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OneSmart International Education Group Limited (ONE 0.94%)
Q3Â 2020 Earnings Call
Aug 18, 2020, 8:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good day and welcome to the OneSmart International Education Group Limited Financial Results for the Third Quarter of 2020 Conference Call. [Operator Instructions] I would now like to turn the conference over to Ms. Ida Yu, Investor Relations Director. Please go ahead.
Ida Yu -- Investor Relations Director
Thank you, operator. Good morning, good evening, everyone, and thank you for joining OneSmart International Education Group Limited third fiscal quarter 2020 earnings conference call. The Company's earnings results as well as supplementary slide presentation were released earlier today, and are available on the Company's IR website at ir.onesmart.org.
Joining me this call are Mr. Steve Zhang, Chairman and Chief Executive Officer and Mr. Greg Zuo, our Chief Financial Officer and Chief Strategic Officer.
I will remind you that this call may contain forward-looking statements made under the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements are based on management's current expectations and current market and operating conditions and related to events that involve known or unknown risks, uncertainties, and other factors, all of which are difficult to predict and many of which are beyond the Company's control, which may cause the Company's actual results, performance or achievements to differ materially from those in the forward-looking statements. Further information regarding these and other risks, uncertainties, and factors is included in the Company's filings with the United States Securities and Exchange Commission. The Company does not undertake any obligation to update any forward-looking statements as a result of new information, future events or otherwise, except as required under law.
With that, I will now turn the call over to Steve. Please go ahead.
Xi Zhang -- Founder, Chairman of the Board of Directors and Chief Executive Officer
Thank you, Ida. Hello, everyone, and thank you all for your interest in today's earnings presentation. The third fiscal quarter 2020 was the most challenging one in our 12 years operation history. Strictly following local government's guidelines, we have taken proper measures to protect health and the safety of our students and employees. Meanwhile, our teachers and advisors dedicated to prepare our students both academically and the mentally for the GaoKao and ZhongKao, which are key milestones in every Chinese student's lifetime. Our efforts have been much appreciated by our students and their parents. Greg will give you more details later.
Today, I'd like to take a few minutes to review our strategic focus with you. Consistently, our business and the growth is guided by three priorities. Firstly, OneSmart has a premium brand positioning. This is evident by our remarkable track record on OneSmart students' academic excellence. College admission rate of OneSmart students is more than 50% higher than national average, and high school admission rate of OneSmart students is 40% to 50% higher than average for China major cities. We invest in our premium quality education services and the learning centers to meet the growing needs.
Secondly, we design our products and services oriented by our customers. We responded to their increasing needs for personalized learning with more caring and engagement. Personalized curriculum is designed for each individual student to make smart use of time and drive excellent results.
Last but not least, we continuously upgrade our products and technologies to enhance learning experience and effectiveness.
We have developed a robust teaching system UPC, data-driven, OMO tools and platforms, AI-powered OneSmart Online, etc. All those priorities mentioned above will enable us to enhance the brand value to expand share further in the mature markets and penetrate into new markets in a disciplined manner.
With that, I will now turn the call over to Greg, who will provide you more updates on the Company performance. Greg, please go ahead.
Honggang (Greg) Zuo -- Director, Chief Financial Officer and Chief Strategic Officer
Thank you, Steve. Hello, everyone, and thank you all for joining us today. Let me start with the overall business update. The fundamentals continue to be solid with 1on1 demand becoming stronger, though our short-term operations are impacted by COVID-19. In Q1, the hardest hit quarter, all of our learning centers have been temporarily closed. All public schools in China have also been temporarily closed without reopen schedule being provided. All classes and customer acquisitions conducted through our online platform until late May. The latest update is as of August 4, more than 90% of centers have been reopened. However, we think the worst is past. We remain very positive for the long-term outlook due to four main reasons.
First, the demand for highly effective and premium education services is increasing that will gain market shares. Second, increasing numbers of consumers are better educated and become convinced that 1on1 format provides a better quality of education. Third, OneSmart's upgraded services are receiving extremely positive feedback by parents and students. And fourth, industry consolidation opportunities are rising for OneSmart as a market leader in the premium 1on1 education services sector.
