Investment highlights:

General books outperformed the market, and total profit increased steadily. A dividend of 0.19 yuan per share is planned in mid-2024

(1) Revenue side: 2024H1 achieved revenue of 5.788 billion yuan, yoy +6.64%, 2024Q2 revenue of 3.314 billion yuan, yoy +6.34%, qoq +33.96%, 2024H1 general book revenue of 3.144 billion yuan, yoy +5.46%, outperforming the general book market (according to unpublished data, 2024H1 book retail market year-on-year ratio); textbook and teaching aids revenue of 2.835 billion yuan, yoy+ 2.92%

2024H1's gross profit was 2.226 billion yuan, yoy +5.61%, corresponding to a gross profit margin of 38.46%.

(2) Profit side: 2024H1 achieved net profit of 0.716 billion yuan, yoy -6.08%, net profit of non-return to mother of 0.744 billion yuan, yoy -4.4%, and 2024H1 ETR 11.31%. The company benefited from the Western Development Strategy. Some subsidiaries applied a preferential income tax rate of 15%, regardless of income tax changes. 2024H1 achieved a total profit of 0.848 billion yuan, yoy +5.83%; 2024Q2 net return to mother Profit 0.51 billion yuan, yoy -9.43%, total profit 0.603 billion yuan, yoy +2.56%.

(3) Dividends: The company disclosed the 2024 semi-annual profit distribution plan. It plans to distribute a cash dividend of 1.9 yuan for every 10 shares, with a total dividend of 0.23 billion yuan, with a dividend rate of 32.75%. Based on the closing price on September 23, the dividend rate for the past 12 months is 4.27%.

The expansion of high school classes has led to an increase in textbooks and teaching aids, and the share ranking of general books in the real world has increased

(1) Education services: High school students drive the increase in textbook distribution revenue, and the education informatization business is growing rapidly: 2024H1's textbook teaching aid sales code is 3.36 billion yuan, yoy +2.25%, and textbook teaching aid distribution revenue is 2.263 billion yuan, yoy +6.53%, mainly benefiting from the increase in sales of educational products in the high school sector. 2024H1's education informatization and other business revenue is 0.242 billion yuan, yoy +41.98%. The online service platform “Wenxuan Youxue” covers 6036 schools and serves 4.7468 million students.

(2) General books bucked the trend: 2024H1 Company's general book sales code was 6.888 billion yuan, yoy +16.06%. Publishing Side Code Yang grew 29.72% year on year. Thanks to the increase in market-based cultural and educational books and literature book publications, the distribution of Sidecode Yang grew 9.45% year on year, thanks to the growth of Internet operations and new channels. The company's group's share of Shiyang's mass book market ranked 9th out of 37 publishing and media groups in the country, up 2 places from the end of 2023.

Profit forecast and investment rating: The company's basic textbook teaching aid base is steady, focusing on the deep integration of online and offline teaching aids, and the continuous increase in general book publishing and distribution capabilities. Considering that the company benefits from the Western Development Strategy and applies a 15% preferential income tax rate, we predict that the company's 2024-2026 revenue will be 12.4/12.9/13.6 billion yuan, respectively, and net profit to mother will be 1.5/1.7/1.8 billion yuan, respectively. The corresponding PE is 11/10/9x, covered for the first time , giving it a “buy” rating.

Risk warning: risk of changes in the school-age population, risk of paper price fluctuations, risk of book sales falling short of expectations, risk of changes in tax policies, risk of industry policy changes, etc.