Incident: On the evening of April 18, 2016, Storm Technology (300431.CH/RMB 74.88, unrated) released its 2015 performance report. In 2015, the company achieved operating income of 652 million yuan, an increase of 68.85%; net profit to mother was 173 million yuan, an increase of 313.23% year on year; after deducting non-net profit of 54.09 million yuan, an increase of 45% year on year. Basic earnings per share were $0.70. Comment: 1. The sharp increase in investment income contributed to the company's profit growth. During the reporting period, the company achieved operating income of 652 million yuan, an increase of 68.85%; net profit to mother was 173 million yuan, an increase of 313.23% year on year; after deducting non-net profit of 54.09 million yuan, an increase of 45% year on year. There are two main sources of revenue growth for the company: 1) Sales revenue. During the reporting period, the company's newly launched “Storm Super TV” was highly recognized by users, achieving revenue of 132 million yuan, an increase of 2,452.97% over the previous year; 2) advertising revenue. The company increased its marketing efforts during the reporting period, driving annual advertising revenue of 462 million yuan, an increase of 34.93% over the previous year. The main reason for the huge difference between the company's net profit and deducted non-net profit is that during the reporting period, the company achieved investment income of 104 million yuan, accounting for 62.15% of the company's total profit. It mainly comes from the investment income from the company's transfer of part of Storm Mirror's shares and the investment income confirmed by re-measuring the remaining shares according to fair value. 2. During the reporting period to establish the “platform+content+data” strategy, the company relied on existing mass user video platforms to gradually build and improve the virtual reality platform “Storm Magic Mirror”, the smart home entertainment hardware platform “Storm Super TV”, and the online interactive live streaming platform “Storm Show”. Furthermore, on the basis of various platforms, the company extends to the upstream film, television, game, music and other content industries, and uses big data to open up platforms and content to improve commercial monetization efficiency. 1. Platform side: Drive user growth through platform strategy 1) Internet video platform: Storm Video. During the reporting period, the company released “Storm Video for Mac” and upgraded Storm Video for Android 6.0.01. During the reporting period, the total number of monthly active users of Storm Video Platform reached about 200 million. There are approximately 140 million monthly active users on PC and 60 million monthly active users on mobile. 2) Virtual reality (VR) platform: Storm Mirror. During the reporting period, in terms of hardware, Storm Mirror's market has reached an absolute leader in China and the world, with more than 1 million Magic Mirror users; in terms of content, Storm Mirror launched about 116 VR games, of which “Kingdom of Bliss” is the world's first VR social game platform independently developed by Storm Mirror; in terms of channels, the company has begun to establish the first mobile VR experience center in China and set up VR experience stores and experience facilities in 20 provinces and cities. 3) Smart home entertainment platform: Storm Super TV. In December 2015, the company launched Storm Super TV, which ranked first in sales and praise among 4,000-5,000 yuan televisions on the JD platform. Storm Super TV has the support of IP (intellectual property), CP (content provider), and SP (service provider) models, making it a next-generation Internet TV brand with an open content ecosystem. 4) Online interactive live streaming platform: Storm Show. During the reporting period, Fengxiu Technology completed the 2.0 upgrade of Xiuchang products. Currently, PC, iOS, and Android devices are all online. In March 2016, Storm Show was newly launched, creating the first 3D live streaming platform in China. The ARPU value per person is 10% higher than the industry average. 2. Content side: Building a pan-entertainment content ecosystem centered on music, video, and games 1) Music: A strategic investment in Ocean Music Group. During the reporting period, the company strategically invested in Ocean Music Group, the fourth largest Internet service platform in China. The company's 50 million users will collaborate with Ocean Music's 100 million users on resources to jointly develop advertising, game and show businesses, share video, music and other content, and cooperate to develop new businesses such as VR layout, O2O, and internet finance. 2) Film and television: It is proposed to acquire 60% of Straw Bear's shares. During the reporting period, the company plans to acquire 60% of Straw Bear's shares and establish a VR film and television production company in cooperation with Straw Bear. The cooperation between Storm Technology and Straw Bear Pictures is mainly the ecological operation of Super IP, which includes omni-channel IP development including online series, mobile games, page games, music, books, and derivatives. 