Investment Rating - Investment recommendation: Outperform the market (maintained) [8] Core Viewpoints - The report highlights the successful transition of the company from online education to the trendy toy market, with its brand WAKUKU gaining significant popularity, topping various sales charts [5][9] - The strategic acquisition of Letsvan for 235 million RMB has allowed the company to enter the high-growth trendy toy sector, which is expected to complement its existing education business [11][51] - The global IP toy market is projected to reach 525.1 billion RMB in 2024, with a CAGR of 9% from 2020 to 2024, indicating a robust growth opportunity for the company [11][46] Summary by Sections Transition from Online Education - The company faced challenges in its core online education business, with a revenue decline of 24.6% year-on-year, prompting a strategic shift [10][31] - As of March 31, 2025, the company had 1.45 billion registered users, but the growth momentum was weakening due to rising competition and marketing fatigue [10][28] - The company adopted a "quality over quantity" strategy, focusing on high-value users and improving product offerings, resulting in a 34.4% reduction in marketing expenses [35][36] Entry into Trendy Toys - The company recognized the potential of the trendy toy market, which is characterized by emotional consumption trends among younger consumers [47][48] - The acquisition of Letsvan has positioned the company to leverage its operational capabilities from the education sector in the toy market [52] - WAKUKU's pricing strategy, with products priced between 59-98 RMB, effectively targets entry-level consumers and fills market gaps [55] IP Economy and Opportunities for Traditional Companies - Traditional stationery companies are encouraged to enter the IP economy, utilizing their established supply chains and design capabilities to capture new growth [61] - Companies like Morning Glory and Guangbo have the potential to thrive in the IP derivative market due to their strong brand recognition and existing distribution channels [61][62] - The report suggests that the rapid growth of the trendy toy market presents significant opportunities for companies willing to innovate and adapt [62]

Key Points - The report emphasizes a cautious investment strategy focusing on stability amid geopolitical tensions and economic uncertainties [1][2] - Recent events include US-China trade talks in London, disappointing US CPI data, and escalating conflicts in the Middle East, particularly between Iran and Israel [1][8] - The A-share market showed mixed performance, with the Shanghai Composite Index facing resistance at 3400 points, while sectors like new consumption, innovative pharmaceuticals, and precious metals demonstrated resilience [1][8] Weekly Event Review - The US-China trade discussions did not yield substantial agreements, indicating a prolonged negotiation period on tariffs and export controls [2][9] - The US CPI for May rose by 2.4%, below expectations, while non-farm employment increased by 139,000, suggesting a mixed economic outlook [9] - The military conflict between Iran and Israel intensified, with significant airstrikes and retaliatory actions, raising concerns over regional stability [9] Trading Data - The report notes an increase in average daily trading volume to 1.37 trillion yuan during the week [1][8] Investment Strategy Recommendations - The report suggests focusing on sectors with strong defensive characteristics and stable earnings, particularly: - **Gold**: Driven by geopolitical tensions and inflation concerns, gold prices have surged, breaking through $3,400 per ounce [3][17] - **Banking Sector**: The banking sector is viewed as a stable investment due to resilient earnings and attractive dividends, providing a safe haven for investors [3][18] - **Hydropower**: The hydropower sector is highlighted for its stable cost structure and consistent cash flow, making it a preferred choice for risk-averse investors [3][18]