The company disclosed its report for the third quarter of 2020: in Q1-Q3 2020, revenue increased 0.35% to 1,634 million yuan, net profit of the mother increased 11.01% to 251 million yuan, and the same increase of 11.50% of the net profit of the mother to 231 million yuan. In Q3 2020, revenue increased 10.53% to 654 million yuan and net profit to the mother increased by 33.85% to 118 million yuan.
Q3 Book revenue returned to 20% growth, and cost control was effective. (1) In the first three quarters of 2020, the book business achieved revenue of 639 million yuan, a year-on-year decrease of 0.31%, and gross margin was basically the same as the same period last year. This shows that demand for professional books published by the company was rigid; Q3 achieved revenue of 260 million yuan in a single quarter, an increase of 21.9% over the same period last year. The corresponding gross margin increased 6 percentage points over the same period last year, mainly because the resumption of schools nationwide in September led to an increase in sales of textbooks, teaching aids and professional books. (2) In the first three quarters of 2020, the company's journal circulation was 820,01 million copies, and confirmed service revenue of 5579 million yuan and advertising revenue of 1.62 million yuan.
Academic influence creates competitive barriers and continues to promote internationalization and digitalization. According to the newly released 2019 “Journal Citation Report”, the company has 10 journals selected for SCI, 7 journals ranked in the Q1 region of international same-subject journals, and the SCI influence factor of domestic journals continues to increase.
Investment advice. We expect the company's net profit to be 513/589/647 million yuan in 2020-2022, the corresponding EPS is 0.65/0.74/0.82 yuan, and the PE corresponding to the closing price on October 29, 2020 is 16.73 X/14.57 X/13.26 X. China Science Chuan is a leading company in the field of professional publishing in China. Backed by the Chinese Academy of Sciences and academic influence, it leads the country, and the company's performance has maintained steady growth under the impact of the epidemic. Our view of maintaining 20 times PE valuation in 2020 remains unchanged. The reasonable value of the corresponding company is 12.97 yuan/share, maintaining the “buy” rating.
Risk warning. The impact of the COVID-19 pandemic; digital projects falling short of expectations; risk of cooperation between overseas institutions; increased competition in the teaching aid market in primary and secondary schools.