The company released its 2014 three-quarter report: in the first three quarters of 2014, it achieved main business revenue of 384.5630 million yuan, an increase of 34.68% over the previous year; net profit to mother was 166.517,300 yuan; net profit to mother was 144.1506 million yuan, net operating cash of 589.806 million yuan, and earnings per share of 0.24 yuan. 1. OTT information consumption and operation based on radio and television users is the biggest highlight in the future. Since this year, the strategic direction of digital video has gradually changed from traditional radio and television equipment and solution providers to OTT information consumer operators based on radio and television users — the company has signed OTT cooperation agreements with radio and television operators in Hunan, Guangxi, Xinjiang, Inner Mongolia, Zhejiang and other places. Currently, the user development trend is good: it is expected that by the end of 2014, the number of radio and television OTT users will reach 500,000 households, and the number of users that can be reached by the end of 2015 is about 5 million. The average number of users charged for the whole year of 2015 is about 3 million. Only considering the value of content such as Youku Under the assumption of distribution of 2-3 yuan/household/month, the annual contribution of a single user is about 30 yuan, and the corresponding performance contribution is about 80 million yuan (considering income tax factors), corresponding to a 30% increase in performance in 2014. Furthermore, we note that while successfully introducing resources from various sources, the company's OTT business is expected to form a comprehensive advantage, effectively promoting the company's smart terminal/home gateway, multi-screen interaction, internet finance, two-way network reform, and the further development of value-added services such as TV commerce, online lottery (Internet lottery), somatosensory technology, and video games, and will promote the joint development of cloud strategy business segments such as cloud technology, virtual terminals, cloud transcoding, cloud gaming and big data user behavior analysis, and accurate advertising. These innovations will significantly enhance the value of a single user. Finally, in the context of Alibaba's accelerated strategic layout in the entertainment sector, competition for television screens will be fierce as never before, and the value of radio and television networks may be revalued, and digital video can be expected to benefit from this process. 2. The layout of the film and video business and somatosensory game business will significantly enhance OTT user operation collaboration while bringing direct performance contributions. The subsidiary Perfect Starry Sky Media Co., Ltd. has completed the gradual development and growth process of team building, brand building, co-production, and homemade distribution. The homemade TV series “Emergency Room Story” obtained a distribution license, and the co-filmed films such as “Beijing No. 81” and “Girlfriends” were screened in the third quarter. The response was overwhelming, and received good reviews and box office. “Hot Blood Men Gang” has also been confirmed to officially land in the Spring Festival Gold Festival at the end of January 2015. Combined with public box office information, the performance contributions of “Beijing No. 81” and “Girlfriends”, which have already been screened, will be officially reflected in the fourth quarter. In addition, improving the power of homemade dramas will also provide valuable content resources for digital video's next step in the layout of radio and television OTT operations, enable multi-channel collaborative distribution of homemade content, and contribute to expanding performance. Furthermore, significant progress has been made in the development of the somatosensory game platform developed by Digital Video and Tsinghua University. Considering the good sales trend of Microsoft X-BOX, we are optimistic that Digital Video will soon launch somatosensory game terminals and platforms. 3. The traditional radio and television equipment business can still maintain steady growth. We note in particular: (1) Significant progress has been made in the promotion of the ultra-optical network business, which is an important driver for future equipment revenue growth — on top of the existing provinces of Guangdong, Jiangsu, Guangxi, Fujian, Zhejiang, Inner Mongolia, and Sichuan, new cases in Beijing, Henan, Hebei, Shanxi, and Heilongjiang provinces were added in the third quarter. They were used or tested by 24 provincial network companies, and the market winning rate exceeded 90%, maintaining an absolute leading edge. The c-docsis standard (technical standard for ultra-optical networks), which the company participated in formulating during this period, has also been officially released internationally by the US Cable Television Laboratory. This has also become an important successful example of exporting Chinese standards to the international market, and will promote the deployment of the company's ultra-optical network business overseas. (2) The