Main points of investment

Event: the company released its semi-annual report for 2017.

Comments:

The performance of the variety and sports business is poor, and the performance has decreased significantly. 1) 2017H1 realized revenue of 875 million yuan, down 20.19% from the same period last year; and realized net profit of 65 million yuan, down 29.43% from the same period last year. 2) the sharp decline in the company's performance in the first half of the year was mainly due to the poor performance of variety business and sports business. Variety revenue of 92 million yuan decreased by 76.06% compared with the same period last year, and sports business revenue of 64 million yuan decreased by 57.51%. 3) 2017H1 sales expense rate 5.31%, year-on-year increase of 1.91pct, management expense rate 4.64%, year-on-year increase of 1.45pct.

The film and television variety works will be released in the second half of the year, and the film and television variety revenue is expected to explode. 1) the number of works released by the company in the first half of the year is relatively small. The first half of the year broadcast "the Workplace is a Technical Life" and "the late Night Canteen". 2) the repertoire is rich in the second half of the year. The annual drama "Qin Shili's Mingyue Heart" was broadcast on August 14; "I am not an Elite", "Mangqinglou" and other plays are in the release stage. "Moonlight" and "mind Reading" are in the post-production stage, and the repertoire in the second half of the year is expected to exceed that in the first half of the year. 2) 2017H1's variety income mainly comes from "Crossing King". In the second half of the year, original projects such as "come on, Brother", "Chinese Film Premiere", "whirlwind filial son" and "small Town Story" are expected to be broadcast, and revenue from the variety section is expected to explode in the second half of the year.

Profit forecast: the annual net profit of the company in 2017-18-19 is expected to be 4.46 yuan 5.13 / 592 million yuan, and the EPS is 0.55 yuan 0.63 prime 0.73 respectively, corresponding to the current share price PE which is respectively times that of 36-32-27, maintaining the "overweight" rating.

Risk Tip: the income of the film and television variety business is not as expected.