Incident 1: Proposed repurchase of company shares. The company plans to use its own capital to repurchase the company's shares through centralized bidding transactions. The total repurchase capital is not less than 200 million yuan (inclusive) and no more than 400 million yuan (inclusive). The repurchase price does not exceed 8.5 yuan/share (inclusive), and the upper limit of the repurchase price is not higher than 150% of the average trading price of the company's shares in the 30 trading days before the board of directors passes the repurchase decision. The repurchase period is within 12 months from the date the company's shareholders' meeting deliberates and approves the share repurchase plan.

Incident 2: It is proposed to change the non-public offering of shares to raise capital investment projects. The company plans to end the construction of the “Intelligent Learning All-Media Platform” and the “Smart Bookstore Operation Platform” projects, and invest a total of 2.43 billion yuan in raised capital and accumulated revenue that it has not yet invested in the new project. The name of the new project and investment amount are: 1. The “Digital Science Promotion Project” has an investment amount of 174 million yuan; 2. The investment amount of the “Industry-Education Intelligent Finance Platform Project” is 119 million yuan; 3. The “Digital Bookstore Construction Project” has an investment amount of 334 million yuan; 4. The “Supply Chain Smart Logistics Park Project” has an investment amount of 589 million yuan; 5. The “Smart Gaming Platform Project” has an investment amount of 300 million yuan; 6. Permanent supplementary working capital of 914 million yuan.

“Yuan Book Bureau” appeared at the Yangtze River Delta Cultural Expo. “Yuan Bookstore” is a new generation digital experience bookstore built by the Anhui Xinhua Distribution Group. It brings together a variety of technologies and new ways to integrate culture, introduce multicultural consumption scenarios such as digital experiences, digital sports, digital science, and digital picture books into bookstores, and build a new type of digital bookstore with an immersive, experiential, and multi-format digital bookstore. It is committed to creating a “playground” for youth culture, a “experience center” for cutting-edge technology, and a “place for gradual entry” of parent-child relationships. After repeated upgrades, the former Hefei Sipailou Xinhua Bookstore returned brilliantly in August 2023 with a new “Yuan Bookstore” look. It is full of cultural atmosphere and technological texture. It has received high praise from all sectors of society, and has become a new landmark for Hefei's science and innovation culture. We believe that the combination of the digital scenario and offline bookstores is expected to increase the consumption scenarios of offline bookstores and bring an increase in customer flow to stores.

Digital education products are expected to be further implemented, combining the metaverse, VR, and robots to bring a new educational experience. At the Yangtze River Delta Cultural Fair, the Yuan Book Bureau Digital Bookstore showcased special business formats and products such as the Fantasy Space Experience Hall, the Metaverse Digital Sports Center, and Anhui Xinzhu Zi Robot. 1) The Illusion Space Experience Center uses an immersive display to transform scenes that cannot be experienced in real environments, real time, and real speed, and broadcast the naked eye 3D video “Flying Over Anhui” live. 2) The Metaverse Digital Sports Center uses digital technology to innovate consumption scenarios and create smart sports experience venues, horse-riding, javelin and other sports. 3) Anhui Xinzhu Zi Robot is a fully automated classroom robot teacher for young children. It can enable students to learn in an immersive way through personalized intelligent voice interaction modes, artificial intelligence super algorithms, etc. Currently, courses such as “Fun Math,” STEAM, “Fun Science,” “Fun Reading,” “Little Musician,” “Little Artist,” “Mental Health,” and “Labor Education” have been developed and implemented in more than 200 kindergartens in Anhui Province. 4) MR Holographic Nature Museum wearable devices allow visitors to interact with ancient creatures such as dinosaurs at zero distance. We believe that the company is actively developing in the field of smart education, and related products are gradually being implemented. With its long-term accumulation in education, the company is expected to launch high-quality products in combination with metaverse, VR, AI and other technologies; at the same time, B-side products are expected to take the lead in commercialization and contribute to performance through its advantages in school channels.

Profit forecast and investment advice: We maintain the company's profit forecast. It is estimated that in 2023-2025, the company's operating income will be 138.81/160.20/17.890 billion yuan, 18.8%/15.4%/11.7% year-on-year; net profit of 10.02/12.05/1,45/1,465 billion yuan, 41.5% /20.3%/21.6% year-on-year. In terms of traditional distribution business, offline stores are expected to add payment scenarios and increase customer flow by combining digital experiences. The company is leading the way in smart education business, and has already launched B-side and C-side products, which are expected to be further commercialized. We are optimistic about the company's future in terms of culture and education in addition to the distribution business, and maintain a “buy” rating.

Risk warning: Risk of reducing the number of future students due to reduced fertility rates; increased risk of increased competition in the industry; risk of falling short of expectations in smart education product development, etc.