Incident: The company released its 2024 interim report. 24H1 achieved revenue of 5.79 billion yuan, +6.6% year on year, net profit to mother 0.72 billion yuan, -6.1% year on year; net profit after deducting non-return to mother 0.74 billion yuan, -4.4% year over year. The company disclosed the 2024 semi-annual profit distribution plan and plans to distribute a cash dividend of 1.9 yuan and a cash dividend of 0.23 billion yuan (tax included) for every 10 shares to all shareholders.

Focus on key publishing projects to promote high-quality development. 24H1 maintained its advantage in publishing capabilities. Among them, the textbook teaching aids and general book distribution business achieved revenue of 2.26 billion yuan/2.65 billion yuan respectively, an increase of +6.5%/4.7% over the previous year. The company launched books with key themes such as “Dacheng Kun”; dug deep into local resources and steadily promoted key publishing projects; at the same time integrated new paths to develop the AIGC audiobook automatic production project with the Himalayas. According to the opening data, Shiyang's share of the popular book market ranked 9th among 37 publishing media groups in the country, up two places from the end of 2023.

The upgrading of education services is a new driving force for the growth of informatization. Thanks to the increase in sales of educational products for high school students, 24H1's textbook and teaching aid distribution business achieved revenue of 2.26 billion yuan, +6.5% over the same period last year. The company continues to promote the transformation and upgrading of education informatization and education equipment business. The digital online service platform “Wenxuan Youxue” covers a total of 6036 schools, serves 4.745 million students, and education informatization services give new impetus to business growth.

Integrate online and offline scenarios to digitally transform reading services. The company integrates platforms such as large bookstores, small and medium-sized bookstores, and Internet publication reading services, etc., combined with logistics service networks to achieve a nationwide reading service network system. The company continues to deepen platform e-commerce operations, further promote short video and live streaming services, enhance competitiveness in the national book e-commerce industry; build a “cloud store” business system to build diversified, personalized and intelligent reading consumption scenarios.

Profit forecasting and investment advice. Net profit due to mother in 2024-2026 is estimated to be 1.54 billion yuan, 1.71 billion yuan, and 1.89 billion yuan respectively, corresponding to PE of 12 times, 11 times, and 10 times, respectively. Considering that the company is the leading organization of a local publishing group and benefits from the Western Development Strategy, the company is expected to obtain income tax benefits while maintaining a stable high level of dividend rates. In summary, we gave the company 15 times PE in 2024, with a target price of 18.75 yuan, maintaining a “buy” rating.

Risk warning: the risk of changes in national policies, the risk of fluctuations in the enrolment population, and the risk of fluctuations in paper prices.