Net profit increased 16.48% in '23, maintaining a “buy” rating
The company released its 23 annual report & 24Q1 quarterly report: 23 million yuan in revenue of 901 million yuan (yoy -3.94%), net profit of 160 million yuan (yoy +16.48%, base figure adopted 22 years ago), net profit of 140 million yuan (yoy +11.69%); 24Q1 revenue of 225 million yuan (yoy +9.97%), net profit of 49 million yuan (yoy +7.81%), net profit of 41 million yuan (yoy +4.57%). The company plans to pay a cash dividend of 0.9 yuan (tax included) per share, with a dividend rate of 5.3% corresponding to the closing price on April 26. We expect the company's net profit to be 1.8/1.98/217 million yuan in 24-26. Comparable company Wind unanimously expects an average PE value of 20X in 24. Considering that the company's overseas business is still being dragged down, we gave the company 18X PE for 24 years, corresponding to a target price of 19.98 yuan, to maintain a “buy” rating.
Gross margin was under pressure. Yu Hua's work led to 24Q1 performance growth and revenue falling by 3.94% in 23, mainly due to poor industry prosperity. According to Beijing Open, the book market code for books increased by 4.72% in '23, but the drop in sales discounts caused Shieyang to drop 7.04%. In '23, the company's domestic book planning and distribution business revenue was 734 million yuan, down 8.84%, and the gross profit margin was 48.45%, down 0.6 pct. The company focused on controlling discounts, and gross margin was relatively resistant to pressure under industry discount pressure. Sales/management/R&D/finance expenses for 23 years were 17.91%/8.6%/1.12%/-0.19%, with a year-on-year ratio of +0.49pct/-0.47pct/-0.12pct/-0.02pct, respectively, and overall stable. According to the publication, the 24Q1 book market fell by 5.85%, while the company's 24Q1 revenue also increased by 9.97%, and the same increase after deducting non-net profit by 4.57%. The main reason was that Yu Hua's “We Live in a Huge Gap” appeared on social platforms at the end of '23. Some accounts on the short video live streaming platform led to a sharp increase in sales of the book, but it also lowered the gross profit margin. The 24Q1 gross profit margin was 48.47%, down 3.94 pcts.
Overseas business revenue grew rapidly, and losses narrowed sharply
The overseas business achieved revenue of 135 million yuan in '23, an increase of 53.82%; net loss of 14 million yuan, which is significantly narrower than in '22 (loss of 40 million yuan). Through integration and efficiency, the company promoted the publication and listing of early-planned books one after another, boosting overseas revenue growth. At the same time, based on market feedback, the company continuously adjusted topic selection direction, integrated internal resources and personnel structure, optimized related costs, and achieved phased progress.
With high-quality copyright resources and a reserve of best-selling books, the omni-channel marketing and sales system, the company has rich copyright resources. The headquarters and overseas copyright library have nearly 7,000 types of rights, including paper books, e-books, audiobooks and related derivative rights, and have the foundation for diversified content development and copyright licensing operations. Over the years, the company has created a number of “best-selling and long-selling” books, forming a solid accumulation of high-quality products; at the same time, the company focuses on iterative changes in sales channels, insists on starting from product content, actively expanding cooperation with experts on various platforms, and formulating refined marketing strategies based on platform characteristics to achieve accurate reach and continuous dissemination of content, promote the same frequency resonance of marketing and sales, and increase sales conversion rates.
Risk warning: Book sales fall short of expectations, and overseas business falls short of expectations.