Page 6 of our prepared presentation summarizes of our online and offline class offerings. Our 12 years solid offline operations cover premium K-12 1on1 after-school tutoring and young children education aged from three to 18 years old. Premium education, propelled by online education technology, OneSmart, is able to better serve customers with more flexibilities in study schedules and teaching resources with less limitation on locations. The combination of offline and online products and services have enhanced customer experience and loyalty, increased smart teaching, and management efficiency and supportive of long-term healthy growth.
Now please turn to Page 7. As shown on this page, OneSmart 1on1, our premium K-12 1on1 tutoring business has seen a solid V-shaped recovery backed by rigid demand. As of today, more than 90% of nationwide learning centers reopened. Students in the cities affected by the resurgence of COVID-19 will continue to have access to OneSmart Online to facilitate their ongoing education until further notice.
After the GaoKao, cash sales have recovered to grow by 29% and 25% year-over-year in July and August to date effectively. In fiscal year 2021, we will continue our plan to upgrade and expansion in the Top 20 cities.
According to recent market studies, we have visualized a key consumption habit of our direct customers as shown in Page 8. They are mothers of K-12 student from affluent families in Top 50 cities in China. They pursue high quality lifestyle. They purchase iPhone, Estee Lauder, Louis Vuitton, they drive Mercedes Benz, they stay in upscale hotels such as Marriott and Hilton for holidays. They engage private arts teachers, private sports coaches for their children, and they are target customers for OneSmart 1on1 business. Based on one of the global leading consumer -- consulting firm's analysis, so far, OneSmart serves only 3% of those target families. We still have a huge potential to expand our shares in the premium education sector, a large underserved addressable market.
Page 9 shows the K-12 good news from our OneSmart 1on1 learning center in Shanghai. We are proud to announce that student Yao has achieved top score in Shanghai GaoKao this year. He has been studying in OneSmart center for six years. Just to quote his mother as saying, "We are grateful to OneSmart teachers for their dedicated efforts, especially during the pandemic this year. The personalized curriculum and the heartful teaching help my son to enhance his learning power and effectively improve his academic score." Again, we congrats student Yao and his family for the excellent results. We believe more families across China will get engaged with OneSmart because of the result and great experience.
As Steve mentioned earlier, we continue to solidify our premium positioning and the premium pricing power to upgrading products and services. On Page 10, OneSmart 1on1 Elite VIP program launched since the beginning of fiscal year 2020. We have started to upgrade our learning centers to offer larger classroom with intelligent and interactive teaching tools and platforms. The better environments enable us to facilitate enjoyable study experience. On the Elite VIP, our students will have highly selected teachers with extensive teaching experience to meet their higher requirements.
Year-to-date, this newly launched product generated cash sales of RMB94.5 million, representing 3% of OneSmart 1on1 business cash sales. The Elite VIP is priced 40% to 80% higher than our regular 1on1 class, with a high expected margin. We will continue the roll-out in fiscal year 2021 starting in September and onwards. Our goal is to generate about 20% of OneSmart 1on1 business cash sales from the Elite VIP program in the near future.
Now let's move on to our young children education business on Page 11. Its recovery has been slower compared with our K-12 1on1 children businesses due to later resumption of school activities for younger children in the third fiscal quarter. Most recently, we see a good signal of its growth momentum. Cash sales recovered to grow by 12% year-over-year in August to date.
Based on our recent customer service, we believe the primary demand had shifted from elementary school admission preparation to the development of learning power for young children. We will adjust our product and service combinations to quickly capture the evolving need in the coming years. In fiscal year 2021 starting September, we are going to upgrade products, upgrade and open new centers in selected cities. We will also adopt a product upgrade program under these two brands.
Now move on to OneSmart Online business as shown on Page 12. Our online classes provide convenience and complementary services to our children in a form of take-out services. For most of our customers, they become engaged with OneSmart Education through our offline centers, and most of classes are taken on weekends. However, with the introduction of OneSmart Online, those existing offline acquired customers are able to schedule their incremental online class throughout the entire week to achieve a higher frequency for better results with less limitation on occasions. The additional online class offering will also drive-up our subject to student ratio, which is average subject taken by each student. For example, the student takes math course in our offline center, while taking history course through our online platform. Currently, our subject to student ratio is above 1.3, and then we expect students would take additional subject thanks to the convenience and high quality provided by OneSmart Online as it rolled out. This is probably to drive-up the subject to student ratio to 1.7 as our target. In fiscal Q3 of 2020, online business generated RMB59 million in cash sales, a sequential increase of 128% growth, accounting for 8% of total cash sales in the quarter.
