Incident: Tang De Film and Television announced its results for the third quarter of 2017. Revenue for the first three quarters increased 30.8% year on year to 529 million yuan, net profit increased 23.16% year on year to 122 million yuan, net profit after deducting non-return mother increased 25.77% year on year to 110 million yuan. In the third quarter of 2017, single-quarter operating income increased by 57.61% year on year, net profit from net income increased by 46.15% year on year, and net profit after deducting non-return net profit increased 39.94% year on year (non-financial profit and loss for the first three quarters was about 11.85 million yuan). Comment: The first and third quarters began a major drama confirmation period. In the fourth quarter, “Win the World” is expected to contribute to the annual results. The company's revenue growth in the first three quarters mainly comes from the TV broadcasting rights and information network distribution rights transfer revenue for the TV dramas “Flowers and Distances,” and “I Haven't Seen You in a Long Time,” as well as the split revenue from the co-filming of the TV drama “That Year Flowers and the Moon Blossomed”. “That year, when the moon was in full bloom” was confirmed for the third quarter. The drama's distribution revenue and gross margin were high, with a total of 75 episodes. Tang De participated in the investment. From the beginning of the broadcast on August 30 to the end on October 8, the drama won the TV ratings title for 39 consecutive days. The total number of broadcasts on the Internet also exceeded 11 billion, achieving impressive results. In the fourth quarter of this year, companies such as “Win the World” and “Emergency Physicians” are expected to confirm revenue. The TV drama projects that the company expects to invest in and produce in the fourth quarter of 2017 include “A Basket of Parents,” “Singularity,” “Living with Children,” “People from Beibu Gulf,” and “Anaya Romance.” Reserved movies and TV drama projects such as “Orient Palace,” “We Were Young in Time of War,” “Swallow,” and “Suzaku,” etc. are expected to be confirmed next year. “Orient Palace” was adapted from a super popular online novel, and has a huge fan base and a high level of online attention. 2. Expand the channel-side layout and improve the industrial chain ecosystem. The company has now participated in several cinemas, laid out the cinema line field using the “manage output and participate in investment” model, creating a “content+marketing+channel” multi-wheel drive model. The plan is to introduce the concept of future cinema, repackage it to create a pan-entertainment platform, and build a boutique cinema line with Tang De characteristics. A number of “Tang De Movie Park” brand cinemas opened in 2017. At the same time, various methods are used to enhance the cinema experience, such as VR experience halls, e-shopping platforms, new product promotion platforms, etc., to optimize the customer experience and build a boutique cinema line with Tang De characteristics. 3. Overall gross margin increased. The period expense ratio was reduced year on year. The gross margin for the first three quarters of this year increased 2.9 percentage points year on year to 52.1% year on year, and the period expense ratio fell 3.6 percentage points to 21.9% year on year. Among them, the sales expense ratio reduced 3 percentage points to 3.8% year on year, financial expense ratio reduced 0.4 percentage points to 5.7% year on year, and management expenses fell slightly by 0.2 percentage points year on year to 12.4% year on year. In the first three quarters, the company's operating cash flow was -217 million yuan (-103 million yuan in the same period last year), mainly due to the company's expansion of investment in movies and TV dramas and the large investment in individual shows such as “Win the World”, “Orient Palace”, and “We Are Young in Time of War”. Net cash flow from fund-raising activities increased 77.69% year over year to $82.31 million, mainly due to loan applications from banks (to supplement production funding for movies and TV shows). 4. Profit forecast and investment recommendations We expect the company's net profit in 2017/18 to be 360 million yuan and 500 million yuan respectively, and the corresponding price-earnings ratio valuations are 28.5 times and 20.6 times, respectively; if the increase is taken into account, the corresponding price-earnings ratio is 31 times and 22.3 times, respectively, maintaining a highly recommended rating! Risk warning: The risk that the film and television drama project cannot be confirmed as scheduled and the unit price of sales is lower than expected, the risks associated with the “Voice of China” lawsuit, and the operational risk of “The Voice of China” season 5-8.