Main points of investment:

It is proposed to increase capital to acquire concave-convex education and Siqi education. The company announced that it had reached a preliminary intention with the shareholders of Beijing concave-convex Education Consulting Co., Ltd. on the capital increase / acquisition of education shares in Beijing, and signed a "Capital increase / acquisition Memorandum"; reached a preliminary intention with the shareholders of Changsha Siqi Education Consulting Co., Ltd. on the acquisition of Siqi education equity, and signed a "Capital increase / acquisition Memorandum". The company intends to increase capital or acquire a stake of no less than 10% in Bump Education / Siqi Education in the form of cash. Concave-convex education has a pre-investment valuation of 260 million yuan and Siqi education has a pre-investment valuation of 600 million yuan. in the future, it is planned to complete the acquisition of the remaining equity by issuing shares to purchase assets and cash payment.

Concave-convex education focuses on personalized education in second -, third-and fourth-tier cities, increasing the infiltration of front-line resources. Concave-convex personality education is a K12 personalized education group that integrates education and training, educational research and development, dual-division live broadcast classes, etc., adhering to the online and offline 020 + content output mode, covering the whole country. Concave and convex education infiltrates to the second, third and fourth tier cities in the form of joining, and the joining models include 1) standard schools; 2) flag schools; 3) urban partners; 4) strategic partners. Bump will provide franchisees with 6 stages, 18 modules, 66 service items and hundreds of service sub-projects from research to operation. According to the official website, its directly operated schools have entered 10 provinces, and the direct alliance schools have entered 31 provinces across the country. We believe that the high-quality resources in Longwen, Eddie and Siqi in the company's layout system can be grafted on the concave and convex platform channels and infiltrate to the second, third and fourth-tier cities.

Siqi Education is the premier regional K12 extracurricular tutoring leader in the central region. Siqi Education has a good reputation and brand influence in Hunan and even the central and southern regions, and is the regional leader of K12 extracurricular tutoring. The company's business is mainly concentrated in Changsha, with a total of 67 campuses. Siqi Education currently has business sectors such as cultural excellence, personalized education, international education, music education, art education, full-time education, subject English education, Chinese studies and Chinese arts. Siqi Education, equipped with unified brand, unified teachers, unified teaching materials, unified service and unified management, is one of the high-quality educational institutions in China. We think that from the point of view of some regions, the word-of-mouth of Siqi education directive can be on a par with that of front-line brand learning. Siqi cooperated with concave-convex education in the early years, and now holding Longwen and listed companies, it is expected to burst into stronger vitality.

Maintain earnings forecasts and maintain overweight ratings. The main line of the company's education business has been completed, 1) outside the school is K12 extra-curricular tutoring: Longwen education + Siqi education + concave-convex education; 2) the inner line of K1203 school is international school + kindergarten: Eddie International School + Little Red Riding Hood kindergarten. We expect that the 17-year consolidated education business includes Longwen Education's profit of about 130 million in 2017, Little Red Riding Hood's promised profit of 57.5 million in 2017 (and the new park will increase the profit level), and British Education's 13 million profit, totaling about 200 million yuan. If concave-convex education and Siqi education complete the merger and acquisition in 17 years, the profit of educational exam preparation will reach about 250 million yuan. Eddie Education now has a profit volume of about 150 million. When the Shanghai campus enters the mature stage, it may reach 300 million profits. Due to the transaction structure and injection time to be determined, it will not be included in the listed company for the time being. Only considering the profit of LED+ education in vivo, it is predicted that the EPS of maintaining profit in 16-18 years is 0.16,0.20,0.30 yuan, and the corresponding PE is 62,50,33 times. At present, the market capitalization of listed companies is 15.1 billion, the profit of LED business is 5000-60 million, and the education profit under control reaches 400 million +. It is suggested that the profit scale of Eddie International School Shanghai campus can continue to increase after it matures.