1. In the event, Video Media released its annual report. In 2012, it achieved operating income of 1,228 million yuan and net profit of 45.21 million yuan, an increase of -4.7% and -38.25%, respectively, corresponding to an EPS of 0.14 yuan. 2. Our analysis and judgment (1). 2012 report analysis: Get rid of burdens and go to battle lightly 1. The main reason for the sharp decline in performance is that the company evaluates sales expectations in the long-term historical drama market and carries forward costs according to the principle of prudence, leading to a decline in the gross margin of the film and television business. If this factor is not taken into account, we expect net profit in 2012 to be roughly the same as in 2011. 2. The company's advertising business revenue fell 27% due to the cancellation of trailing advertisements for CG1 and CG8 TV series and rising operating costs. However, the company's key development of the film and television drama business increased 22% year over year, and the travel business increased 8% year over year, offsetting the adverse effects of the decline in advertising. After the disposal of bad inventory and the elimination of unfavorable regulatory policies, the company is expected to enter the battle lightly in 2013 and enter the fast track of growth. (2) 2013 is an inflection point in business, and the company's three major businesses will move to a new level of TV drama business: Beginning in 2010, the company's TV drama model gradually transitioned from previous investment to independent investment and distribution, and in 2013, it began to bear fruit. 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. Tourism business: Wuxi and the South China Sea Area will transform from traditional film and television tourism to film and television cultural tourism; film and television technology services: CCTV's move to a new site will greatly increase demand for high-definition business; advertising business: the company will change its business model and seek new resources, and the gross margin of advertising business will increase. (3) Long-term optimistic logic: The positioning of China Television Media on CCTV has greatly improved, and the company is expected to enter a “positive cycle” of development. The company emphasized in its annual report that China Television Media should become the leading enterprise of listed domestic media companies. The starting point of this goal is based on the company's reliance on China Central Television, the largest media agency in China. At the 2013 CCTV working conference, CCTV Director Hu Zhanfan clearly proposed at the CCTV 2013 working conference that Taiwan's industrial development should make full use of the capital market to achieve leapfrog development; it should give full play to the advantages of China Television's listing, promote the restructuring of existing assets, and drive new business development. This shows that CCTV places the development of China Television Media in a very different position from the past. The media industry is developing from a resource-monopoly type in the past to a capital and technology-intensive direction. Mergers and acquisitions and the entire all-media industry chain will become the mainstream of media development. As the only capital platform, China Television Media is expected to follow the pace of industrialization of CCTV and enter the fast track of development. 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. We expect the company's 2013/2014 EPS to be 0.31 yuan and 0.49 yuan, and YoY 127% and 58% respectively, raising the company's rating to “recommended”.