The company's main business growth logic has not changed, and there is still room for improvement in the dividend rate. 1) We predict that the number of students enrolled in the Guangdong region will continue to grow in the future + high per capita consumption level+ rigid demand for education. The logic of increasing the main business volume has not changed due to income tax. 2) Growth is driven by epitaxial mergers and acquisitions. The company acquired Guangzhou Education Bookstore in '22, and the acquisition of Guangzhou Lingnan Art Publishing House and Map Press in '23, all of which contributed to a certain increase in profits for the company.
Looking forward to the future, on the one hand, there is still room for integration between distribution channels and publishing houses in Guangdong; on the other hand, the integration of channels and publishing houses is expected to have a scale effect and enhance the company's market competitiveness; 3) The company's dividend level has continued to rise in recent years. Looking ahead, the company has plenty of cash on its accounts. Compared with leading companies, the company still has a lot of room to improve its dividend rate in the future.
AI+ education continues to advance to verify the company's ability to implement new businesses. Reviewing the company's previous AI+ education product layout, it was discovered that the company has the high-quality ability to continuously iterate and implement new businesses. 1) Continuous product launch: From Cantonese AI Listening and Huacheng Art Test to subsequent Cantonese E-learning machines, AI Go, etc., the company has the ability to continuously develop new products; 2) Continuous product iteration: functions and versions such as AI Listening and Huacheng Art Test are constantly being iterated, and revenue has already been generated. We believe that the new business logic of the company's layout is clear, mainly based on the company's main business [education] and existing advantages [entrance channels/student traffic resources], and the overall degree of implementation is high. Based on this, we are also more optimistic about the company's subsequent new business development performance.
Expand education, blossom more, and look forward to the future. K12 regulations tend to be normalized, and after-school services and quality education are all policy incentives. 1) After-school services: The company actively lays out in-school and after-school services based on the Education Agency and the Xinhua Distribution Group. Among them, the school provides teaching content and one-stop classroom teaching management solutions, and the “Xinhua Leyu Academy” is used as a space outside the school to provide paid quality hosting for K12, etc. Currently, revenue has been generated. 23H1 has served more than 460,000 students after school, with total revenue exceeding 130 million. It is anticipated that subsequent companies will speed up the layout of the province (631 sales outlets in the province) and actively explore markets outside the province. We believe that the business model of this business is highly viable and has a large market profit margin. For the company, it is essentially a re-monetization of school entry channels and existing resources (Xinhua Bookstore space & personnel & AI products, etc.); for students & parents: “Xinhua Entertainment” extends from within the school to outside the school. Students' parents are inherently more trustworthy, and bookstores close to the school have a geographical advantage, making it easier to convert user payments. 2) Layout children's programming: The company established “Guangdong Nanchuan Technology Co., Ltd.” as a joint venture with Dianmao Technology (Programming Cat) in 23. The company holds 51% of the shares, or will lay out the children's programming business based on the Programming Cat course system. In addition, the Guangdong Science Group established by the company last year will also continue to provide popular science after-school services, etc., all of which are expected to contribute incremental revenue.
Investment advice: We are optimistic about the stability and dividend value of the company's main business. In the long term, we are optimistic that the company will actively embrace new businesses such as AI and education and training, which is expected to open up revenue and valuation ceilings. However, due to income tax, short-term performance may decline slightly. We will slightly adjust our previous performance expectations. We expect the company's net profit to be 12.52/10.73/1.121 billion yuan respectively (the original 23/24/25 forecast value was 12.33/14.29/1,641 billion yuan). The current stock price corresponds to 12/14/12 times PE, with reference to comparable company valuations (Phoenix Media, Zhongnan Media, Shandong Publishing, Xinhua Wenxuan), due to the company's steady main business+active new business layout, giving the company 24 years 18xPE, with a target market value of 19.3 billion yuan, corresponds to a target price of 21.6 yuan, maintaining a “strong push” rating.
Risk warning: rising paper costs, changes in education policies, changes in the number of students enrolled, progress in mergers and acquisitions falling short of expectations, and falling short of expectations in new business