On the evening of July 29, the company released an interim results report. The company achieved operating income of 604 million yuan in the first half of 2016, an increase of 47.81% over the same period of the previous year, and realized net profit attributable to owners of the parent company of 108 million yuan, an increase of 159.79% over the same period last year. On a quarterly basis, the company achieved revenue of 421 million yuan in the second quarter of 2016, an increase of 75.81% over the same period of the previous year, and realized net profit attributable to owners of the parent company of 93 million yuan, an increase of 218.01% over the same period last year. A brief review of the overall steady growth of the production and operation business, and the transfer of Meishengyuan showed a significant increase in performance. (1) In the first half of 2016, the overall production and operation business of the company grew steadily. According to our estimates, excluding Meishengyuan's combined influence, the company's main decoration business achieved operating income of 451 million yuan, an increase of 10.43% over the same period last year, and realized net profit attributable to owners of the parent company of 46 million yuan, an increase of 9.52% over the same period last year. (2) The main reason for the sharp increase in the company's operating performance this time is that Meishengyuan completed the asset transfer procedure in early May 2016. Suzhou Meishengyuan Information Technology Co., Ltd. became a wholly-owned subsidiary of the company. Meishengyuan achieved operating income of 153 million in May-June 2016, and achieved net profit of 62 million yuan attributable to shareholders of listed companies. Meishengyuan has strong strength, the game industry has broad space, and the main game and decoration industries drive development. (1) Meishengyuan is a leader in the mobile stand-alone game industry. In 2015, Meishengyuan accounted for about 1.05% of China's mobile game market share and 4.86% of China's mobile stand-alone game market share, making it a leader in the domestic mobile game industry. In terms of distribution business, from January to September 2015, 175 channel providers and 416 SP service providers established business partnerships with Meishengyuan. Throughout the year, Meishengyuan collaborated with more than 100 channel providers to distribute more than 80 mobile stand-alone games. Furthermore, the company has begun to set up a joint operation business for mobile online games, and jointly operated “Battle Through the Sky” with Beijing Yiyou Network Technology Co., Ltd. to enter the mobile online game distribution business. In terms of R&D business, the company's stand-alone game products are positioned as the medium to light casual game type with the largest audience today, and has independently developed a series of boutique mobile games. Among them, many games such as “Happy Baby Rush Forward” and “Pig Man: The Ultimate Battle” have won many awards such as the Golden Ling Award and the Golden Entertainment Award. (2) The mobile online game industry is developing rapidly, and the industry space is broad. The compound annual growth rate of mobile game revenue reached 130.25% between 2008 and 2015. The market size increased 87.2% year on year to 51.46 billion yuan in 2015, far higher than PC client games (PC games) and PC browser games (page games). In terms of market share, the share of mobile game revenue in the entire game industry increased from 0.87% in 2008 to 38.24% in 2015. According to iResearch's forecast, the growth rate of China's mobile game market will remain within the range of 20%-35% between 2016 and 2018. Among them, the mobile stand-alone game market was 9.114 billion yuan in 2015, and the scale is expected to expand to around 15 billion yuan in 2016. Investment advice: Meishengyuan's performance commitment: The net profit scales for 2015-2017 are: 1.8, 3.2, and 468 million, respectively. Based on the data disclosed in the interim report, we think the probability of achieving the promise in 2016 is high. We assume that Dilong's original decorative materials business had net profit of 85.8 million yuan in 2015. We assume that the net profit amounts achieved in 2016 and 2017 were 1.03 and 120 million respectively. After the consolidated statement, the net profit for 2016 exam preparation was 423 million yuan, and the net profit for 2017 588 million; total share capital of 852 million shares (including issuing shares to purchase assets and raising supporting capital), EPS was 0.50 and 0.69, respectively, PE was 2.7 and 20 times, respectively, with a total market value of 11.7 billion, maintaining a “buy” rating. Risk factors: Performance promises have not been fulfilled due to the slowdown in mobile game growth and fierce competition.