The net profit of 24H1 after deducting non-return to mother increased by 8.14%, maintaining the “Buy” rating company's semi-annual report: H1 achieved revenue of 0.453 billion yuan (yoy +3.03%), net profit to mother of 91.0288 million yuan (yoy +3.80%), and deducted non-net profit of 81.6659 million yuan (yoy +8.14%). Among them, Q2 achieved revenue of 0.228 billion yuan (yoy -3.03%, qoq +1.13%) and net profit to mother of 42.4869 million yuan (yoy -0.43%, qoq -12.47%). We maintained the company's net profit of 0.18/0.198/0.217 billion yuan in 24-26, and compared to Wind, the 24-year average PE was 21X. Considering that the company's overseas business is still being dragged down, we gave the company 18X PE for 24 years, corresponding to a target price of 19.98 yuan, maintaining a “buy” rating.

The book planning and distribution business performed better than the industry. The focus was on improving efficiency and driving the cost rate down. 24H1's book planning and distribution business revenue was 0.38 billion yuan, an increase of 1.99%, which was superior to the industry.

According to unpublished data, due to insufficient consumer demand and the transformation of industry channels, etc., the 24H1 book retail market sales code dropped 6.2% in China. The gross profit margin of the company's book planning and distribution business was 47.65%, down 1.96pct, mainly due to intense industry competition and strong discount pressure; 24H1 comprehensive gross profit margin of 48.13%, same decrease of 1.63pct; sales/management/R&D/finance expenses ratio 17.55%/6.81%/0.82%/-0.37%, -0.51/-1.25/-0.23/-0.26pct. The main reason is that in the context of the overall pressure of the industry, the company's “focus” and “efficiency improvement” are the business priorities, strengthening internal refined management and cost control. It will definitely work.

Overseas business revenue continues to grow, and losses continue to narrow

24H1's overseas business continued to grow, achieving revenue of 62.5556 million yuan, an increase of 18.24%; loss of 6.9991 million yuan, 47.5% narrower than 23H1. The company continues to promote optimization and adjustment in the direction of topic selection, integrating children's book brands, and optimizing asset quality. 24H1 has launched 103 new products overseas, including 18 popular books, 85 children's books, and works such as “Pretty Ugly” and “Dragon Fall”, which have received good reviews and market feedback. The company continues to promote outstanding domestic works through overseas platforms, and successfully promoted the Douban 23 annual list work “I Deliver Express Delivery in Beijing” to more than 10 countries including the United Kingdom, Germany, France, Italy, Russia, and South Korea. The comic book “The Fantastic Journey of the Shepherd Boy (comic version)”, adapted and created by the company itself, was also released in Spanish and Czech, following copyright in Italian, French, and Russian.

It has high-quality copyright resources and a reserve of bestsellers. The omni-channel marketing and sales system 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 created a number of “best-selling and long-selling” books, forming a solid accumulation of high-quality products; at the same time, the company focuses on iterative changes in sales channels, insists on starting from product content, actively expanding cooperation with experts on various platforms, and formulating refined marketing strategies based on platform characteristics to achieve accurate reach and continuous dissemination of content, promote the same frequency resonance of marketing and sales, and increase sales conversion rates.

Risk warning: Book sales fall short of expectations, and overseas business falls short of expectations.