Key points of investment
Incident: In 2023, the company achieved operating income of 9.365 billion yuan, an increase of 3.35% over the previous year; net profit to mother was 1,284 billion yuan, an increase of 34.39% over the previous year. Cash out of $5.40 (tax included) for every 10 shares, without transfer. With 2024Q1, the company achieved operating income of 2,088 billion yuan, a year-on-year decrease of 4.86%; net profit to mother was 152 million yuan, a year-on-year decrease of 33.96%, mainly affected by fluctuations in the fair value of foreign investment and the cancellation of tax incentives.
Core strengths and endowments, and the publishing business is growing steadily. In 2023, the company published 1,077 textbooks and 2,847 teaching aids. The publication of textbooks and teaching aids achieved annual revenue of 2,821 billion yuan, an increase of 7.3% over the previous year. The company's influence and voice in the field of education publishing has increased markedly. The profits of its education clubs have been growing steadily, reaching 286 million yuan in 2023. The profit scale is among the highest among local education publishing houses, and the results of the intensive management reform of education publishing are remarkable. The submission of Guangdong's national standard textbooks for review has progressed steadily. All 14 subjects and 90 textbooks have been prepared and passed the preliminary review. The Cantonese version of teaching aids is progressing steadily. The comprehensive revision of the catalogue of teaching aids has been completed, and the distribution code has increased significantly over the same period last year. Vocational education was developed simultaneously, and 38 kinds of vocational textbooks were selected for the first batch of “14th Five-Year Plan” vocational education textbooks list.
Seize the opportunity to increase the integrated development of AI+ education. In terms of education services: Under the “double reduction” policy, the company actively grasped the opportunity, accelerated the transformation from a single textbook publisher to a “diversified product development+customized service plan” supplier, and promoted the construction of an after-school research service platform, with a total revenue of nearly 200 million yuan. In terms of the construction of a digital education platform, the company proposed the “Digital Knowledge South” development strategy. The service capacity of the “Guangdong Education Xiangyun Digital Textbook Application Platform” platform has been steadily improving. The number of active users throughout the year exceeded 43 million, an increase of 95.77% over the previous year. The company also makes full use of the capital operation platform to promote resource integration to help the main business development, actively seek external cooperation and investment opportunities, and become the first local publishing company to explore AI+ education. As a pioneer on the racetrack, the company's first-mover advantage and accumulation of industrial resources are expected to enable the long-term development of AI+ education with two-wheel drive.
Deepen media integration, and online channels help steadily improve distribution services. In addition to the continuous strengthening of traditional channel control, online marketing channels have made new breakthroughs. Xinhua Distribution Group set up a “Xinhua Selected” live streaming base, Xinhua Selected Supply Chain Company, and Xinhua Hanmo Company to establish a complete new media industry chain and create 4 popular customized publishing products, with sales volume of 6.2 million sets (books) and 750 million yuan. The company focused on promoting digital transformation and upgrading and high-quality development of integrated media business throughout the year, creating a new media communication matrix with multiple platforms and multiple content formats. Private customers continued to accumulate, and online marketing saw initial results. In 2023, the media matrix had more than 3.96 billion online traffic, 21.27 million Weibo followers, 2.25 million WeChat followers, 25.8 million client downloads, 5 million readings and more than 200 manuscripts across all platforms.
The policy side is stable, moderate and positive, and empowers the long-term development of educational publishing. The country's “14th Five-Year Plan” proposes to “build a strong cultural nation”; the “14th Five-Year Development Plan for the Publishing Industry” issued by the State Press and Publication Administration states that the “14th Five-Year Plan” period should focus on high-quality development, with deepening supply-side structural reforms as the main line to promote the development of the publishing industry with better quality, higher efficiency, stronger competitiveness and greater influence, and lay a solid foundation for building a strong publishing nation. According to the opening data, the size of China's book retail market in 2023 was 87.1 billion yuan, an increase of 4.72% over the previous year. Under the “double reduction” policy, the company seizes the opportunity of informatization to actively reform. Based on high-quality content, it is expected that the new business format will continue to be extended with quality to enable the development of new business formats.
Investment advice: The company has strong industrial resources, and the new era and new opportunities are expected to benefit the company, spawn new forms of education and publishing, and empower the development of the industry. We forecast that the company's revenue from 2024 to 2026 will be 10.01 billion yuan, 10.678 billion yuan, and 11.396 billion yuan; net profit to mother will be 1,022 billion yuan, 1,156 billion yuan, and 1,294 billion yuan respectively; EPS will be 1.14, 1.29, and 1.44 yuan respectively; and corresponding PE will be 13.1, 11.6, and 10.4, respectively. Covered for the first time, with recommendations to increase holdings -A.
Risk warning: the risk of macroeconomic fluctuations, policy uncertainty, the development of technologies such as AI falls short of expectations, etc.