Incident Overview

On November 17, the company issued an announcement on the plan to repurchase the company's shares through centralized bidding transactions. The company plans to use its own capital of not less than 200 million yuan and no more than 400 million yuan to repurchase the company's shares through centralized bidding transactions. The repurchase price shall not exceed RMB 8.5 yuan/share, and the upper limit shall not be higher than 150% of the average trading price of the company's shares in the 30 trading days before the board of directors passed the repurchase resolution. The repurchase period is within 12 months from the date the company's shareholders' meeting deliberates and approves the share repurchase plan. This repurchase is based on confidence in the company's future development prospects and high recognition of the company's value, enhancing investor confidence and enhancing the long-term investment value of the company's shares. The company comprehensively considers factors such as financial conditions, future development, and reasonable valuation levels, and plans to use its own capital to carry out share repurchases to cancel and reduce the company's registered capital, so as to promote the matching of the company's stock market price with intrinsic value.

On November 17, the company issued an announcement on changing the capital investment projects raised by the non-public offering of shares. In order to improve the efficiency of the use of capital raised, optimize the company's investment layout, and digitally empower the new media strategy in Anhui, the company plans to end the construction of the “Intelligent Learning All Media Platform” and the “Smart Book City Operation Platform” projects, and invest 2,429 billion yuan of the capital raised and accumulated revenue that it has not yet invested in new projects, including digital science popularization projects, industry-education smart finance platform projects, digital bookstore construction projects, supply chain smart logistics park projects, smart travel game platform projects, etc., the total investment amount is 1.74, 1.19, 3.34, 5.89, and 300 million yuan respectively.

Analysis and judgment

(1) The company's main business is developing steadily, and profitability continues to improve. In the first three quarters, the company achieved operating income of 9.780 billion yuan, an increase of 5.92% over the previous year; net profit of 984 million yuan, an increase of 18.32% over the previous year; and net profit of 928 million yuan after deducting non-return net profit of 928 million yuan, an increase of 11.05% over the previous year. Q3 alone achieved operating income of 3.747 billion yuan, an increase of 0.53% over the previous year; net profit of 260 million yuan, an increase of 13.30% over the previous year; net profit after deducting non-return mother's net profit of 279 million yuan, an increase of 14.32% over the previous year. We expect that the company's performance in the second half of the year will continue to be flexible and maintain a rapid development trend. The company's revenue and profit in 2023 are expected to be superior to 2022.

(2) Affected by factors such as industry policies, market environment and technological development, the company changed the original “Intelligent Learning All-Media Platform” and “Smart Bookstore Operation Platform” projects to projects such as the popularization of digital science, the smart integration platform for industry and education, the construction of digital bookstores, smart logistics parks in the supply chain, and the smart travel game platform.

Digital science popularization project: The company implements the digital transformation of popular science experiences around technologies such as “extended reality (XR), blockchain, cloud computing, and digital twins” to open up a new ecosystem of immersive science experiences within and outside of schools, online and offline, mainly through: 1) Upgrading the science education product service system to create an independent product service system for teacher promotion, integrated publishing, immersive learning, and AI. 2) Build a “Digital Resources+Platform+Immersive Experience Center” offline experience center to achieve the effectiveness, immersive experience, and lifelong science education.

Industry-education intelligent integration platform project: Based on the construction of an integrated platform for the integration of industry and education, the company takes curriculum resource construction as the core, creates an engineering-technology-centered product system, builds an integrated business model of “platform+resources+service”, and deeply cultivates the field of integration of maternity and education in vocational education. Integrated platforms for the integration of industry and education include integrated teaching platforms, management platforms and big data centers; curriculum resources revolve around the five major directions of artificial intelligence, innovation, industrial simulation, digital twins, and the Internet of Things; the Engineering Technology Center focuses on next-generation information technology, builds self-research bases, promotes the reform and innovation of teaching models, and promotes the transformation of school teaching results and the implementation of scientific research results.

Digital bookstore construction project: Company 1) By building a “Houzhongtai, Easy Application” technology system, we will accelerate the construction of “Anhui New Cloud” reusable digital technology infrastructure, drive the full deployment of front-end and innovative businesses to the cloud, centralize control IT resources, shorten the iteration cycle of business scenarios, and support the digital deployment and rapid upgrading of cultural services. 2) By building a digital landmark bookstore, creating a double landmark of “urban meeting room+new living space”, combining basic platforms, diverse cultural and creative products, internet-based welfare purchase platforms, and online e-commerce service system development to build a user-centered cultural service system and enhance cultural service capabilities.

Supply chain smart logistics park project: The company deeply integrates the new economy and new retail model, relies on “big data +” logistics platform system construction, creates a smart logistics distribution system based on data clouds, and develops integrated supply chain procurement, storage, distribution and transportation services.

Smart Gaming Platform Project: Through cooperation with domestic and foreign game companies, the company plans and develops IP series game products such as “Legend of Sword and Fairy 4: Remastered” and “Stealth 2”. Relying on the block game platform distribution, the company provides a series of services such as packaging promotion, version reporting, and product distribution to partner game vendors.

Investment advice

The company consolidates the development of its main business, focuses on digital technology empowerment, uses technological integration and innovation as driving force, promotes the development of smart ecosystems, and actively expands new cultural business formats. We expect the company's net profit from 2023-2025 to be 1.06 billion yuan, 1.18 billion yuan, and 1.31 billion yuan respectively, up 49.8%, 11.0%, and 10.9% respectively. The corresponding valuations will be 14 times, 13 times, and 12 times respectively, maintaining the “buy” rating.

Risk warning

The risk of increased competition in the industry, the risk of comprehensive promotion of cultural digitalization, the risk of impact of new technologies, and the risk of fluctuations in raw material prices.