The performance of H1 grew steadily in 2017, and the valuation was at the bottom. In 2017, H1, the company achieved operating income of 3.807 billion yuan, an increase of 13.68% over the same period last year; the net profit of shareholders belonging to listed companies was 323 million yuan, up 2.07% from the same period last year; and the net profit of shareholders belonging to listed companies was 308 million yuan, an increase of 5.07% over the same period last year. The company's main business covers all aspects of publishing, distribution, material trade and printing, and various businesses play a synergistic effect to contribute to the steady growth of performance during the reporting period. By the close of August 24, the company PE (TTM) 16 times, located at the bottom of the publishing plate, the valuation advantage is obvious.
The performance of the publishing business is outstanding, and the business of the whole industry chain is carried out in an orderly manner. Compared with the whole of 2016, the company's 2017 H1 net profit returned to positive growth, but different businesses were divided. The publishing business achieved a net profit of 135 million (+ 7.86%), and the outstanding performance led to an increase in the overall net profit level; the performance of the distribution business remained stable, with a net profit of 189 million (+ 0.8%); and other businesses declined slightly, but accounted for a small proportion of the company's performance, so it had little impact. The growth of traditional business is mainly due to: 1) the main publishing industry has launched theme books around current political hotspots and brand building, Haiyan Society's original picture books, Science and Technology Society biology and other books have had an impact; 2) the company's teaching materials account for a high proportion of teaching assistants. the growth rate of the book publishing industry has slowed down, but the teaching materials can support the steady growth of the company's traditional main business due to rigid demand such as government procurement and college entrance examination. 3) Channel guarantee and technical support were further strengthened during the reporting period, 23400 square meters of new stores and other construction projects were added to the distribution system, and a provincial non-map business chain backbone structure was built, including 18 relevant stores in municipalities under the provincial jurisdiction. Through docking Xinhua Express, non-map business chain O2O system function to complete the Yunshu website search accuracy and mobile terminal function optimization.
Promote digital education and new businesses, and enhance the driving force of annual performance growth. The company plans to: 1) continue to expand new markets of education business, and further develop China Education Publishing Network and Elephant Wisdom Education Media Publishing platform ADP5 to enhance the influence of online platforms and combined cloud education services; 2) promote the integration of online and offline services through the construction of e-commerce service stations and third-party logistics 3) support key laboratories, deepen the application of technologies such as AR, VR, MR, AI, etc., the industrial application of ISLI standard, the industrial application of US key QR code, and the promotion and application research of ADP5 publishing platform; 4) promote the construction of printing logistics industry park to meet the needs of business integration.
It is expected that the company will rely on the continuous promotion of new businesses such as digital education and improve its full-year performance through further content construction and cost control.
Profit forecast and investment advice. We estimate that the EPS of the company from 2017 to 2019 is 0.71 yuan, 0.75 yuan and 0.81 yuan respectively. Reference publishing industry Changjiang Media, Phoenix Media, Wanxin Media and Xinhua Wenxuan unanimously expected PE to be 12 times, 19 times, 20 times and 24 times respectively in 2017. We gave the company 19 times PE in 2017, with a target price of 13.49 yuan. Maintain the buy rating.
Risk tips: publishing and distribution of the main business decline risk, education layout is not as expected risk.