Events:
The company announced its annual report on April 18 that its operating income reached 1.824 billion yuan in 2016, an increase of 17.39% over the same period last year, and its net profit was 223 million yuan, down 21.32% from the same period last year. It deducted 218 million yuan from non-parent net profit, an increase of 9.11% and 0.22 yuan compared with the same period last year. The profit distribution plan is to distribute a cash dividend of 0.22 yuan (including tax) for every 10 shares.
Comments:
The newspaper advertising market continues to be under pressure, and the advertising and planning business remains stable. The newspaper advertising market continued to shrink during the reporting period. According to Nielsen's 2016 all-Media Advertising Market Watch, the overall advertising market in 16 years has declined by 1% compared with 15 years, which is basically stable, but the proportion of newspaper advertising spending has shrunk to 4% from 6% in 15 years. Therefore, it can be estimated that the size of newspaper advertising may decline by about 1%.
This is consistent with the 41.4 per cent drop in 16H1 of newspaper revenue previously estimated by CTR. Therefore, from the perspective of the market environment, newspaper advertising is still in a rapid shrinking trend. In this context, the company's advertising and planning revenue only slightly declined by 2.57%, with a strong performance robustness. On the one hand, it comes from the resource advantage of the company's regional party newspaper. Hangzhou News Media achieved a 4.49% increase in revenue and a 10.69% increase in net profit during the reporting period, indicating that the party newspaper still has a strong advantage in gathering advertising demand. On the other hand, due to the company's newspaper companies have made great efforts to expand exhibition planning and other value-added business, planning revenue effectively hedged the decline of some newspaper advertising revenue.
Fengsheng Media + quickly spread and make concerted efforts to improve performance. During the reporting period, Fengsheng Media's outdoor advertising business achieved revenue of 148 million yuan, an increase of 68.67% over the same period last year, while Quick Communication (mainly video information service business) achieved revenue of 211 million yuan, an increase of 74.35% over the same period last year. Among them, Fengsheng's performance growth mainly comes from the subway advertising business, which won the print media advertising right of Hangzhou Metro Line 1 in November 16, becoming the exclusive advertising operator for all three opened lines in Hangzhou. In the future, Fengsheng will continue to expand more outdoor advertising resources to achieve the continuous expansion of the profit base. Quick Communication is the target of the company's acquisition in 15 years, and its business is mainly to provide mobile video, animation and reading services through mobile operators, and get a certain percentage of the fees paid by users. Benefiting from the rapid development of the mobile video market and the advantage of channel resources, fast video revenue is expected to continue to grow.
Secondary education will also contribute the largest revenue growth in the future. During the reporting period, the company completed the acquisition of 60% of the future equity of Zhongjiao, a vocational education group, and consolidated in April 16. After the merger, Zhongjiao contributed 140 million yuan in revenue to the company and increased its net profit by 33.1539 million yuan, which is the most important engine of the company's performance growth. The business sector of secondary education includes five parts: vocational education, international education, art education, IT education and online education. The output of educational services in the way of school-enterprise cooperation belongs to the mode of light asset operation, with strong replicability, large expansion flexibility and high gross profit margin. During the reporting period, all sub-businesses were expanded, including 3 new vocational education projects, 7 international education projects, 4 art education projects, 12 IT education projects and 13 online education projects. The continuous release of the performance of new projects in the future will provide a solid foundation for the sustained growth of the profitability of secondary education.
Investment advice: the company achieved revenue growth of nearly 20% during the reporting period, making it a leader among newspaper listed companies. The change of the company's revenue structure shows that new business type, established through endogenesis and epitaxy, is constantly playing the role of performance engine, and is expected to continue to maintain strong growth. At present, the company is rich in cash and supported by its industrial funds, and there is the possibility of continuous extension in the fields of culture and education, so the follow-up planning is worthy of attention. It is estimated that the company's net profit for 17-19 years will be 246x290 million yuan, and corresponding earnings per share will be 0.24max 0.26max 0.28 yuan respectively. Give 40 times the target PE for 2017, corresponding to the target price of 9.66 yuan, and maintain the "buy-A" rating.
Risk hint: the downside risk of the newspaper industry, the future project expansion of secondary education is less than the expected risk.