Key investment points: Double control of content channels to strengthen the main business, and transformation and upgrading promote performance growth. In 2016, the company achieved operating income of 13.789 billion yuan and net profit attributable to the parent company of 592 million yuan, up 16% and 82% respectively over the previous year. In terms of traditional publishing and distribution, the company adheres to the concept of quality publishing and follows the path of quality-efficient development; at the same time, it is speeding up the construction of specialty bookstores and improving the channel system. Through double control of content channels, the company's book sales bucked the trend in an environment where policies were extremely unfavorable and market competition was extremely fierce. Education and aid sales increased 10% year on year, and general book sales increased 32% year on year. At the same time, the company is actively deploying digital publishing to deepen industrial transformation. Its digital publishing companies are developing new businesses around popular reading; steadily advancing the “Belt and Road” layout in overseas markets, exporting and introducing 135 types of copyright, and the Changjiang Children's Group signed a strategic agreement with Russia's “Kids International” company. With the refinement and personalization of the traditional main business, and the integration and transformation of new media, we expect the company to continue to promote industrial upgrading to strengthen the endogenous nature of performance growth. Strongly enter the education industry, and expand the industry to cultivate new growth points. On April 27, 2016, “iCube”, an education company owned by the company, was successfully listed on the new third board, becoming the first state-owned cultural enterprise in the country in the preschool education category. Using a chain of kindergartens as the carrier, iCube provides a “trinity” overall solution for early childhood education. By the end of 2016, it had covered more than 200 homes and more than 50,000 registered users. At the same time, Bosheng's education service products have gradually become a system. The two-course platform has reached cooperation with the People's Education Society and education publishing houses in Heilongjiang, Yunnan, Guangxi and other places; the education integration service won 11 bids, training evaluation services won 43 bids, and the comprehensive quality evaluation project was promoted in 400 schools and 320,000 teachers and students in Yichang, and was selected as “National Outstanding Education Informatization Case” by the Ministry of Education. The Changjiang Children's Group has also initially formed a development model integrating the main publishing business, preschool education, and children's digital media. The company has made a strong entry into the education industry, cultivating new growth points for industrial development through the establishment of an industrial extension system, and laying the foundation for sustainable growth in future performance. Accelerate resource integration, standardize capital investment, and strengthen the development pattern of the whole chain. The company promoted deep internal integration. The textbook branch and Xinhua Group achieved channel and business resource integration. The three companies, Bosheng, Research Institute, and Pangu, completed business restructuring and team restructuring, social and store integration promoted book sales in this edition, strengthened publishing and printing cooperation, and various publishing units arranged for the processing output value of Xinhua Printing to more than double over the same period last year; signed an agreement with Jincheng Press to establish Xiyuan Press Co., Ltd. At the same time, the company further regulates capital investment: Dejin Investment Company focuses on the four sectors of “equity investment, project incubation, asset management, and financial services”, and the Xiangcun shares it invested in have entered the “innovation layer” list of the new third board; Changrui Xingrun successfully completed the reduction of shares in Kangxin's new materials project, achieving a return on investment of 168%. The company improves and strengthens the development pattern of the whole chain through resource integration and capital investment, and optimizes business collaboration. Profit forecast. Future prospects: 1) Steady growth in performance, low valuation, low PEG, and high margin of safety. It is expected that the company will still benefit from cost reduction and efficiency policies in '17, and the integration of offline resources combined with the explosion of advantageous content products; 2) Further layout of the education industry can be expected, with strong expansion expectations. The company's own capital is sufficient, and there are strong expectations that epitaxial transformation will deepen into the education industry. 3) The reform of the country continues, and traditional media and state-owned enterprises benefit. Following the implementation of Oriental Pearl's equity incentives, media and state-owned enterprise reform expectations are getting stronger, company benefit policies are being relaxed, and reform expectations are strong. We expect the company's 2017-2019 EPS to be 0.61 yuan, 0.70 yuan, and 0.78 yuan, respectively. Considering that in the same industry, Anhui New Media and Southern Media's agreed PE forecast for 2017 was 27.14 times and 20.77 times. Based on the company's 2017 PE valuation of 20 times, the target price is 12.2 yuan, maintaining the “buy” rating. Risk warning. The overall downside risk of the traditional media industry; corporate transformation falls short of expectations.