The implementation of the people's Promotion Law has brought more operational advantages to public vocational schools. In addition, local governments are expected to be more inclined to divert students to public vocational schools. We expect that the increase in vocational colleges will also put pressure on the enrollment of companies in the short term. We expect the company to face more competitive pressure from public vocational schools in the future.

The revenue in the first half of 2021 is basically in line with our expectations, but the net profit of shareholders is lower than we expected. Although the number of freshman registrations and new customer registrations increased by 34.7% year-on-year, driving the company's total revenue up 31.9% year-on-year, net profit belonging to shareholders fell 3.9% year-on-year due to a decline in gross profit margin, a significant increase in sales expenses and unexpected foreign exchange losses. After deducting the net loss in foreign exchange and the share payment confirmed by equity settlement, the adjusted net profit was 301 million yuan, an increase of 41.8% over the same period last year.

Considering the impact of COVID-19 's epidemic situation and policy on freshman enrollment, we have mainly lowered the expectation of freshman enrollment. We lowered our earnings per share forecasts for 2021-2023 by 60.2%, 43.3% and 34.4%, respectively.

In view of the company's stable dividend payout and the current rigid demand for vocational education in China, reiterate "buy" and lower the target price from HK $19.03 to HK $7.47. The target price corresponds to 32.1,18.0 and 14.4 times 2021-2023 price-to-earnings ratio and 2.4x, 2.2x and 2.0x 2021-2023 price-to-net ratio.