The performance was generally in line with expectations, and Huangshi Group announced results for the third quarter of 2016: operating income of 494 million yuan, up 30.8% year on year; net profit attributable to parent company was 31.725 million yuan, up 70.5% year on year, corresponding to earnings of 0.04 yuan per share. Trends 1. The performance was generally in line with the forecast. The main revenue comes from the dairy sector. Revenue from film and television drama projects will be concentrated on confirmation in the fourth quarter. Some TV dramas such as “The Red Guard,” “Born in the 70s,” and “Bastard” are already in post-production and distribution, and revenue is expected to be confirmed in the fourth quarter. Newly involved in the production of web dramas is also being prepared, which will further enhance the company's influence in content creation for new media; in the third quarter, the overall gross margin increased by 2.7ppt to 36.4% over the previous month, maintaining a high level; and there has been a steady increase in costs. The sales expense ratio and management expense ratio increased by 5.3 ppt and 1.4 ppt, respectively, and the financial expense ratio increased by 0.9ppt over the same period. The main reason was the increase in bank loans and the merger of companies such as Beijing Shengshi Hotsun Culture Communication Co., Ltd. and Tibet Huangshi Investment Management Co., Ltd. during the reporting period. 2. Strategic cooperation has been carried out one after another. The company has successively announced that it has reached strategic cooperation agreements with companies such as Qihu 360, New Oriental Online Education, and Shaanxi Sandi Culture, etc., and has joined forces in terms of content, online and offline channels, technology, etc., to take the lead in the field of early childhood education, demonstrating the company's strong ability to integrate resources and a clear pattern, and continuously improving the core competitiveness of children's products. The profit forecast estimates net profit attributable to the parent company in 2016-2018 to be 315 million, 454 million, and 594 million yuan, respectively, corresponding to EPS of 0.38 yuan, 0.54 yuan, and 0.71 yuan. Considering that the pace of film and television series distribution is lower than expected, we have lowered our earnings per share forecasts for 2016 and 2017 by 17% and 11% from RMB 0.45 and RMB 0.61 to RMB 0.38 and $0.54, respectively. Valuation and recommendations Currently, the company's stock price corresponds to a price-earnings ratio of 56 times in 2016. We maintain the recommended rating and target price of RMB 20.80, corresponding to a price-earnings ratio of 54.7 times in 2016, which is 21.92% higher than the current stock price. Competition in the risk dairy industry has intensified, M&A performance has not met expectations, and there is a risk of business integration after capital operation.