The company disclosed its mid-2023 report: (1) 23H1 achieved revenue of 440 million yuan, down 1.37% from the same period last year; net profit from its mother was 88 million yuan, up 7.35% from the same period last year; and non-net profit from its mother was 76 million yuan, up 1.43% from the same period last year. (2) 23Q2 achieved revenue of 235 million yuan, a decrease of 1.84% over the same period last year; net profit of 43 million yuan, an increase of 9.20% over the same period last year; and non-net profit of 36 million yuan, a decrease of 0.53%.

Slow down the launch of new books in the first half of the year and optimize the organizational structure. (1) the revenue of 23H1 book planning and distribution business reached 370 million yuan, a decrease of 5.61% over the same period last year, and the gross profit margin decreased by 0.2pct compared with the same period last year. On the one hand, the size of the national book retail market of 23H1 decreased by 2.41% compared with the same period last year; on the other hand, the company slowed down the listing pace of children's books. 23H1 launched a total of 45 popular books and 17 children's books, including Wang Shuo's "initial Bamboo Book", Higuo Higo's "White Bird and bat", Yi Yi "GOTH severed palm incident" and so on. During the reporting period, the company further integrates editors, marketing and marketing personnel, and strengthens the connection between the product side and the sales end. It is expected that the pace of the launch of new books will accelerate in the second half of the year. (2) the revenue of 23H1 digital content business reached 11.47 million yuan, an increase of 1.2% over the same period last year.

It is expected to reduce losses in overseas business. 23H1's overseas business achieved revenue of 52.9 million yuan, an increase of 44.90% over the same period last year, and a net profit of-13.33 million yuan, with a loss basically the same as that of the same period last year. Excluding depreciation and amortization charges arising from the acquisition of copyright assets, 23H1's overseas business lost 11.08 million yuan, 19% less than the same period last year.

Profit forecasts and investment advice. We estimate that the company's revenue from 2023 to 2025 will be RMB 959 million and its net profit will be RMB 2.02 billion. New Classics has a leading ability to operate long-selling books and copyright resources. in the first half of this year, the company slows down the listing of new books and comprehensively promotes various businesses to reduce costs and improve efficiency in the market where book consumption is weak. It is expected that the publication of new books will be accelerated in the second half of this year, and the overseas business is expected to reduce losses. We maintain the company's 2023 PE valuation of 25 times, with a fair value of 26.20 yuan per share and a "buy" rating.

Risk hint. Weak book consumption; decline in book sales at the company's head; AI technology application is not as expected; online discounts have intensified; overseas business losses; industry regulatory policy changes.