Key investment points: Endogenous growth is weak, and the company is facing a painful period of breakthroughs in business transformation. During the reporting period, Borui Communications kicked off a strategic transformation, with mobile internet as the core, digital entertainment clusters and industrial finance systems as two wings, and actively exploring the path of transformation and upgrading of innovative media group companies, but the results fell short of expectations. In 2016, the company achieved total operating income of 1 billion dollars for the whole year, down 18.97% from the previous year; realized total profit of 90 million yuan and net profit of 0.6 billion yuan, down 1.35% and 19.46% respectively from the previous year. After deducting non-net profit, there was the first loss, down 191.6% from the previous year. As of the end of 2016, the company had total assets of 4.3 billion dollars, and shareholder equity attributable to owners of the parent company was 3.6 billion. The company's endogenous growth is weak, and it is facing a painful period of breakthroughs in management transformation. The growth rate of traditional media business is declining, and cultural industry merger and acquisition funds are driving transformation and upgrading. Affected by the contraction of overall demand in the traditional media industry, the company's traditional paper media business distribution, delivery, printing, and press advertising revenue all declined at an accelerated pace during the same period. Printing, advertising, distribution and delivery revenue fell 25.20%, 11.55%, and 6.01% respectively. In 2016, the company participated in investing in 3 cultural industry mergers and acquisitions funds to invest in innovative cultural industries, ensure the sustainable development of new media and new businesses, and promote the transformation and upgrading of the company's advertising, distribution, education and other industries. The collaborative effect of “media+finance” has not been achieved, and “risk control+internal control” strictly controls business risks. The company built an industrial finance system based on the existing small loan business. During the reporting period, the company spent 168 million yuan to enter the guarantee industry in Sichuan to promote the optimization and upgrading of the company's industrial finance structure. In an environment of macroeconomic downturn and continued high non-performing loans, small loan companies were affected by the double impact of pressure to clear overdue loans and loan benchmark interest rates. The results fell short of expectations, and only achieved total operating income of 43.44 million yuan throughout the year. However, in its business cooperation with state-owned guarantee companies such as Chengdu Small and Medium Insurance and Chengdu Xiaobao, Borui Small Loan has effectively controlled the repayment risk of new businesses, strengthened internal management process control, and increased the collection of overdue loans in stock. The performance of mobile games fell short of expectations, and the layout of the digital entertainment cluster was still being explored. In 2016, the company's Internet game business revenue decreased by 41.25% compared to the previous year. In order to expand the market influence of games, operating costs such as manpower and promotion increased significantly, and operating costs fell only slightly by 12.74% compared to the same period last year. Affected by factors such as increasingly heated game competition, the declining life cycle of old games, and the slowdown in the launch of new games, the company's game flow has declined sharply, and both revenue and profit have declined. In the future, the company will continue to deepen the integration of resources in the online game industry chain, focusing on mobile games and continuing quality products. In 2017, it will focus on developing the mobile games “Battle for Supremacy 2” and “All Democracy 2”, explore product advantages such as strategy, tower defense, and martial arts, develop the H5 version of “Battle for Supremacy” and “For All”, and reserve teams and products in the H5 and casual game fields. At the same time, it is promoting exploration and layout in film and television, animation, e-sports, and other peripheral industries. The company's DreamWorks will continue to cooperate with companies such as Tencent and South Korea's Netmarble to promote the launch and operation of related mobile games and extend the life cycle of old products such as “The Way of Chivalry.” The online game section expects a total of 5-8 new games to be launched throughout the year, and the construction of the company's digital entertainment cluster is still being explored. Profit forecasts and investment advice. The company's future outlook: (1) The new “media+finance” business development model: The small guarantee company invested by the company is conducive to the collaborative development of small loan business and financial guarantee business, provides integrated and comprehensive financial services to key customers, enhances user stickiness, and enhances user experience. (2) New media layout: The industrial merger and acquisition fund established by the company is powered by IP, grasps upstream source resources in the industrial chain, and builds a pan-entertainment digital ecosystem. (3) Education service layout: In the future, the company will continue to consolidate K-12 basic education business focusing on training at Shudborui School and Jiurui University, actively and steadily promote education segments such as early childhood and sports training, and seek business breakthroughs and new profit growth points. EPS for 2017-2019 is expected to be 0.06 yuan, 0.06 yuan, and 0.07 yuan, respectively. Since the effects of the company's traditional business transformation and new business layout still need to be seen, we will not rate it yet. Risk warning. The layout of new businesses such as games and education falls short of anticipated risks.