The company comprehensively promoted cost reduction and efficiency improvement, and 23H1's net profit increased by 7.35% compared with the same period last year. According to the company's semi-annual report, 23H1 achieved revenue of 440 million yuan, down 1.37% from the same period last year, realized net profit of 88 million yuan, up 7.35% from the same period last year, and deducted 76 million yuan from non-net profit, an increase of 1.43% over the same period last year. Of this total, Q2 realized revenue of 235 million yuan, down 1.84% from the same period last year, and realized a net profit of 43 million yuan, an increase of 9.2% over the same period last year. 23H1's overall gross profit margin was 49.75%, a year-on-year decrease in 0.20pct.

Under the macro disturbance, the company adjusts the listing rhythm of new products, and it is expected to open the space for H2 revenue growth under the same frequency resonance of content and marketing. The company's 2023 half-year report quoted open-book data showing that the 23H1 book retail market fell by 2.41% compared with the same period. In the face of poor expectations of a recovery in book market demand in the first half of the year, the company adjusted the pace of new product launches, so the revenue end was slightly under pressure. 23H1's sales expenses were 79 million yuan, up 12.10% from the same period last year, while management expenses were 35 million yuan, down 7.64% from the same period last year. This is mainly due to the company's efforts to adjust and optimize the organizational structure, to sort out various business teams with business as the main line, to optimize operation processes and related costs, and to comprehensively promote cost reduction and efficiency improvement of each business unit. We believe that the company has high-quality copyright resources and best-selling book reserves, the results of organizational structure optimization are initially revealed, and H2 is expected to open the space for revenue growth under the co-frequency resonance of content, personnel and marketing.

Continue to promote the integration and efficiency of overseas business, the second half of the year may be expected to reverse losses. 23H1 continues to promote the integration and efficiency development of its overseas business, with revenue of 53 million yuan, an increase of 44.90% over the same period last year, and a net profit of-13 million yuan, which is basically the same as that of the same period last year. Excluding depreciation and amortization expenses arising from the acquisition of copyright assets, 23H1's overseas business lost 11 million yuan, 19% less than in the same period.

Based on the market performance and copyright storage and allocation of each product line, the company's overseas business has further optimized and adjusted the topic selection direction and personnel structure, while achieving revenue growth, reducing costs and improving efficiency has shown initial results.

Cover the marketing and sales system of all channels and strengthen the connection between the product end and the sales end. The company has omni-channel sales capabilities, including e-commerce platform, live e-commerce, social e-commerce, proprietary e-commerce, Xinhua Bookstore, private dealers and characteristic bookstores. 23H1 actively explores the way of channel fine operation and sales transformation. The new version of Yu Hua's "Seventh Day" is promoted based on Douyin platform, which has become a hot topic at the phenomenon level. The feminist work "beginning with the limit" sparked a heated debate on social platforms and topped Weibo Corp's hot search list. We believe that under the trend of the transfer of public consumption habits to the online and more cautious consumption decisions, by strengthening the connection between the product side and the sales side, 23H2 is expected to increase the sales conversion rate and rebuild the market competitive advantage.

Profit forecast and valuation analysis. We estimate that the EPS of the company from 2023 to 2025 is 1.04,1.25 and 1.43 yuan per share, respectively. With reference to the comparable company, we give the company 23 times the dynamic PE in 2023, corresponding to the target price of 23.92 yuan per share, maintaining the company's "better than the market" rating.

Risk hint. Book sales fall short of expectations, overseas business falls short of expectations, and the macro environment recovers less than expected.