Main points of investment

Event: city Media released its 2019 half-yearly report. In the first half of the year, the company achieved revenue of 1.115 billion yuan, an increase of 6.62% over the same period last year, a net profit of 221 million yuan, an increase of 37.98% over the same period last year, and a non-net profit of 165 million yuan, an increase of 5.80%. Q2 single-quarter revenue increased by 0.81% year-on-year, and home net profit increased by 57.15% compared with the same period last year.

The growth rate at the income end is stable, and the net profit has increased significantly. In the first half of the year, the company's revenue grew steadily, up 6.62% from the same period last year, and the net profit from home increased by 37.98% over the same period last year, mainly from the company's indirect investment in the Himalayas, with a recognized investment income of 63 million yuan in the current period.

The profit margin is stable as a whole, and the expense rate decreases slightly. The company's gross profit margin in the first half of 2019 was 39.22%, an increase of 0.84pct over the same period last year, and a net profit rate of 19.76%. Affected by investment income, it increased 4.49pct over the same period last year. The rate of the three fees has dropped slightly, and the overall operating efficiency is stable.

The implementation of boutique publishing strategy, the steady growth of publishing business. The company's publishing business achieved revenue of 430 million yuan in the first half of the year, an increase of 11.41% over the same period last year. The gross profit margin was 44.28%, an increase of 1.15pct over the same period last year. In the first half of 2019, the company put forward "pressure, quality improvement and efficiency" in publishing business, compressing the variety of books, focusing on education, children, fashion life, social science and humanities and other sub-fields. In the case of 26% reduction in the variety of new books, the company achieved an increase of 8.5% over the same period last year, and the comprehensive reprinting publishing rate reached 87.88%.

Online and offline parallel development, the issuance business continues to grow. The company's revenue from the issuance business in the first half of the year reached 885 million yuan, an increase of 4% over the same period last year. The gross profit margin was 22.09%, an increase of 0.11pct over the same period last year. The company continues to build the operation model of the theme bookstore offline, and establishes a strong relationship with readers with new compound cultural space and cultural activities; in the online distribution business, the company cooperates steadily with mainstream e-commerce channels such as Dangdang, JD.com and Tmall, and the sales business of network channels increases by 22% compared with the same period last year.

New media, film and television and other new business sections have been actively developed. The company deepens its layout of new business such as VR, new media and audio dramas: the company's digital time "True China" VR project has established cooperative consignment channels in many places across the country; Lanyi Company has extended from the development of copyright resources to the overall service of new media, and its revenue has grown rapidly; the market response such as the audio drama "Uncle Nine Emperors" launched by Carpenter's Voice Company has been enthusiastic, and the number of broadcasts has continued to rise. The TV series "Operation Ice Breaking", which was shot by film and television companies, has become popular on many platforms; 60 places of the "shared Book Pavilion" project have been implemented, which are included in the "offensive Operation Plan for the Construction of Qingdao International Fashion City (2019-2022)"; and BCMIX has obtained the IP image authorization of Tencent across the line, opening up new areas of cooperation.

We will speed up the transformation and upgrading of traditional forms of business and establish a service system for urban cultural consumption. The Qingdao City Media Plaza invested by the company in the West Coast New area of Qingdao has been officially opened and has become an important fulcrum and platform for the transformation and upgrading of the company. One of the largest main store "Xinhua Bookstore Media Book City" fully opened in May. Create theme bookstore operation mode, gradually form BC food bookstore, Qingdao study, Mingyue Island 24-hour bookstore, Hanyu compound reading space, trestle bookstore and other different theme-oriented theme bookstores. The BC MIX "compound cultural consumption space" created by the company in cooperation with JD.com has opened nearly 20 stores.

Profit forecast: we predict that the revenue of City Media from 2019 to 2021 will be 2.311 billion yuan, 2.544 billion yuan and 2.791 billion yuan respectively, an increase of 6.50%, 10.08% and 9.69% over the same period last year, and the net profit of returning home will be 429 million yuan, 453 million yuan and 491 million yuan respectively, up 23.15%, 5.69% and 8.30% respectively. The corresponding EPS from 2019 to 2021 is 0.61,0.65 and 0.70 yuan respectively.

Risk hints: industrial policy change risk; new technology shock; intensified competition; market risk preference downward.