In 2023, the company achieved operating income of 9.365 billion yuan, +3.35% year-on-year; net profit attributable to shareholders of listed companies was 1,284 billion yuan, +34.39% year-on-year. The first quarter of 2024 achieved revenue of 2,088 billion yuan, -4.86% year-on-year, net profit to mother of 152 million yuan, or -33.96% year-on-year, net profit after deducting non-attributable net profit of 169 million yuan, or -9.34% year-on-year.

The company operated steadily in 2023, with revenue +3.35% year-on-year, mainly due to the textbook teaching aid business revenue of +6.5% year-on-year. It publishes 1,077 textbooks and 2,847 textbooks throughout the year. Among them, the publication of textbooks and teaching aids achieved annual revenue of 2,821 billion yuan, an increase of 7.3% over the previous year. The publication and distribution of the Cantonese version of Hong Kong and Macau textbooks has been fully promoted, and the Hong Kong Youth History Association and the Hong Kong Youth History Society have been established one after another. Vocational education was developed simultaneously, and 38 kinds of vocational textbooks were selected for the first batch of “14th Five-Year Plan” vocational education textbooks list. Furthermore, changes in fair value brought about by investing in Dragon Media shares, etc. (an increase of 260 million yuan over the previous year) combined with income tax expenses (-90 million yuan) also had a significant positive impact on net profit to mother. Net profit to mother was 1,284 billion yuan for the whole year, +34.39% over the same period last year. Furthermore, the company's dividend per share reached a record high, with a cash dividend of 0.54 yuan per share, an increase of 0.07 yuan/share compared with last year, to actively give back to shareholders.

The company's revenue in the first quarter of 2024 was -4.86%, mainly due to spring textbook repayment issues and -7.93% revenue from the general book publishing business, but gross margin achieved a year-on-year increase of 4.29pct. In the first quarter, due to fluctuations in fair value changes in financial assets and financial liabilities held by non-financial companies and profits and losses from disposal of financial assets and financial liabilities due to fluctuations in stock prices held by the company such as Longpan Media, etc., fell by more than 40 million compared to the same period last year. Furthermore, since 2024, China Southern Media will no longer enjoy the preferential policy of exemption from corporate income tax. Accordingly, the accrued income tax increased year-on-year, and finally achieved net profit of 152 million yuan in the first quarter, or -33.96% over the same period last year.

Innovative businesses have blossomed, and the field of “education+AI” has been explored in multiple dimensions. The company actively grasped the opportunity of the “double reduction” policy, promoted the construction of the “Southern Education Media After-School Service Platform” and the “Greater Bay Area Research Service Platform”, and implemented “one county, one policy” and “one school, one case” for after-school services, with a total revenue of nearly 200 million yuan. Organize interaction among Bay Area students to enhance cultural identity. Implement teacher quality and ability improvement plans, organize testing and evaluation, and innovative product service projects. Xinhua bookstores around the world have implemented a grid reform of education services, opening up new routes for education services in all fields. The service capacity of the “Guangdong Education Xiangyun Digital Textbook Application Platform” platform has been steadily improving, with over 43 million active users throughout the year, an increase of 95.77% over the previous year. Various market-based projects such as the “Southern Intelligent Operating System”, “Language Music Platform” and “Guangdong High School Learning Platform” have been launched to achieve commercial operation.

Maintain a “Highly Recommended” investment rating. We predict that in the future, the main textbook publishing and distribution business will maintain a steady development trend with the number of students in the province. In addition, the company's innovative business will blossom, multi-dimensional exploration in the “education+AI” field, and after-school services will grow rapidly. Taking into account expectations of changes in tax policy, the 2024-2026 profit forecast was lowered as appropriate. It is estimated that 2024/2025/2026 will achieve profit of 9.18/9.95/1.05 billion yuan, respectively, and the corresponding PE is 13.7/12.6/11.4, respectively, maintaining the “Highly Recommended” investment rating.

Risk warning: risk of changes in tax policy, risk of fluctuations in upstream paper costs, etc.