Matters: On September 30, the company issued an announcement on changes in accounting estimates. According to the relevant regulations of enterprise accounting standards and the actual situation of the company's fixed assets, the company re-approved the actual usage period for various fixed assets, decided to adjust the depreciation period for some fixed assets from July 1, 2017, and adjusted the depreciation period for line assets from 8 years to 8 to 15 years. According to estimates, after this change in accounting estimates, it is estimated that the depreciation of the company's fixed assets in 2017 will be reduced by about 354.1274 million yuan, and owners' equity and net profit will increase by about 30,0841 million yuan. Comment: A brief analysis of the impact of changes in accounting estimates related to the company's line asset depreciation was compared by the company on the actual usage of fixed assets, and it was found that the actual useful life of some of the company's fixed assets was quite different from the expected period of use. In order to more fairly reflect the company's asset status and operating results, the depreciation period of fixed assets is closer to the actual useful life, and the fixed asset depreciation period is more reasonable. By comparing the fixed asset depreciation period of companies in the same industry, the depreciation period of line assets was adjusted from 8 years to 8 to 15 years. The book value of the company's line assets at the end of the 2014-2017 H1 period was 4.251 billion yuan, 4.867 billion yuan, 5.581 billion yuan, and 5.292 billion yuan. According to the announcement, the current depreciation accounting estimate is changed on July 1, 2017, which will reduce the depreciation of line assets in 2017 by 350 million yuan, affecting net profit by about 300 million yuan. Based on the above data, we have calculated that at present, line assets have accrued depreciation of about 3.5 (cumulative depreciation/original asset value), and the comprehensive income tax rate is 15%, which is in line with the actual situation. Note: New Year's depreciation expenses = (net fixed asset value - estimated net residual value) /period of use (15 years - depreciation period) Also, as can be seen from the table above, line assets in 2016 increased by about 1.75 billion yuan compared to the original book value in 2015, partly due to the consolidation of assets under construction; the other part came from assets purchased during large-scale construction of the company; the other part came from assets purchased during large-scale construction of the company. The growth rate of this amount declined in 2017 H1. It can be seen that the growth rate of the company's capital expenditure is also gradually declining. We assume that the original value of the company's fixed assets in 2018 and 2019 each increased by 500 million yuan. Based on the above assumptions, we simply estimate that the impact of the above changes in accounting estimates on the increase in net profit in 2018 and 2019 is around 550 million and 500 million dollars. The company plans to buy 49% of the shares of CITIC Network, and the significant company plans to transfer 49% of the shares of CITIC Network. In this transaction, the target enterprise, CITIC Network, has basic telecom business operation qualifications approved by the state. It is the only basic telecom business operator with legal qualifications for fixed network dedicated line circuit business other than the three basic operators, and can also use the resources of Asia Satellite Co., Ltd. to carry out satellite transponder rental and sales business. In terms of network resources, CITIC Network has the fiber-optic backbone network “Pentium-1,” which covers the whole country, and is worth a lot. “Pentium 1” is the fourth largest backbone network in China. It has an optical fiber network with a length of about 32,000 kilometers. Currently, it has opened 30 nodes including Beijing, Shanghai, Guangzhou, and Shenzhen, covering more than 200 large and medium-sized cities across the country except Lhasa, with a transmission capacity of 3.2T. In the preliminary report, we pointed out that the Pentium 1 backbone network is worth a lot by benchmarking HGC's fixed network business at a premium: compared to HGC's fixed network resources, whether in terms of length, coverage, number of users, or transmission capacity, Pentium 1 is clearly superior in terms of length, coverage, number of users, or transmission capacity. We believe that “Pentium One” will continue to exert its advantages in the future. Internally, “Pentium One” provides a basic support network for the company's broadband business, which is an important guarantee for the smooth progress of the company's “Global Home Operator” strategy, saving settlement costs between Internet networks and reducing reliance on operators' backbone networks. Externally, “Pentium One” may cater to the burgeoning demand for IDC exchange visits, hybrid cloud connectivity, etc., giving the company new growth impetus. We are optimistic about the company's leading private broadband value, maintain the “buy” rating company's early cooperation with China Unicom, and gather more resources for future corporate platforms. Currently, the company is steadily advancing the “cloud management end” strategy. We believe that Dr. Peng, as a private broadband operator with both value and growth, should enjoy a higher premium space than state-owned broadband operators. In the future, with the gradual increase in internet rates, performance will be steadily supported. We are optimistic about the expansion of the company's steady user growth base in OTT, online education, etc., and the fund-raising project is conducive to the long-term development of the company. The company's net profit for 2017-2019 is estimated to be 11.47/14.18/1,697 million yuan (the impact of changes in accounting estimates has been taken into account), corresponding to PE of 27/22/18 times. Considering the premium and epitaxial dynamics of private broadband leaders, the long-term logic remains unchanged and the “buy” rating is maintained.