The company's main publishing and distribution business is sound, cash is abundant and dividends are considerable; with high-quality cultural and educational content resources, it is expected to rely on advantages to explore AI+ education and other areas to achieve data asset revaluation. We are optimistic about the company's position as a regional leader in the publishing industry and maintain its "buy" rating.
The core main business is sound and there is plenty of cash on paper. 3Q23 realized operating income of 2.437 billion yuan (year-on-year + 0.02%) and gross profit margin of 44.13% (year-on-2.18pcts), mainly due to the adjustment of transportation expenses related to performance to operating costs according to the new revenue criteria; the sales / management / R & D expense rates were 16.58%, 14.51% and 0.76%, respectively (year-on-2.38/+3.61/-0.67pct). 3Q23 achieved a net profit of 265 million yuan (year-on-year + 11.34%) and a net interest rate of 10.87% (year-on-year + 1.11pcts). 3Q23 realized deduction of non-return net profit of 263 million yuan (year-on-year + 1.76%) and non-return net profit of 10.80% (year-on-year-0.18pct).
By the end of 3Q23, the company's monetary funds and transactional financial assets totaled 10.407 billion yuan, with sufficient paper cash assets.
The publishing business grows steadily, and the distribution plate has a bright advantage. In terms of publishing, in the first three quarters of 2023, the company's general book publishing business achieved 1.348 billion yuan (year-on-year + 15.07%), operating income 473 million yuan (year-on-year + 3.9%), gross profit margin 45.03% (year-on-year + 0.09pct), steady growth. In terms of distribution, 1) the company attaches importance to the development of the education service market, according to the company's 2023 mid-class report, Hunan Provincial Education Department 2023 teaching materials purchase amount of 1.02 billion yuan (year-on-year + 5.1%); 2) according to the company's 2023 mid-term report, subsidiary Jiahui Company continues to grow in revenue and profits, and 950000 copies of public course materials have been issued; 3) the platform of "after-class intelligence and interest" will speed up quality upgrading and effectively open up the market of secondary vocational and higher education. 4) Joint education adds business products such as "excellent Chinese traditional culture" and "safety education" to cultivate new business growth points.
Diversified business continues to develop, and the pan-cultural ecology is gradually improved. In the newspaper network media sector, the revenue of the Xiaoxiang Morning Post operating company has increased; according to the company's mid-2023 report, Happy Old Man News operates the official Douyin account "Happy Golden Age" to build a live broadcast base with nearly 2.68 million followers; Central South Metro Media to strengthen the overall layout of business in Wuhan and Changsha to achieve digital upgrading and upgrading of subway media is expected to drive the growth of the sector's performance. In the financial investment sector, the Malanshan Park project is progressing steadily, and most of the buildings have been capped. After landing, the park will promote the deep integration of digital media.
Risk factors: higher-than-expected changes in education policy, the impact of teaching materials and auxiliary market risk; the risk of a sharp rise in the price of raw materials; project investment schedule is not as expected risk; online for offline book diversion risk.
Investment suggestion: the company ranks the first echelon of the domestic publishing industry, we are optimistic that its market share will maintain its leading edge, the core main industries such as distribution and publishing will develop steadily, and the ability to share out dividends is considerable. We maintain the company's revenue forecast for 2023 to 2025 of 133.08x141.56 billion, and the company's net profit forecast for 2023 to 2025 of 16,81,81,069 million yuan, which is 10 times the current share price of PE 13 / 11. In terms of valuation, with reference to the valuation levels of comparable companies Phoenix Media, Xinhua Wenxuan and Zhejiang Edition Media (Wind unanimously expects the average PE in 2023 to be about 12 times), and considering that the company has a solid leading position in education and publishing, with a dividend rate higher than the industry average, the company is given 16 times 2023 PE, corresponding to the target price of 15 yuan, maintaining a "buy" rating.