Core views:
CITIC Publishing disclosed the 2023 mid-year report results: (1) 23H1. The company achieved revenue of 873 million yuan, an increase of 2.92%; net profit of 91 million yuan, an increase of 1.35%; and non-net profit of 89 million yuan, an increase of 1.03% over the previous year. (2) In 23Q2, the company achieved revenue of 446 million yuan, an increase of 2.18% over the previous year; net profit of 49 million yuan, an increase of 0.32%; and non-net profit of 50 million yuan after deducting non-net profit of 50 million yuan, a year-on-year decrease of 9.66%.
Market share has been rising steadily, and gross profit is declining under pressure. 23H1 book publishing and distribution achieved revenue of 688 million yuan, an increase of 3.25% over the previous year. At the same time, the size of the national book retail market decreased by 2.41% year on year. CITIC Publishing's leading position is stable and the growth rate is outperforming the industry. 23H1's share of the Shiyang market was 3.47%, up 0.48 pp from the previous year, ranking first among publishing organizations, and ranked first in the Shiyang market share in segments such as management, children, psychological self-help, and biography; the efficiency of the Shiyang variety was 5.03, up 0.44 from the previous year, the number of mobile sales varieties increased 7.3% year on year, and inventory turnover increased 0.41 year on year. The gross margin of 23H1 book publishing and distribution fell 1.63 pp year on year, mainly because the company continued to invest in content e-commerce, and the average GMV of the official live broadcast room increased by 329% year on year.
Promote “AIGC Digital Intelligence Publishing.” Facing changes in AIGC technology, the company set up a parallel publishing laboratory to promote the re-engineering of the “AIGC Digital Publishing” process. At present, a product production and promotion system co-built by artificial intelligence has been basically set up, the first batch of AI-assisted publishing books have been prepared for sale, and the company's AIGC digital publishing integration tool platform has been opened for trial to the internal editorial team to effectively improve efficiency.
Profit forecasts and investment recommendations. We expect the company's operating income from 2023-2025 to be 18.65/20.39/2,207 million yuan, and net profit to parent to be 183/230/261 million yuan. In a market environment where book consumption is generally weak, CITIC Publishing maintains growth and its leading position, while actively embracing AIGC technology to reshape the publishing industry chain. Referring to similar listed companies, we gave CITIC Publishing a PE valuation of 35 times that of 2023. The corresponding reasonable value per share was 33.70 yuan/share, maintaining the “buy” rating.
Risk warning. Book consumption is weak; the application of AI technology falls short of expectations; online discounts have intensified; industry regulatory policies have changed; and investment in new media channels has been high.