After many stock repurchases, the reading group recently reported that it has entered the overseas market.
Editor’s note: This article is from WeChat public account “Hong Kong Stock Research Institute” (ID: Ganggushe).
According to Tencent News, on September 27, the full-text subsidiary of the reading group, Wenwen Literature, and KapokTree, Ookbee or OBU have entered into an acquisition agreement to acquire a 20% stake in OUB. Obviously, reading the text directly refers to the Thai online literature market.
As we all know, the Reading Group is the first domestic online text, recognized as the industry’s first. With the sudden emergence of the free reading APP in the online literature market, the huge market share of the reading group has been eroded a lot, and the stock price has also been falling. Even if the stock repurchase program is launched several times, the stock price has not improved much.
The current reading group faces the tricks of the free reading field. On the other hand, it still has to be explored in new business and new markets. The days are not good.
The “industry brother” of the past is not a smooth way to grow up
Reading Group entered the HKEx in November 2017 and won the title of “First Network Literature”. Currently, it has multiple platforms such as QQ Reading, Start Chinese Network, Chuangshi Chinese Network, and Yunqi Academy.
All along, the reading group has a difficult position in the online literature market. Taking 2016 as an example, the annual revenues of PalmReading Technology and Chinese Online are not comparable to the total revenue of 2.476 billion yuan in Reading Group, which occupies half of the industry.
Today, status is still there, but in the context of the digital reading dividend is gradually disappearing, it is not as crazy as it used to be. For example, today’s stock price has not boosted the confidence of the capital market after many stock repurchases. The current offer price of HK$26.65 has fallen by 51% from the issue price of HK$55.
The latest earnings report shows that net profit is declining. According to the Interim Report of the Reading Group in 2019, in the first half of the year, its revenue reached 2.97 billion yuan, a year-on-year increase of 30.1%, and net profit decreased by 22.4% year-on-year to 390 million yuan.
The reason for this a large part is because the market size of its online business is shrinking. This is related to its paymentThe decline of the household is not unrelated. According to the financial report, in 2017, the average monthly paying users of the reading group was 11.1 million, the number of users in 1018 was 10.8 million, and the number in the first half of 2019 was 9.7 million. The proportion of its paid users to active users is also gradually decreasing, from 5.8% in 2017 to 5.1% in 2018 and 4.5% in the first half of this year.
The main business is facing multiple problems of falling net profit and weak growth of paying users. In addition, the net profit of Xinli Media, which undertakes the task of filming and reproducing its IP resources, is less than expected. The film and television route also means some uncertain factors such as policy supervision and success. The Hong Kong Stock Research Institute below also looks at its future development direction through the analysis of the business of the Reading Group.
Business faces multiple challenges. Reading Group breaks out easily
In fact, from the reading of the free reading market in the first half of the reading group, it can be seen that the rise of the online reading market is also taboo. After all, in the context of the current traffic dividend peak, the reading group must also learn Look at the market’s eyes.
1. Free reading of the sudden emergence of the main business dividend period gradually disappeared
In the first half of this year, the reading group increased revenue by 30.1%, but its net profit fell by 22.4%. Among them, the size of the online business segment as the pillar of the reading group is shrinking. According to the financial report, in the first half of 2019, the online business revenue of the reading group was 1.662 billion yuan, a year-on-year decrease of 11.53%, accounting for 56% of the total revenue. This ratio hit a record low.
In addition to the impact of the decline in paying users mentioned above, it is not unrelated to the decline in average payments. In the first half of the year, the average payment for each paying user was 22.5 yuan, compared with 24.4 yuan in the same period last year, down 7.78%. Of course, in the face of the impact of free reading, the reading group also actively took countermeasures. In the first half of the year, the Reading Group launched a free reading model and hopes to realize it through advertising. For example, in the mobile QQ and QQ browser applications to distribute free content, in the second quarter launched its own free reading application “flying”.
Free reading is a supplement to the paid reading model, which captures users who are more price sensitive but can accept page ads, but there are also a few competitors in this market. Before the reading group pushed for free reading, this market has already emerged a relatively strong opponent. For example, the Wi-Fi Master Key’s Lian Shang Literature and the fun headline’s rice reading novel. Relevant data show that as of December 2018, Lian Shangwen’s monthly active users exceeded 30 million, and the average daily life of rice reading novels exceeded 5 million.
