Incident: Recently, we conducted off-site research on Huawen Media (000793) through phone calls and emails, etc., and had in-depth exchanges with the company's directors' office on many important issues such as Huawen Media's current business conditions, performance indicators, and future development strategy direction. Investment points: The fundamentals of companies that have continuously acquired new media targets have changed significantly: the company's main business is newspaper publishing and distribution, advertising, and gas production and supply. The media and gas business account for 77% and 16% of revenue, respectively. It owns newspaper businesses such as “Securities Times” and “Huashang Daily” operated by subsidiaries such as Times Media and Huashang Media, as well as advertising design agency business operated by Huashang Advertising. Since this year, the company has carried out a series of mergers, acquisitions and restructuring, and has successively purchased controlling interests in companies such as Guoshi Communications, Janshi Yitong, Jingshi Culture, Bangfu Software, and Manyou Culture. The synergy between channels and content between new media and traditional media has greatly increased. The company will achieve a spectacular transformation of its main business through mergers, acquisitions and restructuring, and the company's fundamentals are undergoing major changes. A leader in the mobile video industry that leverages operators to achieve rapid growth: Huawen Media acquired GuoTV (Shanghai) through cash in the first half of the year and officially entered the mobile video field (currently completing asset transfer procedures in accordance with relevant procedures). GuoTV Communications is one of the best partners in the video bases of the three major operators, operating the largest vertical channel of the mobile video base - the video channel, and the brand Baoguo Television Communications. By the end of last year, GuoTV Communications had more than 6 million monthly subscription users at the mobile video base, with revenue of about 465 million yuan before sharing, making it the highest revenue sharing partner for the mobile video base with a 25.6% share. Since April 1 of last year, the mobile video base began charging for traffic, and the division ratio with partners has also been adjusted from 60%: 40% (mobile video base: partner) to the current 40%: 60%. This adjustment will also contribute to a significant increase in revenue from GuoTV Communications. Furthermore, since last year, due to Tianyi Video's strict control of the promotion of social channels, the partner's business has been adversely affected to a large extent. This is also something we are more concerned about. However, through this survey, we found that GuoTV Communications only accounts for about 3% of Tianyi Video's revenue, so the negative impact is basically negligible. Acquisition of the entire mobile video industry chain of Jangshi Yitong Bureau: Zhashi Yitong is a company dedicated to operator video business. Through cooperation with mobile video licensors and channel parties, the company has now become the leading provider of video content distribution and technical services for operators in China. The company's main business model is to provide content distribution and promotion services, program packaging planning, transcoding and other technical services to mobile video license holders and operators. The main customers confirm that video information service fee revenue generated by Yizitong provides content or distribution promotion services on a monthly and agreed share ratio with mobile phone license parties. Major customers This includes China Television Communications, China News and China News, Huashu Media, etc. In 2013, the net profit growth rate of Yangshi Yitong reached 123%, and the net profit for the first quarter of 2014 had reached 29.935,500 yuan, close to the net profit for the whole year of 2012. The share of mobile video applications has increased dramatically, and there is broad room for growth in the industry: According to the “33rd Statistical Report on China's Internet Development Status” released by CNNIC in 2014, as of December 2013, the number of mobile video users in China was 247 million, an increase of 83.8% compared to the end of 2012, and the usage rate of netizens was 49.3%, an increase of 26.8 percentage points over the end of 2011, with the biggest increase among 16 types of mobile applications. Currently, it has surpassed mobile games to become the fifth largest mobile Internet application. Mobile video is a mobile Internet application that has emerged with the commercialization of 3G communication technology. The corporate operation period is only a few short years, yet the pace of development is astonishing. We believe that with the gradual implementation of 4G licenses, larger smartphone screens, and the increase in penetration rate and resolution, the mobile video operating environment will become more optimized, and people's traditional habits and payment methods for watching videos will gradually change. Among the “four screens” of mobile phones, PADs, PCs, and TVs, the mobile screen video business has the greatest potential for growth. The direction of strategic transformation is clear, leading new media companies are looming: Looking at Huawen Media's series of acquisitions since 2013, its strategic direction of getting rid of the restrictions of paper media and transforming new media is very clear. If the various business restructuring is successfully implemented this year, Huawen Media will become a new media group with Internet and mobile Internet businesses including GuoTV Communications, Yangshi Yitong, Huashang Network, and Chenghuai Technology. According to the company's estimates, the revenue contributed by these new media businesses in 2014 is expected to reach 1.5 billion yuan, accounting for 31% of the company's exam preparation revenue, and the net profit they contribute is expected to reach 409 million yuan, accounting for about 37% of the company's net profit for exam preparation. As the new media business will continue to grow rapidly in the next few years, its profit contribution ratio in the company's total business will increase year by year. It is estimated that in 2015 and 2016, the net profit contributed by these new businesses will account for 44% and 53% of the company's net profit, respectively. After two years, Huawen Media will truly transform into a leading listed media company with a focus on new media business. In order to achieve its strategic vision of an “Internet platform media group,” if it has suitable targets in the future, we believe that Huawen Media will continue the epitaxial growth model of mergers, acquisitions and restructuring. Profit forecast and investment advice: If the asset restructuring process goes smoothly this year, we expect the company's 2014-2015 EPS to be 0.56 and 0.73 yuan respectively, and the price-earnings ratio corresponding to the current stock price is 20.54 and 15.75 times, respectively, giving it a “buy” rating for the first time. Risk factors: The asset restructuring process did not go well; the performance of the company underlying the acquisition did not meet expectations.