We have a different view from the market:

We think we can pay attention to the three highlights of Guangdong Media in the near future: (1) Yuncai Network has entered the final testing period, and its professional information analysis capabilities are building product barriers, which is expected to achieve the first batch of connections with the million readers of “Soccer Lottery Winner”. The customer base space is huge; (2) the frequency of game launches has accelerated, and the expansion of the game industry chain is anticipated; (3) in 2014, the Champs-Elysées successfully merged, and LED screen ratio advanced into the “new screen interaction” era. We think 2014 is a year of transformation for Guangdong media. There is a lot of paving work in the new and old media businesses. It is foreseeable that good news will spread frequently in the future. The establishment of the company into a comprehensive media group integrating distribution, paper advertising, and new media is just around the corner. We are firmly optimistic about the Guangdong media and maintain “strong recommendations.”

Key points of investment:

Merger and acquisition of Champs Elysees to embark on a new journey of integrating LED advertising. The company's acquisition of the Shanghai Champs-Elysees was approved by the restructuring committee, marking the company's official entry into the LED outdoor advertising market. According to the gambling agreement at the time of the merger and acquisition, the profit of the Champs Elysees in the next 14-16 years will not be less than 56.83 million yuan, 68.7 million yuan, and 81.56 million yuan, with an average growth rate of 20%. Our vision for the Champs-Elysées is not only its net profit contribution of 60 million yuan, but also its “ambition” to integrate the outdoor LED advertising market through the Guangdong Media listing platform: (1) the number of screens owned by the Champs-Elysées is 16 blocks, accounting for nearly 1/5 of the screen resources of leading companies, and its leading position advantage is obvious; (2) using Guangdong Media's huge advertiser resources to improve order digestibility; (3) the current listing price of Champs-Elysées is 1.06 yuan/second, far lower than the price of 1.6 yuan/second of its peers; every 0.1 yuan increase in publication price will contribute 7% to the Champs-Elysées The increase. Considering the close correlation between the advertising value of outdoor LED screens and local commercial locations, we believe that there is still room for further improvement in the advertising revenue value of independent Champs-Elysées screens. Coupled with the company's pioneering application of new technologies such as “screen interaction”, the market position will be further enhanced, providing operational strength for integrating the fragmented outdoor LED market.

Accelerate transformation and enter a big year of attack in 2014

The traditional transformation, the community newspaper model is expected to usher in the second spring of print media. The company invented an original community newspaper model to create an exclusive community newspaper for the local community that is different from portals and big newspapers. The advertising positioning is clear, and customers target local advertisers. Twelve companies were set up in 2013, the plan was increased to 30 in 2014, and 100 companies are planned to be built in the next three years. It is estimated that the average profit per share is 1 million yuan. After the business matures, the profit contribution is expected to exceed 100 million yuan, accounting for 1/4 of the current net profit.

The sports lottery app has entered its final testing period, and I'm looking forward to enjoying the World Cup feast. (1) The popular teams in this year's World Cup are all in the dead group. Soccer enthusiasm will further boost soccer lottery growth. It is expected that the growth rate of betting lottery tickets is expected to break through the 2010 level of 102%; (2) Relying on the millions of loyal readers of “Soccer News”, it is expected that the first batch of lottery fans will have a huge customer base. Assuming that 20% of readers successfully connect, buy lottery tickets for 100 yuan a week, and get a refund according to the 7% lottery revenue ratio, the company's gross profit can reach 72.8 million yuan, and the business prospects are promising; (3) The “Soccer News” professional information team is building the core competitiveness of the platform.

Increase the capital of game companies to accelerate the expansion of the industrial chain. The company announced on March 19 that it would increase the capital of Wanjiang Technology with 4.8 million yuan in cash, demonstrating the company's determination to accelerate the expansion of the game industry chain. The company's broad-game platform currently operates 4 super popular ARPG games “Wu Yi”, “Dark Dragon Slayer”, “Here Comes the Miracle”, and “The Legend of Heroes of the Martial Arts”. Among them, the first two games are currently ranked 4th and 8th in the top ten in the number of launches, with monthly turnover exceeding 10 million yuan, effectively gaining popularity for the platform. However, most of the games owned by the target company have also been launched on the game platforms of listed companies, so this capital increase will help raise the level of the platform's distribution agency business and enhance the core competitiveness of the game business. It is expected that the company's game launch speed will accelerate in the second and third quarter. Driven by both internal media traffic and external traffic, the market results are expected to exceed expectations.

Increase capital to Feifei Mall and expand the layout of the e-commerce industry chain. The company intervened in Feifei Mall through a shareholding model, with the intention of enhancing its ability to operate the “Home Delivery” e-commerce store and forming better synergies with Feifei Mall. There are three advantages of the company's e-commerce operation: (1) the huge advertising distribution team can easily achieve “last mile” logistics distribution, with a current approval rate of 97%, ranking first in South China; (2) the company's various media resources are rich in various media resources, effectively realizing the advantages of online and offline integration and promotion; (3) the company's “take-home” shopping mall provides products that are inconvenient to carry, such as household goods, cold chain, etc., which are particularly suitable for logistics delivery models.

Profit forecast and valuation: Guangdong Media's share capital will increase to 725 million shares due to the merger and acquisition of Champs-Elysees, and Guangdong Media's 14-15 EPS will increase by 0.08 yuan and 0.1 yuan respectively. We expect the company to prepare for the EPS exam in 14-15 years to be 0.51 and 0.63 yuan respectively, corresponding to 43 and 35 times PE. The target price is expected to be 26 yuan, which continues to give it a “highly recommended” rating.

Risk warning: the performance of mergers and acquisitions did not meet expectations, subsequent integration work was poor; construction work for community newspapers fell short of expectations, local advertising revenue fell sharply; progress in the new media business fell short of expectations, etc.