Net revenues from online business totaled RMB46 million, a sequential increase of 47%, accounting for 6% total net revenues. Those figures reflect pure online users only. If we add back online courses taken by offline students, cash sales and net revenue were RMB165 million and RMB54 million for fiscal Q3, representing 543% and 74% sequential growth respectively.
Before Ida walk you through financial results in more detail, I'd like to elaborate on the one-off impairment loss in the fiscal Q3 as shown on Page 21. In Q3, we booked impairment loss of RMB335 million related to 15 investee companies. This was primarily caused by COVID-19 outbreak. We used prudent approach in evaluating financial performance of these investee companies and decided to mark down our investment amount by at least 80% for 14 of the 15 investee companies. We will continue to stick to a highly selective investment discipline, and will only consider opportunities that can immediately help the growth of our core business. After this mark down, our long-term investment balance dropped significantly to RMB1.1 billion as end of Q3 of fiscal year 2020 from RMB1.5 billion at the end of fiscal year 2019. The remaining investments are expected to be solid with more upside potential than downside in the future.
In summary, under the unprecedented event of pandemic, the nature of our personalized education program demonstrated a clear V-shaped performance as students waited in fiscal Q3 for back-to-school and exam seasons to resume our services. As demonstrated by recent swift rebound and return of strong year-over-year growth in fiscal Q4, our business fundamentals remain solid and consumer demand for highly effective and premium education services is increasing.
Currently, we expect fiscal Q4 revenue to grow 21% to 34% over fiscal Q3, and margin to return to the pre-COVID-19 level for the next few quarters. Looking forward, we expect strong revenue growth and the margin recovery in fiscal year 2021 and beyond, primarily underpinned by two major factors. Firstly, the maturing of previously opened learning centers, as 57% of them were opened in the last three years and are ramping up as planned. And secondly, the new offerings of upgraded premium products, which shall bring in improved economics over the next few years.
With that, I will turn the call over to, Ida. Ida, please.
Ida Yu -- Investor Relations Director
Thank you, Greg. In the third quarter of fiscal 2020, net revenues were RMB744.9 million, a decrease of 31.9% from RMB1,093.3 million during the same period last year. The decrease was mainly attributable to the temporary shutdown of our offline learning centers for COVID-19-related government requirements, offset by the incremental volume from online platform.
Cost of revenues decreased by 11% year-over-year to RMB482.6 million. We actively managed down the staff cost, rental cost, and other related costs, partially offset by the increase in the depreciation and amortization cost related to our center expansion and upgrade prior to the pandemic.
Selling and marketing expenses decreased by 17% year-over-year to RMB165 million. Non-GAAP selling and marketing expenses, which excludes share-based compensation expenses, were RMB164.8 million, a decrease of 17% from RMB198.5 million during the same period last year. The decrease was primarily due to our disciplined expense control and less cash sales generated during the quarter when all learning centers remained closed until late May 2020.
General and administrative expenses decreased by 23.7% year-over-year to RMB174.7 million. Non-GAAP general and administrative expenses, which excludes share-based compensation, were RMB136.9 million, a decrease of 35.9% from RMB213.8 million during the same period last year. The decrease was primarily due to our expense control policy to keep a healthy financial condition during COVD-19.
Let me now move on to cover some other key financial points for the third fiscal quarter of 2020. Capital expenditures for Q3 this fiscal year were RMB20 million [Technical Issues] of 45% from RMB37 million in the same period last year. Capital expenditures accounted for 2.7% of net revenue in Q3, representing a year-over-year decrease of 70 basis points from 3.4% in the same period last year. The decreases were mainly because we prudently managed our cash flow and temporarily suspended leasehold improvements due to COVID-19.
OneSmart's prepayments from customers balance, which represents cash collected from enrolled students for courses and recognized proportionately as the training sessions are delivered, was RMB2,359 million at the end of the fiscal quarter of 2020 Q3, a year-over-year increase of 6.4% from end of fiscal quarter of 2019 Q3.
