Financial Risk Warning | The performance of the second year of listing continued to decline, Rongxin Culture's overseas revenue decreased by 30%, and the promotion fee fell by more than 20 million yuan

Source of this article: Times Business School Author: Vic

Source: Times Business School

Author|Vic

Editor|Zheng Shaona

On April 23, Rongxin Culture (301231. SZ) released its 2023 annual report, and its performance continued the downward trend in 2022.

Two years ago, in September 2022, Rongxin Culture was listed on the Growth Enterprise Market (GEM) and was listed by Zhongyuan Securities (601375. SH) sponsored, overraising 159 million yuan, but its performance changed in the first year of listing. The financial report shows that in 2022, the company's revenue and net profit deducted from non-attributable to the parent company will be 321 million yuan and 12.2734 million yuan respectively, with year-on-year growth rates of -15.39% and -66.17% respectively.

In 2023, Rongxin Culture will achieve revenue of 274 million yuan, a year-on-year decrease of 14.67%, and a non-net profit of 1.5421 million yuan, a year-on-year decrease of 87.44%.

After two consecutive years of declining performance, Rongxin Culture's performance in the stock market has also been sluggish recently, with a cumulative decline of more than 30% since 2024. On April 24, Rongxin Culture's share price closed up 4.63% at 17.64 yuan per share, with the latest total market value of 1.485 billion yuan.

In response to the continuous decline in performance after listing, the income of the Douyin platform and the investment of promotion fees, on April 23, Times Business School called the secretary of the board of directors of Rongxin Culture to inquire, but the staff said that it was inconvenient to be interviewed.

Revenue and non-net profit both declined, and the revenue contribution of the Douyin platform was insufficient

According to the 2023 annual report, Rongxin Culture is mainly engaged in the planning and distribution of children's books and the export of children's cultural products.

In terms of business, in 2023, Rongxin Culture's children's book planning and distribution business will achieve revenue of 271 million yuan, a year-on-year decrease of 14.46%. The main reason is that the company's sales revenue from traditional physical stores and traditional online channels has declined a lot, while the revenue scale of the Douyin platform has contributed relatively little to its overall revenue.

In 2023, the export business of Rongxin Culture's children's cultural products will achieve a revenue of 2.5578 million yuan, a year-on-year decrease of 30.02%. The main reason is that with the slowdown of global economic growth, overseas consumers' reading habits tend to diversify.

As for the reasons for the decline in revenue, from the perspective of the consumer market, from 2020 to 2022, due to the impact of the epidemic, the recovery of demand will slow down in 2023, and mass consumption will tend to be cautious.

From the perspective of sales channels, it is mainly the structural changes in the sales channels of the book industry. With the change of readers' consumption habits and the rise of new media platforms, traditional physical stores and traditional online channels have declined to varying degrees, and short video e-commerce channels represented by Douyin have grown rapidly in the overall book retail market.

In 2023, the physical store channel of China's book retail market will still show negative growth, down 18.24% year-on-year, while short video e-commerce will still show a rapid growth trend, with a year-on-year increase of 70.1%, which is the main driving force for the growth of the overall retail market.

The promotion expenses of the short video channel increased, and the operating cash flow was negative for two consecutive years

In the medium and long term, Rongxin Culture is facing an industry environment in which the number of births is declining year by year, the growth rate of China's children's book market is gradually slowing down, and the industry environment is transitioning to the stock market.

In 2023, Rongxin Culture will put forward the core plan of "one core and two wings" to promote the digital transformation of the company's business system to enhance competitiveness. Among them, on the main business side, it is mainly to improve business operation efficiency with the help of online platforms.

Rongxin Culture said in its 2023 annual report that in 2023, the company's promotion expenses on the Douyin platform and offline exhibition expenses increased were the main reasons for the decline in net profit in the reporting period.

From the perspective of the period expense rate, in 2023, the sales expenses of Rongxin Culture will be 60.8453 million yuan, a year-on-year increase of 5.14%, the sales expense rate will be 22.25%, far exceeding the management expense rate of 11.27%, and the R&D expense rate of 0.9%, and the sales expense items will reach 22.8548 million yuan, a year-on-year increase of 42.5%.

In addition, from the perspective of cash flow, in 2022 and 2023, the net operating cash flow of Rongxin Culture will be -35.1785 million yuan and -2.1764 million yuan respectively, which will be negative for two consecutive years.

Rongxin Culture said in its 2023 annual report that the net cash flow generated by its operating activities during the reporting period was -2.1764 million yuan, and the net profit was 9.9605 million yuan, with a difference of 12.1369 million yuan, mainly due to the combined impact of the decrease in operating payables, the increase in inventory, and investment income.

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