I. Overview of events
The company released its annual report for 2018, with operating revenue of 10.363 billion, down 7.74% from the same period last year, and net profit of 733 million, up 19.45% from the same period last year. The decline in revenue was mainly due to a decrease of 2.6 billion yuan in bulk trading business. Excluding this factor, the revenue of the main publishing and distribution business increased by 25 per cent over the previous year.
II. Analysis and judgment
Adjusting the structure to increase efficiency, the main publishing industry has become increasingly prominent, making progress in a steady manner.
The company insists on making progress in the midst of stability, and the pace of structural adjustment is obviously accelerated, further highlighting the development of the main business. In 2018, the company took the initiative to reduce the volume of bulk trade business by 2.6 billion yuan, speeding up the adjustment of business structure, and the net profit data of the main publishing industry reached an all-time high. The business income of four publishing houses (1 more than last year) exceeded 100 million yuan. Its fine arts products ranked first, children's products ranked fourth, and Xinhua Bookstore Group's revenue and net profit reached record highs. In the future, the company will focus on the construction of key product lines, focus on market segmentation, enlarge the value chain, and lengthen the industrial chain. In the face of uncertain factors such as policy adjustment and market changes, the company will straighten out the distribution order of provincial teaching aids, comprehensively integrate high-quality publishing resources internally, and do a good job in product planning and market layout in advance.
Actively innovate and upgrade to create the format of "Publishing +"
The company extends the industrial chain around "publishing +", makes every effort to speed up industrial expansion, and promotes the transformation and upgrading of the distribution format. Xinhua Bookstore Group introduced new business type in 2018 to build a single book store into a new type of cultural consumption and exchange space. 41 new physical bookstores were built throughout the year, with an area of 44000 square meters. We will vigorously expand the educational equipment and information business of Xinhua Bookstore, form its own product system of educational equipment and information technology, build an "integrated" operation model of Xinhua Wenchuang, and promote multi-industry innovation. The sales revenue of digital national reading has increased by 80% over the same period last year, and the new media business of digital publishing has developed by leaps and bounds. In the future, the company will promote integration and development with technological innovation, give full play to the advantages of resource integration, promote industrial extension with content innovation, build an industrial chain of "publishing + culture + life + creativity", and extend deep industrial integration.
III. Investment suggestions
Recommend for the first time, give recommended rating. The company has been ploughing the publishing business for many years, and in recent years, it has continuously upgraded and innovated, optimized its business model, extended the publishing industry chain and value chain, and sought steady progress. Therefore, the company is given a 2019-2021EPS of 0.70 10X/9X/8X and a current PE of 0.79 PE, which is much lower than the 15X of 19-year PE in the wind data, so it is recommended for rating.
Fourth, risk tips:
Business adjustment is less than expected; competition in the publishing industry intensifies.