The Zhitong Finance App learned that Huachuang Securities released a research report saying that values such as high stability in the publishing sector, high dividends+active layout of new businesses have not fundamentally changed. The short-term focus is on the implementation of policies related to actual income tax rates. On the one hand, the full-year dimensional recommendations focus on publishing valuation trends and are optimistic about high dividend cost performance; on the other hand, the AI industry continues to progress. AI+ education is one of the application directions that launched earlier, and is optimistic about catalytic opportunities for the publication corner/AI+ education theme.

The views of Huacheng Securities are as follows:

Income tax impact: Don't be overly pessimistic; leading companies' dividend rates may still be cost-effective.

On October 23, 23, the Ministry of Finance and three other departments jointly issued the “Notice Concerning the Continued Implementation of the Tax Policy for Transforming Operational Cultural Institutions into Enterprises in the Reform of the Cultural System”. The new version of the policy tightens the scope of exemption from corporate income tax (limited to conversion to operating cultural institutions that have been registered for less than 5 years). This means that the vast majority of state-owned publications will resume paying income tax after 24 years, while the value-added tax concessions will be extended until December 31, '27. 1) What is the income tax rate? The actual tax rate has yet to be determined. The theory is 25%, but subsequent preferential measures (including local government exemptions, local incentive policies, certification of innovative technology enterprises, etc.) may actually be lower than 25%. 2) Income tax-profit sensitivity analysis: The bank assumes that the effective tax rates are 25%/20%/15% in pessimistic/neutral/optimistic situations, respectively. The industry profit growth rate declined by 5%-20% in 24 years, but the growth rate rebounded to 5%-10% in 25 years, and the valuation has already gone through a round of correction and digestion. 3) Income tax-dividend rate sensitivity analysis: Assuming that each company's subsequent dividend rate remains unchanged, even after considering the tax rate, the dividend rate of some leading companies is still cost-effective. As of the 2024/2/26 closing price, Zhongnan Media/Phoenix Media still had a dividend rate of 4.5% + in 24, and the Chinese Media/Zhejiang Media/Southern Media dividend ratio is also cost-effective. Furthermore, the bank believes that most publishing companies have plenty of cash in their hands+stable main business without a large amount of capital to invest; they can maintain or even continue to raise the level of dividends in the future; there is no need to be too pessimistic about dividend rates.

Let's look at the main business again: the logic of steady growth has not been broken.

The textbook teaching aid industry has characteristics such as high administrative barriers and high robustness. Based on the volume-price split, the bank believes that the stability of the industry is expected to be maintained in the medium term. 1) Number of students enrolled: We are not pessimistic about the number of students enrolled in the short to medium term, and focus on regions with an advantage in population inflows. The birth rate is transmitted to changes in the number of students enrolled in school with a time lag. The number of students enrolled in school in 24 reflects the birth rate in 06-18 (11-17 is the peak number of second births), and the absolute value of the number of students enrolled in school is still growing. Furthermore, considering population mobility factors, benefiting from a net inflow of population, the number of students enrolled in school in economically developed regions is more resilient. 2) Per capita holdings: Focus on structural opportunities. ① The number of textbooks and evaluative teaching aids per capita: determined by local governments, the amount is highly rigid; ② The amount of market-type teaching aids per capita: similar to mandatory consumption, spending fluctuations are affected by the macro or less; ③ It is recommended to focus on the structural opportunities of per capita holdings: the higher the grade level, the higher the per capita holdings. Students born at the peak of their second child are entering middle and high school, which is expected to partially offset the decline in primary school enrolment due to birth rates in 18 and later. 3) Price: The profit margin of the industry is stable. ① Revenue side: The government guides the pricing of textbooks and educational aids and follows the principle of low profit; ② Cost side: mainly composed of the cost of printing and paper materials, and paper prices are also highly stable.

The new business is still worthy of attention, and we look forward to increasing growth and extracting valuation.

Publishing companies have abundant cash flow and endowment advantages such as school entry channels and student traffic. Therefore, they are also actively experimenting and expanding diversified new businesses. In the long run, they may be expected to create new growth points in addition to their main business and provide excellent valuation opportunities. Currently, some companies are actively developing new businesses such as AI+ education (mainly TOB/G, focusing on in-school products+channel distribution, e.g.: Southern Media, Anhui New Media, etc.), cultural tourism research (Shandong Publishing, Southern Media, etc.), and after-school services (Zhongnan Media, Southern Media, etc.), which are expected to give full play to the advantages of publishing companies and revitalize the company's existing resources. It is recommended to actively pay attention to future developments, looking forward to long-term incremental growth and valuation opportunities.

Investment advice:

The bank believes that the values of the publishing sector, such as high stability, high dividends+active layout of new businesses, have not fundamentally changed. The short-term focus is on the implementation of policies related to the actual income tax rate. On the one hand, the annual dimensional proposal focuses on publishing valuation trends and is optimistic about high dividend cost performance; on the other hand, the AI industry continues to progress. AI+ education, as one of the application directions that were implemented earlier, is optimistic about catalytic opportunities for the publication corner/AI+ education theme.

It is recommended to actively focus on the three main lines:

1) High dividend+high stability. It is recommended to focus on those with high dividend rates and demographic advantages in the region, including Zhongnan Media (601098.SH), Phoenix Media (601928.SH), Chinese Media (600373.SH), etc.;

2) Actively lay out new business directions, focusing on recommending Southern Media (601900.SH), which has an active new business layout such as AI+ education; it is recommended to focus on Anhui New Media (601801.SH), Zhongyuan Media (000719.SZ), etc.;

3) For central enterprises, it is recommended to focus on China Science and Technology (601858.SH), China Publishing (601949.SH), CITIC Publishing (300788.SZ), etc.

Risk warning: paper costs are rising, education policies are changing, consumer demand is changing, birth rates are falling, and new businesses are falling short of expectations.