The performance of the traditional main business is declining, and the digital business is becoming saturated. In the first half of 2016, the company achieved operating income of 1.043 billion yuan, an increase of 0.24% over the same period last year, and a net profit of 168 million yuan, down 17.60% from the same period last year. As of June 30, 2016, the company's urban network coverage reached 97%, rural network coverage reached 54%, cable TV occupancy rate reached 77%, and the overall digitization rate reached 98%. Under the overall downward trend of the cable TV industry, the company's main growth is weak, digital business is becoming saturated, and the layout effect of new business type's transformation remains to be shown.

The "10 Gigabit Network Chip" has been successfully developed, and the future Huitong science and technology project may enter the harvest period. In March this year, the company Huitong Technology Project has successfully developed the "10 Gigabit data processing chip" of the intelligent access gateway based on the "I-PON standard", and the 10 Gigabit IP of the radio and television network may become a reality. The "10 gigabit data processing chip" adopts a new technology, which can increase the bandwidth of radio and television network transmission by 4 times, reach 10 gigabytes of home bandwidth, and greatly improve the network transmission quality. Relying on the product first-mover advantage, the company has signed 250000 intelligent access gateway product contract, and reached a terminal procurement intention with a number of provincial radio and television network operators. At present, the company Huitong science and technology project products already have the conditions for mass production and may enter the harvest period in the future.

We will lay out the informationization of education and intelligent forestry, and accelerate the upgrading and transformation of the social service field. In terms of educational informatization, with the strong support of Jilin Provincial Department of Education, the company provides a complete set of cloud service products of educational informatization for more than 7000 primary, junior middle and senior high school schools and 2.8 million students in Jilin Province. At present, the company has completed the construction of provincial high-quality educational resources audio and video management platform, network teaching application management platform, resource management platform and digital TV live on demand platform, and has functions based on interactive classroom, live classroom and on-demand classroom, which will realize the sharing of high-quality teachers' classroom resources in the province in the future. In terms of intelligent forestry, relying on the technical advantages of the Internet of things and big data analysis, the company carried out in-depth cooperation with Jilin Forestry Department in ecological protection and wildlife monitoring Internet of things and intelligent forestry in May this year.

Multi-industry and diversified operation help the company to transform its layout. The main industry innovation plate, the company on the basis of tamping cable TV channel business, actively layout the upper reaches of the industrial chain resources. In May 2016, the company signed a "Strategic Cooperation Agreement" with Mandarin Film and Television to strengthen cooperation in content between the two sides. In terms of the layout of cinemas, the company has operated four cinemas in Jilin Province, striving to build the brand of "Jilin TV Cinema". In the financial investment sector, the company has invested five in the field of agricultural and commercial banks in the province, and the scope of investment is expected to be further expanded in the future.

Risk tips: the traditional main decline risk; new business type carried out less than expected risk.

Profit forecast and valuation. In the second half of 2016, the company will still adhere to the development direction of "outstanding main business and multi-industry". Main business: under the background of digital saturation of cable TV, the company will strive to launch value-added services to create rich and high-quality video-on-demand, live broadcast and other new business models and profit growth points. In addition, the company will also actively lay out new business type and continue to make efforts in the fields of "educational informatization", "main business innovation" and "financial investment", so as to open up the growth space of the company. We estimate that the EPS of the company from 2016 to 2018 is 0.14,0.15 and 0.16 yuan respectively. Referring to the same industry, the PE of Tianwei Video, Gehua Cable and Huasu Media in 2016 is expected to be 27,32 and 45 times respectively. We value the company 35 times in 2016 and give it an overweight rating corresponding to the target price of 4.90 yuan.