The company was founded in 2008, the first learning center was established in Shenzhen in 2014, the company is listed on the main board of Hong Kong in 2019, and there are 127 learning centers. The company mainly carries out exam preparation training from primary to senior high school and quality education in junior primary schools. It has the brand of academic preparation courses "further study" and the brand of quality education courses "happy learning". The number of students enrolled in thinking music education in 2017-19 was 145800 / 241200 / 296000 respectively, and the number of students enrolled under the influence of the 2020H1 epidemic is still growing by 7.1% compared with the same period last year. The effect of summer promotion courses is good, and the growth is expected for the whole year.

Based in South China, enjoy geographical advantages, and strive to achieve the "550" Plan in five years. The company benefits from the acceleration of industry integration. In recent years, the strict operating standards and regulations of regulators have led to the gradual withdrawal of non-compliant small and medium-sized market participants from the market. The competition for educational resources in Guangdong Province is fierce, and the market demand for after-school educational services is exuberant. In the future, thinking Music Education will be based in South China and expand outward to enter more than 50 cities within five years, build more than 500 branch schools, and achieve the revenue target of 5 billion.

The introduction of online courses to supplement the offline network, to create a "Hongmeng class" to enhance brand strength. The company launched "thinking Music double teacher classroom" in the autumn of 2019, using the way of "online famous teacher lecturing + offline tutor" to improve students' learning efficiency. With the outbreak of novel coronavirus's epidemic in early 2020, he is happy to launch online courses quickly and comprehensively in early February to ensure students' learning progress. Online courses are a powerful supplement to offline courses and a way to broaden students' foundation and profit, and do not conflict with offline courses. In May this year, thinking Music Education launched a high-end teaching system for students with excellent grades. If we successfully build this excellent teaching product for top students, it will help to enhance the reputation of thinking music brand and enhance the influence of thinking music brand among parents and students.

The motivation is in place and the group is stable. The company has launched a characteristic core incentive mechanism, including teacher partner, principal management fission mechanism and option partner system, which provides a strong incentive for teachers, principals and core management.

The company's team is stable, none of the founders has left for years, and the teacher turnover rate has remained low.

The whole department age staff training system, reserve the follow-up expansion strength, and attach importance to the improvement of teaching and research strength. Sikole training College includes three mature training systems: teacher line training, management line training and functional line training, covering the full-age career of teaching staff. A mature and complete staff training system reserves blood for the company's follow-up expansion plan. The company attaches importance to teaching and research investment, and the proportion of R & D investment in income has been increasing in recent years. The number of Sikole Teaching and Research Institute has increased from 58 in 2016 to more than 200 professional teaching and research staff, specializing in the standardization of curriculum system, teaching materials and teaching methods.

K12, the fastest growing leader in South China, has excellent overall operating efficiency. In terms of the compound annual growth rate of income in 2015-18, the company grew the fastest among the top five after-school educational institutions in Guangdong, with an average annual compound income growth rate of 61% in 2016-19, with year-on-year profit margins, continuous improvement in operation and management efficiency, and strong debt repayment ability.

Originated from the after-school education service provider in Guangdong Province. The company was founded in 2008, the first learning center Sikao Center was established in Shenzhen in 2014, Xiamen Branch was established in 2016, and the company expanded its business to Dongguan and Foshan in 2017. The company entered the Huizhou market in 2018, listed on the Hong Kong main board in June 2019, and entered Jiangmen and Zhongshan cities, expanding the number of learning centers to 100. In the first half of 2020, the number of learning centers increased to 127, entering the markets of Guangzhou and Shantou, and opening online schools as a supplement to offline business.

Sianle is one of the top five K12 after-school tutoring institutions in Guangdong Province. In 2018, the market size of K12 after-school education service in Guangdong Province reached 53.9 billion yuan, and the number of participants reached 55.2 million. By 2023, the market size is expected to reach 90.5 billion yuan, and the number of participants will reach 70.2 million. The top five educational institutions have a total income of 4.1 billion yuan in 2018, with a market share of 7.6%, and the market is highly dispersed. Among them, thinking Music Education is the fourth largest K12 after-school education institution in Guangdong Province, with a market share of 0.9% in 2018, and is the top five fastest-growing teaching and training institutions.

Benefit from the accelerated expansion of industry consolidation. The policies and regulations issued by the Ministry of Education and the local government have established strict operating standards and regulations for K12 after-school education service providers. According to statistics, about 10% (about 2200) participants withdrew from Guangdong after-school education market in 2018, and about 2200 participants withdrew from Shenzhen market. Since the epidemic in 2020, small and medium-sized educational institutions have been greatly affected by the epidemic, opportunities for integration have emerged in the industry, and educational and training institutions with strong financial strength and online development have been able to further expand the market rapidly. Sixue Education comprehensively launched online classes in early February 2020 as a supplement to offline scenarios to ensure students' learning progress. All the offline study centers of the company were completely headstrong in June and focused on the flow of work during the summer vacation, with remarkable results. The number of overall students during the summer vacation increased by 91.4% compared with the same period last year, and the number of students in cities other than Shenzhen increased by 215.0%.

