Performance summary: the company achieved operating income of 7.68 billion yuan in the first three quarters of 2018, an increase of 14.7% over the same period last year, and its net profit was 630 million yuan, an increase of 21.4% over the same period last year. The net profit after deducting non-return was 550 million yuan, an increase of 25.1% over the same period last year. 2018Q3 achieved an operating income of 2.45 billion yuan in a single quarter, an increase of 13.4% over the same period last year, and its net profit was 150 million yuan, an increase of 5.9% over the same period last year. The net profit after deducting non-return was 153 million yuan, an increase of 20.8%.
The performance has increased steadily, basically in line with expectations. The company's overall performance grew steadily, and operating income and total operating cost increased by 14.7% and 14.1% compared with the same period last year. Among them, the slight decrease in gross profit margin (0.64pp) was mainly caused by the decline in gross profit margin of the publishing business; the expense rate during the period decreased by 0.81pp compared with the same period last year, while sales, management and financial expenses increased by 4.9%, 6.1% and-299% year-on-year; and the sharp change in financial expenses was caused by the substantial increase in interest expenses.
In addition, the company received 200 million yuan in investment income, an increase of 47.9% over the same period last year, mainly due to the increase in equity disposal income and financial management income.
The company is a leading publishing group in China, and the transformation and upgrading is carried out smoothly. The company is the largest state-owned publishing group in Hubei Province, based on the advantages of regional teaching materials and auxiliary distribution, to speed up the transformation and upgrading of business.
1) pay close attention to the key themes and give full play to the role of propaganda positions. The company continues to promote the publication and distribution of various thematic publications. "Xi Jinping on governing the country" issued 950000 copies, ranking third in the country; "Xi Jinping's Thirty lectures on Socialism with Chinese characteristics in the New era" issued 700000 copies.
2) the city takes the lead in the country, and the competitive advantage is significant. In the first three quarters, the company's publishing business sales of 2.8 billion yuan (YOY+15%), distribution business sales of 3.3 billion yuan (YOY+11%), physical bookstores, online stores, comprehensive retail market share ranked 5th, 9th and 9th respectively, art, children, biography and other business sectors ranked in the top 10 positions in the market segment.
3) start the transformation of the physical bookstore, and the project construction is orderly. The company focuses on the transformation and upgrading of the "four new upgrades" of the physical bookstore, Xiantao Book City has been completed and opened, Huanggang Yi'ai Lake Book City has paid close attention to construction, Hong'an Red Bookstore has completed its planning and design, and 10 other projects have been carried out in an orderly manner.
4) blossom at multiple points, and the industrial chain continues to extend. Based on traditional advantages, the company continues to develop new business lines. Cultural and creative plate, cultural and educational plate have achieved substantial growth; Ecube company to speed up the pace of expansion, the scale of revenue has increased steadily.
Profit forecast and rating. We estimate that the EPS from 2018 to 2020 will be 0.58,0.66,0.73 yuan respectively. The company has a significant competitive advantage and a clear industrial layout. For the first time, the company has been given an "overweight" rating.
Risk tips: the risk of intensified market competition, the risk of business transformation effect or less than expected, the risk of business development or less than expected, the risk of price change of raw materials.