Matters:

24Q2 achieved revenue of 1.937 billion yuan (YOY +3.9%), and realized net profit of 0.147 billion yuan (YOY -18.6%), including a net fair value loss of 0.036 billion yuan (net income of 0.007 billion yuan in the same period last year); realized net profit of 0.161 billion yuan (YOY -1.9%) without deduction. Q2 income tax was 0.062 billion yuan, and the actual tax rate was about 25%. Excluding tax effects, net profit returned to mother YOY +2%, and net profit not attributable to mother YOY +23%. The company's endogenous growth remained strong.

24H1 achieved revenue of 4.025 billion yuan (yoy -0.8%), net profit due to mother of 0.299 billion yuan (yoy -27.2%), excluding income tax expenses (about 0.119 billion), which affected YOY -4.3%, mainly due to an increase in fair value change losses (24H1V23H1: -0.062 billion VS 0.028 billion); net profit not attributable to mother of 0.33 billion yuan (yoy -5.95%), excluded YOY +19% after income tax.

Commentary:

Operating performance is in line with expectations, cost reduction and efficiency increases, and operating efficiency is improved, and the main business is optimistic for the whole year. 1) The month-on-month growth rate of the company's revenue (Q1/Q2 YOY -4.9%/+3.9%) and net operating cash flow (Q1/Q2 was -0.19/0.14 billion yuan, respectively) was mainly due to partial recovery of unconfirmed payments in Q1; 2) Cost reduction and efficiency improvement: 24Q2 The company's gross margin was 34.4%, YOY+0.88pct, paper and other costs were well controlled; 24Q2 sales/management/R&D rates were 11.3%/10.9%/0.1%, YOY- 0.1%, respectively 0.87/-1.37/ -0.01pct; 3) Looking ahead to the whole year, the company is located in Guangdong with a demographic advantage and is one of the few publishing targets that still have epitaxial mergers and acquisitions logic. The growth rate has not changed, and the main business is still growing.

The company's new business layout is positive, the degree of fulfillment is high, and there is great upward flexibility. 1) The company has a variety of AI+ education products, and the overall progress is relatively rapid. It is expected to continue to advance in 24 years; 2) The layout is high for education and training, and there is plenty of room for growth, and the province will continue to expand off-campus hosting in 24 years. In addition, the company is also actively developing new businesses such as children's programming and research, and new businesses are highly flexible.

Investment advice: We are optimistic about the stability and dividend value of the company's main business. In the long term, we are optimistic that the company will actively embrace new businesses such as AI and education and training, which is expected to open up revenue and valuation ceilings. However, due to income tax, short-term performance may decline slightly. Considering the H1 performance, we will slightly adjust our previous performance expectations. The company's net profit for 2024/25/26 is 0.904/1.007/1.122 billion yuan respectively (the original forecast value was 1.02/1.168/1.315 billion yuan). The current stock price corresponds to 12/11/10 times PE, with reference to comparable company valuations (Phoenix Media, Zhongnan Media, Shandong Publishing, Xinhua Wenxuan), due to the company's steady main business and positive new business layout. The company was given 16 x PE for 24 years, with a target market value of 14.4 billion yuan, corresponding to a target price of 16.1 yuan, maintaining a “strong push” rating.

Risk warning: rising paper costs, changes in education policies, changes in the number of students enrolled, progress in mergers and acquisitions falling short of expectations, and falling short of expectations in new business