The company's dividends are stable, cash is abundant, and the main textbook and teaching aid business is expected to grow steadily. For the first time, coverage was given an “increase in wealth” rating. We expect the company's EPS in 2024-2026 to be 0.65/0.71/0.78 yuan, respectively, with a target price of 9.75 yuan, corresponding to the PE valuation of 15x in 24, and for the first time, a “gain” rating.
The company's cash accounts for a high proportion of market value, and the scale of dividends has been rising steadily. According to the company's 2023 financial report, the total amount of various types of monetary funds, time deposits, and capital protected financial management of the company reached 8.025 billion yuan. As of the closing market value on June 11, 2024, cash accounted for about 80%. The company's dividends have been growing steadily. Over the past 4 years, the dividend rate fell back to 47.8% in 2023. In a horizontal comparison, the dividend rate ranked 8th among 18 local state-owned publishing companies, which is at the middle level. We expect there is still room for the dividend ratio to maintain the upward trend.
The number of high school students enrolled in Hubei Province will continue to grow in the next 5 years, and the high school teaching aids market space has potential. Unlike the market, we believe that changes in the local student structure over the next 5 years will have an important impact on trends in the local textbook teaching aid business. First, in the context of the “one education, one supplement” and “double reduction” policies, the per capita demand for teaching aids at the high school level is much higher than at the compulsory education stage, and the unit price of market-based teaching aids at the high school level is also far higher than that of compulsory education, which contains a higher individual value; secondly, although the overall population size is shrinking, the number of high school students enrolled in high schools in Hubei Province will still maintain a growth rate of more than 2% over the next 5 years, which will have a certain supporting effect on the textbook teaching aid business; finally, the company's ability to “provide education services” “Improvement” is one of the company's three major projects, The positive movement of market-based teaching aids has begun to bear fruit. If investment and development continues, it is expected to increase market share and contribute flexibility to performance in this market.
Focus on the “three special actions” and actively develop new businesses. The company is actively consolidating “theme publishing” capabilities and promoting the “digital transformation” process. At the same time, it has begun exploring the directions encouraged by policies such as research and after-school services. The development of cultural and creative business has shown the initial results of reusing channel capabilities, and new business exploration is expected to present a new development trend.
Risk warning: The risk of a decline in the number of students enrolled, the increase in the company's market share falling short of expectations, and the risk of the company's new business capital taking up or dragging down performance.