Matters: On the evening of August 23, the company announced its results for January to June 2024, with 24H1 revenue of 1.63 billion yuan, yoy -3.1%; net profit of 0.278 billion yuan, yoy +240.9%; adjusted net profit of 0.349 billion yuan (plus share payment), yoy +21.2%.

Revenue declined slightly in the first half of the year. 24H1's revenue was 1.63 billion yuan, yoy -3.1%, of which training services/book sales revenue was 1.379/0.252 billion yuan, yoy -3.1%/-3.0%, mainly due to the decline in sales of public institutions recruiting courses and textbooks and teaching aids due to the collision period between the 24H1 public institution recruitment joint examination written examination and the provincial civil service joint examination. Training services are the company's core revenue source, accounting for 75%. Among the various training products, small classes (online or OMO small classes/7000 yuan +) earned 1.026 billion yuan, accounting for 63% of total revenue, large classes (main system class/300-980 yuan) earned 0.266 billion yuan, accounting for 16% of total revenue, and online learning products (that is, membership packs/monthly price of 20-70 yuan and novice training camps/99-598 yuan) and other training courses (special courses and promotion courses) were 64.5 billion yuan, respectively Million yuan and 22.7 million yuan account for 4% and 1% of total revenue. At the industry level, the company expects that given current employment trends, financial support jobs will continue to be popular. The increase in the number of applicants in the short to medium term will drive an increase in the number of participants, but the decline in industry concentration puts pressure on customer unit prices.

Gross margin was optimized in the first half of the year, and adjusted net margin increased to 21.4%. 24H1's gross profit margin was 54.2%, +3.3 pct. Among them, the gross profit margin for training services/book sales was 57.9%/33.6%, +4.0/-0.8ppt. The increase in gross margin of training services was mainly due to reduced employee remuneration and improved operational efficiency. 24H1's sales/management/R&D rate was 19.6%/12.1%/6.6%, compared with +1.6/-6.9/-1.9ppt. The reduction in management expenses and R&D expenses was mainly due to reduced share payments to administrative and R&D personnel. The increase in sales expenses was mainly due to increased marketing expenses to meet long-term business development strategies. 24H1's adjusted net profit margin was 21.4%, up 4.3ppt year on year, a record high since listing.

Over HK$0.35 billion was repurchased in the first half of the year, and 35.87 million shares were cancelled. 24H1 bought back a total of 35.87 million shares at a total cost of about HK$0.154 billion, reflecting the company's confidence in long-term business prospects and increasing the value of the shares. These shares have been cancelled, causing the total share capital to be reduced. Currently, the total share capital is about 2.239 billion shares. In addition, a total of approximately 54.57 million shares were purchased under the company's 23-year restricted share unit plan, with a total consideration of approximately HK$0.237 billion. On August 26, the company announced that its controlling shareholder, Chairman and CEO, Zhang Xiaolong, increased its holdings by 0.66 million shares to a consideration of approximately HK$1.95 million, showing confidence in the company's business development.

Investment advice: The company is one of the largest recruitment and training institutions in China, and the online gene is unique. Although industry concentration has declined, the company is dominated by providing high-quality teaching services, and profit margins continue to increase under cost optimization. In 2024-2026, the company's net profit to mother is expected to be 0.452/0.478/0.519 billion yuan, and adjusted net profit to mother is 0.553/0.578/0.619 billion yuan. The current stock price corresponds to the adjusted net profit PE from 2024-2026 to 11/11/10 times that of 11/11/10, maintaining the “recommended” rating.

Risk warning: The number of jobs recruited has shrunk sharply; candidates' willingness and ability to pay has declined; industry competition has intensified; core teachers have been lost; teaching quality and reputation have declined.