occurrences
The company released its 2023 three-quarter report. The first three quarters of 2023 achieved operating income of 9.207 billion yuan, an increase of 5.93% over the previous year, net profit of 1,236 billion yuan, an increase of 15.38% over the previous year, and realized net profit of 1,194 billion yuan, an increase of 5.11% over the previous year.
2023Q3 achieved operating income of 2,435 billion yuan in a single quarter, up 0.02% year on year; net profit of 265 million yuan, up 11.34% year on year; net profit after deducting non-return net profit of 263 million yuan, up 1.76% year on year.
reviews
Deeply involved in the main publishing and distribution business, the leading position is stable. In terms of publishing business, as of the end of H1 2023, the company's real share in the national comprehensive book retail market was 3.52%, up 0.4 pct from the previous year, ranking second in the country. In 2023, the sales volume of Q1-Q3's general book publishing business was 1,348 billion yuan, up 15.07% year on year; revenue was 455 million yuan, up 3.90% year on year. In terms of distribution business, Xinhua Bookstore in Hunan Province continues to strengthen the education service market and further build an education service system covering the whole province. In 2023 H1, Xinhua Bookstore in Hunan Province achieved operating income of 4.918 billion yuan, an increase of 13.01% over the previous year; net profit of 652 million yuan, an increase of 12.41% over the previous year. In 2023 H1, the new textbook company continued to expand the diversification of teaching aids and local textbook business, and the overall business was rising steadily; Jiahui's revenue and profit continued to grow. The spring distribution of middle school textbooks increased by about 20% year-on-year, and 950,000 copies of public course textbooks were distributed.
Profitability remained steady, and the expense ratio declined over the period. In 2023, the gross sales margin/net margin of the Q1-Q3 company was 42.13%/14.04%, respectively -2.39/+1.07 pct; Q3 sales gross margin/net profit margin for the single quarter was 44.13%/11.58%, respectively, -2.18/+1.40 pct, and +3.02/-4.39 pct month-on-month, respectively. By business, in terms of expenses, the cost rate for the 2023 Q1-Q3 period was 27.11%, down 1.48 pct from the previous year; among them, the sales/management/R&D/financial expenses ratio was 14.89%/12.42%/0.69%/-0.89%, respectively, -1.83/+0.65/-0.40/+0.09 pct year-on-year. The year-on-year decline in the company's sales expenses ratio was mainly due to the adjustment of transportation expenses related to performance obligations to operating costs in accordance with the new revenue standards in the current period.
The digital transformation continues to deepen, and the Zhongnan Media Malanshan Park project is progressing steadily. Tianwen Digital Media has implemented a deep reform plan, and various digital education products serve more than 10,000 schools. Shell Network is actively transforming and upgrading, focusing on building a smart cloud platform for Hunan education. Zhongnan Xunzhi is focusing on developing education quality monitoring and examination services, using paper media such as test papers and teaching aids as traffic entry points, and focusing on building products such as examination paper reading systems and examination evaluation systems. As of the end of H1 in 2023, the number of registered users of the Zhongnan Xunzhi mobile app exceeded 5.6 million, an increase of 350,000 over the previous year. The Zhongnan Media Malanshan Park has been fully capped and is expected to be completed and inspected by the end of August 2024. The park is positioned as a “dream factory” for Hunan publishing that integrates short videos, media, digital education and other industries. It cultivates a new engine leading the future development of media in Central and South China, and will provide solid support for the development of industries such as the company's book publishing topic planning, new short video media, Internet education, and services for the new elderly.
Profit forecasting and investment advice
Based on the steady growth of the company's main publishing and distribution business, the digital transformation continues to deepen; we expect the company's 2023-2025 revenue to be 133.86/141.91/14.932 billion yuan, net profit of 15.39/16.78/1,821 billion yuan, and EPS of 0.86/0.93/1.01 yuan respectively; the current stock price corresponding P/E is 13.22/12.13/11.17 times, maintaining the “buy” rating.
Risk warning:
Risk of macro-population decline; risk of book distribution falling short of expectations; risk of declining content appeal; risk of policies exceeding expectations.