Core views:
Zhongnan Media revealed the 2023 annual report and 2024 quarterly report: (1) In 2023, the company achieved revenue of 13.613 billion yuan, an increase of 9.21%; net profit to mother of 1,855 billion yuan, an increase of 32.55% year on year; net profit after deducting non-return to mother was 1,552 billion yuan, an increase of 5.69% year on year. (2) In 24Q1, the company achieved revenue of 3.0 billion yuan, a year-on-year increase of 12.61%; net profit to mother of 284 million yuan, a year-on-year decrease of 18.18%; net profit after deducting non-attributable net profit of 250 million yuan, a year-on-year decrease of 24.54%. The decline in net profit is due to the expiration of the corporate income tax exemption policy applied by the company in 2024, while total 24Q1 profit increased 15.37% year-on-year, and the company's main business grew steadily.
The main publishing and distribution business continues to grow, ranking first in the country. In 2023, the publishing business achieved revenue of 3,599 billion yuan, an increase of 4.68% over the previous year; the distribution business achieved revenue of 11.313 billion yuan, an increase of 15.01% over the previous year. In 2023, the company's share of Shiyang in the national book retail market was 3.80%, ranking second, up 2 places from the previous year; Shiyang's share in the new book retail market was 4.13%, ranking third, up 3 places year on year.
Strengthen in-depth integrated development. (1) Education services: Continuing to improve the quality of products such as “Four-dimensional Reading” and “Reading Book Series for Primary and Secondary School Students”, the promotion of the “Smart Fun New After School” platform achieved remarkable results. By the end of '23, class resources had reached 61 courses and more than 6,000 lessons. (2) Financial investment: Zhongrun Guangneng, which is invested by Bofu Fund, has completed an IPO meeting on the Shenzhen Stock Exchange. Malanshan Park was completely capped in '23.
Profit forecasting and investment advice. In 2024-2026, we expect the company's revenue to be 146.09/154.02/16.104 billion yuan, and net profit to mother of 14.51/15.81/1,694 billion yuan.
The profit side declined this year due to changes in the company's applicable income tax policy. However, the company's main publishing and distribution business is growing steadily, and it is actively expanding innovative businesses such as education services and financial investment. Cash flow is abundant, and the frequency of dividends is increased to give back shareholders. It is proposed to distribute a cash dividend of 0.55 yuan/share in fiscal year 23, and a cash dividend of 0.10 yuan/share for 24 and a half years. We gave the company a PE valuation of 18 times that of 2024, with a corresponding reasonable value of 14.55 yuan/share, maintaining a “buy” rating.
Risk warning. Changes in income tax policies; Fewer K12 students; weak book consumption; changes in regulatory policies; changes in market themes.