Event: the company announced that the subsidiary Linkage Culture will increase capital with its own capital of 627 million yuan and acquire all shares of Epu Digital Media, of which 95% of the equity transfer of the corresponding party will be paid in four installments of 595.65 million yuan. Among them, it is agreed that the transferor or the designated subject shall purchase Lianjian Optoelectronics shares in the open market for a cumulative total of 387 million yuan, accounting for 65% of the consideration, and all the shares purchased shall be pledged to the investor. Within 10 working days after the annual audit report and / or impairment test report of the performance commitment period is issued and the compensation for the current year (if any) is deducted, the transferor shall release the pledge of the corresponding proportion of the stock in batches according to the progress of the profit commitment, the subsequent amount of stock pledge will be retained each time the stock pledge is released. During the performance commitment period, the target company shall pay dividends to the investors at the rate of 50% of the net profit promised each year. At the same time, the company launched the second phase of the employee stock ownership plan, the upper limit of the employee stock ownership plan is 195 million yuan, the stock source is buyback in the secondary market, the price of the repurchased shares is not less than 24.8 yuan per share, and the shares held are unlocked averagely in two years.

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Acquisition of Epp new media to promote marketing integration and strengthen mobile marketing business matrix: the subject matter of this acquisition is a new third board listed company, which is based on the mobile Internet industry and focuses on mobile advertising business. promotion based on integrated self-media matrix and advertising promotion based on mobile marketing big data platform as the main business The independent product R & D team has successfully developed and released more than 100 App products to Apple Inc App Store platform, covering weather, games, shopping, life, news, tools, social networking, navigation and other aspects. The target company promised to deduct the non-return net profit from 2017 to 2020: 4500 yuan, 5850 yuan, 7020 yuan and 77.22 million yuan respectively. According to the 2017 bet results, the valuation level is 13.9 times PE, the target company's 2016 net profit is 24.92 million yuan, and the corresponding gambling performance growth rates are 80.58%, 30%, 20% and 10%, respectively. The company continues to promote the marketing layout around "display equipment, offline advertising, marketing planning, online advertising and collaborative user data". At present, offline advertising has formed an offline marketing camp composed of eight offline advertising companies such as time-sharing Media, fully integrating the advantages of audience media resources such as company display equipment, and successively acquiring Shenzhen Lima and Precision focus in online advertising. At the marketing planning level, resource integration and program planning are carried out by relying on Youtuo public relations and Litang marketing, and a strategic planning department is set up at the group level to make overall planning for the group marketing strategy and the future strategy of subsidiaries. The current integrated synergy effect of each subsidiary is beginning to show, and it is committed to building the group's digital marketing platform in the medium and long term. The acquisition of Epp new media is conducive to strengthening the layout of the company's mobile marketing plate. Enhance the advantage of mobile media resources.

The medium-and long-term trend of marketing integration remains unchanged, and the strengthening of post-investment management is still the focus of the industry: with the pullback of the secondary market, leading to the return of investment valuation in the primary market, some of the high-quality target investment value appears. We believe that in the medium and long term, the logic of marketing industry to achieve industrial integration based on mergers and acquisitions has not changed, but it has put forward higher requirements for post-investment management and integration. In the short term, the tightening of refinancing policy brings challenges to the financing ability of companies carrying out industrial mergers and acquisitions, and the industrial logic of the integration of companies with good financing capacity and strong endogenous hematopoiesis will continue to be verified by the market. The company's current endogenous profit is more than 500 million yuan, providing steady endogenous cash flow growth, and the asset-liability ratio is about 27%, which is at a low level in the same industry. The company previously announced that it would issue bonds of no more than 2 billion yuan in five years. In the case of abundant endogenous cash flow and low leverage, bond financing is conducive to solving the capital needs of the company to continue industrial integration. From the perspective of global advertising leading companies, the current performance growth rates of Omnicom, Publicis Group, Dentsu, IPZ and WPP Group are generally in the single digits, with an average valuation level of about 18 times. The current A-share marketing sector has experienced a pullback and the valuation adjustment has been low. Considering that the plate growth continues to maintain a high level, the growth rate of companies in the sector is generally more than 10%. Longer continuous validation is expected to lead to a valuation premium. Since Lianjian Optoelectronics strengthened its marketing layout in 2014, many new marketing targets have been added in recent years, the layout of the industrial chain has been continuously improved, and the follow-up plate performance is expected to be released.

The second phase of the employee stock ownership plan is promoted, and the share buyback + Dong Jiangao reduction plan stabilizes confidence: the company has previously launched a buyback plan of 240 million yuan under the price of 24.8 yuan per share, and the previous buyback of 45 million yuan has been taken as the first phase of the employee stock ownership plan. the remaining 195 million yuan of repurchase shares will be used as shares held by employees in the second phase, reflecting management's confidence in the follow-up stock price trend. At the same time, the main Dong Jiangao's reduction plan within 12 months released in December 2016 (when the share price is more than 27 yuan, 52% of the shareholders promised to reduce their holdings by no more than 70.2 million shares, and mainly through bulk trading), the major shareholders uniformly arrange the reduction plan, it can avoid the impact of disorderly reduction on the market, and the agreed price range of reduction is above 27 yuan per share, combined with the latest new regulations, the pressure of subsequent reduction can be effectively alleviated.

Profit forecast and valuation: it is expected that with the acceleration of the growth of small spacing business and the enhancement of the performance contribution of the traditional sector, many new consolidation tables for the whole year of 2017 will bring considerable growth in the marketing sector. considering the merger of Epp new media, we predict that the net profit of the company from 2017 to 2019 will be 6.02,7.39 and 888 million yuan respectively, and the EPS will be 0.98,1.21,1.45 yuan per share respectively. The current share price corresponds to PE of 21, 17 and 14 times respectively. Taking into account the impact of the New deal, Dong Jian Gao and other volume and price commitments, the concern about the substantial lifting of restricted shares has been greatly reduced, and the recent share buyback launched by the company shows stock price confidence (the buyback price is 24.8 yuan per share. The commitment price is not less than 27 yuan, the current stock price has a certain margin of safety), the company's business level extension integration industry layout continues to advance, strengthen the target integration coordination, and maintain a strongly recommended rating.

Risk hints: the market continues to fall risk, betting performance does not meet expectations risk, M & An integration does not meet expectations risk, LED business development is not smooth and so on.