Company summary: publishing and distribution leader, extending the cultivation of new business type. Shandong Publishing is one of the leading publishing companies in China, mainly engaged in publishing, distribution and other business, gradually integrating new forms of business such as mobile media and digital publishing, and extending the development of research, literature, travel, wisdom education and other fields. formed a complete industrial chain and constantly extended industrial pattern. From 2018 to 2022, the company's revenue increased from 9.35 billion yuan to 11.22 billion yuan, the CAGR reached 4.6%, and the revenue growth rate was steady; the company has abundant cash flow + high dividend strong defense attribute. In 2022, the company's cash on account reached 9.83 billion yuan, and the dividend ratio was as high as 48.4%, helping the company to make steady progress.

Industry analysis: the efficiency of new book publishing continues to improve, and the increase in volume and price drives the growth of the retail market. The overall competition pattern of the publishing industry is dominated by state-owned publishing groups, supplemented by private enterprises, and the pattern is stable. On the supply side, the efficiency of new book publishing is gradually improved, which is conducive to the creation of a healthy competitive format of content. On the demand side, the increase in volume and price drives the growth of the retail market. The size of the book retail market will reach 128.51 billion yuan in 2021 and 10.9% CAGR in 4 years. In terms of channels, the decline of online and offline channels has narrowed, and the market boom is expected to pick up. In addition, the policy side has sufficient support for education digitization, research and other education new business type, and the publishing industry is expected to speed up transformation and upgrading by virtue of content and financial advantages, and build an integrated development system of education and publishing.

Business model and core competitiveness: centering on the main book industry, moving towards the field of integration and innovation, and expanding diversified realization channels.

The company's business model is mainly composed of the main business of publishing and distribution and innovative business such as digitalization of education, research and travel, etc.

(1) the main business of publishing and distribution: the performance of teaching materials is steady, and there are many kinds of best-selling books. From 2018 to 2022, the company's publishing business revenue increased from 2.5 billion yuan to 3.3 billion yuan, CAGR reached 7.1%; distribution business revenue increased from 6.65 billion yuan to 8.47 billion yuan, CAGR reached 6.2%, still making steady progress in the context of the impact of the epidemic and economic pressure.

On the one hand, the population of K12 students in Shandong Province is large, and the number of students in school maintains a positive net inflow, which provides a strong support for the revenue growth of teaching materials and auxiliary teaching materials. On the other hand, the company's tomorrow's children's books have obvious advantages. The sales code of the "laughing Cat Diary" series has totaled more than 1.3 billion yuan, and it is in the depth layout of children's picture books, children's popular science and other bonus sub-tracks, which is expected to continue to increase the market share of children's books. In addition, the company also through the transformation of offline bookstores, the expansion of new media platforms and other diversified channels to enhance channel distribution power.

(2) innovative business: expand new business growth points in an all-round way, and enable the coordinated development of the main business. The intensity of policy support and the input of local funds have continued to increase to promote the development of education new business type. In the aspect of educational digitization, the company's intelligent teaching auxiliary product "small load Evaluation" is deeply bound to students, teachers and parents to achieve closed-loop teaching process and improve teaching efficiency. In terms of research, the company achieves all-round research, full school-age coverage and coordinated development of the main business by creating a trinity of cloud research, research camp and book-loving guest research.

Comparable analysis: the advantage of provincial population is obvious, and the digital layout of education is in the lead. In recent years, the birth population of each province shows a downward trend and most of the net population inflow is reverse, while the birth population of Shandong Province in 2022 is still as high as 682000, and there is no obvious sign of population outflow. The basic market and long-term momentum of the company's education services are stable. Secondly, the company effectively controls costs through the coverage of the whole industry chain, and the company's gross profit margin and net profit margin are higher than the industry average, with gross profit margin and net interest rate of 38.9% and 14.9% respectively in 2022. In addition, the company increases the intensity of R & D and innovation, and takes the lead in the layout of the educational digital track, and the 2C-end knowledge payment scene can be expected.

Profit forecast, valuation and investment rating: we expect Shandong Publishing's revenue from 2023 to 2025 to be 124.40, 138.75 and 15.182 billion yuan respectively, an increase of 10.93%, 11.53% and 9.42% respectively over the same period last year. From 2023 to 2025, the net profit of homing was RMB 2.342 billion, an increase of 11.92%, 12.37% and 10.82% respectively over the same period last year, corresponding to the PE valuation of 9.7x/8.6x/7.8x. With reference to the peer-to-peer comparable company PE, which has a high layout performance-to-price ratio, and considering that the company's leading digital layout of education is expected to bring new increments in performance, and the research camp is expected to continue to contribute to revenue and profit after it is put into operation, it is recommended to pay continuous attention, cover it for the first time, and give it a buy rating.

Risk tips: cultural regulatory side of the policy risk; the number of students growth is not as expected risk; short video live e-commerce book discount; research and reporting of the use of information data update is not timely risk.