Zhonggong Education (002607): The first three quarters of results increased by 71% -80% in the 2020 national examination enrollment number increased by 66%. Future performance will continue to grow.

Zhonggong Education (002607): The first three quarters of results increased by 71% -80% in the 2020 national examination enrollment number increased by 66%. Future performance will continue to grow.

Brief evaluation of performance On October 14, 2019, China Education Education issued a performance forecast, and the first three quarters of 2019 are expected to achieve net profit attributable to mothers9.

2.5 billion-9.

75 ppm, an increase of 71% -80% per year, and is expected to achieve net profit attributable to mothers in the third quarter of 20194.

45 ppm-4.

78 ppm, an increase of 35% -45% per year.

The performance has an improving trend, and net profit attributable to mothers was achieved in the first three quarters of 20185.

41 trillion, accounting for 47% of the highest net profit, of which Q1 / Q2 / Q3 respectively account for -5% / + 23% / + 29% of the initial net profit attributable to the mother.

In Q1 2019, the company turned losses into profits, and in Q2 2019, the net profit attributable to mothers increased by 46%.

Analysis of the five aspects of the long-term growth of public education-① The track where public education is located is a “fuzzy and important” training field, and the Matthew effect is very obvious: the industry of public education is only getting stronger and stronger.In the case of not much marketing costs, it can be reflected in the top of some searches.

②Industrialization operation, large backstage and small front desk, significant advantages 北京夜生活网 in management system, and improved profit margins: China Public Education’s net profit margin increased by 5.
.

5pct. In the first half of 2019, costs and expenses continued to improve, showing scale and brand effects, and gross margin increased by +2.

2pct, sales expenses can be reduced by -3.

3pct, overhead cost rate is -2 years.

3pct, net interest rate +4 per minute.

9 points, profitability has been continuously strengthened.

③Horizontal expansion area: In addition to civil servant recruitment training, public institution recruitment training, teacher recruitment and teacher qualification certificate training, other businesses, such as the post-graduate business, are expected to double in this year.) Revenue increased by 89% in ten years.

④ Initial coverage of low-tier cities, with extensive and deep demand and strong sinking capacity: As of the end of the second quarter of 2019, the company’s outlets covered 319 prefecture-level cities with a coverage rate of over 95% and 880 learning centers, compared with the end of 2018.701 net increase of 179, rapid expansion of outlets (at least 150/138 net increase in 2018/2017 respectively), county-level cities are the main direction for future channel expansion.

⑤ The main source of demand for public education is the improvement of the participation rate-with the repeated content of the exams and fierce competition, there is still a lot of room for improvement in the participation rate of the track.

The one-time enrollment of national civil servants in 2019 fell by 49%, which did not reduce the number of participants. It only made people feel that “the content of gold was higher”, and the theater effect helped to improve the intention of participation.

On October 14, 2019, the National Civil Service Bureau released the 2020 National Civil Service Examination Recruitment Announcement. In 2020, the national examination enrollment will be 24,128, an increase of 66%, a significant rebound, and the industry’s overall market margins are upward.

Investment suggestion: We estimate the company’s net profit attributable to its mother to be 16 in 19-20.

9/22.

7 trillion, corresponding to 65/49 times the P / E. The company’s third quarterly report exceeded market expectations. The partial increase in the number of recruited candidates for the national examination is expected to have a positive impact. The leader will continue to strengthen gradually, maintain the buying level, and raise the target price to 20 yuan.

Risk reminders: policy risks; the increase in participation rate may be less than expected; risks such as recruitment rankings.