New Classic released its 2023 annual report: the company's total revenue in 2023 was 900 million yuan (yoy -3.9%), with net return of 160 to 140 million yuan (yoy +16.5%, 11.7%%); net operating cash flow of 170 million yuan (yoy -10.45%) in 2023, after deducting 15.5% net non-sales interest rate (up 2.2 percentage points); and plans to distribute a cash dividend of 0.9 yuan (tax included) per share to all shareholders in 2023. Looking at a single quarter, 2023Q4 had revenue of 244 million yuan (yoy +4.2%), net profit of 0.305 million yuan and 0.24.7 million yuan (yoy +183%, +209%), 2024Q1 had revenue of 225 million yuan (yoy +9.97%), and mother and deducted non-net profit of 0.485 million yuan and 0.41.4 billion yuan (yoy +7.8%, +4.6%).
Key points of investment
The company's overseas business losses narrow the growth in digital content and copyright revenue in 2023
On the industry side, the book retail market was 91.2 billion yuan in 2023 (up 4.72% year on year, shifting from negative growth in 2022 to positive growth); in 2023, Shieyang's national book retail market fell 7.04% year on year. The data difference between Maoyang and Shiyang was mainly due to discounts. The retail discount in 2023 fell from 6.6 percent off in 2022 to 6.1 percent off.
In 2023, the company adheres to the development concept with copyright resources as the core and high-quality content as the drive, strengthens content planning, and optimizes the topic selection structure. In 2023, the company adjusted its new book publishing plan in the face of industry changes. Domestic book planning and distribution business revenue was 734 million yuan (yoy -8.8%), and works such as “We Live in a Huge Gap”, “Beginning at the Limit” and Yu Hua's “Seventh Day” performed well; further focused on its own IP business, promoted the upgrading of the IP roles of “Bibi Zoo” and “Minimalist History”, and reached advertising cooperation with various consumer goods brands. Commercial implementation was further implemented; copyright and digital content revenue of 0.21 million yuan and 0.47 million yuan respectively ( yoy +49.65%, +19.28%); overseas business revenue of 135 million yuan (yoy +53.8%), loss of 014 million yuan (loss in overseas business narrows). Relying on international publishing platforms, the company will continue to promote Chinese writers and works to the world, tell Chinese stories well, and spread the Chinese voice.
The reserves of high-quality copyright resources are rich, and future commercial potential can be expected
The company's copyright business revenue increased year-on-year in 2023, thanks to the company using overseas copyright banks as the main foundation to develop copyright operations and licensing business. The company's copyright resources are rich. The headquarters and overseas copyright library have nearly 7,000 types of rights, including paper books, e-books, audiobooks and related derivative rights, and a foundation for diversified content development and copyright licensing operations. Short-term copyright revenue accounts for relatively low, but future commercial value still has potential for development.
Content+channel dual-wheel drive focuses on high-quality content to drive content marketing in the face of AIGC's opportunities and challenges in the content industry. The company continues to consolidate its main business, enhance content originality capabilities, and expand the creation and operation of its own IP works. At the same time, it will also promote the application of relevant AI tools in the business, improve creative efficiency, and explore diverse content creative paradigms. Under the foundation and core of high-quality content, the company will comprehensively transform content marketing ideas, further build an expert cooperative marketing system based on existing channels, improve the effectiveness of content distribution based on works and operational data, build short video marketing capabilities, and wait for content marketing to empower the main business.
Profit forecasting
Maintaining the “buy” investment rating, predicts that the company's 2024-2026 revenue is 96\ 10.2\ 1.11 billion yuan, the return profit is 1.8\ 2.04\ 232 million yuan, EPS is 1.11\ 1.25\ 1.43 yuan respectively, and the current stock price is 15.2\ 13.5\ 11.8 times PE, respectively. Based on the company's insistence on high-quality content supply, it has launched a “best-selling and long-selling” book. The main business is stable and has high-quality copyright resources and long-selling book reserves. The overseas business has already begun to be commercialized. See results, and in turn maintain a “buy” investment rating.
Risk warning
Risks that new business exploration falls short of expectations, risk of topic selection, risk of losing talent, risk of intellectual property protection falling short of expectations, risk of changes in tax policies, risk of overseas business and new business development falling short of expectations, risk of content e-commerce not progressing as expected; risk of challenges posed by industry transformation and development; risk of macroeconomic fluctuations, etc.