The competition for educational resources in Guangdong Province is fierce, and the market demand for after-school educational services is exuberant. In 2018, the undergraduate admission rate in Guangdong Province was 39%, which is 43% lower than the national average. Students and parents have the motivation to participate in after-school training. Benefiting from the prospect of economic growth and the improvement of per capita consumption, the number of students enrolled in K12 education in Guangdong Province is expected to increase from 19.9 million in 2018 to 22.7 million in 2023. The popularization rate of K12 after-school education is expected to increase from 27.7% in 2018 to 30.9% in 2023, and the number of students enrolled in K12 after-school education courses will increase from 5.519 million in 2018 to 7.016 million in 2023. The average hourly tuition fee per student is expected to increase from 53.3 yuan in 2018 to 62 yuan in 2023, with an average annual compound growth rate of 3.1%.

Provide academic preparation and quality education courses under the two brands of "further study" and "happy learning". 1) through the "further study" brand, the company conducts exam preparation courses for students from grades 1 to 12, covering a wide range of disciplines, and the courses are conducted in small classes, usually with no more than 20 students in each class. Academic preparation classes are usually held once or twice a week, and most courses range from 1.5 to 3 hours per class, depending on the grade. Students are mainly concentrated in junior and primary schools. In the first half of 2020, the proportion of primary, junior and senior high school students was 41.7%, 50% and 8.3% respectively. (2) quality education courses are carried out through the "Happy Learning" brand, offering children's education courses and interest classes such as language and performing arts to students from grades 1 to 3. The class hours vary from 1.5 hours to 2.5 hours depending on the grade stage. The main purpose of these courses is to develop students' concentration, expression skills and reading habits.

In 2019, the company trained a total of 296000 students, and the number of tutoring hours reached 8.64 million class hours, an increase of 22.8% and 36.2% respectively over the same period last year. The number of students in the enrollment / pleasure course reached 289700 / 6415 respectively, an increase of 25.2% / 35.3% over the same period last year, and 8.453 million / 189000 tutoring hours, an increase of 37.9% / 13.3% over the same period last year. The decline in enrollment and class hours of quality education courses is mainly due to the closure of three "happy learning" learning centres during the year and their reopening at the end of 2019 after relocation. In the first half of 2020, under the influence of the epidemic, the number of students enrolled in further studies / happy studies still reached 121000 / 2700 respectively, and the hot summer school is expected to provide incremental impetus for the performance in the second half of the year. The overall continuation rate of students is high, reaching nearly 70%, and about 60% of students participate in more than one subject.

The comprehensive launch of thinking music net school curriculum, the integration of online and offline educational products and services. Online education enables students to break through the limitations of commuting and time, enjoy a diversified learning environment, and have huge market potential and development space. The company launched "thinking Music double teacher classroom" in the autumn of 2019, using the way of "famous online teacher + offline tutor", combined with online and offline advantages to improve students' learning efficiency. The sudden outbreak of the novel coronavirus epidemic at the beginning of 2020 accelerated and catalyzed online education, allowing more students to try and experience online educational products, thus enhancing the popularity of online education.

In response to the explosive online demand, Sianle responded quickly and launched a comprehensive online course in early February to ensure students' learning progress. So far, the company has launched a standardized online teaching process suitable for online teaching, which is integrated with offline courses and adopts small class teaching to provide students with a convenient environment for online and offline double-button learning. The company believes that offline is still the most important and effective way for K12 students to learn, and the group's online courses are a powerful supplement to offline courses and a way to broaden students' foundation and profit, and do not conflict with offline courses.

Create "Hongmeng high-end class" to help brand upgrade. In May this year, thinking Music Education launched a high-end teaching system for outstanding students, subdividing the training team and top students at two levels, covering primary school, junior high school and senior high school, bringing together a lineup of famous teachers such as Tsinghua University, Peking University and Chinese Academy of Sciences. We believe that if we successfully build this excellent teaching product for top students, it will help to enhance the reputation of the brand and enhance the influence of the brand among parents and students.

Attach importance to the investment in teaching and research and improve the quality of teaching service. The proportion of R & D investment in income in 2016-2019 was raised from 3.8% to 6.4%. In the first half of 2020, R & D investment was 20.4 million yuan, accounting for 6.3% of income, which was mainly used to optimize teaching methods, service supply and information management system. The number of Sikole Teaching and Research Institute has increased from 58 in 2016 to more than 200 professional teaching and research staff, specializing in the standardization of curriculum system, teaching materials and teaching methods. The company customizes the courses and teaching materials according to the demand, and develops most of the teaching materials internally. When designing the scope and depth of different course materials, the internal product development team will conduct detailed investigation and development according to the requirements and needs of different cities. The draft textbook will be reviewed several times by the person in charge of the relevant subject during the development period. Each new course must be launched on the internal platform to solicit comments and suggestions. Members of the internal product development team will attend the on-site course and follow up feedback. In the future, with the rapid growth of business, we will invest more in the research and development of courses and teaching materials in order to improve the quality of teaching and improve the tutoring results of services. Specifically, such as: the launch of artificial intelligence STEAM education courses for young children to introduce artificial intelligence technology for young people; through the digital platform to integrate a number of courses and existing classroom education courses to promote the customization and digitization of the teaching process.

