Incidents:
In 2023, the company achieved revenue of 11.244 billion yuan, a year-on-year decrease of 3.79%; net profit to mother was 936 million yuan, an increase of 32.21% year on year; non-net profit deducted from mother was 754 million yuan, an increase of 9.66% year on year.
2024Q1 achieved revenue of 2,829 billion yuan, a year-on-year decrease of 5.44%; net profit to mother of 293 million yuan, a year-on-year decrease of 13.28%; and deducted non-net profit of 315 million yuan, an increase of 17.13% over the previous year.
The 23 year performance was steady, and the 24Q1 performance declined slightly year-on-year due to income tax. The company's revenue declined slightly year-on-year in 2023, mainly due to the decline in the education equipment installment business and sales of diversified products, which led to a decline in revenue from the education equipment and diversified business. Among them, the company's distribution and education service business continued to develop, several sub-sector businesses grew, and the main business remained steady. Net profit increased year-on-year in 2023, mainly due to the company's expectation that applicable income tax policies will change in the future to confirm related deferred income tax expenses. Entering 2024, the company will no longer enjoy the preferential income tax policy due to the expiration of the income tax benefits of the transformation policy of operating cultural institutions. 24Q1 income tax expenses were 85.67 million yuan, an increase of 829% over the previous year, leading to a decline in the company's net profit.
Cash dividends of $645 million, the highest level in nearly five years
The company announced the 2023 profit distribution plan, with a cash dividend of 3.05 yuan for every 10 shares, with a total cash dividend of about 645 million yuan. The company's current dividend ratio reached 68.90%, the highest in the past five years. High dividends protect investors' interests.
Promote the deep integration of digital technology, actively deploy “AI+ Education” companies to promote smart school business with high quality, complete 54 smart classroom projects; actively expand the C-side product line, and cooperate with Huawei to launch the domestic system product “New Learning Machine in Anhui”. Furthermore, we will promote the in-depth development and application of AI in the vertical field of cultural education services, including the development of a new reading model in Anhui and the development of the new Zhuzi educational AI robot in Anhui. We believe that by using digital technology and AI technology, the company is expected to expand a new digital circuit in the field of culture and education and enhance the potential for performance growth.
Profit Forecasts, Valuations, and Ratings
The company continues to promote the development of distribution and education services and actively lays out new tracks such as smart schools and “AI+ education”, which is expected to enhance the potential for performance growth in steady operation. However, due to the impact of income tax, the company's performance may decline. Therefore, we expect the company's revenue for 2024-26 to be 128.9/145.6/16.12 billion yuan, corresponding growth rate of 14.65/12.98/ 10.69%, and net profit to mother of 883/10.41/1,119 billion yuan, respectively, corresponding growth rate of -5.66/17.96/ 7.50%. The company was given 18 times PE, corresponding to a target price of 7.92 yuan/share, maintaining the company's “gain” rating.
Risk warning
The risk of changes in industry and tax policies, the risk of a reduction in the size of the school-age population, and the risk of digital technology and AI technology falling short of expectations.