1. Incident, on April 27, Video Media released its 2013 quarterly report. The company achieved operating income of 184.12 million yuan, an increase of -10.79% over the previous year; realized net profit attributable to shareholders of listed companies of 6.88 million yuan, an increase of 195.71% over the previous year (loss of 7.19 million yuan in the same period last year), and basic earnings per share of 0.021 yuan. 2. Our analysis and judgment (1). Performance loss reversal was due to changes in advertising business management methods and TV drama business growth. The company's profitability improved markedly in the first quarter. The gross margin increased from -0.27% in the same period last year to 12.7%, mainly due to: the change in the company's advertising business management style and the increase in profit; the first quarter “The Case of Orphans of Zhao” was broadcast on CCTV, with ratings second in the same period, and the film and television business continued to grow; the gross margin of the travel business increased. Due to the increase in business reform, the company paid some of CCTV's agency fees in advance. Monetary capital was reduced from 837 million at the beginning of the year to 690 million yuan, and financial interest income was reduced by 5 million yuan. If this factor is not taken into account, the company's actual net profit for the first quarter increased by 19 million yuan over the same period last year. Judging from previous years, the performance for the first quarter was low, and the fourth quarter was a high point, but the first quarter results basically reflect the annual performance trend. We believe that the high year-on-year growth in the first quarter is indicative of the business situation for the next three quarters. (2) The change in the way the advertising business operates will have a significant impact on the company's annual performance. The recovery in advertising business is a highlight of the quarterly report. The advertising business accounts for 40% of the company's revenue. Due to the decline in CCTV10 ratings and rigid agency costs, the gross margin of the company's advertising business fell from 19% in 2009 to -0.38% in 2012, which is the main factor in the decline in the company's net profit in the past 3 years. Thanks to the new advertising business management method, the company's advertising agency costs for CCTV in Q1 2013 were reduced from 122.95 million yuan last year to 69.71 million yuan, a year-on-year decrease of 53.15 million yuan, which is an important factor in the company's loss. We expect the decline in overall ad agency costs in 2013 to have a very positive impact on full-year results. (3) The film and television business will also face new breakthroughs in the TV drama business: Beginning in 2010, the company's TV drama model gradually transitioned from previous investment to independent investment and distribution, and began to bear fruit in 2013. In addition to “Orphan Zhao” (screened in CCTV 1, second in ratings during the same period), films such as “Hakka” and “The Woman with the Rag Also Has Spring” were screened in 2013. Thanks to CCTV's relocation into a new building and increased demand for high-definition business, the company's leasing and technical services are also expected to shift from last year's decline to a year-on-year increase of more than 25%. 3. Investment recommendations In 2013, China Television Media will adopt a development strategy that places equal emphasis on endogenesis and extension, and there is a possibility that performance will explode. For the time being, we maintain the company's 2013/2014 EPS at 0.31 yuan and 0.49 yuan, and YoY 127% and 58%, respectively. It is not ruled out that future performance forecasts will be raised, and the “recommended” rating will be reiterated.