Recommended logic: 1) Private teaching assistant distribution leader, the company sells more than 4000 copies of teaching books every year, covering 45% of high school students, 15-20% of junior high school students, high coverage superimposed rigid demand for teaching assistance, supporting sustained growth. 2) in 2020, the funding for educational informatization in China has increased to 343.1 billion yuan, and the trend of educational informatization is obvious. the company actively arranges the educational content AI system, and the project funds are sufficient, which is expected to open the second growth curve.
3) Teaching auxiliary book distribution equipment moat: rich products, stable cooperation of publishers and intensive network of dealers.
The company is mainly engaged in book distribution business, and the performance fluctuation increases under the impact of the epidemic. From 2017 to 2021, the company's operating income and return net profit showed a fluctuating upward trend. In 2021, the company's revenue was 410 million yuan, an increase of 15.2% over the same period last year, and the return net profit was 35 million yuan, an increase of 4.1% over the same period last year. Book distribution business is the company's main source of income. In 2021, the cumulative income of book distribution and planning services contributed 97.4%. Book distribution and planning are expected to maintain 15% revenue growth and 30% profit growth in 2022.
The demand for teaching auxiliary products is strong, and the business barrier of teaching auxiliary books is solid. China's primary and secondary school students have a large population base, and the teaching auxiliary products face the student group directly, and the demand is exuberant. In 15-21 years, the number of primary and secondary school students in China increased from 163 million to 184 million; in 19-20, the share of teaching materials in the book retail market increased from 17.97% to 20.8%. The main results are as follows: 1) the company has rich teaching auxiliary products, coordinated development up and down the line, and a wide range of offline products covering 12 grades and all disciplines; online teaching auxiliary products simultaneously serve teachers and students to improve teaching efficiency. 2) the company's main business model is mature: the content planning team is experienced, and the company has well-known publishing houses for long-term cooperation, including people's Education Publishing House, Education Science Press, people's Publishing House, etc.; the marketing channel is stable, and the cooperative dealers are mainly local Xinhua Bookstores and large retail bookstores.
The trend of information transformation is obvious, and the AI system promotes the core competitiveness. China's educational informatization funds continue to increase, from 211.4 billion yuan in 14 years to 343.1 billion yuan in 20 years. The trend of educational informatization is obvious. In order to actively respond to the "double reduction" policy and the educational information transformation, the company has raised nearly 300 million yuan to develop the educational content AI system, which has advanced technologies such as artificial intelligence algorithm, OCR, NLP, etc., to achieve peer-to-peer accurate auxiliary teaching, reduce the amount of students' homework and time, and improve teachers' homework correction and teaching efficiency.
Profit forecast and investment advice: it is estimated that the EPS of the company in 22-24 years is 0.21 yuan / 0.24 yuan / 0.27 yuan respectively, and the corresponding PE is 36-31-28 times respectively. As the leader of private publishing, the layout education AI is expected to further open up the growth space, with a net profit CAGR of 18.8% in the next three years. For the first time, the coverage gives a "hold" rating.
Risk hints: the double reduction policy brings the risk of uncertain demand for education; the risk that the R & D and sales progress of education AI system is not as expected; the risk of deterioration of market competition.
