Company Overview: Guangdong Publishing and Distribution Representative, creating a new education business format. As the leading publishing and distribution leader in Guangdong, China Southern Media has formed a comprehensive media business structure integrating traditional publishing and distribution business with innovative businesses such as digital publishing, smart education, and extracurricular education. It has a complete integrated industrial chain of publishing and media industries, including publishing, printing, distribution, retail, sales of printed materials, and cross-media management. In 2018-2022, the company's revenue increased from 5.60 billion yuan to 9.05 billion yuan, and the four-year CAGR reached 12.8%.
Industry analysis: The competitive pattern of books is stable, and commercialization of the education industry can be expected.
The competitive pattern in the book publishing industry is stable, and the sharp increase in volume and price is driving book retail sales to continue to rise. Among them, textbooks and teaching aids are growing steadily, and the impact of the decline in the birth population is limited in the short to medium term, while all categories of general books have clearly recovered after the epidemic. In addition, emerging technologies such as AI have a good effect on education, and smart education products can be expected to be implemented at an accelerated pace; demand for after-school services is strong, and I am optimistic that publishing companies will continue to further monetize.
Business analysis: Based on the main business, promote the construction of new education business formats and expand new monetization paths.
The basic market for the main publishing and distribution business is stable, demonstrating growth resilience. The company promotes the reform of intensification of educational publishing and specialization in mass publishing, and the profitability of publishing is expected to increase. Distribution channels are continuously integrated to effectively enhance distribution competitiveness. We believe that the continuous reform of the company's publishing and distribution business, combined with the advantages of population and cultural resources in Guangdong Province, where the company is located, is expected to clearly benefit from the combined effects of internal and external factors, the company's textbooks, teaching aids and general book products. We are not only optimistic that after completing the integration of resources and channels for the company's textbooks and teaching aids, the performance growth rate is expected to increase under the logic that the number of students in the K12 level in Guangdong Province and the increase in demand for quality education will drive up customer unit prices. We are also optimistic that the company's general books themselves will increase their publishing capabilities and diversified channels, and that upward flexibility can be expected in the context of a recovery in market sentiment.
Actively expand the education industry and tap new momentum for performance growth. The company actively uses its own content and channel advantages to promote smart education construction and build a smart education product matrix. The construction and operation of comprehensive smart education platforms continues to improve, and AI+ education products such as the Guangdong Education iFLY E and Cantonese Education-Elstom layout segmented tracks such as language listening and quality training. On the other hand, the company takes on the demand for after-school education and creates a new form of after-school service education. It is expected to expand new derivative monetization paths such as customized value-added services based on basic after-school hosting and research services.
Profit forecast, valuation and investment rating: We expect Southern Media's revenue for 2023-2025 to be 96.47/108, respectively.
95/12.215 billion yuan, up 6.54%/12.94%/12.11%, respectively. Considering that changes in tax policy will have an impact on the amount of the company's current confirmed deferred income tax assets and non-recurring profit and loss in 2024-2025, it is estimated that the net profit due to mother for 2023-2025 will be $12.54/10.19/1,127 billion yuan, respectively, up 32.96%/-18.73%/10.54% year-on-year, respectively. The corresponding PE valuations are 12.6x/15.5x/14.0x, respectively. We selected companies in the publishing industry that are also engaged in book publishing as comparable targets, including Phoenix Media, Zhongnan Media, Zhejiang Media, Chinese Media, and Shandong Publishing. Refer to comparable companies in the same industry. Considering that the company has a stable textbook teaching aid base and leading innovative business layout such as smart education and after-school services, which is expected to open up room for performance growth, it is reasonable to give it a certain valuation premium. It is recommended to continue to pay attention, cover it for the first time, and give it a purchase rating.
Risk warning: Policy risks on the cultural supervisory side; changes in preferential policies for state-owned media companies; increased discounts on e-commerce books for live video broadcasts; risk of untimely updating of information data used in research reports.