Incident: The company achieved revenue of 0.805 billion yuan in the first half of 2024, a year-on-year decrease of 7.75%, and net profit to mother of 0.093 billion yuan, an increase of 2.25% over the previous year.

The leading position of mass publishing is stable, and the promotion of animation cultural and creative strategies is being accelerated. According to the report, the 2024 H1 overall book retail market fell 6.20% year on year. Under pressure from industry demand, the company's 2024H1 book and publishing business revenue was 0.624 billion yuan, or -9.32% YoY. The company is steadily at the top of mass publishing. According to the publication, 2024H1 CITIC Publishing has a market share of 2.68%, ranking first among individual publishers in the country; in terms of segmented production lines, the company steadily ranked first in management, science popularization, psychological self-help, and biography categories, and ranked second in children's and lifestyle categories. The company set up an animation division to accelerate the animation cultural and creative strategy. In the first half of the year, the revenue scale of animation book publishing increased 30% year-on-year. Cooperation with Universal Studios was reached on Minions and Kung Fu Panda derivatives, and the IP derivatives business is expected to contribute new impetus to the company's growth.

Kuafu AI has enabled the entire publishing and distribution process, and profitability has steadily increased. The Kuabu AI digital publishing platform developed by the company covers the entire publishing process, including topic selection evaluation, content planning, translation trial translation, text creation, marketing materials, channel distribution, e-commerce operations, etc., and a total of 122 AI applications help the business continue to improve quality and efficiency.

Through measures such as digital intelligence empowerment, production optimization, and sales price control, the gross margin of the company's publishing business increased by 3.68 pcts year-on-year to 37.77%.

The number of knowledge services has been upgraded intelligently, and the cultural consumption business has positioned the operation of urban cultural spaces. 1) Digital intelligence service business revenue was 0.1 billion yuan, YoY +12.66%. The company officially announced the digital intelligence development strategy in early July. In the first half of 2024, the CITIC Academy app launched more than 10,000 digital products, with a cumulative total of more than 13 million registered users. 2) Urban cultural space operating business revenue was 0.147 billion yuan, YoY -12.24%.

The CITIC bookstore floor efficiency increased by more than 37% year on year; the CITIC bookstore's new media matrix was rapidly built, and the cumulative reading/viewing volume exceeded 100 million, and the profitability of “parallel bookstores” was greatly improved.

Profit forecast and investment advice: The company's leading position in mass publishing is stable. Net profit to mother is expected to be 0.16/0.191/0.221 billion yuan in 24/25/26, +38%/19%/16% compared with the same period last year. Maintain an “Overweight” rating.

Risk warning: The recovery of the book industry falls short of expectations; risk of changes in tax policies; increased market competition.