Citic Publishing disclosed the results of the three quarterly reports in 2023: (1) 23Q1-Q3, the company's revenue was 1.286 billion yuan, down 3.11% from the same period last year; the net profit from its mother was 126 million yuan, down 8.98% from the same period last year, including a loss of 39 million yuan from asset impairment; and its mother deducted 119 million yuan from non-net profit, down 12.35% from the same period last year. (2) 23Q3, the company achieved revenue of 413 million yuan, down 13.77% from the same period last year; net profit of 35 million yuan, down 27.82% from the same period last year; and non-net profit of 29 million yuan, down 37.60% from the same period last year.

Citic Publishing has a solid leading position in the book retail market, and its market share has further increased. According to open-book data, the national book retail code of 23Q1-Q3 decreased by 1.04% compared with the same period last year, and the company's share of the national book retail market in the same period was 3.28%, an increase in 0.38pp compared with the same period last year.

In the market segments of management, children, psychological self-help and biography, the company ranks first in the market.

During the reporting period, the company launched the key book "Biography of Elon Musk", "Biography of Oppenheimer" and "Chang'an 30,000 Li" series books in the form of IP linkage.

With the integration of new AIGC technology, the cost has increased during the period. The company uses data-driven and technology applications to improve quality and efficiency, and 23Q3 gross profit margin increases 2.88pp compared with the same period last year. The company builds digital intelligence system, develops data assets, and actively cooperates with major AIGC model technology companies. In August 2023, when the science fiction series "Blood and Rust" was published by AIGC Mathematical Intelligence Publishing platform, the 23Q3 R & D fee increased 0.39pp year-on-year, and the management fee increased 1.88pp year-on-year.

Profit forecast and investment advice. We estimate that the company's operating income from 2023 to 2025 will be 1.831 billion yuan, 1.951 billion yuan, and the net profit of returning to its mother will be 170 million yuan, 235 million yuan. Although domestic book consumption is relatively weak, CITIC Publishing maintains a leading position, and its market share further increases, the company actively integrates AIGC technology to improve quality and efficiency, and create a smart publishing industry chain. With reference to similar listed companies, we give CITIC Publishing a valuation of 26 times PE in 2024, corresponding to a fair value of 32.18 yuan per share, maintaining a "buy" rating.

Risk hint. Book consumption is weak; the application of AI technology is not as expected; online discounts are intensified; industry regulatory policies change; new media channels invest more.