In 2023, overseas business losses narrowed, and net profit to mother grew steadily. The company released its 2023 annual report. The company achieved revenue of 901 million yuan for the full year of 2023, a year-on-year decrease of 3.94%, achieved net profit of 160 million yuan, an increase of 16.48% over the previous year, achieved net profit without deduction of 140 million yuan, an increase of 11.69% over the previous year, and achieved steady growth in net profit to mother. 23Q4 achieved revenue of 244 million yuan, a year-on-year increase of 4.17%, and realized net profit of 30 million yuan to mother, an increase of 183.14% over the previous year. In addition, overseas business revenue in 2023 was 135 million yuan, up 53.82% year on year, accounting for 14.98% of the company's total revenue. The loss was 14 million yuan, a sharp decrease of 64.25% compared to the previous year. We believe that the company has a stable advantage in the domestic market in 2023. At the same time as high growth in overseas business, losses were drastically reduced, driving steady improvement in main business performance.
Both revenue and profit increased in 24Q1, and continued dividends to give back to investors. The company released its 2024 quarterly report. In 24Q1, it achieved revenue of 225 million yuan, an increase of 9.97% over the previous year, and realized net profit of 49 million yuan, an increase of 7.81% over the previous year, and realized net profit of 41 million yuan without return to mother, an increase of 4.57% over the previous year. In addition, the company announced the 2023 dividend plan. It plans to distribute a cash dividend of 0.9 yuan (tax included) per share to all shareholders, totaling 139 million yuan (tax included). The company's cash dividend in 2023 accounts for 86.78% of the net profit attributable to the mother. At the closing price on April 26, the dividend rate was 5.15%.
Copyright resources and long-selling books are abundant, and the marketing system covers all channels. The company is rich in copyright resources. The headquarters and overseas copyright library have nearly 7,000 types of rights, including paper books, e-books, audiobooks and related derivative rights, and have the foundation for diversified content development and copyright licensing operations. Over the years, the company has built a number of “best-selling and long-selling” books, forming a solid accumulation of high-quality products. Among them, “Ordinary World”, “Little Peas by the Window”, “One Hundred Years of Solitude”, “The Little Mouse” has sold more than 10 million copies, “Alive,” “White Night Walk,” “The Story of the Sahara,” “You Should Fly to Your Mountain Like a Bird”, “Sea of Life”, and “1Q84,” which have sold more than 1 million copies. In addition, the company has omni-channel sales capabilities, including platform e-commerce, short video live e-commerce, community e-commerce, and physical bookstores, and formulates refined marketing strategies based on platform characteristics to improve sales conversion rates.
Profit forecasting and valuation analysis. We expect the company's revenue for 2024-2026 to be 997, 11.04 billion yuan, and 1,224 million yuan, respectively, and net profit to mother of 1.80, 1.99, and 220 million yuan, respectively, and corresponding EPS of 1.11 yuan, 1.22 yuan, and 1.35 yuan respectively (the original forecast for 24-25 was 1.25 and 1.43 yuan/share). Referring to the consistent expectations of comparable companies in the same industry, and considering the increase in industry valuation, we gave the company a target PE of 23 times in 2024, corresponding to a target price of 25.53 yuan (original target price 23.92 yuan/share, 23 times dynamic PE in 2023, +7%), maintaining a “superior to market” rating.
Risk warning: Overseas business losses fall short of expectations, increased risk of industry competition, risk of declining book sales, risk of falling profit margins.