This report is read as follows:
Dragged down by the decline of the industry as a whole, the company's performance in 2016 was slightly lower than we expected, the company's new business grew significantly during the reporting period, and the continuous pace of transformation is worth looking forward to.
Main points of investment:
Lower the target price to 9.23 yuan, maintaining the "overweight" rating. Taking into account that the decline of traditional business is higher than we expected, we adjust the company's forecast EPS for 2017 and 2018 to 0.23 PE (previous value: 0.33 Universe 0.38 yuan). Due to the recent decline in the overall valuation of the media (the current Shenwan media sector PE TTM (holistic method) is 38.75x), we lowered the company's target price to 9.23 yuan, corresponding to 35.5 x PE in 2018, maintaining the "overweight" rating.
Performance description: in 2016, the company achieved main income of 1.824 billion yuan (+ 17.39%), net profit of 223 million yuan (- 21.32%), and non-return net profit of 218 million yuan (+ 9.11%).
The decline in the industry has affected the company's traditional business, and the performance is slightly lower than we expected. Domestic newspaper media investment declined for four consecutive years in 2016, which affected the company's traditional newspaper subscriptions, advertising revenue and distribution declined during the reporting period and affected the overall performance. The company relies on the advantage of the party media brand, the substantial growth of outdoor advertising, the solid competitive strength of other media such as radio, and the comprehensive interaction between different media businesses to slow down the impact of adverse trends in the industry to a certain extent. however, the decline of traditional newspaper business is still slightly higher than we expected.
New business is growing significantly, focusing on further transformational actions. In 2016, the revenue of independent accounting new media enterprises increased by 35% compared with the same period last year (of which the net profit of fast spread increased by 58.67%), contributing 20.81% to the company's total revenue, close to the proportion of traditional advertising. Since the backdoor listing, the company has actively promoted the transformation through investment mergers and acquisitions, and there is more room for the future to focus on the company's media and local advantages in the fields of mobile video, vocational education, cultural property rights transactions and so on. The company disclosed in the annual report that the private placement is progressing smoothly, and the follow-up transformation action is worth looking forward to.
Risk hint: the overall decline in the newspaper industry is a drag on performance, and the growth of new business is not as good as expected.