The incentive mechanism is in place, the turnover rate of partners and teachers is low, and the group is relatively stable. At present, the company has more than 4000 employees, including more than 3000 teachers. The management team is mostly promoted from the front line, with a teacher background, profound industry expertise and extensive operational experience. Chen Qiyuan, the founder of the group, is a mathematics teacher with 15 years of teaching experience and is now the vice president of Guangdong Elementary Mathematics Society. The Group has launched a characteristic core incentive mechanism in line with the situation of the company, including teacher partner, principal management fission mechanism and option partner system, which provides strong incentives for teachers, principals and core management. The company's team is stable, no founder has left for many years, and the teacher turnover rate has remained low. The resignation rate of teachers appointed for more than two years in 2016-18 was 0.8%, 1.6%, 3.5%, 1.7% respectively.

Establish a training system for teachers and staff of all ages and reserve the strength of follow-up expansion. The company set up the Sikole training College, which includes three mature training systems: teacher line training, management line training and functional line training, covering the full-age career of the teaching staff. Take teacher-line training as an example, new employees will go through three stages including face-to-face training, assessment, and on-the-job learning before they can be promoted to teaching assistants, and then formally enter the post after a series of training and assessment. A mature and complete staff training system reserves blood for the company's follow-up expansion plan.

Based on the rapid expansion of the Greater Bay area, we will strive to realize the 550-year Plan in five years. As of the first half of 2020, the company has 127learning centers. According to the company's plan, 33 new learning centers will be opened in the second half of 2020, and the number of schools will reach about 160. In the next three years (21E/22E/22E year), it is planned to open new learning centers in 50-52-72, and it is estimated that there will be 334 learning centers in 2023. The company has put forward a "550th plan", that is, to enter more than 50 cities and build more than 500branch schools in the next five years, achieving the revenue target of 5 billion.

The average return on investment for each new school is about one year. The company opens a new learning center with a total floor area of 1000 square meters, with a total investment cost of about 2.5 million yuan. According to the average tuition fees for each tutoring session and the total tutoring hours, depending on the time of the opening of the learning centres, the company estimates that the average annual revenue generated by the new learning centres over the past years will be between $3.5 million and $6.5 million. The company usually opens new learning centres before the school winter and summer holidays, that is, in January and July, to promote the new learning centres through experience classes during the school holidays. Based on the expected income generated by the new centre and the associated cost of sales, the expected payback period for a new learning centre is about 10 to 16 months (meaning that the total net cash flow from future operating activities is equal to the expected total investment).

K12, the fastest growing leader in South China. In terms of the compound annual growth rate of income from 2015 to 18, the company has the fastest growth among the top five after-school education institutions in Guangdong. The company's income comes from tuition fees paid by students, which are usually paid in advance before the start of the course, and the tuition income is confirmed after the company provides services according to the course schedule. The company's revenue increased from 170 million in 2016 to 710 million yuan in 2019, with an average annual compound growth rate of 61%. In the first half of 2020, the company achieved income of 326 million yuan, an increase of 10.2% over the same period last year. Of this total, the income of academic preparation and quality education courses was 315 million yuan, up 10.6% and 0.1% respectively over the same period last year.

The overall profit margin is improved and the operating efficiency is improved. From 2016 to 2020H1, the annual gross profit margin increased from 33% to 37.5%, the operating profit margin increased from 8.1% to 20.5%, and the net interest rate returned to the mother increased from 6.1% to 14.2%. In terms of the cost of sales, salary and benefits and venue rent are the two largest expenses, accounting for 62% of the cost of sales. 23%. In terms of operating expenses, the proportion of sales expenses to income has increased in recent years, but the sales efficiency has improved, as shown by the decrease in the average sales cost per reading (from 147 yuan in 2016 to 73 yuan in 2019). It is estimated that it is mainly due to the high renewal rate of students and the excellent results of brand development.

As of the first half of 2020, the company's total asset-liability ratio was 60.3%. Of the total liabilities, 17.5% were contractual liabilities, reflecting the teaching services that schools should provide to students after collecting tuition fees, and 48% were long-term leasing liabilities. Cash has a strong ability to cover interest-bearing loans, with 156 million cash corresponding to 25.7 million of long-term and short-term loans, more than 6 times the coverage ratio. Current assets have a strong ability to cover current liabilities, with a current ratio of 1.44 times.