Event description Tianzhou Culture announced its 2016 annual results on April 18. During the reporting period, the company achieved operating income of 779.99396 million yuan, an increase of 43.30% over the previous year; net profit attributable to shareholders of listed companies was 243,569 million yuan, an increase of 38.22% over the previous year. The company plans to distribute a cash dividend of 0.45 yuan (tax included) to all shareholders for every 10 shares, and transfer 3 shares to all shareholders for every 10 shares from the capital reserve fund. Incident reviews and performance indicators led to growth, and the gross profit margin and cost ratio remained good. 1) During the reporting period, the company completed 51% investment in Renmin Jindian and 100% in Youai Network. The two were combined in June-December and September-December, respectively, with consolidated net profit of 279.521 million and 49.1429 million. Among them, Youai Network successfully completed its 2016 performance promise. In addition, the mobile game subsidiary Magic Times had a consolidated profit of 163.2814 million yuan, an increase of 6% over the previous year, slightly lower than expected. Outreach and endogenous growth together drive high growth in the company's performance. 2) During the reporting period, the company's gross margin further increased by 4.8 percentage points to 61.48%; sales, management and financial expense ratios were 8.17%, 15.26%, and -1.03%, respectively, with year-on-year changes of 0.46, 1.59, and 0.37 percentage points. The three strategies of education+online games+books continue to advance in unison. 1) During the reporting period, the company's book publishing and distribution and mobile game business achieved revenue of 434 million yuan and 346 million yuan respectively, up 48.13% and 37.66% year-on-year, with gross profit margins of 37.40% and 91.71%. 2) The company improved education content distribution channels through investment in the People's Code; participated in education and successfully entered the new third board to accelerate the company's layout in the field of Internet education; established two new subsidiaries in the education sector, Zhongnan Tianzhou and Tianzhou Classroom, used the company's educational content resources to consolidate the company's education brand; and signed a strategic cooperation agreement with Hengshui Middle School to continuously improve the industrial chain and expand various fields such as education and training. Through foreign investment and endogenous development, education resources were integrated to promote education business upgrading. 2) The subsidiary Magical Era operates 8 mobile game products. “Forgotten Fairy” and “Crouching Tiger, Hidden Dragon” have maintained steady development. Among them, “Forgotten Fairy” earned 113 million yuan in 2016, accounting for 32.62% of the game business revenue. Youai Network has a rich product line. Currently, it operates 25 game products. As a comprehensive game company with integrated research and operation and overseas cooperation, it is expected to enhance the company's mobile game strength and establish a diverse and rich product matrix. 3) The book publishing and distribution business developed steadily. During the reporting period, the company established Renmin Tianzhou to lay out the overseas publishing and distribution market. At the same time, Tianzhou Academy's overseas distribution was also actively planned. Profit forecasting and investment advice companies expect to achieve net profit attributable to shareholders of listed companies in 2017 Q1 of 58,000-61 million, an increase of 4.55 times to 4.84 times over the previous year. We are optimistic about the layout of the company's education, pan-entertainment, publishing and distribution businesses since the company's transformation; the collaborative integration of endogenesis and extension is expected to continue to promote the company's development; the smooth implementation of employee stock ownership plans enhances the company's internal management and stimulates employee enthusiasm. The company's 2017-2019 EPS is expected to be 0.61, 0.76, and 0.90 respectively. The corresponding company's closing price on April 18 is 20.29 yuan, and 2017-2019 PE is 33, 27, 23, and 22, respectively, to maintain “buying”. There is a risk of policy changes; increased market competition; uncertainty about the returns of cultural products; M&A and business integration falling short of expectations; and fluctuations caused by systematic market adjustments.