CICC: First-quarter performance of publishing companies slightly exceeds expectations, highlighting high dividend value.

CICC released a research report stating that state-owned publishing companies are reducing costs and increasing efficiency, improving revenue structure, and expecting a stable growth in non-GAAP net profit; the resumption of tax policies is expected to result in a higher apparent growth rate in the net profit attributable to the parent company of state-owned publishing enterprises in 2025. Most state-owned publishing companies' non-GAAP performance in 2024 is in line with market expectations, with 1Q25 performance slightly exceeding expectations, mainly due to: 1) some companies adjusting their revenue structure, reducing the proportion of low-margin varieties, while some regions have revised textbook prices, added new varieties, etc., resulting in an increase in gross profit margin levels. 2) Proper control of expenses driving profit release. This trend is expected to continue in 2025. Publishing state-owned enterprises are seen as having high dividend value, with attention to the transformation of popular publishers. CICC's main points are as follows: Income: The stability of educational publishing is highlighted, while the demand for popular publishing is weak, and related companies are considering transformation opportunities. Educational books still show stability, with several local state-owned publishing companies continuing to focus on self-compiled textbooks and teaching materials, such as Jiangsu Phoenix Publishing & Media Corporation and China South Publishing & Media Group, with their revenue increasing by 12% and 8% respectively. The weak demand for non-essential categories of popular publishing is driving companies to consider transformation paths for selection and distribution channels in light of the trend of lightweight reading habits. According to Open Book, the scale of the domestic book retail market (excluding textbooks and teaching materials) decreased by 5% in 2024. Some companies are exploring transformation paths: Thinkingdom Media stated they will continue to explore the diversified operation of original IPs, advance anime and film adaptations, and continue to focus on marketing channels such as Douyin; Citic Press Corporation has signed contracts for a variety of key topics and plans to expand its linkage with top anime, games, and film IPs across various fields; Guomai Culture & Media is also exploring a second growth curve, with plans to release the animated film "The First Stars of the Three Kingdoms" in 2025. Profit: State-owned publishing enterprises continue to show stable internal growth, while private book companies face pressure. Educational publishing: State-owned publishing companies are reducing costs and increasing efficiency, improving revenue structure, and expecting a stable growth in non-GAAP net profit; with the resumption of tax policies, it is expected that the apparent growth rate of net profit attributable to the parent company of state-owned publishing enterprises in 2025 will be relatively high. The performance of most state-owned publishing companies in 2024 matches CICC's and market expectations, with 1Q25 performance slightly exceeding our expectations. This is mainly due to: 1) some companies adjusting their revenue structure, reducing the proportion of low-margin varieties, while in some regions, textbook revisions, price increases, and new varieties have contributed to an increase in gross profit margins. 2) Proper control of expenses leading to profit release. This trend is expected to continue in 2025. Popular publishing: Private book companies are generally under pressure. On one hand, channels still face significant competitive cost (discounts) and expense (advertising impact) challenges, while on the other hand, some companies are in a transition phase and require some time to return to a profit growth trajectory. Dividend: Dividend frequency has significantly increased, with a focus on high dividend value. Most companies have sufficient cash assets, with some companies increasing their interim dividends, and operating cash flow status has significantly improved. In terms of dividend frequency, some companies achieved two dividends within the year in 2024, with some companies planning to pay mid-term dividends in 2025. In terms of dividend amounts, most companies saw a stable increase in dividend amounts in 2024, emphasizing shareholder returns. Risk factors: Industry regulatory policy changes, changes in tax preferential policies, intensified channel competition, downturn in macroeconomic conditions, and other forms of entertainment competing for user time.