huge development of OTT users has brought good opportunities for CA module sales. Considering that digital video will provide advanced terminal payments for radio and television operators to develop OTT users, since such terminals are generally equipped with CA modules, this will bring an important source of growth to the digital video CA module business. It is expected that this business segment will continue to maintain a growth rate of around 10% in the future. (3) The development of radio and television OTT will increase the demand for front-end high-definition devices. We note that in the first three quarters of this year, when radio and television OTT user operations were not yet effective, the company's performance achieved high growth — the first three quarters achieved main business revenue of 384.5630 million yuan, up 34.68% year on year, operating profit of 128.625 million yuan, up 37.50% year on year, net profit to mother was 166.517,300 yuan, up 30.49% year on year, and deducted from mother of 144.1506 million yuan, up 32.62% year on year. We expect that the traditional radio and television equipment business will maintain steady growth of 20-30% in the next 1-2 years. This provides a good performance guarantee for the company's strategic transformation and upgrading, and also makes the company's acquisitions more focused on obtaining the strategic resources necessary for long-term development. Such acquisitions or acquisitions that pursue profits from mergers and acquisitions in the short term are more in line with future investors' preferences. 4. The financial derivatives business based on the company's core technical advantages is expected to achieve explosive growth. (1) The CA module has the same technology as financial IC cards, mobile payment cards, etc., and will accelerate the process of benefiting after acquiring Fuzhou Zhaoke Smart Card Co., Ltd. to obtain financial IC card qualifications. We have noticed that recently, many commercial banks have clearly stated specific plans to upgrade traditional magnetic stripe cards to IC cards, which will enable the digital video financial IC card business to explode. (2) P2P trading platforms have achieved explosive growth - the company has turned the Fengpay platform into a secure P2P management platform. During the third quarter, it has cooperated with more than 100 P2P platforms, and its business volume has entered a stage of rapid growth. Through leading online loan management concepts, Fengpay Network Finance Manager has greatly improved the safety and speed of P2P. Currently, the average daily turnover exceeds 20 million yuan. Considering that the profits of P2P trading platforms are mainly interest income from accumulated capital and matching fee income, and considering the current business development trend, the profit contribution from this business is expected to reach about 20 million yuan in 2015, and the resulting performance growth rate is close to 10%. 5. The military video command business based on high-definition video technology is also progressing steadily. Based on high-definition video technology in the field of traditional radio and television, digital video can extend users across industries on the basis of fully considering the characteristics of military systems. The military can use digital video command and control systems, fully demonstrating its technical strength and bringing it new growth points. Combined with the investment scale and market accessibility of special industries, we expect digital video video command system orders from military and other special industries to reach about 50 million yuan in 2015, contributing about 20 million yuan to corresponding performance. 6. Profit forecasting and investment suggestions. Based on the company's current orders and execution progress, we estimate that the main digital video business revenue in 2014-2016 was 578.32 million yuan, 915.68 million yuan, and 1379.81 million yuan, respectively, and net profit to mother was 238.79 million yuan, 376.54 million yuan, and 52.96 million yuan, respectively. The corresponding earnings per share were 0.35 yuan, 0.55 yuan and 0.76 yuan, respectively. Considering the characteristics of the company's operating performance contribution being transformed from traditional radio and television equipment business to radio and television OTT user operations, financial P2P platforms, and military video systems, we expect that the future valuation level will increase significantly, maintain the purchase rating, and give the company a target price of 19.25 yuan for 6 months, corresponding to a price-earnings ratio of about 35 times 2015. 7. Major uncertainties. The progress of OTT promotion has fallen short of expectations, terminal occupancy costs in OTT business development have risen sharply, the launch of somatosensory games has fallen short of expectations, the progress and results of video content integration have fallen short of expectations, the profit level of P2P platforms has fallen short of expectations, financial IC promotion and market share have fallen short of expectations, and economic systemic risks.