Core views:
New Classic released its 2023 annual report and 2024 quarterly report: (1) In 2023, the company achieved revenue of 901 million yuan, a year-on-year decrease of 3.94%; net profit to mother was 160 million yuan, an increase of 16.48% year on year; net profit after deducting non-return to mother was 140 million yuan, an increase of 11.69% year on year. (2) In 24Q1, the company achieved revenue of 225 million yuan, an increase of 9.97% year on year; net profit to mother of 49 million yuan, up 7.81% year on year; net profit after deducting non-return to mother was 41 million yuan, an increase of 4.57% year on year. (3) In 2023, the company plans to distribute a cash dividend of 0.9 yuan/share. The total dividend accounts for 86.78% of the current net profit to mother, and the current dividend rate is 5.1%.
Domestic business is affected by the market, and the performance of new books is still impressive. In 2023, the domestic book planning and distribution business achieved revenue of 734 million yuan, a year-on-year decrease of 8.84%, and a gross profit margin of 48.45%, a slight decrease of 0.6 percentage points over the previous year. The overall domestic book market was sluggish in 2023, and Shiyang decreased by 7.04% year on year. As a result, the company adjusted its new book publishing plan. A total of 146 new books were launched during the reporting period, a decrease of 59 from the previous year. However, the company continued to launch popular new books. “We Live in a Huge Gap” published in November 2023 refreshed the shortest time for the company's single book sales to exceed one million copies, driving the 24Q1 company's paper book revenue to increase 10.13% year over year. According to opening data, the 24Q1 national book retail market decreased by 5.85% year on year.
Overseas business integration improved efficiency, and losses were drastically reduced compared to the previous year. In 2023, the overseas business achieved revenue of 135 million yuan, an increase of 53.82% over the previous year. Overseas business grew rapidly as books were launched in the early stages. At the same time, the company integrated internal resources and personnel structure to optimize related costs. In 2023, the overseas business achieved net profit of 14.26 million yuan, and losses narrowed by 25.64 million yuan over the same period last year.
Profit forecasts and investment recommendations. We expect the company's revenue in 2024-2026 to be $9.57/10.05/10.53 billion, and net profit to mother of $180/1.97/212 million. Referring to comparable companies, we gave the company a PE valuation of 22 times that of 2024. The corresponding reasonable value per share was 24.43 yuan/share, maintaining a “buy” rating.
Risk warning. Book consumption is weak; sales of the company's leading books have declined; the application of AI technology falls short of expectations; online discounts have intensified; overseas business losses; and industry regulatory policies have changed.