Matters:
Revenue of 9.365 billion yuan (YOY +3.35%) was achieved in 2023, net profit attributable to mother was 1.284 billion yuan (YOY +34.39%), excluding deferred income tax expenses (approximately $139 million), which affected YOY +21.4%, mainly due to an increase in fair value earnings (achieving fair value income of 143 million in 23, -113 million in the same period in '22); realized net profit of 891 million yuan (YOY +0.31%).
24Q1 achieved revenue of 2,088 billion yuan (YOY -4.86%), net profit attributable to mother of 152 million yuan (YOY -33.96%); realized net profit without deduction of 169 million yuan (YOY -9.53%). Among them, Q1 paid a total of 57.27 million yuan in income tax (9.16 million yuan in the same period last year), and the actual tax rate was 25.1%. Excluding the impact of additional taxes this year, net profit attributable to mother was 200 million yuan (YOY -10%, mainly Q1 confirmed investment and fair value net loss of 31 million yuan), and net profit after deducting non-return to mother was 217 million yuan (YOY +16%). Overall, excluding income tax and non-economic factors, the company's main business maintained good growth. In addition, the company plans to pay a dividend of 484 million yuan, with a dividend ratio of about 37.69%. After deducting the repurchase, a cash dividend of 476 million yuan, a cash dividend ratio of about 37.10%; the dynamic dividend rate calculated based on the company's 2024/4/26 closing price is 3.9%.
Commentary:
The 23-year results were in line with expectations, and the main business progressed steadily. Looking at revenue breakdown, the company's textbook revenue in '23 was 8.3 billion yuan, YOY +5.9%, and the company's main business grew steadily; general book revenue was 1,971 billion yuan, or YOY -5.2%. It is estimated that mainly due to strong discounts on general books, which mostly affected revenue, all other businesses remained steady.
Q1 Business performance was in line with expectations, gross margin increased, and the main business for the whole year was optimistic. 1) Revenue & operating cash flow pressure is expected to be seasonal fluctuations: 24Q1 revenue YOY -4.9%, net cash flow from operating activities is -193 million yuan. Short-term pressure is mainly seasonal fluctuations due to delays in government settlement; 2) Increased operating efficiency: 24Q1 The company's gross margin is 34%, YOY+4.3pct, operating efficiency has improved markedly, mainly due to better cost control of paper, etc.; 3) Looking ahead to the whole year, the company is located in Guangdong, where there are few population advantages and growth rates that still have extended mergers and acquisitions logic. The logic of outperforming peers has not changed; there is no need Concerns due to quarterly disturbances.
The layout of AI+ education, education and training is active, and the ability to implement new businesses is strong. 1) Various AI+ education products are progressing steadily. Among them, products such as Huacheng Art Test continue to be iterated and actively promoted. Guangdong Education Xiang Yun is expected to start exporting outside the province in '24, and it is expected that the products will continue to be delivered in '24. Furthermore, the company is expected to launch a GPT publication model to enable industry upgrading; 2) The layout is high, education and training growth rate is large: 23 years of after-school services have achieved revenue of nearly 200 million yuan. Subsequent companies will speed up the layout of the province and actively explore markets outside the province. We believe that the business model of this business is highly viable and has a large market profit margin. In addition, the company is also actively developing new businesses such as children's programming and research, which is expected to contribute incremental revenue, and is still worth looking forward to throughout the year.
Investment advice: We are optimistic about the stability and dividend value of the company's main business. In the long term, we are optimistic that the company will actively embrace new businesses such as AI and education and training, which is expected to open up revenue and valuation ceilings. However, due to income tax, short-term performance may decline slightly. Considering the Q1 results, we will slightly adjust our previous performance expectations. The company's net profit for 2024/25/26 is 10.20/11.68/1,315 billion yuan respectively (the original 24/25 forecast value was 10.73/1.121 billion yuan). The current stock price corresponds to 12/11/10 times PE, with reference to comparable company valuations (Phoenix Media, Zhongnan Media, Shandong Publishing, Xinhua Wenxuan), due to the company's steady main business+active new business layout, we will give the company 16 x PE for 24 years The target market value is 16.3 billion yuan, corresponding to the target price of 18.2 yuan, maintaining the “strong promotion” rating.
Risk warning: rising paper costs, changes in education policies, changes in the number of students enrolled, progress in mergers and acquisitions falling short of expectations, and falling short of expectations in new business