Phoenix Media is a regional publishing company with the leading strength of book publishing in China. The company's steady growth potential energy, higher dividend ratio and lower valuation level have a strong investment performance-to-price ratio. Combining comparable valuation and absolute valuation, we give the company a target price of 8.5 yuan per share, covering it for the first time and giving it a "buy" rating.
Phoenix Media: regional publishing and distribution leader, new and old business integration and upgrading. Phoenix Media is a leading publishing and distribution company in China, based on Jiangsu region and facing the national market. The company's business is mainly book publishing and distribution, publishing books cover a wide range of teaching materials, literature, art, children and other fields, its six national first-class publishing houses (the second largest number in the country). In addition, the company actively layout data center, software, film and television and other businesses, through the new and old business integration strategy to promote transformation and upgrading. The company has seen steady growth in revenue and profit in recent years. In 17-21, the company's revenue CAGR 3.5% was 9.63 billion yuan (YoY+9.0%); non-net profit CAGR 15.3% in 17-21 was deducted from non-net profit 1.51 billion yuan (YoY+15.8%).
Publishing and distribution industry: high qualification threshold and stable market pattern. In terms of the overall scale, the sales volume of book distribution in China has exceeded 100 billion yuan (107.5 billion yuan in 2020), 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 has steady growth in revenue and profits, abundant cash and a high proportion of dividends.
The company focuses on: the publishing business is profound, and the innovative business is developing healthily. Publishing business, the company teaching materials auxiliary publishing strength, primary and secondary school curriculum standard teaching materials market share ranks in the national Top2, covering more than 40 million students in 29 provinces; general book layout, 22H1 company in the general book retail market share of 3.62%, ranking Top2. Innovative business, 1) education information one-stop content service provider discipline network 22H1 realized revenue of 190 million yuan (YoY+22.2%) and net profit of 39.89 million yuan (YoY+110.3%); 2) Phoenix data center realized revenue of 203 million yuan and net profit of 52.35 million yuan in 2021, contributing considerable performance increment.
Risk factors: changes in the policy of the publication and distribution of teaching materials, changes in tax policies and subsidy policies, rising prices of paper and other raw materials, the number of newborns and primary and secondary school students in Jiangsu Province are not as expected, and the local epidemic repeatedly has an impact on offline book retail.
Profit forecast, valuation and rating: Phoenix Media is a leading regional publishing and distribution group in China, with steady growth potential, high dividend ratio, low valuation and investment performance-to-price ratio. We forecast revenue of 134.55 million yuan and net profit of 18.40 billion yuan and 2.059 billion yuan for 22nd 24e, respectively, and the current stock price corresponds to PE 10.6x/9.9x/9.4x. Combined with comparable company valuation, DCF and DDM valuation, we give the company a target price of 8.50 yuan per share, covering it for the first time and giving it a "buy" rating.