Incident: The company released its semi-annual report for 2023, and the performance recovery trend is remarkable. 2023H1 achieved operating income of 873 million yuan, an increase of 2.92% over the previous year; realized net profit of 91 million yuan, an increase of 1.35% over the previous year, and achieved net profit of 89 million yuan after deducting non-return net profit of 89 million yuan, an increase of 1.03% over the previous year. The company achieved revenue of 446 million yuan in a single quarter in 2023Q2, up 2.29% year on year, and 4.49% month on month; realized net profit of 49 million yuan, up 0.32% year on year, and 16.13% month on month; realized net profit of 50 million yuan after deducting non-return net profit of 50 million yuan, down 9.66% year on year, and 26.1% month on month.
Leading mass publishing, operational efficiency continues to improve. In the first half of 2023, the book retail market shrunk by 2.41% year on year, while the company outperformed the general trend of the industry. The share of the physical ocean market increased by 0.48 pct year on year, reaching 3.47%, ranking first among publishing institutions. The company's Shiyang variety efficiency increased by 0.44 to 5.03 over the same period last year, ranking first in the industry. The market share of management, children's, psychological self-help, and biographical books all ranked first. In addition, the company has continuously optimized its operating indicators. The number of sales categories increased by 7.3% year-on-year, the number of inventory turnover times increased by 0.41, and all operating indicators for book publishing increased overall compared to the same period last year. The number of TOP500 bestsellers in the 10 major segments covered by the company was on the list a total of 311 times, an increase of 4.4% over the previous year.
Market segmentation strategies have achieved remarkable results, and literary and artistic animation strategies have been released. The company has refined the subdivision layout into six major headquarters for theme academics, think tank publishing, commercial publishing, financial literacy, arts and animation, and lifestyle aesthetics, and is systematically rich in content planning to improve the quality of production. Specifically, the 2023H1 company ranked first in the market share of management, children's, psychological self-help, and biographies; it ranked second in the real-world market share of lifestyle books. In addition, the company released a literary and artistic animation strategy, actively laid out derivatives business, increased investment in literature, art, and animation, and collaborated with well-known IPs such as “China's QiTan,” “30,000 Miles to Changan,” and “Deep Sea” to plan bestsellers, which is expected to contribute additional revenue to the company.
To promote AIGC digital publishing, the first batch of AI-assisted publishing books is ready to be marketed. The company set up a parallel publishing laboratory to promote the re-engineering of the “AIGC Digital Publishing” process. At present, the product production and promotion system jointly built by the company's AI has been basically set up, and the first batch of AI-assisted publishing books are also being prepared for launch; in tests open to the internal editorial team, the company's AIGC digital publishing integrated tool platform can greatly improve the efficiency of various process steps such as topic selection evaluation and marketing hot spots. The company integrated internal resources to establish an “intelligent digital system”. Based on the AIGC application layer, the company built a super content platform and knowledge service system based on the integration of digital platforms, reader interaction and social embedding, starting a second growth engine.
Profit prediction and rating: The company is a leading enterprise in the field of mass publishing, maintains a leading position in the industry in market share by segment, actively promotes AI to empower the main business, and creates a second growth curve with AIGC's digital publishing business and smart reading digital platform. The company is expected to achieve operating income of 20.6/234/2.58 billion yuan in 2023-2025, corresponding to a year-on-year growth rate of 15%/14%/10%; realized net profit of 2.3/2.6/290 million yuan, corresponding year-on-year growth rate of 83%/12%/10%, and current market capitalization corresponding to PE of 24/21/19 times. Maintain a “buy” rating.
Risk warning: There is a risk that the policy will become stricter and that the copyright party will not be able to renew the contract.