The incident company released its 2018 semi-annual report. 2018H1 achieved total operating income of 2.122 billion yuan, an increase of 44.77% over the previous year; net profit of 277 million yuan, a year-on-year decrease of 35.54%; net profit after deduction of net profit of 252 million yuan, an increase of 151.29% over the previous year; and the performance was in line with expectations. Among them, the film and television entertainment business achieved revenue of 1,962 billion dollars, up 94.54% year on year; gross margin was 52.38%, up 19.82 percentage points year on year; the top 5 movies and television productions that achieved revenue were “Former 3: Goodbye,” “Long Time No See You,” “Fanghua,” “King Bahobari 2,” and “Gardenia Blossoms,” accounting for 40.26% of film and television entertainment revenue. The brand licensing and live entertainment business achieved revenue of 142 million yuan, down 28.4% year on year; gross margin was 92.29%, down 6.55 percentage points year on year; Internet entertainment business achieved revenue of 32.4755 million yuan, down 88.12% year on year; and gross margin was 41.98%, down 29.58 percentage points year on year. Investment income was 49.3851 million yuan, a year-on-year decrease of 90.88%; mainly due to the sale of some shares in Guangzhou Yinhan Technology Co., Ltd. in the same period last year. The review company effectively integrates film and television entertainment and brand licensing with the live entertainment and internet entertainment business sectors and industrial investment. Under the overall operation of the company's unified platform, all business segments develop collaboratively. With content innovation as the core driving force, film and television productions are spawned offline into brand licensing and reality entertainment products such as Film Corporation and Movie World, and linked to the online entertainment sector represented by games and fan communities. The “strong core” strategy, “internationalization” strategy and “big entertainment ecosystem” strategy launched by the company in 2016 have become the main lines of the ecological layout. Through a multi-dimensional and multi-level investment layout, the company has established a number of listed companies in Hong Kong, China and overseas regions. Film business, complete the “content+distribution+terminal” layout, win-win film box office and quality, and further strengthen international cooperation. The main films that have confirmed revenue in 2018H1 include “Fanghua,” “Former 3,” and “Nice to Meet You”; 2018H1 “Fanghua” contributed about 220 million yuan to the box office, and “Former 3” contributed about 1.64 billion yuan to the box office; “Children of the River and Lake”, which participated in the investment as the only representative of Chinese-language films, was shortlisted in the main competition section of the Cannes Film Festival; the film “Jasmine's Card” with the US STX was nominated for a Golden Globe Award and an Oscar, and the collaboration project with STX is progressing steadily; in 2018, “Di Renjie 3” was screened on July 27, “Family of Thieves” in It was screened on August 3. The films expected to be screened also include “Ghost Blowing - Bugs Valley in Yunnan”, “Children of the River, Lake” and “Finding You”; in 2019, the films expected to be screened include “Mobile Phone 2” and “Onmyoji”; at the same time, the company has set up a distribution company, and Huaying World will release about 12 films every year. By the end of the reporting period, a total of 25 cinemas (including 1 shareholder) had been opened, and 3 cinemas were under construction. The live entertainment business has entered the harvest period, and projects have been opened one after another. In 2017, a total of 18 projects were signed for projects such as Movie Town, Movie World, Movie City, and Cultural City; in 2018, several projects were under construction and started one after another. Huayi Brothers Movie World (Suzhou) opened on July 23, 2018, and projects in Changsha, Nanjing and Zhengzhou will also open one after another; the company's revenue, including pre-project licensing fees, operating share, project investment and sales revenue, etc., will provide the company with stable cash flow. Increase investment in TV series, web series, variety shows, and artist brokerage services, and strengthen the layout of the content sector. The TV drama “Long Time No See You” produced by the company aired in the first half of the year, and also participated in investment in a number of TV dramas, including “July and Safety”, “Frontier”, “Top Secret”, and “Solitary Warfare: Life and Death Rescue.” In terms of web dramas, the company actively participated in investing in major online movies and online dramas to broaden its business model; participating online dramas and major online movies mainly included “Hi! “Predecessors,” “Meow, Meow, and Monster,” “A Girl's Fantastic Diary,” and “The Time I Like You Is So Sweet,” etc. While the artist agency is developing steadily, many new artists have been signed; on the music side, copyright cooperation with various music platforms has been strengthened; on the variety side, the series “Let's Run Season 2”, “Ace vs. Ace Season 3”, and the first domestic drama-style reality show “Robot Supremacy” with the main story line of the Robot Fighting Global League, etc. Investment recommendations and valuation: It is estimated that 2018E and 2019E will achieve net profit of 1 billion yuan and 1.24 billion dollars, corresponding to 18P/E 15.8X and 19P/E 13.1X. Risk warning: policy risks in the film and television industry; the progress of the company's projects falls short of expectations.