3Q17 results were in line with expectations Simei Media announced 3Q17 results: operating income of 3,016 billion yuan, up 13.11% year on year; net profit attributable to parent company was 190 million yuan, up 88.38% year on year, falling into the median forecast net profit of 161-212 million yuan, in line with expectations; corresponding to earnings of 0.63 yuan per share. The gross margin of trend companies for the first three quarters of 2017 was 15.5% (YOY+3.7pct), mainly due to the higher gross margin of the three companies in the consolidated table. Among them, third-quarter operating income was 1,212 billion yuan (YoY +44.8%), net profit was 154 million yuan (YoY +54.2%), and gross margin was 12.7% (YoY +0.8 pct). Companies such as Zhihai Yangtao/Guanda Film and Television/Zhangwei Technology/Keyi Communications also announced increased profits, but the short-term downturn in traditional media still drags down endogenous performance. The company expects net profit of 198-269 million yuan for the full year of '17, an increase of 40-90% over the previous year. Mainly, to increase profits, the company strengthens and enhances its one-stop integrated marketing service capabilities; the median estimate of 234 million yuan is lower than our previous forecast of 278 million yuan. We expect to mainly consider the full amount of accounts receivable owed by Douglas Liquor (bankrupt) of 34.4 million yuan as disclosed in the interim report; furthermore, the short-term downturn in traditional media agency business continues to drag down endogenous performance. The company has perfected the “digital marketing+content marketing+media marketing” service framework, implemented comprehensive and accurate marketing on the Internet and mobile terminals through professional resource center coordination, and upgraded from the traditional agency model to the brand to provide integrated marketing services throughout the industry chain. In line with the development trend of the marketing industry. The profit forecast takes into account the impact of the above accounts receivable bad debt calculation factors and the continuing slump in traditional media agency business. We have lowered our earnings per share forecasts for 2017 and 2018 by 16% and 5% from RMB 0.88 and $1.18 to RMB 0.74 and $1.12, respectively. Valuation and recommendations Currently, the company's stock price corresponds to 17/18 EPS 33.9X/22.3X. We maintained the recommended rating, but raised the target price by 9.09% to RMB 30.00, which is 20.05% higher than the current stock price. Compatible with 18-year EPS 26.7X. Risk The traditional media agency business continues to be sluggish, the risk of repayment of accounts receivable, and the business development of mergers and acquisitions of subsidiaries falls short of expectations.