CITIC Publishing released its 2024 mid-year report: the company's revenue and total operating costs for the first half of 2024 were 0.805 and 0.69 billion yuan (yoy -7.75%, -10.43%), respectively; sales, management, and R&D expenses were 0.14, 0.054, and 0.005 billion yuan (yoy -5.14%, -2.63%, +0.95%), and the company accrued asset impairment losses of 0.02251 billion yuan in the first half of 2024; in a single quarter, 2024Q2's revenue 0.4 billion yuan (yoy -9.6%, qoq +0.23%), 0.0553 billion yuan (yoy +12.7%, +10.77%, qoq +45%, +54%)

Key points of investment

2024Q2 Month-on-month revenue growth is not due to mother and deduction, same month-on-month double increase, main business is resilient

In the first half of 2024, the company's revenue was 0.805 billion yuan (yoy -7.75%). On the industry side, China's book retail market fell 6.2% year on year in the first half of 2024, and the company's revenue growth rate converged with industry fluctuations; by classification, the company's three major revenue from book publishing and distribution, digital intelligence services, and urban space operations in the first half of 2024 was 0.624, 0.1, 0.147 billion yuan (yoy -9.3%, +12.66%, -12.24%), and digital intelligence business revenue increased.

In the first half of 2024, the company's book market share was 2.68%. In terms of production line segmentation, the company ranked first in management, science, psychological self-help, and biography categories; children and lifestyle categories ranked second; in a single quarter, 2024Q2's return to mother and non-profit both increased year-on-year, helped by the company's measures to reduce costs and increase efficiency. Through measures such as digital intelligence, production optimization, sales price control, etc., the gross margin of the publishing business increased by 3.68 pcts year-on-year. Overall, the gross margin of the publishing business increased by 3.68 pcts over the same period last year.

▌Accelerate the promotion of animation cultural and creative strategies, and the establishment of the Animation Division IP business has potential for growth

In the first half of 2024, the company's animation book publishing revenue increased 30% year on year, ranking second in the anime book market share. Focusing on IP logic, it has expanded its layout in the surrounding derivatives field. It has reached cooperation with Universal Studios on Minions and Kung Fu Panda derivatives, and has obtained licenses to operate IP derivatives such as “Buried Flillian”. Anime theme stores can also be expected in the second half of the year.

As one of the leading cultural brand companies, how to implement new quality productivity under AIGC?

The company accelerated the construction of intelligent digital systems and officially released a digital intelligence development strategy in early July 2024, opening up the infrastructure layer and cooperating with model technology companies; the developed Kuafu AI digital publishing platform covered multiple application scenarios such as topic selection evaluation and content planning, and continued to improve quality and efficiency through data analysis and AI technology application in the entire publishing process; the training platform for knowledge-based enterprises was officially launched, and the revenue scale of enterprise knowledge services increased 15% year on year; knowledge services were fully upgraded to digital intelligence services, actively building a new integrated publishing ecosystem.

Profit forecasting

Maintaining the “buy” investment rating, predicts that the company's 2024-2026 revenue will be 1.799, 1.932, and 2.09 billion yuan; the return profit will be 0.158, 0.2, and 0.256 billion yuan, respectively; EPS is 0.83, 1.05, and 1.35 yuan respectively; the current stock price corresponds to PE of 30.1, 23.7, and 18.5 times, respectively; the company's market share is stable, and tax changes are gradually being implemented; based on the company as one of the representative enterprises of Chinese cultural brands, the mass publishing advantage of the main business will continue. With endogenous epitaxial two-wheel drive, technology empowers the main business. Combining new AI technology with new exploration helps maintain the expansion of business operations. The company continues to increase R&D to help explore high-quality innovation and development paths, thereby maintaining a “buy” investment rating.

Risk warning

The risk of further changes in tax incentives and financial subsidy policies; the risk of new business or foreign investment falling short of expectations; the risk of digital transformation challenges; the risk of intellectual property infringement; the risk of changes in preferential tax policies; the risk of changes in industrial policy; the risk of digital transformation and upgrading falling short of expectations; the risk of content e-commerce falling short of expectations; the risk of macroeconomic fluctuations, etc.