Key Investment Companies are absolutely owned by Shandong Publishing Group, and textbooks+general books contribute the main revenue. Shandong Publishing Group directly and indirectly holds 78.38% of the listed company's shares. Shandong Publishing and publishing accounted for 27% and 71% respectively, while gross profit accounted for 22% and 68% respectively, mainly publishing and distribution of textbooks and general books. Textbooks: Revenue and gross profit account for 73% and 71% respectively, and the growth of the school-age population is the main driving force. The company is the general publisher of textbooks for primary and secondary schools in Shandong Province. It has the exclusive right to distribute high school textbooks and the exclusive publishing rights for some elementary, middle, and high school textbooks. Shandong Province had a population of 1,329,500 births in 2018, ranking second in the country, and the desire to have children is the highest in the country. With the liberalization of “full two children,” and the number of people born between 80 and 90 gradually entering the marriage and childbearing period, the recovery in the number of newborns and the continuous increase in enrolment rates are expected to bring about a golden decade of demand for teaching aids. General books: Rich in cultural heritage, the children's book organization Tomorrow Club is strong and has stabilized in the top three in the country over the years. The share of children's books in the retail book market has been growing year by year, from 24.64% in 2017 to 25.19% in 2018. Tomorrow News's “Diary of a Laughing Cat” and “Guess How Much I Miss You” continued to rank at the top of the bestseller list. Other publishing houses under its category also performed well. The company's three publishing houses, Tomorrow, Qilu, and Art Club, ranked 3rd, 7th, and 10th in the country respectively. Profit forecasting and ratings. We expect Shandong Publishing to achieve net profit of 15.53/17.18/1,872 billion yuan in 2019-2021, corresponding EPS of 0.74/0.82/0.90 yuan respectively, and corresponding PE 10.4/9.4/8.6 times the closing price of May 23, respectively. Judging from the historical PE-Band, it is currently at a historically low valuation level since listing. Comparing valuations with companies in the same industry, Shandong Publishing is still below the median. Judging from the dividend yield, the company is still above the industry median (Shandong Publishing 3.75%, industry median 2.27%). In summary, we believe that the current valuation of Shandong Publishing is at the bottom of history. The dividend yield is high and there is a continuous upward trend, giving it a “prudent increase in wealth” rating. Risk warning: risks brought about by textbook publishing and distribution system reform; textbook recycling policy risk; risk of a sharp drop in birth rate; risk of changes in preferential tax policies; risk of general book growth falling short of expectations; risk of competition in online channels; risk of increased industry competition; risk of fluctuating raw material prices; macroeconomic risks.