\u3000\u3000 China South Publishing & Media Group Co.Ltd(601098) (601098)
1. China South Publishing & Media Group Co.Ltd(601098) : China Publishing & Media Holdings Co.Ltd(601949) is the leader, and the market demand is stable. China South Publishing & Media Group Co.Ltd(601098) was established in 2008. Its main business segments include: publishing business, distribution business, printing and printing material supply business, media business, digital publishing business and financial service business. In 2021, the company's overall revenue and net profit attributable to the parent company reached 11.3 billion yuan / 1.51 billion yuan, and the CAGR from 2008 to 2021 was 9.3% / 11.4% respectively, with strong performance robustness.
The largest business segment of the company is the publishing and distribution of educational products, accounting for about 50% of the revenue in recent five years. From 2017 to 2018, the company responded to the policy of "one subject and one auxiliary" to reduce the burden of primary and secondary school students. In 2018, the publishing and distribution business revenue of educational products decreased to 5.95 billion yuan, and then gradually recovered. By 2020, the revenue volume of this business will return to 6.82 billion yuan, and the CAGR from 2018 to 2020 will be 6.9%, which reflects the strong market demand for educational products.
2. Stable profitability and stable performance. The introduction of the "double reduction" policy in 21 years had little impact on the company's business. According to the company's performance express, the company's annual net profit attributable to the parent and net profit deducting non attributable to the parent still maintained an increase of 4.8% / 9.8% respectively, and the growth rate returned to the level of 2019. We believe that this reflects that the company's products and channels have a better ability to respond to the changes of the "double reduction" policy:
1) the early-stage policies have been digested: in 2017, the company has cooperated with the implementation of the national load reduction requirements, the relevant impact has been reflected in 2017-2018, and the income of teaching materials and auxiliary products has rebounded in recent three years;
2) strong product strength: the "Hunan edition" teaching materials independently developed by the company have been popularized to 30 provinces in China, the United States, South Korea and other countries and regions, with high recognition. At the same time, the teaching aids of teaching materials are mainly used in schools and classrooms. The "double reduction" has limited policy impact on off campus training institutions, and the company also actively expands the categories of teaching materials to the fields of secondary vocational and higher education, Develop sources of income; With the combination of Wuxi Online Offline Communication Information Technology Co.Ltd(300959) , the company has strong business stability through the reconstruction of educational products and channels.
3) number and demand of students: in recent years, the enrollment and number of primary and secondary school students in Hunan Province have maintained a stable growth, and the rigid demand for educational products is growing continuously.
3. High quality statements, abundant cash flow and continuous high dividends. With large business volume and steady operation, the company's monetary capital and cash flow are in good condition. At the end of the third quarter of 2020, the cash flow of the company was RMB 1.9 billion and the operating funds were RMB 10.9 billion and RMB 1.02 billion respectively.
At the same time, the company has paid cash dividends every year since it was listed in 2010. The total dividends in recent five years were 9 / 10.8/11/11.1/1.13 billion respectively, the corresponding dividend payment rates were 49.8% / 71.2% / 88.5% / 87.3% / 78.7% respectively, and the dividend rates were 3% / 4.3% / 4.9% / 5.2% / 6.6% respectively, which maintained an upward trend and were at a high level. Under the sustained and stable profitability in the future, the company is expected to continue high cash dividends.
4. Investment suggestion: the company is the leader of China Publishing & Media Holdings Co.Ltd(601949) media industry, deeply ploughing Hunan market, independently developing "Hunan version" teaching materials, and has a good market reputation. The company's educational products are mainly used in school classrooms, and the impact of "burden reduction" under the "one subject and one auxiliary" policy from 2017 to 2018 has been reflected. At the same time, the steady growth in the number of students in primary and secondary schools in Hunan Province and the company's complete product system and channel ability ensure the company's sustained and steady performance growth. The "double reduction" policy in 2021 has little impact on the company, which also shows that the company has a good ability to resist external policy changes. In addition, the company has sufficient cash reserves and regular high cash dividends every year. In the past five years, the total amount of dividends, dividend payment rate and dividend rate have gradually increased and remained at a high level.
We expect the company's revenue to be 11.330/12.193/13.255 billion in 21-23 years, with a year-on-year increase of 8.18% / 7.62% / 8.71%. The net profit attributable to the parent company is expected to be 1.506/16.84/1.826 billion respectively, with a year-on-year increase of 4.82% / 11.77% / 8.46%. The P / E ratio of the latest market value corresponding to the estimated net profit is 11.84x/10.59x/9.77x. The company has stable operation, stable performance and high financial quality. If it is a high-quality subject with undervalued value and high dividend, it will be given a buy rating.
Risk tip: paper prices continue to rise, new business expansion is relatively slow, and industry policy risks.
