Company summary: deep ploughing K12 teaching auxiliary business, extended layout AI wisdom education new business type. Century Tianhong is the leading private enterprise in the education and publishing industry. over the years, it has ploughed deeply into the field of K12 education and gradually formed a series of teaching auxiliary books represented by "Zhihong Optimization", supplemented by planning, commodity sales and consulting services to meet market demand. At the same time, the company makes efforts to build the educational content AI system to extend the layout of the company's industrial chain. In 2022, the company achieved revenue of 430 million yuan, an increase of 5.3% over the same period last year.

Industry analysis: the demand for teaching assistance is still a rigid demand, and the prospect of digitization of education is broad.

In terms of demand, the attribute of rigid demand for teaching assistance + the large scale of students in school + the structure of students is expected to improve + the consumption capacity of residents is expected to improve, which is expected to hedge against the pressure of the national birth population decline and the "double reduction" policy. It is expected that the education assistance market will return to stable growth.

In terms of channels, online channels continue to infiltrate the retail market share, achieving 73.79 billion yuan in 2022, accounting for 84.7% of the total retail code / ocean ratio, and the rise of e-commerce continues to boost the sales of teaching and auxiliary books.

In terms of policy, the top-level design of educational digitization policy is gradually clear, the breadth and depth of local policy landing is significantly improved, and the investment in education continues to increase, which provides favorable support for the development of educational digitization.

Under the background of the "double reduction" policy, the effect of improving the efficiency and reducing the burden of the group of students and teachers that can be realized by the digitization of education coincides with the demand for accurate teaching that needs to be met urgently. The publishing industry is expected to accelerate the digital transformation of educational resources with the advantage of high-quality content resources and sufficient capital reserves, supported by cloud computing, 5G, AR/VR and other emerging information technologies.

Business analysis: teaching auxiliary main business sales model has a stable foundation, stable revenue, multi-dimensional layout of education digital business.

The ability of high-quality teaching and research promotes the sustainable development of the company. The business model of "Teaching Auxiliary products + Teaching and Research Service" created by Century Tianhong can not only help teachers improve their teaching and research ability, but also help students improve their learning efficiency, empower them, realize the efficient use of teaching aids, and establish close ties with end-users. Continue to create business value. In addition, the company not only holds the scarce qualification of "domestic General Distribution right of Publications" and "National chain Management license", but also forms strategic cooperative relations with a number of domestic mainstream publishing houses to lay the foundation for the development of teaching auxiliary books.

Teaching auxiliary product matrix is mature, continue to output high-quality products. In terms of products, the company has created a product system with "Zhihong Optimization" as the core, and launched "optimized Design", "College entrance examination Blue Book" and other brand books, covering the whole section and discipline of K12.

In terms of channels, the company is characterized by private direct sales in the national market to build omni-channel competitiveness. We are optimistic that the company will strengthen the research and development of teaching auxiliary books and strengthen product promotion, relying on its advantages of resource reserve and business coverage, so as to achieve the sustained growth of teaching auxiliary book revenue.

Multi-faceted layout of the digital track of education, empowering teachers to reduce the burden on students. On the one hand, the company relies on the advantages of brand, channel, resources and teaching and research service system to launch digital school-based. The system through the analysis of student data to generate customized school, and then according to the teaching results report to improve teaching methods, to achieve closed-loop teaching. On the other hand, the company has invested in one stroke, two strokes, micro-oak technology and other educational digital track technology leading companies to create high-quality products such as pen god composition and Xiao Hong's teaching, which is expected to explore new momentum of performance growth.

Earnings forecast, valuation and investment rating: we expect Century Tianhong's income from 2023 to 2025 to be 466 million yuan, 497 million yuan, an increase of 7.53%, 6.82% and 5.91%, respectively. From 2023 to 2025, the net profit of homing was 0.42 euro 0.54 billion yuan respectively, an increase of 18.91% over the same period last year, 27.22% and 10.74% respectively, corresponding to the PE valuation of 87.7x/69.0x/62.3x. We choose the companies in the publishing industry that are also engaged in teaching auxiliary distribution business as comparable companies, including Phoenix Media, Central South Media, Wanxin Media, Southern Media and City Media. With reference to the PE of comparable companies in the same industry, considering that the leading digital layout of the company's education is expected to open room for performance growth, it is reasonable to give a certain valuation premium, so it is recommended to continue to pay attention, cover it for the first time, and give it an overweight rating.

Risk tips: cultural regulatory side of the policy risk; the number of students growth is not as expected risk; short video live e-commerce book discount; research and reporting of the use of information data update is not timely risk.