\u3000\u3 Shengda Resources Co.Ltd(000603) 999 Duzhe Publishing&Media Co.Ltd(603999) )
Core view
China’s leading periodical brand. 1) The company is mainly engaged in the publication, distribution, reading services, electronic publications, online education, cultural creativity and other fields of paper publications such as periodicals, books, teaching materials and teaching aids. The publishing business mainly includes periodical publishing and new media operation, general book publishing, teaching materials and teaching aids publishing, etc.
The distribution business is mainly the wholesale and retail of periodicals, books and electronic publications. The company publishes more than 3000 kinds of books annually, and is in charge of hosting 13 kinds of newspapers and periodicals, with an average monthly circulation of 5.73 million copies (including digital edition). Among them, the core product reader magazine is one of the most influential journals in China. The sales volume of a single issue ranks first in the publication market of similar journals in China, with a cumulative circulation of more than 2.1 billion copies, which has far-reaching brand and user advantages.
Stable performance growth. 1) The company’s revenue growth in the past 10 years has been relatively stable, from 610 million yuan in 2011 to 1.084 billion yuan in 2020, with a 10-year compound growth rate of 5.9%; The net profit was significantly impacted by the periodical business with high gross profit and other factors, which decreased from 140 million yuan in the same period to 74 million yuan in 2020, with a 10-year compound growth rate of – 6.1%; 2) In terms of recent performance, with the peak impact of the Internet on the periodical business passing, the growth rate of the company’s periodical business tends to be stable. At the same time, driven by the growth of teaching materials, teaching aids and general book business, the company has achieved significant growth in revenue and net profit since 2019. The growth rate of revenue in 2019 / 20 is 28% and 12% respectively, and the growth rate of net profit is 52% and 15% respectively; In the first three quarters of 2021, the operating revenue was 782 million yuan and the net profit attributable to the parent company was 64 million yuan, with a year-on-year increase of 17% and 12% respectively, and continued to maintain a high growth rate.
Diversified cross-border layout seeks development, and the meta universe era has greater development potential. 1) Relying on the brand advantages of readers, make efforts to brand output and offline cultural industry complex. In terms of cultural complex, Lanzhou is building a “reader impression” boutique block project around the reader brand (with a core land area of 507 mu). In terms of brand output, it is cooperating with a third party to build Huizhou reader Culture Park and force the reader bookstore to expand offline channels; 2) In terms of education, we should lay out “readers · new Chinese” and Wuxi Online Offline Communication Information Technology Co.Ltd(300959) jointly promote reading and writing education in primary and secondary schools;
3) the digital collection (NFT) is in full swing, the IP value continues to highlight, the company’s brand and content advantages are significant, and the value may be revalued under the tide of the meta universe.
Risk tip: the decline rate of new born population is higher than expected, affecting the growth rate of teaching materials, teaching aids and general book business; New business expansion is lower than expected; The impact of new media on the periodical business led to lower than expected revenue growth.
Investment suggestion: be optimistic about the new growth opportunities of the company, and give a “overweight” rating for the first time. Considering that the new business is still in its early stage, we will not consider its performance contribution for the time being. It is estimated that the net profit attributable to the parent company in 2021 / 22 / 23 will be 86 / 104 / 124 million yuan respectively, the corresponding fully diluted EPS will be 0.15/0.18/0.22 yuan respectively, and the current share price will correspond to 40 / 33 / 28x PE in the same period respectively; We continue to be optimistic about the long-term value of scarce brands, the possibility of stable and upward business under new business expansion, and the opportunity to revalue the value of head IP resources in the meta universe era, and give a “overweight” rating for the first time