As of May 31, 2020, the Company had cash and cash equivalents, restricted cash and short-term investments of RMB1,805 million. Based on our latest estimates, we expect to generate net revenues of RMB900 million to RMB1.0 billion for the fiscal Q4, representing a sequential growth of 21% to 34%. This outlook reaffirms our revenue guidance of RMB3,330 million to RMB3,430 million for the full fiscal year 2020. However, this outlook represents OneSmart's current view, which is subject to change because the COVID-19 impact is still ongoing, and its future development remains unclear.
This concludes our prepared remarks. I will now turn the call over to operator and open for Q&A. Operator, we are ready to take questions.
Questions and Answers:
Operator
We will now begin the question-and-answer session. [Operator Instructions] And our first question comes from Sheng Zhong of Morgan Stanley. Please go ahead.
Sheng Zhong -- Morgan Stanley -- Analyst
Hi. Good evening, Steve and Greg. My -- thank you for taking my questions. The first question is can I ask what the margin outlook for Q4? And secondly, the online business looks -- the trend is very good, and so, can you share some of the near-term target of the online business maybe as a percentage of your VIP business? And do you see any cannibalization with your offline business? So with the online business growth, what's your plan for the offline business capacity expansion in the rest of this year and also in next year? Thank you very much.
Honggang (Greg) Zuo -- Director, Chief Financial Officer and Chief Strategic Officer
Thanks, Sheng. I appreciate your questions. Thank you so much for joining this call. Let me take your questions one at a time, but first question regarding margin outlook for Q4. So, as we mentioned that we have -- we see very strong cash sales in the recent months for July and August. Those are actually a record number historically for us. So that indicates very strong demand in our core business, especially after ZhongKao and GaoKao.
So, with that, we provided a guidance of RMB900 million to RMB1 billion revenue for Q4. So, as we also mentioned earlier that during the COVID-19 period, we have done an excellent job in terms of cost and expense control, so which means we have now a leaner cost structure. So, we are pretty optimistic on our margin outlook for Q4. It will still be hard to provide exact margin number as a guidance, but if you use Q4's results as a proxy, which as you know we generated RMB745 million in revenue and a small operating loss of RMB39 million for non-GAAP operating losses. If we -- our revenue can increase and generate RMB900 million to RMB1 billion, we expect pretty sizable positive operating income for Q4.
So, for your second question regarding OneSmart Online, our target share and -- in terms of percentage of our offline 1on1 business, let me elaborate that. OneSmart Online will continue and grow as part of our core business strategy. We appreciate its value in terms of providing convenience and the complementary services to our existing students and potential new students. So, currently, as you know in Q4, OneSmart Online took about 8% of our cash sales. We expect consumer to continue to experience of OneSmart Online, its quality and good earnings results. So, that market share, we expect to continue to grow in the future. We don't have the internal target, but we will let consumers to decide to let the convenience and value drive its growth.
But in any case, OneSmart Online will create incremental growth for us going forward, which means it can serve additional demand for additional customers in the future. So, we're very -- we are thankful to our teams building OneSmart Online, especially during the COVID-19 period.
Your third question regarding potential cannibalization with the offline operations. So we -- I think that's a fair question. I think we have observed and studied similar situation in other players of the industry who experienced the same thing. That clearly was a problem, but let me elaborate, let me emphasize that. The OneSmart 1on1 business, it services a different demand, especially online channel, it provides convenience, provides flexibility, and more choices for our students. So we have explained in the previous earnings call that OneSmart Online growth provides a complementary services through the existing students as well as provide access to us for additional new students in the areas that our offline centers couldn't cover yet. So, having that in mind, so we have clearly organized our teams in the format that, for example, for the mid of the week, additional higher frequency online hot demand, we have our existing offline team to handle those businesses. Clearly, that alignment of interest, there's no conflict. But for additional new customers that where our existing management cannot serve, we have a separate team who runs that business because it clearly has different nature. We have clearly separated two teams in terms of geographic divisions. That really help us to avoid any cannibalization and potential conflicts. So, so far, we have been operating pretty smoothly in that and we don't see any major internal conflicts and then cannibalization from a customer perspective.
