Incidents:

On October 30, 2024, the company announced the 2024 three-quarter report. 2024Q3 revenue was 3.125 billion yuan, yoy -16.60%, net profit to mother 0.233 billion yuan, yoy -10.09%, after deducting non-return net profit of 0.163 billion yuan, yoy -41.60%.

Investment highlights:

Revenue declined due to business restructuring, and total profit increased steadily (1) Revenue side: 2024Q1-Q3 achieved revenue of 8.338 billion yuan, yoy -14.74%, gross profit of 2.014 billion yuan, yoy -7.36%, and gross profit margin of 24.15%, +1.54 pct year-on-year. 2024Q3 revenue 3.125 billion yuan, yoy -16.60%, qoq +36.80%, gross profit 0.717 billion yuan, yoy -21.58%, gross profit margin 22.94%, year-on-year -1.46pct. 2024Q3 revenue declined year-on-year. Among them, revenue from other businesses (modern logistics, etc.) was 3.155 billion yuan, yoy -26.43%, textbook business sales code 0.947 billion yuan, yoy -2.77%, and general book and video publishing business sales code was 1.3 billion yuan, yoy -19.5%.

(2) Profit side: 2024Q1-Q3 achieved net profit of 0.812 billion yuan, yoy -17.45%, net profit of non-attributable net profit of 0.772 billion yuan, yoy -16.77%; 2024Q3 net profit of 0.233 billion yuan, yoy -10.09%, net profit not attributable to mother 0.163 billion yuan, yoy -41.60%, mainly due to a year-on-year decrease in general book sales; 2024Q1-Q3 income tax ETR 21.63%, excluding income tax effects, total 2024Q1-Q3 profit was 1.052 billion yuan, yoy +2.25%; total profit of 2024Q3 was 0.288 billion yuan, yoy +3.50%. The year-on-year increase in total profit of 2024Q3 was mainly due to net income of 17.9 million yuan due to changes in fair value.

(3) The 2024Q3 company has 10.782 billion yuan in cash (monetary funds+transactional financial assets), yoy +2.31%. In addition, the company has 1.28 billion raised capital for foreign investment.

Profit forecast and investment rating: The company's textbook distribution and sales, general books and audiovisual products business base is stable, and actively embraces technological innovation and creates a smart new business format. Therefore, we predict that the company's 2024-2026 revenue will be 10.5/11/11.6 billion yuan, and net profit to mother will be 0.805/0.932/1.079 billion yuan, respectively. The corresponding PE is 18/15/13x, maintaining a “buy” rating.

Risk warning: Market competition increases risk, risk of investment targets falling short of expectations, risk of student growth falling short of expectations, risk of falling short of expectations in scientific and technological innovation progress, risk of tax policy changes, etc.