Key investment points: The company's IP ecosystem was initially completed. The profit growth rate in the first half of the year exceeded 100%, and high growth continued, in line with expectations. 1) The company's 17H1 revenue was 350 million yuan, up 82.9% year on year, and net profit was 94.61 million yuan, up 108.5% year on year, mainly due to the increase in IP derivatives revenue and the merger of True Fun Network. 2) The company's revenue for the 17Q2 quarter increased 150% year on year to 260 million yuan, and net profit from the company increased 101% year on year to 63.45 million yuan. The company's IP ecosystem has achieved remarkable results, and the performance growth rate has accelerated markedly. 3) The company expects net profit from the mother to reach 3-350 million yuan in the first three quarters of 17 years, an increase of 100%-130% over the previous year, maintaining a high growth trend. Gross margin declined slightly, expenses were well controlled during the period, net interest rates rebounded, and asset quality was relatively stable. 1) Profit meter end: The company's 17H1 gross margin fell 9.5pct to 39.4% year on year, mainly due to the fact that the Genqu Network business model was mainly based on agency distribution and operation, with gross margin of 38%, which lowered the company's overall gross margin level; the sales expense ratio fell 4.9pct to 5.4% year on year, and the management expense ratio fell 5.8pct to 14.8% year on year, and the period expense ratio was well controlled, driving net profit margin up 2.5pct to 26% from the same period last year. 2) Balance sheet side: The company's 17H1 inventory was stable, down 6.6 million yuan to 150 million yuan from the end of the first quarter, and accounts receivable increased 180 million yuan to 280 million yuan from the end of the first quarter, mainly due to the merger of Zhenqu Network. Based on the multi-directional development of IP derivatives, a perfect closed loop for the IP industry was initially established. 1) Cooperation+cultivation of high-quality IP at home and abroad: The company cooperates with the world's top IPs (Disney, Marvel, Nintendo, etc.) and also cultivates and creates original boutique IPs (“Star Academy”, “Demon Slayer”, etc.); 2) Lay out multi-level three-dimensional channels: set up YouYowo (vertical e-commerce) +acquire comic trade (derivatives sales) + acquire Kumi.com (animation and entertainment service platform) + establish Jack Simisheng (marketing platform) +invest 1001 nights (800+ offline stores), online and offline combination, complementing each other's strengths. 3) Build a multi-dimensional new media operation platform: a. Collaborate with creative technology and supercaptains to enter the VR and AR fields; b. Invest in Tentacle TV and enter live streaming; c. Invest in Polar Bear Reading to lay out a two-dimensional literary creation and reading platform; d. Invest in WeMedia (signed by nearly 500 people from the media, covering more than 50 million users). 4) Game services: The company acquired 100% of Zhenqu Network's shares for 1,111 billion yuan. The merger was completed in March '17. Zhenqu Network is mainly a mobile game platform, connecting small to medium operating companies and large platform providers (billing, promotion, service, etc.). At the same time, Meisheng Holdings promised that Genqu.com's net profit after deducting non-return from the mother on 17-19 will not be less than 1/122 billion yuan. In the future, refined management will dig deeper into ecosystem value, and improve IP+channel+brand in multiple ways. 1) IP side: “Uncle Fellow” has successfully industrialized and is expected to have a profit of 30 million in '17. In the future, we are optimistic about using this as a template to explore the company's core IP industry value more quickly. 2) Channel side: Actively lay out offline channels, cooperate with derivatives franchise channels outside of supermarkets, and at the same time try to build own channels (similar to R Us) to increase the company's gross profit. 3) Brand side: In May '17, Hong Kong Meisheng, a wholly-owned subsidiary, invested $19.31 million in JAKKS (children's toy production and sales), with a cumulative shareholding of 19.5%. The company explores the company's product categories through JAKKS while improving the business layout in overseas markets. It will continue to expand product categories and strengthen JAKKS control in the future. The company has performed well and continues to grow at a high rate. The cultural ecosystem of “own IP+ content production+content distribution and operation+new media operation+derivatives development and design+online and offline retail channels” has been initially built. The product categories continue to expand, and the future will usher in an explosion point and maintain the “increased holding” rating. As a leading domestic IP derivatives company, the company has a basic monopoly on the economization of domestic IP derivatives, and has become the fourth largest derivatives company in the world. At the same time, since May, the company's executives have increased their holdings four times, fully demonstrating their confidence. Considering that the acquisition of Zhenqu Network will enhance the company's profitability and have a substantial impact on the company's future performance, we raised our profit forecast for the year 17-19 to 4.33/5.27/615 million yuan (the original net profit for 17/18 was 2.84/335 million yuan), corresponding to PE 29/24/21 times, respectively, maintaining the “increase in holdings” rating.