Key investment points: Performance growth is steady and progressive, and industrial upgrading continues to advance. In the first quarter of 2017, the company achieved operating income of 2,718 billion yuan, a year-on-year decrease of 10.53%; net profit of 140 million yuan, a year-on-year increase of 0.64%. The company adheres to the strategic idea of “seeking progress through stability”, uses the concept and methods of economic work to develop the cultural industry, earnestly works hard with a style of pragmatism and repetition, strives to improve corporate governance, and promotes the quality and efficiency of the main business. In terms of traditional publishing and distribution, the company insists on double control of content channels, industry extension systems are increasingly being formed, and the results of transformation and upgrading are prominent. At the same time, the company is actively deploying digital publishing to deepen industrial transformation and steadily advancing the “Belt and Road” layout in overseas markets. We believe that a series of actions to promote industrial upgrading will strengthen the endogenous nature of performance growth. Traditional main business is combined with new media to comprehensively drive industrial upgrading. During the reporting period, the company used projects and products as a starting point to promote the extension of the industrial chain, cultivate new growth points in industrial development, and implement integrated development projects between traditional media and new media. The company's emphasis on and investment in online channel marketing has gradually increased, and online channels have become an important sales channel for various publishing companies. All publishing companies belonging to the Group have carried out in-depth cooperation with Dangdang, Amazon, and JD, greatly increasing the online market share of the Group's products. At the same time, online channel promotion and marketing has achieved omni-channel coverage. Apart from the official PC website, all publishing units have launched mobile official Weibo and WeChat accounts to provide information inquiries and information promotion services to readers, authors, and booksellers. The Changjiang Chinese Network is like an engine, providing impetus for the Group's transformation from traditional publishing to digital. The company's digital reading business relies on online reading and original platforms that focus on quality reading - Changjiang Chinese Network. Its main media covers PC, mobile clients, pads, large screen readers, etc. On the one hand, it provides content and technical guarantees for the implementation of the national reading program at the headquarters, and on the other hand, it strongly promotes the smooth development of other business sectors through continuous enhancement of brand influence. We believe that the company integrates resources with platforms, content and terminals through the digital reading business, pursues vertical development in the operation of the entire IP industry, and horizontal exploration of product, technology, and cultural integration, is conducive to providing users with more and better products and services and promoting innovation and transformation in digital publishing. 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, corporate 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 unanimously expected PE of 27.14 times and 20.77 times in 2017. 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.