Core ideas:
The company disclosed its mid-year report in 2019: 2019H1 revenue increased by 12.62% to 1.036 billion yuan, net profit from return to mother increased by 22.73% to 138 million yuan, and non-net profit from return to mother increased by 23.77% to 124 million yuan.
1) medium report results: steady growth of main business and improvement of gross profit
The company reported results in line with expectations, the main business of books and periodicals grew steadily, and the gross profit margin improved greatly due to the decline in paper prices and economies of scale. The revenue of the book business reached 428 million yuan, an increase of 11.72 percent over the same period last year, with a corresponding gross profit margin of 63.00 percent, an increase of 5.75pp over the same period last year. The revenue of the periodical business reached 38 million yuan, an increase of 28.49% over the same period last year, with a corresponding gross profit margin of 18.00%, an increase of 3.35pp over the same period last year.
2) the moat is stable, the academic influence of core journals continues to improve, the company builds a moat of professional publishing endowment by saving scientific research talent resources, and the SCI influence factors and CiteScore rankings of the company's core journals continue to improve during the reporting period. According to the 2018 Journal Citation report published in June 2019, the company has a total of 53 publications in the SCI, of which 14 are in the Q1 area of international journals in the same field.
3) rich cash on hand, new developments in digitization and internationalization as of the end of the reporting period, the company has 3.383 billion yuan in monetary funds and 128 million yuan in wealth management products.
Rich in cash on hand to support the company's subsequent expansion of digitalization and internationalization. During the reporting period, the company invested more than 100 million yuan to set up China Science and Technology Co., Ltd. and purchased office space, and planned to buy 100% stake in EDP Sciences, a French academic publishing institution, with its own funds.
Investment suggestion: it is estimated that from 2019 to 2021, the revenue of the company will be 2.455,2760,051 million yuan, the net profit of return to the parent will be 485, 540,599 million, the corresponding EPS will be 0.61, 0.68 and 0.76 per share, and the PE corresponding to the closing price on August 30, 2019 is 18.55X/16.65X/15.00X. We maintain the company's fair value per share at 14.92 yuan per share and maintain a "buy" rating.
Risk tips: overseas institutional cooperation risk; paper price fluctuation risk; mobile reading impact; primary and secondary school teaching assistance market competition intensified; knowledge service business development progress is not as expected.