Introduction to this report:

The establishment of the Shanghai Newspaper Group and the good development of the company's new businesses, such as e-commerce, became the company's main focus in the future. For the first time, the company was given a rating of increasing holdings, with a target price of 14.0 yuan.

Investment highlights:

The overall plan for a new round of state-owned enterprise reform in Shanghai is ready to come out. We expect that after the establishment of the Shanghai Newspaper Group, it will become a pioneering representative for the integration of cultural state-owned assets in Shanghai in 2014. The group's restructuring and optimization of newspaper assets and made every effort to break through to new media, providing many possible spaces for the restructuring, asset injection, and new business expansion of its business related to Xinhua Media, its only capital platform; the company has already achieved initial success in new business development in e-commerce and other fields. We judge that after the restructuring of the majority shareholders, the company will be reorganized and ready to go, as a leading group with a regional monopoly and concentrated development, due to the intensive nature of resources Benchmarking achieved a new breakthrough, covering the first increase in holdings ratings. It is predicted that the 2013-15 EPS will be 0.10 yuan, 0.14 yuan, and 0.17 yuan respectively. In view of the company's special industry position and the driving force of the company's performance by the 2014 reform, it is recommended that the valuation be based on 2014 results, based on PE100x valuation, with a target price of 14.00 yuan.

Key assumption: As the only listing platform after the establishment of the Shanghai Newspaper Group, the company fully participated in the group's breakthroughs and innovations.

The company is experiencing different changes from the past: 1) The controlling shareholder reorganized and established the Shanghai Newspaper Group to take on the heavy responsibility of breaking through the influence and economic benefits of the Shanghai Newspaper Industry under the goal of a new round of state-owned enterprise reform throughout the city. As its sole capital platform, its main business may be adjusted due to the restructuring and optimization of the Group's newspaper assets; 2) The company's e-commerce and other new media businesses have become the most important aspect driving performance, and continue to develop positively. As Shanghai is the only capital platform for newspaper system reform, we are optimistic about the company's future restructuring, asset injection, and new business development.

Catalysts: Group newspaper asset restructuring optimization, breakthroughs into new media, and impetus for traditional media.

Core risk: The restructuring and reform process may not meet expectations.