The company's revenue for the first quarter of 2024 was 402 million yuan, a year-on-year decrease of 5.79%; net profit attributable to shareholders of listed companies was 378.754 million yuan, a year-on-year decrease of 9.89%.

Revenue is under pressure from the sector, and tax policy adjustments affect net profit. In the first quarter of 2024, the company achieved revenue of 402 million yuan, a year-on-year decrease of 5.79%. Net profit attributable to shareholders of listed companies was 38 million yuan, -9.89% year-on-year. From a revenue perspective, according to data disclosed by Open Publishing Network, the book retail market was -5.85% year over year. As a leading company in the industry, the company's performance is under pressure with the industry. In addition to pressure on the main business, profit side disturbances are mainly a significant increase in income tax compared to 35,400 in the same period last year, to 1.30968 million, which had a significant negative impact on profits.

Channel shocks continued, and children's and other tracks declined year on year. Entering 2024, the book retail market still experienced negative growth of 5.85% year over year. Looking at book sales sales, the average sales volume of top books has declined compared to the same period last year. Looking at the retail book market through different channels, short video e-commerce continued to show a growth trend in the first quarter of 2024, with a year-on-year increase of 31.15%; physical store channels still showed negative growth, down 17.78% year on year; platform e-commerce and vertical and other e-commerce declined by 10.31% and 10.59% respectively. The impact on the channel continues, and the leading racetrack, which accounts for the largest share of children, has not stopped declining.

Looking forward to the future, content planning side: The company is currently exploring new models of content planning, linked with excellent anime, film and television IP. The social response of books such as “30,000 Miles to Changan” series, “The Biography of Oppenheimer”, and “The Legend of the Deep Sea Hotel” has exceeded expectations. In the knowledge service business: The company is shifting its focus to the B-side, focusing on providing comprehensive, multi-scenario knowledge service solutions for government agencies and enterprises. On the AIGC application: The company has launched the AIGC digital publishing platform to assist book publishing, improve publishing efficiency, optimize accurate marketing, and continue to reduce costs and increase efficiency. In addition, the company paid a cash dividend of 589.47 million yuan in 2023, accounting for 50.7% of net profit to mother, maintaining a generous dividend ratio.

Maintain a “Highly Recommended” investment rating. We predict that the book retail market is expected to recover further in the future. As one of the leading companies in the industry, the company has significant advantages in operating efficiency and some segments (management, children, etc.). Considering the risk of subsequent tax policy adjustments, it is carefully estimated that net profit to the mother for 2024-2026 will be 1.23/1.45/166 million yuan, respectively, corresponding to 46.1/39.0/34.0 times PE, maintaining a “highly recommended” investment rating.

Risk warning: Digital transformation falls short of expectations; book industry market decline further; e-commerce channel development falls short of expectations; content copyright risks, etc.