Event: 1) the company issued a semi-annual performance advance announcement on June 22, 2018, and is expected to achieve a net profit of 1.7-250 million yuan in the first half of 2018, an increase of about 179% Mu 311% over the same period last year. 2) the company issued an indicative announcement on June 23, 2018 on the transfer of investment income rights in films and TV series, and began to promote the signing of the "Agreement on the transfer of Investment income Rights in TV dramas" with Zoomlion (BABA Film) on June 21, 2018. This matter may have a greater impact on the company's 2018 performance and net profit.

The revenue of the film and television project is confirmed, the semi-annual performance is greatly increased, and the annual income is guaranteed. 1) the reasons for the substantial pre-increase in the company's semi-annual report results are as follows: (1) the main investment control TV series "return", "Sun Ruowei Biography" and "Niangdao" all completed the confirmation of income and profit in the first half of the year. a total of tens of millions of after-tax profits were recorded; (2) the molybdenum industry business plate was affected by the periodic recovery of the downstream industry, the demand for molybdenum ore rebounded, and the price rose slightly. (3) in the first half of the year, the company received profit compensation from Sishadegai, a subsidiary of the molybdenum industry, to the performance commitment of the listed company. 2) the film and television projects to be confirmed in the second half of the year are sufficient, and considerable revenue is expected to be achieved for the whole year. After the semi-annual report of high growth, the company's annual performance provides protection for major projects that have been filmed and are about to be released.

Discuss with BABA the right to transfer the investment income of "old Chinese medicine", the subsequent project reserves are rich, and the cash flow is good. 1) the key project "Old traditional Chinese Medicine" is expected to contribute large profits. According to the agreement, the transfer fee under this agreement shall be calculated according to the standard that the unit price of each episode of the play is not less than RMB 8 million yuan. The total number of episodes of the show is 60 (tentatively), and the total transaction amount is not less than RMB 480 million yuan. The main reasons for the company's agreement with BABA to transfer the right to return on investment are: (1) reasonable risk control to lock in the considerable profits of the project to meet the rate of return on investment; and (2) to accelerate the recovery of cash flow in order to prepare in advance for the following good projects. accumulate word of mouth for the company by producing more high-quality projects. At present, the contract is still in the negotiation stage, and the final result will be considered from the perspective of maximizing the interests of the company. 2) there is a sufficient reserve of film and television projects in the next two years. The company's TV series reserve projects in the next two years include "Forever", "October 1" and "the ideal Home". At present, the two key projects invested in the film reserve are "dare to ask where the way is", "Wealth Diary" and overseas co-production "Greyhound"; and the subsidiary 201 Lu also includes "Uncle and Youth", "Autumn Lotus", "across the Seas" and other projects. 3) A large number of projects are in the investment period, but the company's cash flow is good. At present, the company still has the ability to continue to invest in film and television productions with high expected return on investment, which is further recognized by both the film and television market and the capital market.

We will steadily promote the layout of the "cultural consumption platform" and gradually realize the overall strategy of "realizing influence". The strategic goal of the company is to create a platform for realizing influence. At present, the company has signed a strategic cooperation agreement with Jin Mao, and the follow-up IP related to live entertainment is expected to be realized; the company begins to make efforts in the game field by "dare to ask where the way is"; and the company will also try new things on the innovative distribution platform. The company's goal is to first do a good job in the content, and then through the stickiness of interaction with users to gradually create a cash platform, superimposing the excellent executive power of the company's management and business team, we judge that the company has considerable long-term development space.

Investment suggestion: the company's film and television business has a solid foundation, perfect talents, rich production lines and sufficient reserves. Revenue from key TV series and film projects in 2018 has been confirmed one after another to ensure high performance growth for the whole year, a clear layout of content products in the next two to three years, and a clear strategic thinking for building a cultural consumption platform in the medium and long term. At the same time, it has also begun to cooperate with large real estate companies and game companies to develop a lot of space. To sum up, we estimate that the net profit of listed companies in 2018-2020 will be 500 million yuan, 566 million yuan and 655 million yuan respectively, corresponding to 0.91,1.03,1.20 yuan for EPS, and 18.0,15.9,13.7 times for PE. With reference to the reasonable valuation level of high-quality film and television companies, 25 times PE will be given in 2018, corresponding to the target price of 22.75 yuan, maintaining the "buy-A" rating.

Risk hint: the transfer of investment income contract is still in the negotiation stage, there is uncertainty; the actual progress of some film and television projects is not as expected.