Fully implement the 19th CPC National Congress and take new steps in industrial transformation and upgrading. The company released its annual report for 2017, with operating income of 11.23 billion yuan, down 18.9% from the same period last year, and net profit belonging to the parent company was 610 million yuan, an increase of 3.6% over the same period last year. During the reporting period, the company's operating income declined mainly due to the reduction of 3 billion yuan in bulk trade and other material trade, the company focused on the main business of publishing and distribution, focusing on content construction. We judge that the company will build a high-quality product line in the future and take new steps in industrial transformation and upgrading around "Publishing +" and "Internet +".
Create high-quality products, sing the main theme, and adhere to innovation and integration of new development. In the publishing business section, the company has obtained the exclusive rental agency of teaching materials and auxiliary products in Hubei Province by six publishing units, such as the people's Education Publishing House and the people's Music Publishing House. And won the people's Education Publishing House primary and secondary school textbook synchronization announcement auxiliary Hubei province exclusive publishing authorization. In 2017, the company published a number of best-selling products in the market, such as "Snow Festival", "Mud step practice" and "match". The future company will focus on thematic publishing projects, carefully plan a number of key topics that highlight the value of mainstream ideas, such as the 40th anniversary of reform and opening up, the 200th anniversary of Marx's birth, and the 70th anniversary of the founding of the people's Republic of China, and do a good job in high-quality publishing services. we will promote the integration and innovation of "publishing + digital technology", "publishing + real economy" and "publishing + capital operation".
"Culture + commerce" leads a new way of life of cultural consumption. During the reporting period, the company cooperated deeply with the three major e-commerce platforms Dangdang, Amazon.Com Inc and JD.com, and developed micro-store sales and handheld book stores, realizing all-round coverage from the Internet to the mobile Internet. Online has become an important sales channel for all publishing units. Hubei Xinhua Bookstore Group promotes the transformation of Xinhua Bookstore into a multi-functional cultural experience space. A total of 270 stores in the province have implemented the business format of "Reading + Literary creation + Coffee and Tea + Cultural Salon". We believe that in the future, the company will continue to adopt the "culture + business" model, around the development trend of "new retail", continue to enhance the integration of all-channel formats, enrich user experience, and lead a new way of cultural consumption life.
Profit forecast: the company significantly reduced the scale of bulk trade in 2017, resulting in a decline in operating revenue. We expect the company to continue to focus on publishing and distribution, and bulk trade is likely to continue to shrink in 2018. Due to the low gross profit margin of bulk trading operations, the gross profit margin during the reporting period was only 0.64%.
The proportion of bulk trading business has decreased significantly, and the proportion of other major industries with high gross margins has increased, which will effectively improve the overall gross profit margin of the company. We estimate that the EPS from 2018 to 2020 is 0.54,0.59 and 0.67 yuan. Referring to the same industry companies Wanxin Media, City Media and Central South Media expect PE to be 12 times, 16 times and 14 times respectively in 2018. We give the company 15 times PE in 2018, with a target price of 8.10 yuan, maintaining a buy rating.
Risk Tip: the main business of traditional books is declining.