Investment highlights: The company announced the 2017 annual report and the 2018 quarterly report, in line with expectations: 2017 annual report: the company achieved revenue of 1,790 million yuan, a year-on-year increase of 14.3%, net profit of 165 million yuan, a year-on-year increase of 8.7%, net non-net profit of 139 million yuan, a year-on-year decrease of 3.3%, and net operating cash flow of 220 million yuan, a decrease of 11.5% year-on-year (payment of “overall relocation” financial compensation for employee placement). 2018 Quarterly Report: 2018Q1 achieved revenue of 479 million yuan in a single quarter, an increase of 12.7% over the previous year, net profit of 509.776 million yuan, an increase of 6.2% over the previous year, and net operating cash flow of 824.963 billion yuan. The company forecasts a 0%-30% year-on-year increase in interim results. The company actively expands the high-end upgrading of the piano industry, explores the Internet integration model and the field of art education, and maintains steady growth in sales revenue and performance. The main business structure is optimized, the main piano business model is R & D+production+sales, and the acquisition of Schimmel completes the brand matrix. The company's revenue and profit performance were steady, and Germany's Schimmel business segment performed well and the business structure was optimized. At the same time, the digital musical instrument and culture industry became a revenue growth point. From an industry perspective, the global production of traditional pianos is basically stable at around 500,000 units per year, and demand for mid-range and high-end pianos is on the rise. 1) Build a differentiated product system: The company has built a high, medium and popular brand system with strong international competitiveness at all levels, comprehensively promoted the Schimmel project and domestic marketing network, and continuously optimized the product structure. Currently, it has more than 300 product models and launched no less than 30 new categories every year. 2) Sales model upgrade promotes sales growth: In 2017, the company's main business developed well. The company's piano production and sales volume stabilized and achieved sales of more than 140,000 units, and still maintained the first position in the global piano production and sales scale. Among them, Caesarburg piano sales increased 13.4% year on year. The company's sales model is continuously upgraded, and O2O and B2C e-commerce models such as Tmall and Jingdong and Schimmel resources are integrated to effectively enhance its core competitiveness. 3) Deepening the development of domestic and foreign channels: The company has established a piano business model of R & D+production+sales, cooperating with dealers, and has more than 500 domestic sales and service outlets, up from the end of 2016; the international market is centered around Asia, Europe and America, with more than 200 sales and service outlets, spread across more than 100 countries and regions; the domestic market share has reached more than 35%, and the global market rate has reached more than 25%. Profitability continues to improve, cash management is further strengthened, procurement is centralized, and timely adjustments are made to enhance profitability. 1) Strengthening cash and cost control management led to an increase in profit: The company's financial situation continued to improve in '17, mainly due to the company's further strengthening of cash management. Under the premise of a year-on-year increase in revenue, the balance of accounts receivable at the end of the period fell by 28.1782 million yuan compared to the beginning of the period; through centralized procurement and commodity supervision, the company assessed market prices in a timely manner and adjusted in due course, the comprehensive gross margin increased by 1.8pct to 32.8% in '17, and further increased to 33.5% in 18Q1. 2) Year-on-year increase in sales expenses: The company achieved sales expenses of 144 million yuan (yoy 36.5%) and 18Q1 sales expenses of 43 million yuan (yoy 78.4%) in 2017, mainly due to the increase in packaging, logistics, warehousing, promotion expenses, advertising expenses, etc. along with the increase in business sales volume. 3) The increase in management expenses and the year-on-year decrease in cash flow were mainly due to financial compensation for “overall relocation” employee placement. Digital piano enriches its main business and strengthens its own strength by completing the capital increase and stock expansion of Amoeson. As a holding subsidiary of the company, Amosun mainly engages in the digital piano business. Previously (December 2017), the company announced that Amosun had completed a capital increase, issued 8.41 million shares and increased its shareholding ratio to 72.2%. The 36 investors expanded their shares, including Makino and Cindy. These two companies are mainly involved in the fields of art planning and education, helping to leverage the advantages of art education resources to bring synergy to Pearl River and start new performance highlights. Currently, domestic digital piano consumption is only 17% of global consumption, and there is still plenty of room for future demand. In 2017, Amoeson sold about 40,000 digital pianos, ranking among the top in domestic digital piano sales, and became the designated piano for programs such as CCTV's “Desire for Live” and Zhejiang TV's “China's New Song”, highlighting the brand's influence and reputation. Investment in art education has maintained rapid growth, promoted a nationwide brand system, and achieved an integrated ecosystem. Through industrial operations and capital operations, the company accelerates the development of the art education industry and promotes network construction. Direct stores, Beijing Art House, Fuzhou Flagship Store, and Jinan Central Store, have opened and operated, creating a window for group services and cultural and artistic activities, and realizing an integrated ecosystem of musical instruments, education, online and offline channels, and Internet platforms. The company held a national music competition for young people, colleges, and the elderly to respond to different age groups of customers and establish a differentiated and hierarchical personalized consumption matrix. The product structure continues to be optimized, high-end piano brands have set sail, independent brands have accumulated and weak development, and there is plenty of room for digital piano growth. Focus on the Internet+ art education and value service system to connect with differentiated and integrated consumption matrices. The film and television business is developing smoothly. Implementing a stock options incentive plan in Zhuguang Media will improve the governance structure. As Guangzhou's state-owned assets reform is a scarce target, additional efforts have been made to strengthen the transformation and upgrading of cultural services. The company currently has a market capitalization of 10.5 billion yuan. We maintain the company's profit forecast of EPS of 0.19-0.23 yuan in 2018-2019. The current stock price (10.04 yuan) corresponds to PE 53 and 44 times, and we have added a profit forecast of 0.26 yuan of EPS in 2020, corresponding to PE 39 times. We are optimistic about the development direction of the company's long-term high-end musical instrument manufacturing, music education, cultural finance and media industry, and state-owned enterprise reform expectations, and maintain increased holdings.