The company's sole main business was the production and sale of various knitted woolen yarns and high-end worsted woolen fabrics; according to the company announcement, in November 2014, it acquired 100% of Century Changlong's shares to enter the film and television culture industry; in July 2015, the holding acquired 51% of Tianyi Film and Television's shares, and the film and television business sector strength was further strengthened. The acquisition of the remaining 49% of Tianyi Film and Television's shares is expected to continue in 2017; in July 2015, in order to better produce and distribute Internet movies and TV dramas, the company invested 100 million yuan to establish a wholly-owned subsidiary, Lugang Interconnect and The capital increase of 30.6 million yuan obtained 51% of Yineng Technology's shares, using big data technology to help the film and television drama business. In March 2016, the company completed a fixed increase and raised a total capital of 1 billion yuan, of which 700 million yuan will increase the number of Internet film and television drama projects. Currently, the company's textile business is developing steadily, and the film and television drama business continues to gain strength. Century Changlong, Zhejiang Tianyi, and Lugang Internet jointly develop premium film and television drama business. 1) In 2016, the box office of Chinese movies was 44.56 billion, an increase of only 1.1% over the previous year. The growth rate of the Chinese film market slowed down, and the value of leading content was highlighted. Moreover, in '17, there was a trend of gradual liberalization of the Chinese film market. Imported films will become an important factor in leveraging the box office. Century Changlong's film distribution business, especially the promotion business of imported films, is expected to benefit from this policy dividend. 2) In the context of “one drama, two stars” and the continuous improvement of the production capacity of video platforms, top dramas are still a scarce resource that various TV and platforms compete for. For example, the price of a single episode of “The Legend of Ruyi” reached 15 million yuan. Century Changlong and Tianyi Film and Television all started by producing and distributing premium TV dramas, and have the resources and strength to create leading dramas. 3) The continuous expansion of China's online video market catalyzes demand for web dramas. From January to November 2016, a total of 561 web dramas were launched on the entire network, reaching 70.108 billion hits. Among them, the content of leading web dramas led to an increase in the number of viewers on the platform was obvious. Tencent Video's “If a Snail Fell in Love” reached 1.1 billion viewers in November 2016, which greatly boosted the overall broadcast volume of Tencent Video. Looking back over 16 years, the production standards of web dramas have continued to improve, and works such as “The Old Nine Gates” and “Please Close Your Eyes When He Came” have successfully lost to television stations. In July '15, the company established a wholly-owned subsidiary, Lugang Internet, to integrate all Internet film and television related resources into the Internet Film and Television Platform Company, making Internet film and television a strategic priority in the future. Under the trend of the web drama industry becoming premium, institutions with professional content production capabilities such as Century Changlong and Tianyi Film and Television have become scarce resources. Investment advice: The company's textile business has developed steadily in 16 years, and the film and television drama business continues to gain strength. As the film and television industry gradually returns to rationality, the importance of quality content has come to the forefront. The company's boutique TV series business, web drama business, and film distribution business (especially the promotion of imported films) of Century Changlong, Tianyi Film and Television, and Lugang Internet are expected to benefit from industry trends. The company's film and television drama business will continue to gain strength in '17. Considering that the profit share of the company's film and television business will continue to increase, we expect Lugang Culture's net profit for 16-18 to be 229 million yuan, 350 million yuan, and 453 million yuan respectively. The corresponding earnings per share are 0.26 yuan/share, 0.4 yuan/share, and 0.51 yuan/share, respectively. Referring to comparable companies in the film and television category, the 2017 35X valuation was given, corresponding to the six-month target price of 14.00 yuan, and given a “buy-A” rating. Risk warning: The risk that the progress of the film and television drama business is falling short of expectations and that content supervision is becoming stricter.