This report is read as follows:

Lugang 17 semi-annual report home net profit fell 11.7%, due to the decline in hotel and film and television business profits; wool textile business revenue and total profits have increased significantly. In the second half of the year, we will welcome the recognition period of film and television business revenue and maintain the rating of increasing holdings.

Main points of investment:

Maintain the overweight rating and lower the target price to 9.00 yuan. The revenue and net profit of 17H1 were 1.603 billion yuan and 71.31 million yuan, up 20.20% and-11.70% respectively over the same period last year. The revenue of 17Q2 was 959 million yuan (+ 11.24%), and the net profit was 64.02 million yuan (- 12.53%). It is expected that the second half of the year will usher in the recognition period of film and television business revenue, which will maintain an EPS of 0.36 EPS 0.51 yuan in 2017-19. Due to the sharp decline in the valuation center of the media and textile sector in the first half of 17 years, the company's target price has been reduced to 9.00 yuan, corresponding to 25 times PE in 17 years, increasing its holdings.

Film and television and hotel business 17H1 profit level is lower than the same period in 16 years, waiting for the second half of the year revenue concentration recognition period. The revenue from the film and television business was 172 million yuan, an increase of 12.1% over the same period last year; the total profit attributed to the parent company was 2.2959 million yuan, down 79.53% from the same period last year. Hotel business revenue was 15.1068 million yuan, down 8.58% from the same period last year. In the film and television sector, the income and profit level of Zhejiang Tianyi maintained rapid growth, while the total income and profit of Changlong in the century declined greatly.

The second half of the year confirms the peak season for the revenue of the film and television industry, waiting for the film and television sector to have a performance in line with expectations.

The wool textile business has continued to have a bright performance since 2016, and it is still optimistic about the prospect of the domestic high-end textile industry dominated by the company. The income of 17H1 wool textile business was 1.416 billion yuan, an increase of 25.96%. The total profit attributed to the parent company was 62.5007 million yuan, an increase of 50.59% over the same period last year. In terms of output, yarn production increased by 1.22%, of which worsted yarn with lower gross profit margin increased by 13.66%, and fabric products with the highest gross profit margin increased by 21.96%. The company's wool textile business has passed the factory inspection of Himm, Uniqlo and other brands, and has international first-class brands such as Mark&Spencer, Ralph Lauren, Tomorrow Land and so on in woolen fabric products.

Risk hint: the ratings of film and television works are lower than expected; the wool textile business ushered in the off-season in the second half of the year.