Events:
Publishing Media released three quarterly reports that the company's operating income in the first three quarters of 2016 was 1.303 billion, an increase of 0.89 percent over the same period last year; the net profit belonging to listed companies was 84 million, up 42.48 percent over the same period last year; and the deduction of non-net profit belonging to listed companies was 67 million, an increase of 55.3 percent over the same period last year.
Viewpoint:
The results are in line with our expectations but exceed market expectations, and the company's net profit has increased significantly this year.
The company's revenue in the first three quarters increased by 0.89% compared with the same period last year, and its net profit increased by 42.48% compared with the same period last year, which is in line with our expectations and exceeded market expectations. In terms of revenue, the company expanded online and offline sales channels, including book sales, bill printing revenue and printing supplies sales are all year-on-year growth. In terms of net profit, the company strengthened the budget management of expenses and expenditure, during which the three expenses decreased compared with the same period last year, and the net profit increased.
We think that the company's current stock price is just the starting point for soaring, and we have combed out three logic:
1: the performance has been stable for a long time for several years, and the growth rate of net profit has suddenly accelerated in the last two quarters. Our first logic is that the company's performance is above the inflection point:
The company's net profit margin has improved significantly, thanks to the control of the company's three expense rates. It is expected that the company's net interest rate will fluctuate slightly on a new level in the future.
2: there has been a lot of news from the company recently, and the new management's firm response to the country's strategy of expanding and strengthening the state-owned media group is the second logic that we are optimistic about the publishing media:
From the change of senior management of the company in August 2015 to the development of online K12 education in the layout of "Liaohai Micro classroom", then to the offline derivation of high-quality content from the "Magic Empire of Big ear" and "Elephant Life Pavilion" and the proposed cash acquisition of all shares in Xinhua Printing Co., Ltd., owned by the parent company. The company has made frequent actions over the past year, which shows that the new management firmly responds to the country's determination to support the state-owned media groups to become bigger and stronger.
3: small market capitalization segment market leader, core competitiveness is obviously the third largest logic we recommend:
The company ploughs the Liaoning market, the content production ability is the company's core competitiveness. The company is the general agent of the people's Education Publishing House in Liaoning Province, with Liao Hai Society, Liao Mei Society, Wan Volume Publishing, Liao Science Society, Electronic Society, Spring Wind Society, Liao Shao Society, Audio and Video Society and so on jointly engaged in the publishing business of teaching materials and general books and electronic audio-visual products. The company has obvious advantages in content production, and its "Top students" and "New Curriculum ability training" are famous brand teaching materials commonly used in local primary and secondary schools for decades.
Conclusion:
We estimate that the company's net return profit from 2016 to 2018 is 102 million yuan, 111 million yuan and 115 million yuan respectively, the EPS is 0.18,0.20 yuan and 0.21 yuan respectively, and the corresponding PE is 67x, 62x and 59x, respectively. We believe that the company's cross-disciplinary mergers and acquisitions will continue to make efforts in the future, and the six major industrial layout ambitions of "large publishing, large distribution, big education, pan-entertainment + cultural finance, and cultural trade" will remain unchanged, and will continue to take "secondary entrepreneurship" as the development goal.
