Incident: Dream Star Garden, a wholly-owned subsidiary of the company, plans to use its own capital of 200 million yuan to increase capital to Dongyang Mandala. After the capital increase is completed, Dream Star Shengyuan holds 10% of Mandala's shares. Core view: 1. Mandala is an old team of a new company, gathering high-quality and mature film and television teams, founded from a high start, and the three major business segments are relatively mature. Mandala was founded by Zhang Yuxin (daughter of Zhang Jizhong), who worked at iQiyi for 7 years and was the vice president/general manager of the Copyright Center. The core team includes Zhang Yuxin, Tang Rui (former senior director of iQiyi Entertainment Center/Music Center), Cheng Yang (former vice president of Happy Media/former general manager of iQiyi Pikaru Studio), etc., covering TV series, movies, variety shows, entertainment integrated marketing business, etc., including the three business segments of movies, TV shows, variety shows, and brokerage. 2. Mandala has a post-investment valuation of 2 billion dollars, promises a profit of not less than 500 million over 3 years, reserves a number of film and television productions and variety shows, and plans to prepare for an IPO. Dongyang Mandala promises net profit of no less than 50 million, 200 million, and 250 million yuan after deductions from 2017 to 2019, for a total of not less than 500 million yuan over 3 years. Dongyang Mandala achieved net profit of 1.33 million in the second half of 2016 and a net profit of 571 million from January to May 2017 (the above financial data has not been audited). Up to now, Mandala and its subsidiaries have invested in, produced, or distributed 8 movies and TV productions, and 3 variety shows are being planned in the early stages. The reserve film and television drama projects include “Like a Song of Fire” (collaborated with Jiaxing Media and others, written by Mo Bao Fei Bao, directed by Leung Seung-kuen, director of the TV series “A Thousand Bones” and “Ancient Sword and Odyssey”, starring Dileba and Zhou Yumin), “White Line of Life and Death”, “Kang****” (remake), “Comrades in Arms”, and “What If”. 3. Dream Star Garden invests in the mandala, favoring the other party's mature planning and operation experience and rich project resource reserves, and binds the frontline production and distribution team in advance. The two sides will carry out in-depth cooperation in IP resources, film and television investment, production and distribution, and artist brokerage. After this capital increase is completed, Dream Star Garden has the right to appoint a director to the Dongyang Mandala board of directors. 4. The film and television business is an important development engine for the company. Relying on Dream Star Shengyuan's rich IP reserves and leading quality drama production capabilities, it further strengthens film and television production capabilities and expands the industrial chain layout by investing in mandalas and raising capital. The strengthening of the film and television business can also further promote the growth of online games, animation and related derivative products through the synergy of video game interaction. 5. Maintain a “buy” rating. Assuming that the fixed increase of the company is completed by the end of 17, the company's net profit from 2017 to 2018 is estimated to be 330 million yuan (not including investment income for thumb games) and 401 million yuan, corresponding to the 17-18 EPS of 0.38 yuan and 0.39 yuan respectively (considering stock capital dilution in 2018). The current stock price corresponding to 17-18 PE is 23 times and 23 times. 6. Risk warning: Film and television drama projects are progressing below expectations; film and television drama distribution falls short of expectations; rising film and television drama costs reduce profits; game flow falls short of expectations.