The 2022 results are in line with our expectations
The company's revenue in 2022 increased 8.6% to $13.6 billion, net profit returned 15% to $2.08 billion, and net profit after deducting non-net profit increased 31% to $1.79 billion. Among them, 4Q22 revenue increased 7.8% to 3.97 billion yuan, net profit of the mother fell 49% to 346 million yuan (there was asset disposal income of 400 million yuan in the same period last year, mainly fixed asset disposal in related stores), and net profit after deducting non-net profit increased by 315% to 282 million yuan.
The company plans to pay a dividend of 0.5 yuan per share, a dividend ratio of 61%, and a dividend rate of 4.2% (based on the 4/21 closing price).
Development trends
Educational publishing is steady, and the distribution business continues to have large-scale effects. The company's publishing revenue increased 5% to 4.53 billion yuan in 2022, and distribution revenue increased 13% to 10.43 billion yuan. Looking at book categories, textbook publishing/distribution revenue increased 4%/11%, while general book publishing/distribution revenue increased 0.05%/18%. We believe that the company has maintained its lead in the educational publishing market, and has achieved total growth in segments such as the Phoenix edition, rental curriculum textbooks, and review teaching aids. At the same time, the company continues to expand the scale effect of distribution channels. Textbook teaching aids and the distribution of key political opinion books have all achieved results. We believe that the company's “online+offline” comprehensive distribution capacity continues to improve, and that the multi-level, wide-coverage distribution network lays a good foundation for steady revenue growth.
Internal management strengthened the deployment of information technology to achieve optimization and efficiency, and cost rates were well controlled; the level of dividends was stable and returned to shareholders. The company's sales rate in 2022 was reduced by 0.38ppt to 12.1%, and the management fee rate was reduced by 0.28ppt to 12.3%. The company stated that it is focusing on strengthening information construction and planning the construction of internal informatization platforms in an integrated manner to enhance collaborative internal business deployment. We judge that the establishment of an internal information platform is expected to drive the company's digital transformation from the inside out and improve the quality and efficiency of group management. In terms of dividends, as of the end of 2022, the company's monetary capital and transactional financial assets totaled about 7.8 billion yuan (accounting for 26% of the total market value as of April 21), and there was plenty of cash on hand. At the same time, the company stated that the 2022 cash dividend was 0.5 yuan/share (tax included), and the dividend ratio from 2019 to 2022 was 57%/64%/52%/61% respectively, which remained stable overall. We expect the company's dividend amount to remain steady in 2023 to give back to shareholders.
Strengthen integrated development and transformation, and reach strategic cooperation with China Mobile to explore the development direction of multi-dimensional three-dimensional publishing. From the company's own perspective, the company is currently continuing to explore integrated development models with dimensions such as full copyright operation and full industry chain development. Currently, it has built: 1) various digital publishing platforms such as Phoenix Academy; 2) a new media matrix to promote the three-dimensional development of marketing channels; and 3) an internet-based education product system. In terms of external cooperation, the company announced the “Strategic Cooperation Agreement” with China Mobile on April 20 (Phoenix Group, the controlling shareholder, transferred 10% of the company's shares to China Mobile and was approved by the competent authorities on April 4). The two parties will cooperate in smart education, 5G+ reading service systems, innovative media, informatization, technology research and development innovation, etc. We believe that the company itself has strong support for digital technology. The implementation of the cooperation agreement with China Mobile will promote the creation of a “central-local cooperation” sample, which is expected to help the industry achieve deeper and broader digitization of content resources and actively explore the development direction of multi-dimensional three-dimensional publishing.
Profit forecasting and valuation
Considering the good growth status of the company's main business, net profit attributable to the parent in 2023/24 was increased by 5%/7% to 23/2.6 billion yuan. The current stock price corresponds to 13/12 times the 2023/24 P/E. Maintaining an outperforming industry rating, the target price was raised by 5% to 13.6 yuan (15 times P/E in 2023) due to profit forecast adjustments, with upward margin of 15%.
risks
Changes in industry policies, the risk of rising paper prices, the impact of potential impairment of goodwill, and population growth has slowed.