The company achieved total revenue of 3.344 billion yuan in the first quarter of 2024, up 3.31% year on year, and net profit to mother of 356 million yuan, down 26.26% year on year. In 2023, the company achieved operating income of 13.645 billion yuan, a year-on-year increase of 0.36%, achieved net profit of 2,952 billion yuan, an increase of 41.80% over the previous year, and realized net profit without deduction of 2,074 billion yuan, an increase of 15.79% over the previous year.
The main business remained steady, and net profit after deducting non-return to mother increased significantly. The company's distribution business in 2023 achieved revenue of 10.489 billion yuan, +0.56% year over year; the publishing business achieved revenue of 4.525 billion yuan, -0.01%; the software industry and data service industry had revenue of -49.87%/-0.66% respectively. Among them, the main publishing and distribution business remained steady. In particular, the publishing and publishing of self-written textbooks continued to grow, with revenue +2.96% year-on-year; however, the general book business was affected by poor industry prosperity, even though the company's overall retail market share in 2023 was 3.25%, ranking 3rd, General book publishing/distribution revenue is still -10.84%/-1.55%, respectively. In 2023, the company's financial expenses fell 69.09% year over year to -446 million yuan, mainly due to the increase in interest income due to the increase in large deposits. Furthermore, taking into account changes in income tax policies, income tax expenses for 2023 changed from 121 million yuan last year to -633 million yuan. In the end, the company achieved net profit of 2,952 billion yuan in 2023, an increase of 41.80% over the previous year, and realized net profit without deduction of 2,074 billion yuan, an increase of 15.79% over the previous year.
The impact of changes in income tax policies was highlighted, and profits in the first quarter were negatively impacted. In the first quarter of 2024, the company achieved total revenue of 3.344 billion yuan, an increase of 3.31% over the previous year, of which the distribution business achieved revenue of 2,698 billion yuan, an increase of 6.43% over the previous year. Credit impairment losses increased 209.03% year-on-year in the first quarter due to the recovery of accounts receivable from previous years and the recovery of some credit impairment losses. In addition, income tax expenses increased 3823.36% year-on-year in the first quarter, mainly due to the expiration of tax exemption policies for some subsidiaries and changes in the applicable income tax rate, resulting in a significant increase in income tax expenses compared to the same period last year. Net profit for the first quarter was 356 million yuan, a year-on-year decrease of 26.26%.
There are many highlights of integrated development, and digital technology is further empowering. Digital content platforms such as Phoenix Shuyuan, Phoenix Yixue, Phoenix Vocational Education Cloud, and Jiangsu Digital Farmhouse Bookhouse have more than 20 million users, creating an online and offline integrated service model, and achieved revenue of about 50 million yuan. Try applying artificial intelligence technology to enable publishing, develop the Phoenix Zhiling intelligent office platform to improve office, editing, proofreading, and marketing efficiency; develop an intelligent teaching assistant “Wen Xiaohui” based on data accumulated over 40 years from the “National Outstanding Essay Selection” to help students improve their essay level. Furthermore, the company introduced China Mobile as a strategic investor, leveraging their respective technology, capabilities, resources and platform advantages to jointly carry out strategic cooperation on smart education, 5G+ reading service systems, cloud game film and television production, media integration, and technology research and development innovation, which have begun to bear fruit.
Maintain a “Highly Recommended” investment rating. Considering that the company's main publishing and distribution business is steady, we believe that in 2023, the company will comprehensively promote digital innovation on the basis of continuing to deepen its main business. However, considering tax policy changes, we estimate that 2024-2026 will achieve net profit of 18.59/19.72/2,085 billion yuan, corresponding to 14.3/13.5/12.7 times PE, maintaining a “highly recommended” investment rating.
Risk warning: the risk of increased market competition, the risk of changes in tax policies affecting profits, the risk of the impact of new technologies such as artificial intelligence, etc., and the risk of paper price fluctuations.