Incidents:

On April 24, 2024, the company released its annual report for the year 2023 and the report for the first quarter of 2024, which included annual revenue of 9.365 billion yuan, up 3.35% year on year; net profit before return to mother was 1,284 million yuan, up 34.39% year on year; net profit after deducting non-return to mother was 891 million yuan, up 0.31% year on year; and non-recurring profit and loss of 390 million yuan, mainly including tax-related one-time adjustments of 140 million yuan, financial asset investment income of 150 million yuan, and government subsidy income of 90 million yuan.

In 2024, Q1 revenue was 2,088 billion yuan, down 4.86% year on year; net profit to mother was 152 million yuan, down 33.96% year on year; net profit without return to mother was 169 million yuan, down 9.34% year on year, and revenue from change in fair value decreased by 47.61 million yuan year on year.

Opinions:

The main business is stable and there are barriers, and revenue from the textbook teaching aid business is steadily increasing. As the leading publishing state-owned enterprise in Guangdong Province, the company operates steadily as its main business. The company concentrates superior resources for educational publishing, publishing 1,077 textbooks and 2,847 teaching aids throughout the year. 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 company's influence in the field of education publishing has increased markedly, and the profits of its education clubs have been growing steadily, reaching 286 million yuan in 2023. General book publishing achieved sales of 2,801 billion yuan, an increase of 35.48% over the previous year.

After-school education services are expanding steadily, and the construction of digital education platforms continues to improve. Actively seizing the opportunities of the “double reduction” policy, the after-school service implemented “one county, one policy” and “one school, one case”, with total revenue of nearly 200 million yuan. 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 commercialized.

The dividend payout continues to be strengthened, and high dividends highlight defensive value. According to the 2023 annual report, the company plans to distribute a cash dividend of 5.40 yuan (tax included) to all shareholders for every 10 shares, for a total of 484 million yuan (tax included). In the 2022 distribution plan, a cash dividend of 4.70 yuan (tax included) is distributed for every 10 shares. A total of 421 million yuan (tax included) is proposed to be distributed, which is a significant increase in dividends.

Profit forecast and investment rating: We expect the company's revenue for 2024-2026 to be $9.665 billion, $10.013 billion, and $10.363 billion. Net profit attributable to mother was 953 million yuan, 1,037 million yuan, and 1,162 billion yuan. The current stock price corresponding to 2024-2026 PE is 13.2/12.2/11 times, respectively. We are optimistic about the steady growth of the company's main business and active expansion of new businesses. For the first time, coverage was given a “buy” rating.