3) Gaming: The company currently has three major game business layouts. a. Lidong Technology: The company has 10 years of experience in the game industry and has developed 32 games. Among them, “Tianji” reached over 100 million monthly sales in 2008, and “Song in the Clouds” sold 60 million in three months. Ridong Technology's first VR game “Magic Sword Raider” will go live at the end of the year. b. Ganpu Technology: Its main business is overseas distribution and operation of mobile online games. It has rich experience in the field of overseas game distribution. Ganpu Technology will act as a bridgehead for the full internationalization of Storm's business and promote the implementation of Storm Technology's globalization strategy, with the goal of covering more than 155 countries or regions around the world. c. Tianxiang Interactive: Storm Investment Fund strategically invests in Tianxiang Interactive and co-establishes a game distribution platform with Tianxiang Interactive. It will jointly build a DT-driven distribution platform to develop from the three aspects of traffic, IP diversified interaction, and VR games; it will also jointly establish an investment and acquisition fund dedicated to the game industry, with a fund size of 300 million yuan, dedicated to high-quality game development and IP incubation. 3. Big data: Building a DT big data center, big data connection platform and content announced in the company restructuring project in March 2016. Using supporting financing to build a DT big data platform, using big data to open up the platform and content, on the one hand, provide better services to users, and on the other hand, improve commercial monetization efficiency and enhance the competitiveness of the company's internet entertainment industry. 3. Continue to develop a cross-border layout to consolidate the strategic future of “DT Entertainment”. The company will deeply cross borders, open up a new “Internet+Entertainment” pattern, use the Internet to drive the development of the entertainment industry, improve the Internet platform as a new entry point, integrate resources, develop multiple parties, and create a new entertainment ecosystem for the industry. At the same time, use DT to drive the business development of the entire group. 1. Continue to expand the number of Internet platform users. The company uses “mobile APP+home entertainment+next-generation Internet” as the three main lines to establish core competitiveness in Internet traffic and maintain the rapid growth in the number of mobile Internet users. Among them, the smart home entertainment platform Storm Super TV targets 1 million users, and the virtual reality (VR) platform Storm Magic Mirror targets 10 million users, and is committed to becoming the world's leading VR platform-level enterprise. 2. Strengthen content investment to create content advantages in the entertainment industry. The company plans to complete 90% of the global DT entertainment layout in 2016, and rearrange VR, sports, film, TV and other businesses as a new center. Copyright purchases will involve movies, TV series, variety shows, sports, literature, music, comics, animation, etc., and participate in the production of movies and TV dramas to enhance the production and distribution capabilities of traditional video content and VR content, thereby improving commercial monetization capabilities. 3. Improve the construction of the DT big data system. The company's DT big data support platform is a business platform based on the company's overall “DT Entertainment” strategy to support the development of various business lines. The company will use supporting funds in the restructuring project to build a DT big data platform to promote all-round expansion of the company's business fields, open up multiple terminals of online entertainment, enhance user monetization channels, and enhance user stickiness. 4. Investment Proposals The company listed in A-shares on March 24, 2015, and became a typical example of Internet companies returning to A-shares. During the reporting period, the company formulated the DT Entertainment Strategy with “platform+content+data” as the core, and will continue to develop a cross-border layout around the three aspects of content, users and business models in the future. According to Wande's unanimous forecast, the company's fully diluted earnings per share in 2016 to 2017 are expected to be 0.56 yuan and 0.70 yuan, respectively. The current market value of the company is 23.7 billion yuan, corresponding to the market value of 27.1 billion yuan after the increase (not considering raising supporting capital). It is recommended to pay attention to the continued development of the company's DT Entertainment strategy.