Main points of investment:
The comprehensive implementation of Internet +, the layout of new media to undertake performance growth. The company achieved a cumulative operating income of 1.824 billion yuan in 2016, an increase of 17.39% over the same period last year, realized the net profit attributable to the parent company of 223 million yuan, deducted the non-return net profit of 218 million yuan, and successfully completed the three-year performance commitment of asset restructuring in 2014.
In order to cope with the overall decline risk of the traditional media industry, the company comprehensively implemented Internet + strategy, actively layout the new media business, and cultivate new performance points. The new media business covers a wide range. Hangzhou Network, Kuaifang Network and Xiaoshan Network are the core main bodies of the company's web website, mobile Internet products and video content construction. Chinese media information dissemination is mainly responsible for promoting the construction of mobile Internet technology platform, and Express Communication is mainly responsible for the collection, production and distribution of mobile Internet video content. In 2016, the company independently accounted for the revenue of new media enterprises (including fast transmission of video information services for mobile operators) totaling 380 million yuan, an increase of 35% over the same period last year, accounting for 20.81% of the total business revenue. among them, the video content distribution platform realized revenue of 210 million yuan and net profit of 40.308 million yuan, up 74.35% and 58.67% respectively over the same period last year. With the layout and transformation of Internet +, the company's business focus has gradually shifted from traditional newspaper media to digital operation, cultivating new performance growth points while resisting the decline risk of the traditional media industry, and future performance growth is expected.
Fengsheng Media listed the new third board, and the outdoor advertising business expanded steadily. All of the company's outdoor and subway media business are merged with Fengsheng Media, based on the outdoor advertising industry, strong operation of Hangzhou Metro main line advertising business. Fengsheng Media's application for listing the new third board on July 18, 2016 was approved; in November 2016, it successfully won the advertising right of the print media operation project of Hangzhou Metro Line 1, and its subway media has covered all three lines (road sections) that have been opened in Hangzhou, becoming the exclusive advertising operator of Hangzhou Metro. In 2016, the company's outdoor (subway) media business achieved operating income of 148 million yuan, an increase of 68.67% over the same period last year, accounting for 8.11% of the total operating income. The company holds the high-quality platform resources of Hangzhou Metro and has formed an outdoor advertising communication network integrating urban public transport, urban trunk roads and high school communities, laying the foundation for giving full play to the advantages of resources and improving subsequent performance.
The acquisition of secondary education will cut into the vocational education market in the future and seize the historical opportunity. In March 2016, the company acquired a 60% stake in the future of secondary education, successfully entering the education market with vocational education as the core. In the future, secondary education has cooperated with a number of domestic and international universities to carry out educational cooperation projects, including vocational education, international education, art education, IT education and online education. According to the acquisition agreement, the performance commitments of Zhongjiao in the next three years from 2016 to 2018 are 58 million yuan, 68 million yuan and 79 million yuan respectively, which will cultivate new performance growth points for listed companies and create a good momentum of multi-business development and performance growth prospects. During the table period (April-December 2016), the revenue of Chinese media holding education industry was 140 million yuan, accounting for 7.65% of the company's total revenue, and the business gross profit margin reached 72.14%. There is a huge market for vocational education, and we think this business segment will become a very bright part of the company.
Profit forecast. New media + outdoor advertising + vocational education, fully resist the risk of decline in traditional business, cultivate a new driving force for growth. Future highlights: (1) based on the future of secondary education to further build a vocational education system, expand Zhejiang Province and the national market, in-depth layout of the education industry is expected to be strong; (2) further expand the new media matrix platform and accelerate the innovation of traditional media formats. Strong expectations for transformation. We estimate that the EPS of the company from 2017 to 2019 is 0.27,0.35 and 0.43 yuan respectively. With reference to Zhejiang Digital Culture in the traditional media industry, it is unanimously expected that the PE will be 35.67 times in 2017, and we will give the company 35 times PE in 2017, with a target price of 9.45 yuan. Maintain the buy rating.
Risk hint. The systemic risk of the market continues to be released; the transformation is less than the expected risk.
