Incidents:

On October 30, 2024, the company announced its report for the third quarter of 2024. Q1-Q3 of 2024 achieved operating income of 9.366 billion yuan, yoy +1.72%, net profit to mother of 0.957 billion yuan, yoy -22.56%, after deducting non-return net profit of 0.924 billion yuan, yoy -22.62%.

Investment highlights:

Total 2024Q3 profit declined slightly year over year, with a dividend ratio of 5.29%.

Revenue side: 2024Q1-Q3 achieved revenue of 9.366 billion yuan, yoy +1.72%, gross profit of 4.132 billion yuan, yoy +6.53%, gross profit margin of 44.12%, +1.99pct year; 2024Q3 revenue 2.473 billion yuan, yoy +1.47%, qoq -36.48%, gross profit of 1.059 billion yuan, yoy -1.53%, gross profit margin of 42.83%, yoy -1.3pct year on year. The 2024Q3 general book publishing business sold 0.552 billion yuan, yoy +28.97%, significantly outperforming the general book market.

Profit side: 2024Q1-Q3 net profit of 0.957 billion yuan, yoy -22.56%, net profit of non-return of 0.924 billion yuan, yoy -22.62%; 2024Q3 net profit of 0.183 billion yuan, yoy -30.89%, qoq -62.61%, net profit of non-attributable to mother 0.184 billion yuan, yoy -30.04%.

2024Q1-Q3 income tax ETR 25.74%, excluding income tax impact, total profit of 2024Q1-Q3 was 1.392 billion yuan, yoy +5.50%, total 2024Q3 profit 0.291 billion yuan, yoy -1.40%. Based on the closing price on November 5, the dividend rate for the past year was 5.25%, which remained at a high level.

2024Q3's cash on hand (monetary funds+transactional financial assets) was 13.984 billion yuan, yoy +34.37%, mainly due to the increase in monetary capital and abundant cash on hand.

Profit forecast and investment rating: Affected by the adjustment of the main business income tax rate, we predict a year-on-year decline in the company's net profit in 2024, but the company's main publishing and distribution business will be steady, the business structure will continue to be optimized, and gross margin will gradually increase, and we are optimistic about steady growth in future performance. We expect the company's 2024-2026 revenue to be 14/14.8/15.2 billion yuan, net profit to mother of 1.397/1.485/1.554 billion yuan, and the corresponding PE is 16/15/14x, respectively, to maintain a “buy” rating.

Risk warning: Market competition increases risks, book distribution falls short of expectations, risk of student population growth falling short of expectations, risk of tax policy changes, risk of industry policy changes, etc.