CITIC Publishing released its 2023 annual report: for the first half of 2023, the company's revenue was 873 million yuan (up 2.92% year on year), total operating costs were 770 million yuan (up 1.28% year on year); sales and management expenses were 1.49 million yuan and 56 million yuan (down 11.97% and 5.9%, respectively), R&D expenses increased 67.3% year on year; gross profit margin and net interest rate were 35.36% and 10.82%; looking at a single quarter, In the second quarter of 2023, the company's revenue was 450 million yuan (up 2.2% year on year, 4.5% month on month), return profit was 49 million yuan (up 0.32% year on year, 16.1% month on month), minus non-profit of 50 million yuan (down 9.66% year on year). Sales and management expenses both fell year on year, and R&D expenses both increased year on year.

Key points of investment

Revenue for the second quarter of 2023 increased year on year (2.2%, 4.5%), return profit increased year on year (0.3%, 16%), the main business gradually picked up in the first half of the year, and the overall Shiyang market share was 3.47%, ranking first in the institutional industry. In the first half of 2023, the national book retail market fell 2.41% year on year, and the company's revenue bucked the trend and achieved a 2.92% year-on-year increase (of which the company's book publishing and distribution revenue was 688 million yuan, up 3.25% year on year), superior to the industry, and the company's leading position in mass publishing was stable; the company as a whole was in the middle of the book market The market share was 3.47% (up 0.48 percentage points year on year), ranking first among publishing institutions; in terms of classification, in the first half of 2023, the overseas market share of books managed by the company was 14.19% (up 0.43 percentage points from the previous year), the children's market share was 4.32% (up 1.02 percentage points from the previous year), and the main business gradually picked up in the first half of the year. On the channel side, online companies increased their investment in content e-commerce in the first half of the year, and the GMV of the official live broadcast room increased by 329% over the same period last year; offline promotion of “parallel bookstore” construction was promoted, traffic flow and efficiency at CITIC bookstores picked up, and new models of offline cultural space operation were explored.

Endogenous epitaxial dual driver

Looking inward, the company released a literary and artistic animation strategy, continued to increase investment and publishing efforts in the fields of literature, art, and animation, and collaborated with IPs such as “China's Qitan,” “Changan: 30,000 Miles,” and “Deep Sea”. The company's knowledge service platform, CITIC Academy App also joined hands with Ideal Auto to create a new digital reading scenario to continuously expand the boundaries of traditional paper book publishing; looking outward, the company signed a strategic agreement with Gravity Yuhua, which is an important exploration and practice for the book business in the direction of IP; in August 2023, the two sides cooperated with Jiangxi Media Publishing Group. content, Printing and reproduction, digital transformation, capital investment, etc. further enhance the level of cooperation and seek development; in August of the same year, the company plans to invest in cash in China Economic Information Service Co., Ltd. (China Economic and Social Affairs). CITIC Publishing is committed to pioneering new business formats in the fields of knowledge and professional information services. Through this investment, it will promote in-depth cooperation with China Economic and Social Affairs, and enhance the “influence” business layout in the fields of open data/content cooperation, forum summits, think tank research, content e-commerce, digital marketing and new media content marketing planning, and industry ranking evaluation. The endogenous extension is expected to bring new momentum to the restoration and addition of the company's main business in the second half of the year.

As one of the leading cultural brand companies, how can it develop further under AIGC?

The company set up a parallel publishing laboratory to promote the re-engineering of the “AIGC Digital Publishing” process. A product production and promotion system co-built by artificial intelligence has been basically set up, and the AIGC digital publishing integrated tool platform has been open for trial use by the company's editorial team. In testing of process steps such as topic selection and evaluation, translation, preliminary review, cover and illustration production, marketing hotspot matching, and copywriting, efficiency has been greatly improved; it actively embraces AIGC technological changes to create a second growth curve with a digital platform in the smart reading era.

Profit forecasting

Maintain a “buy” investment rating. The company's revenue for 2023-2025 is 2,005, 22.96 million yuan, 2.63 billion yuan, and gross profit of 197 million yuan, 2.40 million yuan, and 297 million yuan respectively, EPS is 1.04, 1.26, and 1.56 yuan respectively, and the current stock price corresponding to PE is 28.0, 23.0, and 18.6 times, respectively. The company's main business restoration in the first half of the year was gradually evident and superior to industry recovery, leading in the operating efficiency industry; based on the company's main business as one of the representative enterprises of Chinese cultural brands, it continues to have advantages in the field of mass publishing, and subsequent main business growth with internal and external dual wheel drive It can be expected that new technology combined with new exploration will help maintain the expansion of business operations. Continued increase in research and development by the company is conducive to exploring high-quality innovation and development paths, thereby maintaining the “buy” investment rating.

Risk warning

The risk of new business or foreign investment exploration falling short of expectations; the risk of digital transformation challenges; the risk of intellectual property infringement; the risk of changes in preferential tax policies; the risk of changes in preferential tax policies; the risk of changes in industrial policies; the risk of digital transformation and upgrading falling short of expectations; the risk of content e-commerce falling short of expectations; the risk of macroeconomic fluctuations, etc.