Event: Shandong Publishing released the 2023 semi-annual report, 2023H1 achieved a total revenue of 5.225 billion yuan, an increase of 6.9% over the same period last year; net profit of 894 million yuan, an increase of 3.7%; and net profit of 833 million yuan, an increase of 7.5% over the same period last year. 2023Q2's revenue was 3.053 billion yuan, up 7.1% from the same period last year; the net profit from home was 683 million yuan, up 5.2% from the same period last year; and the net profit from non-return was 660 million yuan, up 11.9% from the same period last year.

Comments: steady growth in main business, continuous expansion of teaching materials and auxiliary categories, increase in the share of general books, and continuous promotion of educational digitization.

1) the growth of publication and distribution is steady. In the first half of 2023, the company's publishing business achieved revenue of 1.685 billion yuan, an increase of 12.1% over the same period last year, with a gross profit margin of 27.0%, an increase of 1.24pct over the same period last year; distribution business revenue of 3.906 billion yuan, an increase of 5.4% over the same period last year, and a gross profit margin of 35.7%, an increase of 0.3pct over the same period last year. The company continues to strengthen the core competitiveness of the main business of book publishing and distribution and the endogenous driving force of sustainable development to promote the steady growth of the main business.

2) expand the category of teaching materials, carry out teaching research and training to improve the ability of educational service. The company continues to expand the range of new teaching materials and teaching aids, and enrich the teaching materials and teaching aids. In the first half of the year, 42 new varieties (series) were added, with a total of 455 volumes, and 112 varieties were extended, expanded or renamed. At the same time, the company made every effort to do a good job in the use of teaching materials and new curriculum standard training services, and organized 52 training sessions in the first half of the year, further improving the ability of comprehensive education services. In addition, the company's research curriculum system continues to improve, Shandong Xinwu Literature and Travel Group 2023H1 achieved an income of 99.136 million yuan, the best level in the same period in history.

3) optimize the product line of bestsellers and increase the market share of general books. 2023H1 ranks 3 places higher in the open-book national book retail market than in the same period last year. The company's tomorrow Society has been in the leading ranks of children's book retail market for many years. As of 2023H1, 30 books sold more than 1 million copies tomorrow, an increase of 2 over the same period last year, and more than 100000 books, an increase of 13 over the same period last year.

4) Deep ploughing online and offline channels to promote channel construction. In terms of offline channels, the company continues to strengthen cooperation with first-line products and flow brands, constantly strengthen the integration of formats and functions, bring a variety of services and experiences for users, and the independent profitability of physical stores has been significantly improved. In terms of online channels, the registered users of 2023H1's "Xinhua Yue Shopping" platform has reached 4.37 million, and 13000 enterprise and micro communities have been established in the province. The company is actively exploring new ways of operating Douyin. 2023H1 has broadcast more than 4000 live shows in the province for 15000 hours, with a total of 2.66 million viewers.

5) accelerate the integration of digital publishing and continue to promote the digitization of education. The company actively integrated into the national culture big data construction system, approved the first pilot construction of "National Culture big data Mark Base" in Shandong Province in the first half of the year, and gradually promoted the transformation and application of scientific and technological achievements, focusing on the preparatory work for the transformation and application of "brain of Publishing Industry" and "Shandong Digital Fusion copyright Trading platform". In addition, the company has developed and constructed the "homework + Learning situation diagnosis big data feedback" project, which integrates teaching assistant publishing and big data technology, which has been approved to carry out pilot landing in a prefecture and city in the province.

6) steadily control the rate of expenses and maintain the intensity of research and development. The company's 2023H1 sales expense rate was 9.3%, which decreased 0.2pct compared with the same period last year. The rate of management expenses was 11.0%, an increase of 0.2pct over the same period last year, mainly due to the increase in staff and workers' salary and depreciation expenses. The investment of R & D expenditure is stable, and the rate of 2023H1 R & D expenditure is 0.2%. From a quarterly point of view, the rates of 2023Q2 sales, management and R & D expenses are 9.1%, 10.2% and 0.2% respectively, an increase of-0.09/+0.04/+0.05pct respectively over the same period last year, and the expense rate is relatively stable.

Profit forecast and valuation: considering that the marginal improvement of the general online and offline sales channels after the epidemic is more obvious and the company's 2023H1 performance is in line with expectations, we maintain the previous revenue and return net profit forecast. The current market capitalization of the company is valued at 10.8x, 9.6x and 8.7x respectively, maintaining a "buy" rating.

Risk prompt events: policy risks on the cultural regulatory side; increased discounts on short video live e-commerce books; and the risk that the information and data used in research and reporting are not updated in a timely manner.