occurrences

New Classic released an announcement: In mid-2024, the company's total revenue was 0.45 billion yuan (yoy +3.03%), operating costs were 0.235 billion yuan (yoy +6.36%), sales and management expenses were 0.07954, 0.03089 billion yuan (yoy +0.15%, -12.98%), and the mother and deducted non-profit were 0.091, 0.082 billion yuan (yoy +3.8%, +8.14%); looking at a single quarter, the company's operations of 2024Q2 Received 0.23 billion yuan (yoy -3%), returned to mother and deducted non-profit 0.042, 0.04 billion yuan (yoy -0.43%, +10.25%); 2024Q2 gross sales margin and net profit margin 47.78%, 18.94%.

Key points of investment

2024Q2 After deducting non-profit, gross sales margin and net margin both increased by 10%, and overseas business revenue increased 18.24% in the first half of 2024

In the first half of 2024, the company's three major revenues from paper books, digital content, and copyright operations were 4.2, 0.21, and 0.00815 billion yuan (yoy +3.66%, -3.9%, +17.2%), respectively. The gross margin was 46.69%, 68%, and 57.8%, respectively. The copyright operating revenue increased by double digits, and gross margin increased slightly. The business was beginning to bear fruit; 2024Q2's sales, management, and R&D expenses fell 3.56%, 9.2%, and 20.79%, respectively. There was a 10.25% year-on-year increase in the single quarter, and both gross margin and net margin increased in the single quarter.

Looking at the main business category, in the first half of 2024, the company's book planning and distribution revenue was 0.377 billion yuan (yoy +1.99%), with a gross profit margin of 47.65% (down 1.96 percentage points from the previous year). The book “We Live in a Huge Gap” won the first half of the year's non-fiction shelf e-commerce list and overall sales ranking, and “Altay's Corner” and “What kind of life do you want to live” also drive sales with popular broadcasts of related film and television productions; it continues to cultivate original content and continues to cultivate original content in the original comic “Animal Park” IP Bibi” and “pole Based on “A Brief History,” a new comic image, “Octopus Dumpling,” was launched. On the overseas business side, in the first half of 2024, the company's overseas business revenue was 62.5556 million yuan (yoy +18.24%), loss 6.999 million yuan (year-on-year loss narrowed by 47.5%), and financial improvements.

Operating data is superior to the industry, thanks to the company's “focus and efficiency improvement” strategy to promote steady business development

On the industry side, the book retail market declined 6.2% year on year in the first half of 2024, mainly due to factors such as insufficient consumer demand and channel transformation. However, the company's paper book revenue increased 3.66% year on year, and total revenue increased 3% year on year, all better than the overall book retail industry data. In the first half of 2024, the company achieved a year-on-year increase of 3%, 3.8%, and 8% in revenue, respectively, thanks to the company's high-quality copyright and product reserves, and “best-selling and long-selling” books also built up the accumulation of high-quality products. At the same time, the “focus and efficiency improvement” strategy implemented by the company in the first half of 2024 also promoted the steady development of the main business.

Using new media to help increase value of high-quality content

The company explores content marketing and communication methods on multiple platforms, builds a matrix of cooperative talents, strengthens traffic connections and refined operation in traditional channels, and enhances channel portfolio management and sales conversion capabilities. From “Altay's Corner” graphic interaction to the comic book “Girls' School Star”, which has received good reviews based on high-quality content reserves and leveraged new media (such as Douyin, Xiaohongshu, etc.), diversified marketing methods help communication and sales transformation.

Profit forecasting

Maintaining the “buy” investment rating, predicts that the company's 2024-2026 revenue will be 9.6\ 10.2\ 1.11 billion yuan, the net profit will be 1.8\ 2.04\ 0.232 billion yuan, EPS is 1.11\ 1.25\ 1.43 yuan respectively, and the PE corresponding to the current stock price is 14.5\ 12.8\ 11.2 times, respectively. Based on the company's insistence on high-quality content supply (such as Yu Hua's new book “Valley Breeze”), the main business is stable and has high-quality copyright resources and long-selling book reserves. The IP business explores commercialization, increases revenue from overseas business, improves finance, and embraces new media to carry out refined operations, thereby maintaining a “buy” investment rating.

Risk warning

Risks that new business exploration falls short of expectations, risk of topic selection, risk of losing talent, risk of intellectual property protection falling short of expectations, risk of changes in tax policies, risk of overseas business and new business development falling short of expectations, risk of content e-commerce not progressing as expected; risk of challenges posed by industry transformation and development; risk of macroeconomic fluctuations, etc.