2Q23 performance is slightly lower than we expected.
The company announced 1H23 results: revenue of 5.511 billion yuan, an increase of 2.1%, net profit of 724 million yuan, an increase of 6.6%, and a deduction of 665 million yuan of non-net profit, an increase of 5.4%. Corresponding 2Q23 performance: income 2.825 billion yuan, same increase 1.6%; return mother net profit 578 million yuan, same increase 4.2%; deducting non-net profit 542 million yuan, same increase 4.8%. 2Q23 performance was slightly lower than we expected, mainly due to weak issuance revenue.
Trend of development
The publishing business is developing with high quality, and the distribution business is slightly under pressure under the high base. The company's 1H23/2Q23 revenue increased 2.1% from 1.6% to 55.11 billion yuan respectively. From the point of view of business, the company's publishing business 1H23 increased by 12.2% to 1.44 billion yuan, of which the general book publishing business also increased by 10.9% to 874 million yuan. Considering the main income of teaching materials / general book publishing business (more than 90%), we judged that the related business showed good growth. We believe that the main reason is that the company continues to implement the boutique publishing strategy, and the results of the IPO boutique publishing project are gradually showing. The 1H23 of the distribution business also increased by 1.3% to 4.476 billion yuan, which is relatively weak as a whole. We judge that it may be due to the annual fluctuation in the number of K12 students and the high base of theme books published in the same period. Among them, the company's 1H23 realized online sales revenue of 1.652 billion yuan, an increase of 12.9%, reflecting the good results of the company's online transformation.
The gross profit margin is relatively stable; the increase in promotion fees drives the sales rate, and the operation efficiency is optimized. In terms of gross profit margin, the company's 1H23/2Q23 gross profit margin changed from the same period last year-0.2/-1.0ppt to 27.5% to 30.2%, basically stable. In terms of expenses, the company's 1H23/2Q23 sales rate is increased by 0.7/1.4ppt to 10.7% and 10.8% respectively. We judge that it is mainly due to the increase in the company's promotion expenses after the intensification of competition in the book retail market; the management fee is reduced by 0.6/1.4ppt to 6.3% and 3.7% respectively, and we judge that it is mainly due to the continuous improvement of the company's operational efficiency. To sum up, the company's 1H23/2Q23 net profit increased by 4.2% to 542 million yuan, respectively.
Digital publishing has been promoted in an orderly manner, and cash-rich cash on hand has continued to pay dividends steadily. In terms of digital publishing, 1H23 continues to lay out digital fusion new business type: the total number of users of online education group electronic agency and Qingyun online "dual platform" mobile product matrix exceeds 4.3 million; in digital reading, torch knowledge strict selection platform adds 117 content providers and publishes more than 25000 pieces of high-quality content. The company continues to build a digital publishing ecosystem, which we think may bring long-term performance increments. Cash: as of 1H23, the currency, cash and transactional financial assets totaled 11.976 billion yuan. Considering the sound operation of the company's main business, we expect the company to attach importance to the interests of investors, maintain a steady level of dividends, and continue to return to shareholders.
Profit forecast and valuation
The current share price corresponds to 11.6 Universe 10.7 times 2023 Universe 2024 Pamp E, maintaining the same homing net profit in 2023x2024. Maintain an outperform industry rating and target price of 10.5 yuan, corresponding to 15.0swap 13.8 times 2023 / 2024 Pdeband E, with 29.5% upside space.
Risk
The growth rate of K12 in Zhejiang Province is not as expected, the recovery of the general book industry is not as expected, and the digital transformation is not as expected.