According to the report released by Southwest Securities on the Zhitong Finance APP, Xinhua Winshare (00811) is covered for the first time and rated as "buy". It is estimated that the company's EPS for 2024-2026 will be RMB 1.41, 1.53, and 1.65 respectively. Considering the company's position as the leading local publishing group, the stronger the publishing and distribution business, the education and information technology business is expected to open up a new growth curve. The company will benefit from the western development strategy and is expected to gain preferential tax treatment for corporate income tax. Furthermore, the company maintains a relatively high level of dividend payout, and with the consideration of the valuation discount of Hong Kong stocks, the target price is set at HKD 12.26, with a PE of 8 times for 2024.

Southwest Securities' main points are as follows:

The number of K12 students in Sichuan Province still has resilience in 2024 and 2025.

The decline in the number of births since 2020 reflects a lag in the number of K12 students, and it is expected that the number of students in school will remain resilient in 2024 and 2025. Although the number of children born in Sichuan Province has declined since 2020, considering that primary school students enter school at the age of 6 and graduate from high school at the age of 18, the negative impact of the decline in the number of births on the number of K12 students has a certain lag. The number of primary school enrolments in 2024-2025 corresponds to the number of births in 2018-2019 (about 900,000), and the number of high school graduates corresponds to the number of births in 2006-2007 (about 750,000). It is expected that the number of K12 students in school will still be resilient in 2024 and 2025.

Leading publisher in distribution areas, with rich cooperative resources.

The company wholly owns 15 publishing and media units, involving book, periodical, audio-visual, electronic, network and other publishing categories. In terms of teaching materials, Sichuan Education Publishing House under the company owns the book publishing license issued by the State Administration of Press, Publication, Radio, Film and Television, with a validity period until December 31, 2029; the company has the publishing qualification for teaching materials of all subjects in primary and secondary schools, and mainly sells the published teaching materials in Sichuan Province. In terms of general books, the company has established cooperative relationships with authors including Wang Meng and Liu Xinwu, and institutions including Disney and Penguin Random House. According to the data from Openbook, the company's actual sales share in the mass publishing market ranks 7th among local publishing groups and 11th among 37 publishing and media groups nationwide.

Stable dividend, with a dividend payout ratio maintained above 30%.

The company has a stable dividend payment, and the current stock price corresponds to a dividend yield of about 4.8% of Hong Kong stocks. According to the company's 2023 profit distribution, cash dividends of RMB 4 per 10 shares were distributed to shareholders (including tax), corresponding to a Hong Kong stock price (HKD 9.07; exchange rate 1 HKD = 0.92 RMB), with a dividend yield of about 5%. The company's operating situation is stable, maintaining a continuous dividend payout, and maintaining a dividend payout ratio of over 30% from 2016 to 2024.

Risk reminder: Risk of changes in national policies, risks arising from fluctuations in the number of enrolments, risks arising from fluctuations in paper prices.