The company released its quarterly report for 2019, with an operating income of 1.607 billion yuan (year-on-year-26.12%, month-on-month-40.00%), belonging to the parent company shareholder net profit of 238 million yuan (year-on-year + 33.20%, month-on-month + 142.07%). We are optimistic that the company's book publishing and distribution business will maintain a steady growth rate and maintain the company's buy rating.
Support the main points of rating
The continued contraction of bulk trading business has led to a significant decrease in operating income. During the reporting period, the company achieved operating income of 1.607 billion yuan, a decrease of 26.12% over the same period last year, mainly due to the continuous contraction of material sales business, with operating income of 488 million yuan in the current period, a decrease of 57.73% over the same period last year. As a result, the overall operating cost was 1.115 billion yuan, down 36.26% from the same period last year.
The publishing and distribution business increased significantly, and the overall gross profit margin increased significantly. In the first quarter, the sales of the company's publishing business reached 870 million yuan, an increase of 10.66% over the same period last year, an increase of 366 million yuan, an increase of 24.59%, and a gross profit margin of 35.73%, a decrease of 0.21% over the same period last year. The sales of the issuance business was 1.496 billion yuan, an increase of 12.99% over the same period last year, with operating income of 913 million yuan, an increase of 11.07% over the same period last year, and a gross profit margin of 32.76%, an increase of 1.61% over the same period last year. The obvious growth of the publishing and distribution business in the first quarter, coupled with the sharp contraction of the material sales business, made the company's gross profit margin reached 30.63% in the first quarter, an increase of 11.05 percentage points over the same period last year.
The implementation of the new financial instruments standards has led to a substantial increase in non-main business earnings. During the reporting period, the company realized investment income of 51 million yuan, an increase of 40.58% over the same period last year, mainly due to the increase in financial income of the company during the reporting period; the income of realizing fair value changes was 15 million yuan, an increase of 316330% over the same period last year, mainly due to changes in the standards of new financial instruments. Affected by this, there have been major changes in items such as the company's available-for-sale financial assets. In addition, the company's other income reached 3.598 million yuan, an increase of 563.96% over the same period last year, and non-operating income was 4.4074 million yuan, an increase of 110.17% over the same period last year, mainly due to the increase in government subsidies confirmed by the company according to the progress of the project.
Valuation
During the reporting period, the company complied with the strategy of "focusing on the main business of publishing and distribution" in the 2018 annual report. While the publishing and distribution business grew significantly, the bulk trade business continued to contract. We are optimistic that the company's publishing and distribution business will maintain steady development in 2019, and the company is expected to achieve net profit of 8.68,9.81 and 1.069 billion yuan from 2019 to 2021, with earnings per share of 0.72,0.81 and 0.88 yuan, respectively.
Main risks faced by rating
Book sales are slowing down.