition. Hong Kong Qinshang plans to acquire 100% of Aidi's shares in NiteducationGroup (Eddy Education Group) in cash. Eddy Education is a limited liability company established and survives as an exempt limited liability company under Cayman Islands law. Through a number of arrangements, Eddy Education controls a number of education assets and school operations located in China. The preliminary valuation of the acquisition is RMB 2.9 billion equivalent in US dollars. Eddy's education has a long history, and is excellent in terms of both size and quality. School kindergarten courses include English, Chinese studies, virtue, Eastern and Western manners, etc., and art courses such as Orff music and fine arts. The primary school curriculum mainly includes basic courses+English+information technology+art. The junior high school offers three compulsory subjects of IGCSE: mathematics, English, and science. Students can obtain a junior high school completion certificate issued by the Cambridge University International Examination Board. The high school level has categories such as Australian International High School (WACE), American International High School (ASE), British International High School (A-LEVEL), and international college preparatory courses and English training courses. At the same time, EDI is also the official test site for the five major tests, including IELTS, WACE\ TEE, A-LEVEL, TOFEL, and ACT. We estimate that the average tuition fee for Eddy's International School students is 200,000 per year* 2,600 students. The income is about 500 million yuan, and the profit is about 150 to 200 million yuan (if it becomes a for-profit school, tuition fees and tax costs may change). Take the lead in locking in high-quality assets in the form of funds, and wait until the time is ripe before merging into a listed company. Currently, the target assets have VIE backbone, and there are obstacles for A-share listed companies to directly merge and acquire VIE structured assets; they cannot be combined. At the same time, the business entity is a school asset, and it will still take some time to complete changes in nature and clarify property rights after the Public Promotion Law is passed. This time, the company or Hong Kong Qinshang Plan subscribed to a share of the special fund of 600 to 1 billion yuan, which will not cause the company to gain control of the target company. The company took the lead in using funds to lock in high-quality educational assets in this market, and after the nature of the assets and transaction structure were clarified, it was loaded into the listed company. Maintain profit forecasts and maintain holdings growth ratings. After the completion of this merger and acquisition, the company has basically completed the main structure within the K12+3 stage, and will continue to add bricks and tiles to the education industry in the future. We expect Longwen Education's profit in 2017 to be about 130 million, Little Red Hat promised a profit of 57.5 million in 2017 (and additional parks will increase the profit level), and Eddy Education's profit is 13 million based on 150 million in profit. The overall scale of education profits under the corporate system will reach 350 million +. In addition to the LED business, the company's overall profit will reach 400 million +. The current market value of the company is 14 billion yuan, and we think the target market value is 20 billion yuan. Since the Eddy Education deal is still ongoing and is not listed yet, the profit forecast for 16-18 EPS is 0.16 yuan, 0.20 yuan, and 0.30 yuan, and the corresponding PE is 59, 47, and 32 times. If we consider the full merger of Eddy Education without additional distribution, the corresponding PE was reduced by 35 times in 2017. It is recommended to actively pay attention and maintain the holdings increase rating.