China reported a steady growth in net profit, accelerating the market share of marketing business. In the first half of 17 years, the overall revenue reached 4.578 billion yuan, an increase of 49.38% over the same period last year; the net profit returned to the mother was 319 million yuan, up 16.9% over the same period last year; and the non-return net profit was 295 million yuan, an increase of 16.23% over the same period last year. The company's comprehensive gross profit margin is 17.48% (down nearly 6 percentage points from the same period last year); the period expense rate is 9.51% (down nearly 2 percentage points from the same period last year); and the return net profit margin is 7% (down nearly 2 percentage points from the same period last year). During the overall reporting period, the company accelerated the expansion of Internet marketing business, and the key Internet marketing business achieved high revenue growth, which had a certain impact on Internet business gross profit margin and net profit margin in the short term; the company's overall three fees were well controlled. From January to September 17, the estimated net profit of returning home is 436 million yuan to 566 million yuan, an increase of 0% over the same period last year.

The manufacturing business is sound, and the revenue of the Internet business is growing high. In the first half of 17 years, the revenue of the manufacturing business reached 1.026 billion yuan, an increase of 11% over the same period last year, and the gross profit margin was 27%, down 3 percentage points from the same period last year. The overall revenue of Internet marketing was 3.529 billion yuan, an increase of 66.26% over the same period last year, accounting for 77% of the total revenue (up nearly 8%). If we do not consider smart advertising and table marketing in September of 16 years, the original Internet marketing business has a year-on-year revenue growth of 51%, achieving high growth. The gross profit margin of the Internet marketing business was 14.59%, down nearly 6 percentage points from the same period last year, mainly due to the company's focus on accelerating business expansion, increasing market share, and moderately reducing the gross profit margin in the short term.

The overall Internet marketing business achieved a net profit of 265 million yuan, speeding up the development of integration. Considering the amalgamation of smart advertising in September of 16 years, the six Internet marketing companies achieved a total net profit of 265 million yuan during the reporting period; without considering the amalgamation of intellectual interest, the net profit of the original five marketing companies totaled 245 million yuan, an increase of 18.5% over the same period last year.

In the first half of 17 years, the net profits of Manku, Argon Krypton, Amber, Wanyuan Sheng Weiye, minimally invasive and Intelligent interest were 38.43 million yuan, 18.54 million yuan, 4.11 million yuan and 150 million yuan respectively.), 40.22 million yuan (93.6 million yuan, 43% completion) and 19 million yuan (17-year performance commitment 75.4 million yuan, completion 25%).

Profit forecasting and valuation model. The company focuses on accelerating the integration of digital marketing business groups; in addition, it invests in layout and entertainment marketing. In the past 16 years, it has successively invested in film and television production company Midsummer Star (20% equity) and Century Kunpeng (15% equity). The initial layout of the mutual entertainment industry is expected to create a "digital, mutual entertainment" dual brand. According to the recent announcement, the duration of the original second phase of the employee stock ownership plan has been extended to 2020; it is proposed to issue convertible bonds of no more than 2.2 billion yuan to focus on the development of digital marketing business and the acquisition of 15% of the remaining shares in Manku. We are optimistic that the management will actively bind and effectively speed up the development of digital marketing business. It is estimated that the net profit of returning to the mother in 17 and 18 years is 785 million yuan and 1.06 billion yuan respectively, and the corresponding EPS is 0.14 yuan and 0.19 yuan.

With reference to the industry average (Huayang Lianzhong New Factor), the company is given a buy rating of 28 times PE in 17 years, corresponding to a target price of 3.92 yuan.

Risk hint. The acquisition company's performance bet falls short of expectations, and the goodwill impairment risk.