Incident On December 5, 2017, the company disclosed the progress announcement of the capital increase and stock expansion of its holding subsidiary Amosun Digital Musical Instruments. The matter has completed the listing process on the Guangzhou Property Exchange. Amosun has issued 8.41 million new shares to 36 investors, raising 20.18 million yuan in capital. Comment on the shareholding of various actors and promoting the digital musical instrument business with the same interests. In addition to Liu Chunqing, the original shareholder who subscribed to 500,000 shares, the capital increase and stock expansion introduced three main types of investors: 1) the Guangzhou Municipal Government controls the investment platform under the Guangzhou Urban Development Investment Fund; 2) the management and core employee shareholding platforms; 3) the company's piano sales and art education partners, such as Guangdong Sindi Music Education Consulting Co., Ltd., which specializes in “Sindi Piano Applications,” and Tongxiang Makino Huihuang Art Planning Co., Ltd., representing the famous pianist Wu Muye. Emerson is mainly engaged in R&D, production and sales of a series of products such as digital pianos and digital musical instruments. In 2016, Amosun produced 412,000 digital pianos and achieved revenue of RMB 89,1694 million, an increase of 26.12% over the previous year. As a high-tech product, digital pianos are more entertaining and have more usage functions than traditional pianos, which is one of the directions of industry development. Currently, traditional Chinese piano sales account for about 80% of global sales, while digital piano consumption is only 16.67% of global consumption. There is huge room for future development, which is the company's key business direction. This capital increase and stock expansion binds the interests of all parties involved in the development of the digital musical instrument business. It will be able to maximize the enthusiasm of all parties and facilitate the long-term rapid development of the company's digital piano business. At the same time, the company plans to speed up the securitization process of Amosun. It completed the shareholding system reform in 2016 and plans to apply for a new third board listing. The cultural industry continues to lay out, and the company's transformation is progressing in an orderly manner. The company continues to combine the development of smart instruments and intelligent teaching app modules, and continues to promote art education brand activities such as art classrooms and super partners. In the first half of the year, the company used 368 art education franchisees to complete coverage in 29 provinces across the country. At the same time, the company also completed the opening of cultural and art education centers in Jinan and Foshan, and the Beijing Art House is also in the final stages of construction. In terms of the film and television media business, Zhuguang Media, a holding subsidiary of the company, completed an investment of 62.1 million yuan in film and television projects in 2016, contributing to a 407% year-on-year increase in revenue. At the same time, the company teamed up with Guangzhou Jiayu Advertising to establish Zhejiang Dongyang Zhuguang New Film Media, involved in film and television production and artist brokerage, and completed investment in 12 web drama projects. Moreover, the company completed a private offering in August, raising 1.06 billion yuan for projects such as cultural entrepreneurship incubators, cultural industry bases, and art education centers. The completion of the non-public offering project will promote the further implementation of the company's big cultural industry strategy integrating piano manufacturing and services, art education, media, film and television, and financial investment. Risk factors The risk that the progress of non-public fund-raising projects does not meet expectations The implementation of non-public funding projects may be affected by factors such as domestic and foreign macroeconomic conditions, industrial policies, macro-control, and market conditions. There are certain risks in terms of whether the construction process is properly organized and that plans are implemented on schedule. If the progress of the fund-raising project falls short of expectations, it will affect the return on investment of the project and the expected return of the company. The risk of increased competition in the piano manufacturing industry China is the world's largest producer and consumer of pianos. There are many manufacturers in the industry, and competition is intense. At the same time, the issue of “used piano” imports that have been dumped in the Chinese market over the years has not been fully and effectively solved, and there is a risk that competition in the industry will further intensify. Digital piano business and management risk of the expansion of the cultural industry The company's traditional main business is acoustic piano. When developing digital piano and cultural industry business, the company's organizational model and management capabilities have not been adjusted and improved in a timely manner, thus facing the management risk of new business expansion. Profit forecasting and investment recommendations The company actively extends the cultural education industry on the basis of strengthening the main piano business, while grasping the post-piano service market and building a closed loop in the “manufacturing-rent-sale-service-education” industry chain to achieve the company's strategic goal of strengthening the main piano business and expanding the cultural industry. We maintain the company's 2017-2019 EPS forecast of 0.19/0.24/0.31 yuan/share (three-year CAGR 24.8%), and the corresponding PE score is 60/47/37 times, maintaining the company's “buy” rating.