I. Overview of events

The company released its semi-annual report for 2017: revenue in the first half of the year reached 636 million yuan, an increase of 54.08% over the same period last year; net profit belonging to shareholders of listed companies was 133 million yuan, up 191.20% over the same period last year; net profit belonging to shareholders of listed companies excluding non-recurring profits and losses was 130 million yuan, an increase of 206.96% over the same period last year; basic earnings per share was 0.16 yuan.

The company's net profit attributable to shareholders of listed companies in the first three quarters of this year is expected to be 1.99-265 million yuan, an increase of 50% 100% over the same period last year.

II. Analysis and judgment

The cultural and entertainment industry chain tends to be perfected, and its extension shows high performance growth.

In the first half of the year, the company's cultural and entertainment business income was 423 million yuan, up 128.17% over the same period last year, accounting for 67.34% of revenue; machinery manufacturing business income was 208 million yuan, down-7.70% from the same period last year, accounting for 23.66% of revenue; the proportion of cultural and entertainment business continued to increase, and the manufacturing business completed the transfer.

The main reason for the sharp increase in the company's net profit from January to June this year is that in the second half of 2016, the company completed the consolidation of Xinhua Vanguard (net profit of 17 million yuan during the reporting period) and Vancouver Interactive (net profit of 80 million yuan during the reporting period). And in April 2017, the completion of the merger of Aurora Mobile Limited network (net profit of 23 million yuan during the reporting period), a total increase of 247 million yuan in sales revenue, the extension growth of the cultural sector accelerated.

During the reporting period, the company's film and television subsidiary Datang brilliant income was 158 million yuan, down-8.46% from the same period last year, and the net profit was 53 million yuan, down-14.48% from the same period last year. Qianyi Zhicheng, an artist brokerage subsidiary, earned 23 million yuan, up 71.95% from the same period last year, and its net profit was 8.5 million yuan, up 133.15% from the same period last year. Zhongnan Film's net profit was-4.42 million yuan, and the loss narrowed.

The film and television sector has a rich list of investment, and the popularity of the industry has been opened.

The company's film and television business income in the first half of the year was 172 million yuan, accounting for 26.97% of the revenue. During the reporting period, the company invested in filming key plays such as "Farewell to Las Vegas", "here comes the Police Dog", "the out-of-stock Man on Orange Street", "the Old Boys", "all the idiots are here", "days related to Youth", "Lovers in Hell" and other key projects. It is promoting the development of key projects such as "touching the Golden Bowl", "Snow covering the Sand", "the King of the Jungle soldiers", "son-in-law driving", "late return from strangers" and other key projects. The films invested by the company were released in the first half of the year: the martial arts theme "embroidered Spring knife Shura Battlefield" has grossed 260 million yuan so far, with a Douban score of 7.6 points; the 90th anniversary tribute film "the Great cause of Building the Army" currently grosses 380 million yuan; the comedy film "is it over", the total box office is 37 million yuan. In terms of TV dramas, films such as "Farewell to Las Vegas", "here comes the Police Dog" and "the out-of-stock Man on Orange Street" are expected to confirm their income in the second half of the year.

The game plate is developing rapidly, and the self-research ability of mobile games will be enhanced in the follow-up.

In the first half of the year, the game sector earned 220 million yuan, of which 191 million yuan was from the game promotion business, accounting for 30% of the revenue; and 29 million yuan from web games, mainly from Aurora Mobile Limited network, accounting for 4.55% of the revenue. The company's main operating projects are page tour "Wu Shen Zhao Zilong", "Journey to the West", "Jiutian Feng Shen", mobile games "Pok é mon Reproduction", "duel City", "Little three Kingdoms", "death Awakening" and so on. Among them, the cumulative flow of "Wu Shen Zhao Zilong" has exceeded 600 million yuan at the end of the reporting period. There are also projects under research and development, such as "painting the cup of rivers and lakes", "the immortal king" and "moonlight treasure box" will be launched in the second half of the year. Aurora Mobile Limited network will set up a "page to change hands" game team, and boutique mobile game development team, the company's game self-research ability is expected to be developed.

Copyright operation and artist brokerage section improve the cultural industry chain, and the layout of large-scale entertainment is expected to be carried out in coordination.

From January to June, the copyright and artist brokerage section of the company earned 28 million yuan and 8.3 million yuan respectively. In terms of copyright, the company has stored more than 70 published books, such as "Feng Wu Weiyang: the Legend of Lv Phean", "Xuanyuan Yi", "you won't disappear", "Peach Blossom debt" and so on. "Happiness can wait" and "Crime of Fraud" have been developed independently. Artist brokerage business is mainly carried out through Qianyi Zhicheng and Datang brilliant, its front-line artists include Liu Ye, Huang Xuan, Wang Luodan, Li Xiaoran and so on, and continue to attract potential newcomers. In the future, the company is expected to open up the entertainment industry chain through upstream copyright operation and development, film and television production, artist brokerage, film and tourism linkage and other links.

Third, profit forecast and investment suggestions

It is estimated that the company's EPS for 17-19 years will be 0.57,0.65 and 0.76 yuan, and the current corresponding PE will be 25x, 22x and 19x. If the company is given a "highly recommended" rating, it will be given 30x PE in 2017 and a reasonable share price of 17.1 yuan ~ 19.95 yuan in the next 6 months.

IV. Risk hints

1, M & An integration is not up to expectations; 2, industry competition is intensified.