The company's revenue and net profit grew steadily in the first three quarters of 2018. In the first three quarters of 2018, the company's overall revenue reached 4.195 billion yuan, up 39.09% from the same period last year; gross profit 10.99%, down 4.5% from the same period last year; net profit from home was 200 million yuan, up 5.31% from the same period last year; net profit from non-return was 191 million yuan, up 8.48% from the same period last year In terms of expenses, the sales expenses were 110 million yuan, down 5% from the same period last year, the management expenses were 95.1739 million yuan, up 4% from the same period last year, the R & D expenses were 20.8981 million yuan, down 14%, and the financial expenses were 5.9737 million yuan, up 84% from the same period last year. The overall rate (sales expense rate + management expense rate + R & D expense rate + financial expense rate) is 5.5%. A year-on-year decrease of 2.3 percentage points. On February 1, 2017, the remaining 20% of Keyi Culture, 100% of Zhangwei Technology and 60% of Zhihai Yangtao; on March 1, 2017, Quan Da Film and Television merged. The company's 2018 homing net profit is expected to range from 231 million yuan to 347 million yuan, an increase of 0% 50% over the same period last year.

Marketing service is the first main business of the company. The company focuses on three main businesses: marketing services, film and television content and digital rights operations and services. Marketing service business (including the acquisition of Zhihai Yangtao and Edconce) is composed of traditional media advertising, Internet media advertising and brand management business, which is currently the company's largest main business. In the first half of 2018, the company's marketing services business revenue was 1.974 billion yuan, an increase of 38.8% over the same period last year, accounting for 76% of the total revenue. The overall gross profit margin was 8.42%, down 4.4% from the same period last year, mainly due to the rapid growth of Internet media advertising business with low gross margin.

Film and television content business will be the focus of the company's business in the future. Through the acquisition of the target Kanda film and television and Keyi culture, as well as the company's endogenous development, the company implements the development strategy with content as the core, focusing on increasing investment and operation in film and TV dramas, variety content and other projects. In the first half of 2018, the company's film and television content business totaled 550 million yuan, an increase of 71 percent over the same period last year, accounting for 21 percent of the total revenue, and the overall gross profit margin was 27.43 percent, down 2 percentage points from the same period last year. The digital rights operation and service business is mainly completed through the acquisition of the target palm technology. In the first half of 2018, the revenue of the business reached 63.793 million yuan, an increase of 6.9% over the same period last year, and the gross profit margin was 57.32%, down 2.6% from the same period last year.

Profit forecast and investment advice. We are optimistic about the steady development of the company's "marketing service + film and television content business" in the future. it is estimated that the company's overall revenue from 2018 to 2020 will be 5.527 billion yuan, 7.273 billion yuan and 9.315 billion yuan respectively, with year-on-year increases of 32.01%, 31.59% and 28.08%, respectively. the net profit of returning to the mother was 260 million yuan, 300 million yuan and 340 million yuan respectively, up 12.56%, 15.49% and 13.66% respectively. The corresponding fully diluted EPS is 0.45,0.52 and 0.59 yuan respectively. Combined with 1) PE method: the average PE valuation of the comparable company in 2018 is 17 times. 2) the compound growth rate of the company's parent net profit is expected to be 14% in PEG:2017-2020. The company is given a valuation range of 14-17 times PE in 2018, corresponding to a reasonable value range of RMB 6.3-7.65 per share, which is rated as "better than the market".

Risk hint. The risk of a year-on-year decline in the advertising industry; the risk that the performance of the company's acquisition falls short of expectations.