The company achieved operating income of 321 million yuan in 2022, a year-on-year decrease of 15.39%, net profit of 234.13,300 yuan, a year-on-year decrease of 42.38%, and net profit of the mother after deduction of 12.2734 million yuan, a decrease of 66.17% over the previous year. 2023Q1 achieved operating income of 659.32,200 yuan, a decrease of 9.37% over the previous year, net profit of 3,4173 million yuan, an increase of 3.65% over the previous year, and net profit of the mother after deduction of 2.306 million yuan, a decrease of 17.47% over the previous year.
Key points of investment:
The pandemic has affected company book sales. The recurrence of the epidemic in 2022 led to an overall downturn in the book sales market. The size of the domestic book retail market fell 11.77% year on year to 87.1 billion yuan. Among them, the children's book retail market fell 10.41% year on year. Affected by the overall downturn in the industry, annual revenue fell 15.39% year on year. On a quarterly basis, the operating income of Q1-Q4 companies decreased by 1.30%, 5.84%, 1.44% and 40.49%, respectively, and the net profit of the mother of the mother decreased by 42.38%, 15.15%, 19.32%, and 65.89%, respectively. Among them, the Q1 epidemic in the Xi'an region and Q4 nationwide affected the company's normal sales, logistics and supply chain, while Q4, as the focus of the company's annual performance, was significantly affected by the epidemic, which put pressure on the company's annual performance.
The competitive advantage in the vertical sector is obvious. The company has always focused on the children's book market and has competitive advantages in brand and product strength. According to the opening data, in 2014-2022, the company's market share in the children's book retail market remained in the top two. In 2022, the company ranked first in the retail market for children's enlightenment books, with a 9.55% share; the retail market for popular science books for children ranked second, with a 4,03% share.
Expand the product line and add the children's literature brand “Eryu”. According to open volume data, popular science for children, children's literature, and children's picture books are the three largest market segments for children's books. At the end of 2022, the company launched a new children's book brand “Eryu” based on the original product line, entering the children's literature segment and providing high-quality fictional literature for children aged 6-12. “Eryu” and the company's original children's book brand “Le Fun”, which focused on the middle and high-end markets, and the children's book brand “Aoyoumao”, which focused on the mass market, formed the company's three major children's book brand matrices.
Actively embrace new technology and promote digital transformation. In June 2022, the company launched the smart reading hardware Fun Fun Rocket AI Smart Reading Pen, which relies on the content resources and voice reading of children's books accumulated by the company over many years, and the AI intelligent voice interaction function to bring children a new reading experience. In addition, the company uses “one core, two wings” as the core plan to promote the digital transformation of the company's business system, comprehensively improve the level of digitalization in internal business operations, achieve digital coverage of the whole process on the content production side, improve the quality, efficiency and asset accumulation capacity of content publishing. On the consumer service side, through the establishment of a digital research institute for children's education, the development of book-derived products and extended services, the company increases the added value of the book business and performs labeling, analysis and management of content products and consumer reading behavior, and intelligently recommends more accurate reading services.
Investment advice and profit forecast: The company focuses on the children's book market, has a high popularity and market share ranking, and achieves further coverage of the children's book segment through the three major children's book brand matrices of “Le Fun”, “Travel Cat”, and “Eryu”. Although short-term performance is under pressure due to the impact of the epidemic and the overall contraction of the book market, it is expected that with policy adjustments, demand in the book market will gradually pick up, and the company's performance is expected to pick up. The 2023-2025 EPS is expected to be 0.41 yuan, 0.48 yuan, and 0.56 yuan. According to the closing price of 28.04 yuan on April 26, the corresponding PE is 68.58 times, 58.45 times, and 50.35 times, covering and giving an “increase in holdings” investment rating for the first time.
Risk warning: macroeconomic fluctuations affect book consumption demand; fertility falls more than expected; copyright contracts cannot be renewed when they expire; intellectual property rights are infringed; industry competition intensifies