Your fourth question is regarding capacity expansion plans going forward. Let me -- for the near future, as we mentioned, our strategic focus is in the VIP program. So in Q4 and fiscal year 2021, we will continue and spend a lot of time to upgrade our learning centers and open new VIP learning centers, as well as open more VIP platforms for our students. That's a clear focus. But in terms of number of learning center expansions, we have two separate expansion strategy. For the 1on1, we have been very clear, we want to further continue to grow our Top 20 cities, so we can achieve economy of scales for those 20 cities. So, we'll continue to open more learning centers in the new fiscal year for the 1on1 business. But for young children education programs, as we mentioned earlier, it took a little bit long time to resume its normal operations as the COVID-19 impact and public school reopening schedule being a little bit behind schedule. So, we will -- our priority is to fill in existing centers for the young children. But in the meantime, we'll also upgrade our young children programs by opening some VIP learning centers as well as upgrade some classrooms. So, this summarize our expansion strategy going forward.
Sheng Zhong -- Morgan Stanley -- Analyst
Thank you, Greg.
Operator
Our next question comes from Felix Liu of UBS. Please go ahead.
Felix Liu -- UBS -- Analyst
Hi, good evening, management. Thank you very much for taking my question. My first question is regarding to our trajectory from here. I understand that Q3 has been negatively impacted by COVID-19. But when do you expect the revenue level to return back to normal going forward? What are the recovery trajectory for the top line as well as the margins?
And my second question is on consumer preference post-COVID-19. We hear some competitors saying that a portion of the parents are now becoming more open to the online format. Is that consistent of what we're seeing in the 1on1 space?
My third question is on our learning center resumption or ramp-up by city tier. We'll understand that you have a very matured or successful operations in Shanghai. How are the situations outside Shanghai? I recall previously during the period of your rapid expansion, the utilization of non-Shanghai are relatively under pressure. So, when do we expect that to improve going forward? Thank you.
Honggang (Greg) Zuo -- Director, Chief Financial Officer and Chief Strategic Officer
Thank you, Felix. So, the first question regarding the revenue and margin trajectory from here. So, obviously, Q3 has been a quarter mostly hit by COVID-19. But as we have explained earlier in the call that we have seen and observed very strong demand for our business in the recent months. So, I think in our discussions with our consumers, parents and students, these people experience pretty difficult and special time. During the February to June, they experienced the lockdown in the country and closed out public schools. There is a lot of uncertainty for ZhongKao and GaoKao schedule. So they have taken a lot of online classes during the period of time. And later on, they all have to face the exams, especially ZhongKao which is delayed to one month reschedule as you know. So, they have learned a lot during that period of time to compare different education programs for this online and offline. But their conclusion clearly is that 1on1 program is clearly very effective to provide the best customer experience in helping them. This we have elaborated early in this discussion ZhongKao and GaoKao results for our students has been very excellent this year. So that probably explains why we have seen cash sales growth of 25% to 29% year-over-year we reported recently.
So, we are very encouraged by this result. So, with that, we'll predict a pretty strong growth for new fiscal year 2021 starting September. We would -- we expect to resume our historical top line growth add of 30% plus by next year. So, it's just margin, if top line growth resumed to the normal level with a leaner cost structure that we achieved during COVID-19 period, we are optimistic on margin as well. So, we expect the margin to be back with the pre-COVID level in the next few quarters. But the exact number is hard to say for margin, as you can imagine. And so Q1 next year still will have some tail impact by COVID-19 and Q1, which is September to November, historically has been a low season in terms of productivity. So, I think, we look at more positive margin expansion toward the latter half of the year. So, that's the answer for the first question.
The second question regarding consumer preference, I think that's an excellent question. We have done a lot of research, consumer surveys internally as well, because during that period of time, obviously consumers experienced a lot learning education program online and offline. But let me -- want to point a few points. Number one, OneSmart 1on1 premium education services served a very different demand than a typical mass-market class format as well as those online education programs as we mentioned in the last two earnings calls. So, we have serving the students in the middle school and high school who appreciate very effective 1on1 personalized learning experience, which can help them quickly improve their scores and do well in their exams, especially ZhongKao and GaoKao. So, we did -- in our survey of 2,500 parents, more than 90% of them have responded and said they prefer OneSmart 1on1 education service, especially the offline centers, which they believe provide better results than other online platforms.
