Key points of investment
A benchmark for private education publishing, successfully landed on the GEM. Century Tianhong is a key cultural enterprise in Shandong Province, the first private education publishing company. Having been deeply involved in the field of teaching aids for more than ten years, they have successfully built the “Zhihong Optimization” brand, covering all subjects in primary and secondary schools in China, planning and distributing more than 7,000 books every year.
The teaching aid industry is relatively prosperous, and there is still room for growth in the future. Teaching aids have an important position in the book market. In 2016, the national Xinhua system and publishing houses issued 2,036 million books of teaching aids, amounting to 23.827 billion yuan, accounting for 30.35% and 29.95% of the total, respectively. According to the opening data, the teaching aid market has shown an accelerated growth trend since 2012. The growth rate reached 13.05% in 2016, far higher than the overall growth rate of the book market. We think there are several reasons:
(1) As the number of school-age children increases and demand rises, the two-child policy will further bring a demographic dividend in the future;
(2) Consumption upgrades, post-80s and 90s parents pay attention to investing in children's education;
(3) E-commerce channels reduce circulation links and regularly organize promotional activities with preferential prices to stimulate the desire to buy books.
Teaching aid books contribute the vast majority of the company's revenue, and the future potential of online education is huge. Currently, the company's teaching aid book business accounts for about 98%, which is the absolute pillar of the company's business, but the share of online education has shown an accelerated growth trend. At the same time, the gross margin of online education is also growing rapidly, and it is expected to become a new growth point for the company in the future.
Book distribution is expected to experience a sharp rise in volume and price in the future, and e-commerce is expected to drive new sales growth. The growth in book distribution in recent years has been mainly driven by the increase in unit prices. Since 2014, the company's overall sales of teaching aids have slowly declined, but the unit price of books has risen by 33.44%. With the implementation of the two-child policy, the recovery in the number of students, and the further strengthening of the company's competitive strength after listing, the company's business is expected to usher in a sharp rise in volume and price. The company started related business in 2016 and is expected to drive new sales growth in the future.
Consolidate traditional main businesses and actively transform and upgrade to education informatization. This time, Century Tianhong publicly issued 23.35 million shares to the public, accounting for 25.01% of the total share capital after issuance. The total capital raised was 180 million yuan, with a net amount of 145 million yuan. The funds raised are used for projects related to the main business. Part revolves around teaching aids for content planning and book distribution and marketing network construction; part revolves around online education for the construction of information systems and education cloud platforms.
Profit forecast: We forecast that Century Tianhong achieved revenue of 386 million yuan, 425 million yuan and 468 million yuan respectively in 2017-2019, up 1.79%, 10.07%, and 10.14%; the net profit of returning to the mother was 33.16 million yuan, 3.84 million yuan, and 42.91 million yuan, up 5.87%, 14.74%, 12.78% year on year; corresponding EPS after dilution in 2017-2019 was 0.47 yuan, 0.54 yuan and 0.61 yuan respectively. No ratings yet.
Risk warning: industry downturn; policy risk; transformation and upgrading do not meet expectations; market risk appetite is declining.