Performance summary Century Tianhong released its 2023 annual report. The report shows that in 2023, the company achieved operating income of 51 million yuan, an increase of 17.2% year on year; net profit to mother was 42.36 million yuan, up 18.9% year on year; net profit after deducting non-return to mother was 38.929 million yuan, an increase of 27.2% year on year.

Assistant Professor Xiaohong continues to iterate, and the number of pen essay users is growing steadily. Combining artificial intelligence technology, the company thinks about the ultimate form and development path of “AI+ education”, lays out various AI education products, and has already seen initial results on the user side. 1) Assistant Professor Xiaohong of the company has been iterated to version 4.0. The networking function has been upgraded to update the latest content in real time; at the same time, a document assistant is embedded to support long text generation. 2) The pen essay invested by the company continued to break through in the field of AI essay correction. By the end of 2023, the pen pen essay app had accumulated more than 18 million users, and the paid conversion rate was about 2%. Currently, the pen essay community has submitted more than 300,000 articles per month, and has accumulated more than 5 million high-quality essay materials. Through 4 years of accumulation, the company's corpus corpus has collected more than 300,000 pieces of professionally fine-tuned data based on manual feedback, forming a strong competitive barrier on essay learning platforms and submission communities for primary and secondary school students.

Adhere to content research and development as the first priority task, promote the integration of research and marketing, and help the main business continue to grow. Content research and development is the company's first priority in 2023. The company continues to promote the implementation of the “integrated research and marketing” strategic plan, enhance teaching and research capabilities and product capabilities through an implementation system for ten key tasks, make every effort to build competitive products, promote new product projects, innovate and improve R&D mechanisms, and promote the “subject researcher” mechanism to promote the improvement of planning and editing staff. In terms of product development, the company plans to publish 2,818 books throughout the year, with a total word count of about 1.1 billion words. The company integrates high-quality content and educational resources accumulated over the years in the field of teaching aids, and provides teaching and research service support to teachers, school managers, and the Education Bureau through more than 300 curriculum standards experts, editorial experts, college entrance examination policy research experts, etc., to guide the college entrance examination, share the management wisdom of famous schools, and explore new paths of education and teaching development; the company has organized nearly 500 on-site teaching and research service activities in more than 20 provinces across the country, empowering nearly 200 customers, involving teaching and research training, college entrance examination presentations, exchange of top talents, etc. Proactive and professional Services assist and empower frontline teaching, provide professional and high-quality teaching and research services, and effectively drive performance growth.

Profit forecast and investment advice: The company's EPS for 24-26 is expected to be 0.16 yuan/0.17 yuan/0.19 yuan, respectively, and the corresponding PE is 84/75/69 times, respectively. As a leading private publishing company, the steady promotion of AI in education is expected to further open up room for growth. The net profit CAGR for the next three years is 17.2%, maintaining a “holding” rating.

Risk warning: The double reduction policy poses the risk of uncertainty about the demand for teaching aids; the risk that R&D and sales of educational AI systems will fall short of expectations; and the risk of worsening market competition.