Key investment events: On the evening of August 21, 2018, City Media released its 2018 semi-annual report. The company achieved revenue of 1,045 billion yuan in the first half of the year, an increase of 12.49% over the previous year; achieved net profit of 160 million yuan, an increase of 15.57% over the previous year; and realized deducted non-net profit of 158 million yuan from the mother, an increase of 14.91% over the previous year. The overall business grew steadily, and the performance was in line with expectations. The company achieved revenue of 556 million yuan in a single quarter, an increase of 17.68% year on year; net profit to mother of 80.55 million, an increase of 9.42% year on year. The gross profit margin was 38.38% and the net profit margin was 14.48%. Compared with the previous quarter, the overall operating efficiency was stable. The City Media Plaza is put into use, and is expected to contribute to stable cash flow in the future, and the growth rate of the main business is impressive. Qingdao Media Development Co., Ltd. lost 338.751 million yuan in the first half of the year, mainly due to depreciation and increased operating expenses after fixed assets were put into use at the City Media Plaza. This is an important step to explore a new business format integrating multiple elements. After stable operation, it will become another stable cash flow business for urban media. Without considering this portion of amortization, net profit from other businesses in the first half of the year could reach 40% year-on-year growth. Category advantages are outstanding, and against the backdrop of slowing industry growth, the market share continues to rise. According to the book retail market report for the first half of the year, the market growth rate declined somewhat, but remained above 10%, and the leading effect of the retail market continued to strengthen. With its dominant book category, the company's market share continues to increase. Textbooks: The company's 4 types of textbooks have entered the national catalogue, and more than a dozen have entered the local catalogue, and some products have achieved 70% market share of the primary and secondary school textbook market in Shandong Province and 100% market share in the Qingdao market; general books: (1) lifestyle books lead the country. Among them, food books have been ranked first in the country for many years, creating book brands with sales exceeding one million, such as “Newly Edited Home Cooking,” “Smart Chef,” and “Details Determine Health”; (2) Board books and women's fashion books rank among the highest in the country; (3) Children's books rank among the highest in the country in terms of recognition rate and city approval rate. Rising year by year, around children's literature The four major publishing directions of books, Chinese studies knowledge books, young children's picture books, and youth journals have launched a series of best-selling books, such as “Young People Read XX” and “Chinese Characters with Stories”. With the help of Happy Reading, IP development and operation are being further advanced. The company completed the acquisition of the remaining 49% of Yueduji's shares in Q4 2017, making it a wholly-owned subsidiary of the company. “Happy Reading Chronicles” is the first domestic professional publishing brand for women, and has created many best-selling books, including “How to Sheng Xiao Mo,” “Step by Step,” and “To Youth,” and “To Youth.” The popular novels “If You Don't Meet Jiang Shaoling”, “The Lighter and the Princess Dress”, and “I Heard You Like Me” are about to launch a film and television project, which is expected to drive a new sales boom. Offline upgrades have accelerated the launch of themed bookstores. The company created a themed bookstore operation model that organically combines book sales with cultural elements such as dining experience, lifestyle and leisure, art appreciation, and online interaction. Continue to promote the upgrading of a series of bookstores. The BC MIX “Complex Cultural Consumption Space” created by the department in collaboration with JD has opened nearly 20 stores, covering many cities, and is expected to cooperate to build no less than 50 stores by the end of 2018. Accelerate the implementation of asset-light model replication and output. All-media development, active promotion of the film and television business. The company accelerated the deployment of VR, short video and other fields, and the development of content products was smooth. The film and television company's various projects are progressing in an orderly manner. Currently, it has participated in investing in about 10 film and television projects. At the first SCO National Film Festival in June of this year, the film and television company officially launched a film project with Pakistan on the subject of international economic and trade cooperation. Profit forecast and investment suggestions: We forecast that Urban Media will achieve revenue of 2,269 billion yuan, 2,621 billion yuan, and 3,014 billion yuan respectively, up 15.20%, 15.50%, and 15.00% year-on-year; net profit attributable to mother was 373 million yuan, 427 million yuan, and 495 million yuan, up 13.35%, 14.44%, and 15.96% year on year; corresponding EPS was 0.53 yuan, 0.61 yuan, and 0.71 yuan respectively. Maintain a buy rating. Risk warning: The publishing industry is sluggish; performance falls short of expectations; transformation and upgrading fall short of expectations; systemic risk.