Key investment points: strengthen quality and quality production, and steady performance growth. In the first half of 2017, the company achieved cumulative operating income of 4,541 billion yuan and net profit of 381 million yuan, an increase of 26.53% over the previous year. Revenue declined due to a contraction in the scale of trade business, but business quality improved effectively, with gross margin reaching 17.31%, an increase of 6.78 percentage points over the previous year. Guided by “strengthening the concept of quality and quality production”, the company leverages resources in terms of market competition, industry brand and content advantages, and actively strengthens its main business. In recent years, the company has remained in the top 6 in the national book retail market share ranking, and its market share has remained stable at around 3%; in the first half of 2017, it published 4,579 kinds of books and more than 20 newspapers and magazines, and was selected for more than 30 national publishing awards and key projects, and more than 120 at the provincial level. We believe that the steady development of the traditional main business lays a good foundation for the company to expand its industry, transform and integrate, and that future performance growth can be expected. Accelerate transformation and integration and collaborative development of diverse businesses. With the main publishing business as the core, the company actively promotes industrial transformation, integration and expansion around “publishing +” and “culture +”. While maintaining the steady growth of the traditional distribution business, the company actively explores new business formats such as digital reading, digital education, early childhood education, film, television and animation, and cultivates new performance growth points. 1) Increase preschool education: iCube successfully entered the “New Third Board” innovation level, with a market value exceeding 300 million yuan; 2) Digital education: developed a curriculum support service platform for primary and secondary school students, with nearly 4 million users, covering 3,500 teaching sites; 3) Exploring digital reading: collaborating with YunOS, a subsidiary of Alibaba Group, to build the “Yangtze River Cloud” national reader to create the “four screens, one network, two microscopes, and one end” digital reading three-dimensional transmission matrix for all. The product covers many regions in Hubei, and has built the first digital experience center in Hubei; “Changjiang Chinese Network” station More than 90,000 works, 5.4 million registered users; 4) Entered the horticultural business, planned and launched the “Green Finger” green lifestyle industry project based on the “Green Finger” gardening book brand, extending the industry chain. The company's innovative development model has brought many highlights to the company's development. At the same time, various businesses are organically connected to each other to form collaborative development; we believe that the company's expectations for continued transformation and upgrading in the future are strong. Fine management has achieved results, and talent development has shown vitality. The company's “three, one reduction and one supplement” achieved initial results, costs and expenses were reduced, and the results of cost reduction and efficiency were obvious: in the first half of 2017, sales expenses were reduced by 4.61% compared to the same period last year, and the reprint rate increased to 74%. In addition, the company has further standardized personnel selection and employment procedures, vigorously promoted the implementation of system measures such as the Dual Channel for Career Promotion and the Youth Talent Development Fund, which effectively stimulates the enthusiasm of employees; established a normalized training mechanism, organized 14 training sessions, organized more than 2,000 participants, and further improved the quality of employees. We believe that the improvement of management quality and the optimization of talent development is an improvement in the company's soft power and lays a solid foundation for future performance growth. Profit forecast. The company's future outlook: 1) Performance is growing steadily, valuations are low, and safety margins are high; it is expected that the company will continue to benefit from cost reduction and efficiency policies in the future, and resource integration and superposition of advantageous content will explode. 2) The in-depth layout of the education industry can be expected, and expectations for extension are strong. The company's own capital is sufficient, and there are strong expectations that epitaxial transformation will deepen into the education industry. 3) The reform of the country continues, traditional media and state-owned enterprises have benefited, and expectations for reform are strong. We gave the company an EPS of $0.60, $0.70, and $0.78 for 2017-2019. Also, with reference to companies in the same industry, Anhui New Media and Southern Media all unanimously expected PE to be 20 times in 2017. We gave the company 20 times PE in 2017, with a target price of 12.00 yuan, maintaining the buying rating. Risk warning. The performance growth rate of traditional industries has declined. Centralized release of systemic risk in the general market.