Net profit of $1,855 billion for 23 years is basically in line with the performance report and maintains a “buy” rating.
The company released its 23 annual report & 24Q1 quarterly report: 23 billion yuan in revenue of 13.613 billion yuan (yoy +9.21%), net profit of 1,855 billion yuan (yoy +32.55%), after deducting non-net profit of 1,552 billion yuan (yoy +5.69%), which is basically consistent with the express report; 24Q1 revenue of 3 billion yuan (yoy +12.61%), net profit of 284 million yuan (yoy -24.54%), mainly due to the expiration of income tax relief policies. The company plans to pay a cash dividend of 0.55 yuan (tax included) per share, corresponding to a dividend rate of 4.45% on April 26. The company also plans to distribute a cash dividend of 0.1 yuan (tax included) per share for 24 and a half years.
Considering the impact of income tax policies, we adjusted 24-26 net profit to 13.88/15.16/16.39 billion yuan (24-25 years ago value 17.91/19.34) billion yuan, and the 24-year comparable company Wind agreed to have an average PE of 13X. Considering the company's leading position (with obvious advantages in the education category, leading the industry in digital transformation), we gave the company 18X for 24 years, corresponding to a target price of 13.86 yuan, maintaining a “buy” rating.
The market share of the main business increased, and the distribution business grew rapidly
The revenue from the publishing business in '23 was 3,599 billion yuan, an increase of 4.68% over the same period. According to the Beijing Open Book Report, in '23, the company's share of the national comprehensive book retail market was 3.80%, and the share of Shiyang in the online book retail market was 4.05%. They both ranked second and both rose 2 places year on year, steadily ranking first. During the reporting period, the company sold 64 types of books with an annual sales volume of more than 100,000 copies. The annual sales volume of “Changan's Lychee” exceeded one million, and 16 books entered the monthly unpublished retail bestseller list 67 times in 23 years; sales revenue was 11.313 billion yuan, an increase of 15.01%. Xinhua Bookstore continues to focus on integrated development, deepening and implementing education services, and optimizing and upgrading the education product system. The company continues to improve the quality of products such as “Four-dimensional Reading” and “Reading Book Series for Primary and Secondary School Students”, focusing on distributing current affairs books and themed publications.
The gross margin fluctuated slightly due to changes in product structure. Overall, the company's gross profit margin was stable at 41.36% in 23, -0.90pct year on year; 24Q1 gross profit margin was 40.88%, -0.99pct year on year, mainly due to changes in product structure. The company's sales/management/R&D/finance cost rates in '23 were 15.61%/12.57%/0.73%/-0.71%, respectively, compared with 0.08pct/0.06pct/-0.44pct/0.29pct, respectively, and remained stable overall. Net profit to mother decreased by -18.18% in 24Q1, mainly due to the expiration of the income tax relief policy. The comprehensive income tax rate is about 27.9% in 24Q1 and 1.4% in 23Q1.
Strengthen the development of digital education and optimize reading products
The company will strengthen the development of digital education resources and improve the operation of platforms such as “E-Class Good Course”, “Smart New After Course”, “Yueda Education” and “Zhongnan Xunzhi”. Continue to optimize reading products and distribute products such as recommended bibliography for primary and secondary school students; use the Malanshan Digital Publishing Base as an opportunity and use cutting-edge technology such as artificial intelligence as a new engine to drive the overall upgrading of the Group's industry and management. Accelerate the formulation of the Group's digital transformation master plan and top-level design. Strengthen the application of technologies such as AIGC, digital people, and cloud computing to create integrated communication products.
Risk warning: There is a risk that the publishing business falls short of expectations and that the income tax rate is higher than expected.