Matters:

24Q3 achieved revenue of 2.454 billion yuan (YOY +2.7%), realized net profit of 0.23 billion yuan (YOY -14.6%), and realized net profit without deduction of 0.216 billion yuan (YOY -18.5%). Q3 income tax was 0.092 billion yuan, and the actual tax rate was about 26.7%. Excluding tax effects, net profit returned to mother YOY +17.5%, and net profit not attributable to mother YOY +13.7%.

Commentary:

The main business of textbooks and teaching aids is very resilient. Generally, books are slightly under pressure due to the influence of the general market, and I am optimistic about the main business throughout the year. 1) Textbook teaching aids: Endogenous growth is still strong. Textbook and teaching aid revenue is expected to increase in the middle of the year, and gross margin continues to rise under paper cost control; 2) General books: 24Q3 revenue YOY -20%, gross margin YoY-18pct, mainly due to market pressure and short video e-commerce competition; 3) Overall, 24Q3 achieved a gross profit margin of 33.6% (YOY-0.13pct). Basically, it remains stable. Sales/management/R&D rates are 8.7%/10.5%/YO0.1%, respectively 49/0.24/ 0.05pct, cost reduction and efficiency continue to advance. Looking ahead to the whole year, the company is located in Guangdong and has a demographic advantage, and the company is actively expanding textbook businesses such as vocational education, Hong Kong, Macao, Taiwan, etc., and the company is actively expanding textbook businesses such as vocational education, Hong Kong, Macao, Taiwan, etc., and the logic of outperforming the industry has not changed, and the main business is still growing.

The company's new business layout is positive, the degree of fulfillment is high, and there is great upward flexibility. 1) The company has a variety of AI+ education products, and the overall progress is relatively rapid. It is expected to continue to advance in 24 years; 2) The layout has a high growth rate of education and training, and there is plenty of room for continuous expansion within the province for 24 years. In addition, the company is also actively developing new businesses such as children's programming and research, and the new business is highly flexible; 3) A new investment fund has been established. The company announced the establishment of the Guangdong Southern Chuande Venture Capital Fund, with a fund size of 20 million yuan, of which 51% has been pledged by Nan Chuan Investment. We look forward to further progress.

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. We maintain our previous performance expectations. We expect the company's net profit for 2024/25/26 to be 0.904/1.007/1.122 billion yuan, respectively. The current stock price corresponds to 14/12/11 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 16xPE in '25, with a target market value of 16.1 billion yuan, corresponding to a target price of 18 yuan, maintaining a “strong” 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