Main points of investment
Event: on the evening of April 17, the company disclosed its 2018 annual report that during the reporting period, the company realized operating income of 1.694 billion yuan (+ 20.96%) and net profit of 214 million yuan (+ 139.23%). The company plans to pay a cash dividend of 1.30 yuan (including tax) for every 10 shares, with a dividend ratio of 67.2%.
Steady growth in revenue and high performance: from a sub-sector point of view, the company's advertising and publicity services achieved revenue of 778 million yuan (+ 32.93%), accounting for 46% of the total revenue. The growth mainly comes from the market development of new media channels such as mobile, social, video, vertical platforms and so on. The revenue of mobile value-added services is 313 million yuan (- 17.74%), and the intensification of competition in traditional mobile value-added services brings pressure. In 2018, the company appropriately reduced its resource investment in traditional telecom value-added services such as mobile reading. In addition, Reader is no longer included in the 2018 merger scope, so the company's mobile value-added service revenue has declined compared with the same period last year. However, it is worth paying attention to the company's third-party content audit business, the revenue increased by 166% compared with the same period last year, and the income of the information service business reached 443 million yuan (+ 25.10%).
The increase in gross profit margin and the increase in interest income led to a high performance increase: the gross profit margin of advertising and publicity services, which accounted for the highest proportion of revenue, increased by 17.57 percentage points in 2018, driving the overall gross profit margin up by nearly 10 percentage points compared with the same period last year; interest income increased by 32% compared with the same period last year. Financial expenses fell by 385.16% year-on-year.
The advantage of official media content is highlighted: as the vanguard of the national key news website, people's Daily online has an independent news editing right to efficiently and deeply interpret major political, economic, social, cultural and other major events. In the era of paying for knowledge, the company's high-quality original content is expected to increase income through the paid reading model. While doing a good job in original content, the company launched a "third-party content review platform", which made a preliminary exploration around platform construction, standard-setting, technology research and development during the reporting period. The natural advantages of people's Daily official endorsement bring considerable room for the development of its content review business.
At the same time, the company will explore the Internet content copyright trading market such as pictures: people's Daily recently advocated the active responsibility of mainstream media in the copyright market, and the national mainstream media should form a linkage mechanism in picture acquisition, editing, use and copyright trading as soon as possible. We believe that the company's "people's Picture Network" is expected to play a leading role, and picture copyright trading is expected to increase the company's income. According to the people's Photo Network, the proportion of people's net income to contracted photographers is 50% of the net income actually received from authorized works, and the proportion is reasonable, which is conducive to maintaining a good upstream photographer supply ecology.
As a party media and party network, the company horizontally connects governments, enterprises, social organizations, academic institutions and other subjects, and vertically connects dignitaries and the general public all over the world. Social accounts (Weibo Corp, Wechat official account, Douyin, etc.) matrix public opinion influence is leading, daily communication covers 280 million people, communication matrix covers comprehensive coverage. In the future, the company is expected to achieve higher platform value through extensive access, including advertising revenue growth, content distribution revenue growth and so on.
Investment suggestion: people's Daily, as an official media, will play an important role in public opinion guidance, public opinion monitoring and intellectual property rights, the advantages of content and platform are prominent, and the income-increasing effect is significant under the trend of all-media integration. We forecast that the company's earnings per share from 2019 to 2021 will be 0.30,0.41 and 0.55 yuan respectively, and the closing price on April 18 corresponds to PE 88.6x, 64.6x and 47.7x respectively.
Risk tips: the content expansion is not as expected, the policy is not as expected, and the downside risk of macroeconomic growth