Key points of investment
China Science Chuan is the largest comprehensive science and technology publishing organization in China, and it is also the first central publishing agency to list A-shares. It belongs to the Chinese Academy of Sciences and has a rich heritage. Since its establishment in 1954, it has published more than 40,000 books and more than 300 journals. The main business includes book publishing, periodical publishing, book import, etc.
The growth rate of the industry has slowed, China Science Communications has benefited from the increasing concentration of the industry and the “content is king” trend under the impact of new media.
Under the trend of slowing growth in the book industry and increasing market concentration, China Science and Communications will further enhance its bargaining power in the industry chain with advantages such as scale, brand, and resources.
Under the impact of new media and the trend of industry profit distribution being further skewed towards content, China Science Communications will use its advantages in content, talent, etc. to further enhance its profitability. There is still room for growth in professional publishing, central enterprises have an advantage, and there is plenty of room for China's science communication market share to increase.
The professional publishing market is relatively stable, and there is still room for growth in the future. Professional publishing is mainly aimed at professional and technical talents. Market demand is the most stable, and a small number of types of books are growing rapidly. Benefiting from the country's support for science and technology, there is still room for growth in the future.
There is plenty of room for China's SciChuan market share to increase. As a central publishing agency, it relies on the Chinese Academy of Sciences and is a leader in science and technology publishing. However, at present, the market is still quite fragmented. We predict that China's share of the KeChuan market will only be 4.95%-5.85%, so there is plenty of room for growth in the future. The main business is consolidated, and the advantages of brand content talent are obvious.
In the future, the science and technology publishing business will still be an important source of profit, and there is plenty of room for the gross margin of the import business to increase. The company's net profit has maintained a growth rate of more than 10% in the past three years, which is higher than the market average. In terms of revenue, book publishing and import business go hand in hand, and the share of receivables is expected to remain at 50% and 45% respectively in 2016. However, the book business contributed more than 80% of gross profit, and there is plenty of room for the import business to increase gross margin in the future.
Profit margins are expected to remain stable, and the “niche market, high pricing” model has had remarkable results. The company's gross margin is around 30%, and the net interest rate is around 16%, which is relatively stable and higher than the industry average. China Kechuan maintained the dominant position of gross margin in the industry without a high gross margin issuance business, thanks to a “niche market and high pricing” strategy.
The company has obvious advantages in brand, content, talents, resources, etc., and is actively implementing an internationalization strategy, or a new growth point. The Chinese Academy of Sciences gave strong support. Among the translators, there were more than 800 academicians from both academicians. The company actively implements an internationalization strategy and places equal emphasis on import and export.
Adjust the industrial structure and raise capital to help transformation and upgrading.
Five major strategies have been fully implemented to lay the foundation for transformation and upgrading: resource gathering strategy, industrial chain integration strategy, publication digitization strategy, team specialization strategy, and enterprise internationalization strategy. It lays the foundation for transformation and upgrading to become the largest technology content integrator and technology information service provider in China.
Expanding the advantages of the main business, the digital publishing business is expected to become a new growth point, and the integration of publishing and distribution will effectively increase profit margins. The company issued a total of 130.5 million shares this time, accounting for 16.51% of the total share capital after issuance, and raised a net capital of 834 million yuan, which will be used for projects such as book publishing, digital publishing, publication marketing, and resource management. Among them, digital publishing is a trend and is expected to become a new performance growth point. The construction of a publication marketing system will reinforce the strength of distribution, and the integration of publishing and distribution will effectively increase the company's profit margin.
Profit forecast: We forecast that China Science Chuan achieved revenue of 1,793 million yuan, 1,967 million yuan, and 2,151 million yuan respectively in 2016-2018, up 11.84%, 9.72%, and 9.35%; the net profit of returning to the mother was 277 million yuan, 306 million yuan, and 340 million yuan, up 9.80%, 10.50%, and 11.08% year-on-year; corresponding to the 2017-2018 issuance of EPS after dilution, was 0.39 yuan and 0.43 yuan respectively.
As a leading technology publishing company and the first central publishing agency to be listed on A-shares, China Science Chuan has advantages and barriers in various areas such as brands, content, talent, and resources in the field of professional publishing. Scarce targets, subsequent international business and digital publishing business may become new growth points in performance. The transformation and upgrading is worth looking forward to. It is recommended that attention be paid to.
Risk warning: The publishing industry is in a slump; company operating risks; transformation and upgrading do not meet expectations; market risk appetite is a downside risk.