Incident: Meisheng Culture released the 2017 H1 performance report. During the reporting period, the company achieved revenue of 351 million yuan, a year-on-year increase of 82.89%. Net profit attributable to shareholders of listed companies was 94.611,000 yuan, up 108.51% year on year, and net profit after deduction was 508.18,500 yuan, up 86.66% year on year; basic earnings per share were 0.10 yuan, up 100% year on year. Opinion: The IP derivatives business drives revenue growth, and Zhenqu Network boosts performance. During the 2017 half-year reporting period, Meisheng Culture achieved an 82.89% year-on-year increase in revenue and a 108.51% year-on-year increase in net profit, and excellent performance. The IP derivatives business was further developed, and the first half of the year achieved a year-on-year increase of 46.45% in revenue to 181 million yuan, accounting for 51.47% of total revenue. During the reporting period, Meisheng Qiguyuan reached a formal cooperation with Reading Text Group to obtain a genuine COS peripheral license for the top domestic comic IP “Full Time Master”. The company focuses on creating original boutique IPs “Star Academy” and “Demon Chronicles”. The cartoons have been viewed over 500 million on video websites such as Youku Tudou and iQiyi. At the same time, it also develops movies, games, stage plays, and derivatives to achieve pan-entertainment management. Zhenqu Network also increased its performance. In March 2017, it acquired 100% of the shares of Zhenqu Network for 1,111 million yuan. By the end of the period, Zhenqu Network had achieved total revenue of 92.9987 million yuan and net profit of 267.43 million yuan. Zhenqu Network takes the two major platform-based business modules of a light game service platform and a mobile advertising platform as its core direction to provide diversified platform services to upstream and downstream customers in the global industrial chain. Its rich game development experience and platform advantages will effectively help the company achieve the layout of the entire industry chain. It invested 190 million yuan to become the largest shareholder of JAKKS, laying out multiple links in the industrial chain. JAKKS is a famous American brand IP derivative and Disney's global licensor. It is committed to the design, production, promotion and distribution of toys and related products, and has stable cooperative relationships with sales channels such as large shopping supermarkets and department stores in the US and Canada. With JAKKS's mature product development capabilities and overseas distribution and sales channels, Meisheng will accelerate the expansion of overseas business and achieve “going global” with high-quality domestic IP. At the same time, JAKKS has licenses for many brands, including well-known brands such as Disney, Star Wars, and Nintendo. This investment will help Meisheng obtain world-renowned IP licenses. Meisheng Culture and its partner Jakks Pacific will jointly establish a Jack's Meisheng marketing platform to bring domestic consumers the latest foreign trendy toys and anime clothing experiences, and further strengthen the IP licensing and offline channel layout. The construction of a cultural ecosystem has basically been completed, and there are highlights for future development. The company purchased 10% of Doumeng Technology's shares for 6 million yuan to lay out the two-dimensional literary creation and reading platform “Polar Bear Reading”; 2175 million yuan acquired 75% of Tongdao Culture's shares, signed contracts with outstanding comic writers and literary writers such as Uncle Dao, and reserve high-quality IP content. It purchased 40.10% of Tianjin Cool Mi's shares for 42 million, subscribed to WeChat Interactive's 14.25% shares for 60 million, and invested in Tentacle TV live streaming platforms, Super Captain AR/VR, etc., to form a multi-level new media operation platform. The company independently built the vertical e-commerce platform Youwowo, acquired 51% of Guangzhou Manlian's shares for 20 million, acquired 51% of the children's clothing company Hangzhou Yesheng for 50 million yuan, acquired 85% of Dutch channel provider ScheepersB.V., and invested 490,000 US dollars to set up a marketing platform for Jack's Meisheng in an attempt to create a comprehensive sales channel for IP derivatives. The company focuses on the IP derivatives business, and has now basically completed the construction of a cultural ecosystem of “own IP+ content production+content distribution and operation+new media operation+derivatives development and design+online and offline retail channels”. In the future, the continuous integration of various channels will be an important focus for the company's development. Profit forecast and investment rating: The merger of Zhenqu Network and the rapid growth of the IP derivatives business have led to rapid growth in the company's semi-annual report revenue and net profit. In the future, along with the company's upstream IP content and improved downstream channel layout, I am optimistic about the company's pan-cultural ecosystem construction for a long time. We expect the company's earnings per share from 2017 to 2019 to be 0.36 yuan, 0.45 yuan, and 0.53 yuan, corresponding to PE of 44, 35, 30 times. We give it a “recommended” investment rating. Risk warning: Pan-entertainment consolidation falls short of expectations; IP nurturing falls short of expectations.