In 2016, the company achieved operating income and net profit of 1,639 million yuan and 123 million yuan respectively, up 5.18% and 57.52%, respectively; EPS was 0.22 yuan, an increase of 57.14% over the previous year, and the profit distribution plan was to distribute a cash dividend of 0.47 yuan (tax included) for every 10 shares.
A leading regional publishing and distribution enterprise with deep strength. The actual controller of the company is the Liaoning Provincial State-owned Assets Administration Commission. Currently, its main business includes the publication, distribution and printing of books, journals, and electronic audiovisual publications, as well as the supply of printing materials and bill printing services. The company adheres to the central position of the publishing business and follows the path of excellence. In terms of teaching aids, the company has textbook leasing and agency authorizations from 4 publishing houses including the People's Education Press. Currently, it is the state-designated primary and secondary school textbook publishing unit in Liaoning Province, and has the right to publish multi-subject textbooks and write teaching aids simultaneously. In terms of books in general, the company has a good market share and has many advantageous topics. The company's distribution business is based on the Northern Distribution Company and the Northern Book City, and its channel advantages are outstanding. Its North Book City is the largest bookstore with the widest range of books in Northeast China; its Northern Distribution Company is a large-scale regional publication logistics center in the country's key planned provinces, and is the largest publication distribution company in northern China.
The slowdown in the growth rate of the traditional publishing and distribution industry is expected to benefit from major trends in state-owned enterprise reform. Although the profitability of traditional publishing and distribution companies is under heavy pressure, these companies generally have strong capital and resources. We are optimistic about marginal improvements in the national reform expectations of media-type state-owned enterprises. In fact, many listed publishing and distribution companies are actively exploring the path of transformation. It is broadly divided into two directions. One is vertical deepening, relying on their own teaching aid content resources and textbook teaching aid distribution channel resources to expand into fields such as offline education and training, digital education, etc.; the other path is to horizontally expand other growing and profitable sub-fields in the large cultural industry through capital management, such as games, film and television.
The leadership change was completed in August 2015, and the new management actively promoted the layout of the six major industries of “big publishing, big distribution, big education, pan-entertainment+cultural finance, and cultural trade”, with the goal of “starting a second business, leading the bookstore first”. 1) Accelerate the upgrading of the Northern Book City business format and build a new “New Life in the North” cultural complex; 2) Relying on educational content and channel advantages, expand the big education business, lay out K12 education starting with “Liaohai Micro Classroom”, expand preschool education business and activate the pan-entertainment business by building an all-media children theme park; 3) Invest 200 million yuan to participate in the establishment of an investment fund to target IP development, the Internet, digital publishing, games, film and television, animation, education and other industries, leading to an investment of 2 billion yuan; 4) The investment direction will be driven by an investment of 2 billion yuan; Invested to establish the first company in Liaoning Province Local insurance company, with 14% of the shares.
Investment advice: The company's business is developing steadily. We expect the company's net profit for 17-19 to be 138 million, 153 million, and 166 million yuan respectively, and corresponding earnings per share of 0.25 yuan, 0.28 yuan, and 0.30 yuan respectively. Referring to similar comparable companies, the 45X-50X was given a valuation, corresponding to a six-month target price of 11.70 yuan, giving it an “increase in holdings - A” rating.
Risk warning: Risks such as macroeconomic downturn and new business promotion falling short of expectations.