Zhongnan Media released the report of the third quarter of 2023. In the first three quarters of 2023, the company realized operating income of RMB 9.207 billion yuan, with a year-on-year growth of 5.93%; net profit attributable to parent was RMB 1.236 billion yuan, with a year-on-year growth of 15.38%; non-net profit deducted from parent was RMB 1.194 billion yuan, with a year-on-year growth of 5.11%. In 2023Q3, the Company realized operating income of CNY 2.437 billion, with a year-on-year growth of 0.02%; net profit attributable to parent was CNY 265 million, with a year-on-year growth of 11.34%; non-net profit attributable to parent deduction was CNY 263 million, with a year-on-year growth of 1.76%.
Deep cultivation of publishing and distribution main business, general book sales performance is better than the market. According to the open-book data of Beijing, the book retail market in the first three quarters of 2023 decreased by 1.04% year-on-year. In the first three quarters of 2023, the sales volume of the general book publishing business of the Company increased by 15.07% year-on-year, and the gross profit margin increased slightly by 0.09pct, which was better than that of the market. In the first three quarters, the company's operating income/net profit increased by 5.93/15.38% year-on-year respectively, and the company's main business grew steadily. In the first three quarters of 2023, the Company's gross profit margin on sales decreased slightly by 2.39pct to 42.13%, which was related to the adjustment of transportation expenses related to performance obligations to operating costs in accordance with the new revenue standard. In addition, in the first three quarters, the fair value changes of trading financial assets held by the Company's wholly-owned fund generated gains and losses, which had a positive impact on profits. In the first three quarters of 2023, the sales/management/finance expense ratios of the Company were 14.89/12.42/-0.89%, respectively, compared with-1.83/+0.65/+0.09pct as compared with the same period last year.
The investment in digital publishing base is increased, and the park can be put into operation in the future. The Company increased its investment in Malanshan Park, a national digital publishing base in central and southern China, and took the opportunity of industry introduction to accelerate business innovation and transformation development. The project has been fully capped and is scheduled to be completed and accepted by the end of August 2024. The project is positioned as Hunan Publishing "Dream Factory" integrating Short Video, media, digital education and other industries, cultivating a new engine leading the future development of Zhongnan Media, and is expected to provide solid support for the development of the company's book publishing topic selection planning, Short videos new media, Internet education, new elderly services and other industries in the future.
International cooperation was further promoted and brand influence continued to increase. The company signed a strategic cooperation framework agreement with Frankfurt Book Fair, continuously promoted cooperation on the basis of past cooperation, and actively explored joint initiation and establishment of new initiatives and platforms with international influence. The book fair is the world's largest and most important international copyright trading platform and international publishing information exchange platform, known as the "Olympic Games in the publishing world", which has an important impact on the global publishing industry. As of October 20, 2023, the Company has translated and introduced more than 2100 kinds of high-quality Hunan edition book copyrights to 95 countries and regions around the world, covering 44 languages, forming three characteristics of theme books, traditional cultural books and educational books "going out". This cooperation will strengthen the company's domestic and foreign publishing exchanges and enhance international influence.
Maintain a "strongly recommended" investment rating. Considering that the company's publishing and distribution business remains leading in the industry, the digital transformation strategy actively promoted is expected to contribute new profit growth points to the company. It is estimated that from 2023 to 2025, the net profit attributable to the parent company will be 16.70/18.28/19.19 billion yuan, corresponding to 12.6/11.5/11.0 times PE, maintaining the investment rating of "strongly recommended".
Risk warning: the risk of new media technology impacting traditional publishing business, the risk of business transformation failing to meet expectations, and the risk of project progress failing to meet expectations.