Having said that, I think we also recognize that some of the parents they still appreciate online channel because online provides immediate more choices and better teachers, right? So, I think, as I mentioned earlier, we'll let parents and students to decide whether they want the online or offline, but we provide both services in a high quality fashion.
So, I think to summarize, if the consumer wanted to have a quality education and premium experience, I think clearly OneSmart Online and OneSmart Offline provide the best services. So I think, that's the answer of your second question regarding consumer preferences going forward.
I think your last question regarding the learning center ramp-up situation, especially in non-Shanghai learning center, as I mentioned that we still have very large number of learning centers that are quite young. So, I mentioned 57% of them opened in the last three years. So clearly they are ramped up excellent as I mentioned in Shanghai as well as non-Shanghai cities. We didn't provide the ramp up result this quarter, because those are, as you know, during the May -- March to May period, the COVID period, but we'll continue to get close our ramp up records in Q4 and beyond.
But I can tell you, our ramp up is still and largely on track as we have been previously provided, which means that they follow a pretty healthy pattern of margin ramp up and the top line ramp up. So, with these large number of learning centers been ramping up at the same time, we are very confident of our performance and margin recovery going forward, which ties back to earlier questions.
Felix Liu -- UBS -- Analyst
Okay, Thank you very much, Greg. Very helpful.
Operator
Our next question comes from Tommy Wong of China Merchants Securities. Please go ahead.
Tommy Wong -- China Merchants Securities -- Analyst
Hi, management. Thank you for the opportunity to ask questions. Hi, Greg. Just a quick question. I think a lot of people on offline business right now are talking about the industry consolidation. And I think some of this year, I think as well as next year or even the year after, I know we have added a lot of capacity before and we're trying to increase utilization. But on the other hand, I heard from the other players like [Indecipherable] Shanghai learning centers have shut down. And so, it seems like a lot of the competition has disappeared. And so, how do we -- how do you think about the investments? What are you -- what is the management thinking about investments for expansion over the next year? And what are you hearing from the local market about this so-called industry consolidation? Thank you.
Honggang (Greg) Zuo -- Director, Chief Financial Officer and Chief Strategic Officer
Yes. Thank you, Tommy, for your question. I think this is a good question as well. We actually mentioned this early in our presentation that consolidation is a long-term positive factor for our performance going forward. And then we echo your observation and discussion with other players. We have observed similar trends. And I think a lot of smaller scale players has been pretty challenging for them to recover. So we observed that when the government allowed reopening of learning centers. We found many of them cannot be reopened forever. So, I think this is factoring our one-time impairment losses as well. A lot of smaller players that we invested in, we gained the insight that their performance being tough. That means opportunity for a larger player like us. We are market leader in the 1on1 space, as you've seen very rapid and swift V-shaped rebound of our cash sales. Actually, I think partly is because of that reason. We -- previously, we find it harder for our new signing of new students to walk in, but we found out our conversion rates and number of walk-in to our learning centers much improved than before. So, that's very encouraging in the sense for us to going forward.
So, with that in mind, we'll continue to focus on the cash sales and signing of new students, which as you know, will generate future revenues. And also, we are -- we will also do opportunistic acquisitions of maybe not companies but also -- but students nearby. So, we try to acquire students of other players in a larger number through some transaction arrangements to take advantage of these opportunities.
So, to summarize, we still believe industry consolidation provides a positive opportunity for larger players like us, and we'll continue to take advantage of that.
Tommy Wong -- China Merchants Securities -- Analyst
Okay, thanks. Makes sense. Thank you. Good luck. Thanks.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Ms. Ida Yu for any closing remarks.
Ida Yu -- Investor Relations Director
Thank you, operator. In closing, on behalf of the entire management team, we'd like to thank you again for your participation in today's call. If you have any further inquiries in the future, please feel free to contact. Thank you. Bye-bye.
Operator
[Operator Closing Remarks]
Duration: 43 minutes
Call participants:
Ida Yu -- Investor Relations Director
Xi Zhang -- Founder, Chairman of the Board of Directors and Chief Executive Officer
Honggang (Greg) Zuo -- Director, Chief Financial Officer and Chief Strategic Officer
Sheng Zhong -- Morgan Stanley -- Analyst
Felix Liu -- UBS -- Analyst
Tommy Wong -- China Merchants Securities -- Analyst
