Zhejiang Edition Media is a regional publishing and distribution leading company, with a stable provincial market and strong national and online distribution capacity. The growth of the company's core main business is steady, the dividend return is considerable, and the publishing sector in which it is located is currently valued at a low level and has a cost-effective investment. Combining the methods of comparable valuation and absolute valuation, we give the company a target price of 8.0 yuan per share, covering it for the first time and giving it an "overweight" rating.
Zhejiang edition media: Zhejiang publishing leader, the main business growth is steady. Zhejiang Edition Media is a publishing and distribution group in Zhejiang Province, whose business is mainly publishing and distribution (revenue accounts for more than 90% in 2021), and integrates printing, marketing and other industries. The company has 8 publishing houses (education society, literature and art society, etc.) and 2 distribution companies (Xinhua Bookstore, Boku), which are exclusively responsible for the subscription of teaching materials in Zhejiang Province through the government's "single source procurement", with a regional monopoly position. The company was listed in July 2021, with 81% of the shares held by the majority shareholder Zhejiang version Group (as of 22H1).
The company earned 5.4 billion yuan (YoY+8.7%) in revenue of CAGR 4.8% Magne22H1 in 1720 and 680 million yuan (YoY+16.1%) in net profit of homing in 1721, with steady growth in income and profit. The dividend ratio in 2021 is 54%, corresponding to static dividend rate of 4.4%, and dividend yield is considerable.
Publishing and distribution industry: high qualification threshold and stable market pattern. In terms of overall scale, China's book distribution sales exceeded 100 billion yuan (107.5 billion yuan in 2020, YoY+6.7%), of which the top three categories are culture and education (81.1%, with teaching materials and teaching aids at the core), philosophy and social sciences (7.5%, including party building, economic management), and literature and art (6.5%). In terms of retail channels, online code accounts for nearly 80 per cent (1~3Q22), with traditional e-commerce / short video e-commerce accounting for 61.7 per cent and 19.8 per cent respectively. In terms of industry profits, the head publishing company saw steady growth in revenue and profit (revenue / net profit CAGR of 3.8% / 6.2% respectively in 2016-21), abundant cash (cash assets accounted for 45.5% of total assets at the end of 2021), and a high dividend ratio (49.2% in 2021).
Company focus: publishing, distribution have bright spots, listed to consolidate the strength of the company. In terms of publishing, the sales volume of teaching materials / general books in the publishing business in 2021 is 1.56 billion yuan (YoY+26.2%/+7.3%), which brings incremental space for teaching materials to expand the market. In terms of distribution, the sales volume of teaching materials / general books / non-graphic goods in the 2021 distribution business is 34.6 YoY+10.0%/+25.1%/-0.4%. The company has built an extensive offline and online distribution network, with non-provincial income accounting for 40.6% in 2021, and online sales revenue of 2.69 billion yuan (YoY+60.4%), leading the industry in online sales. Post-listing business layout: 1) tamping boutique publishing, thickening content copyright; 2) promoting digital integration to create full-media content; 3) upgrading offline stores to integrate cultural consumption experience.
Core focus: sound performance, substantial dividends, low valuation.
Stable business and high profit certainty. The publication and distribution of teaching materials and auxiliary teaching materials of the company has regional advantages, and the general book business benefits from the wide distribution of offline sales network.
The dividend rate is high and the dividend return is considerable. The dividend rate of the first year of listing of the company in 2021 is 54%, and the static dividend rate is 4.4%. For the leading company in the industry, we expect the dividend rate to increase steadily.
The estimated value of the publishing section is low, with a cost-effective ratio. At present, the average PE (22e) of state-owned publishing and distribution companies is 8.5x, of which the head company is 100.11x; the current valuation of the publishing (Citic) index is below the 20% quantile (PE TTM) undervalued in the past five years.
Risk factors: changes in the publication and distribution policy of teaching materials, changes in tax policies and subsidy policies, fluctuations in the price of paper and other raw materials, the number of newborns and primary and secondary school students in Zhejiang Province are not as expected, and the digital transformation is not as expected. The epidemic has an impact on offline book retail.
Investment advice: Zhejiang Edition Media is a regional publishing and distribution leading company, with sound profits, considerable dividend returns, and the current plate valuation is low, with investment performance-to-price ratio. We forecast that the company's 22E~24E revenue will be 13.2 billion yuan, and the net profit will be 1.41 billion yuan. The current stock price of the company will correspond to PE 11.2x/10.7x/10.3x. Combined with comparable company valuation, DCF and DDM valuation estimates, we give the company a target price of 8.0 yuan per share, covering for the first time and giving an "overweight" rating.
