Main points of investment:
Newspaper assets listed to create a national modern cultural media group. In November 2014, Zhejiang Huazhi Holdings Co., Ltd. (later renamed Zhejiang China Media holding Co., Ltd.) purchased its shares in 11 media management companies by selling assets to Huali Group and issuing shares to Hangzhou Daily newspaper Group and Urban Express Newspapers. The majority shareholder changed from the pre-transaction Huali Group to the post-transaction Hangzhou newspaper Group Co., Ltd. Hangzhou newspaper Group achieves the overall listing of the group's media operating assets with the goal of building a national first-class modern cultural media group, and effectively connects financial capital, social capital and cultural resources through the capital market.
The transformation and upgrading of Chinese media holdings focuses on modern media and educational creation. In the three years since its listing, Hangzhou News Group has gradually expanded its advertising, distribution, printing and new media business around cultural media, cultural capital and education from the original main newspapers and magazines. In July 2015, the company acquired 35% of Beijing Jingdian Bowei with 107.5 million yuan in cash, as Jingdian Bowei's main business expanded from advertising and book publishing in the tourism industry to a film and television company. there is a deviation from the company's focus on modern media and educational, cultural and creative industry. at the same time, the wholly-owned subsidiary of Hangzhou News Group has film and television business, in order to avoid potential competition between controlling shareholders and listed companies. On May 20, 2017, the company plans to transfer its 35% stake in Jingdian Bowei to Zhejiang Hualang Industrial Co., Ltd for 130.2 million yuan. In March 2016, the company acquired a 60% stake in the future of Zhongjiao with 522 million yuan in cash, with both culture and education, further focusing on modern media and educational, cultural and creative industries.
Profit forecast and investment rating: cover for the first time and give a buy rating. Since the overall listing of the media operating assets of Hangbao Group, in line with the development of the market, it has upgraded "all-media", expanding from the original newspaper advertising, distribution, printing and new media to the field of cultural creation and education. The growth rate of newspaper advertising business has declined, but with the help of the brand influence and credibility of Hangzhou newspaper Group, the company still has regional competitive barriers and channel advantages. The company plans to sell a 35% stake in Jingdian Bowei to further focus on modern media and educational creation, and the controlled secondary education is expected to become a new growth point of the company's profits in the future. From 2016 to 2018, the promised net profit of secondary education in the future is 58 million yuan, 68 million yuan and 79 million yuan, respectively. Based on the fact that the CAGR (compound annual growth rate) of the vocational education industry in the next five years is about 21.3%, and the penetration rate of payment recognition of online education driven by mobile Internet is increasing, the impact of Jingdian Bowei's 35% equity sale factors will not be considered for the time being. It is estimated that the return net profit of the company from 2017 to 2019 is 268 million yuan, 314 million yuan and 348 million yuan respectively, and the corresponding EPS is 0.26,0.31,0.34 yuan respectively. The company is given a buy rating based on the closing price of May 24, 2017, which corresponds to PE of 26.89,22.95,20.73 times, respectively.
Risk tips: the progress of equity transfer is not as expected; the epitaxial M & A business is not as expected; the risk of the impact of new media business; corporate governance and internal control risk; policy risk, macroeconomic downside risk.
