I. events

In the first three quarters of 2018, the total operating income of the company was 3.183 billion yuan, an increase of 31.58% over the same period last year; the net profit of shareholders belonging to listed companies was 328 million yuan, down 45.38% over the same period last year; after deducting non-recurrent profits and losses, the net profit of shareholders of listed companies was 270 million yuan, an increase of 133.76% over the same period last year.

Second, our analysis and judgment

The company's main business continued to improve in the first half of the year, non-net profit increased significantly compared with the same period last year, and operating cash flow continued to improve. Real-scene entertainment projects have been opened one after another, and gradually recognized by the market.

(1) the film and television entertainment sector promotes a significant increase in deduction of non-net profit.

The deducted non-net profit in the first three quarters of 2018 increased by 133.76% compared with the same period last year, mainly due to a substantial increase in business revenue in the film and television entertainment sector. In terms of films, the main films released during the reporting period are "the four Heavenly Kings of Di Renjie", "the Family of thieves" and so on. In terms of TV dramas, the online drama "fighting Tomb occupies Sakuran" was broadcast on iQIYI, Inc. 's online platform on September 9, 2018. Due to the gradual return of film and television projects, the company's operating cash flow increased by 206.7% compared with the same period last year.

(2) Brand authorization and live entertainment are recognized by the market.

The decline in revenue from the brand authorization and live entertainment sector compared with the same period last year is mainly due to the time difference in the progress of each project. Huayi Brothers Film World (Suzhou) officially opened on July 23, only half a month after its opening, nearly 100, 000 people have visited, and Dianping has a five-star rating. The film town of Huayi Brothers (Changsha) opened on September 29 and continued to set a new record for receiving tourists during the National Day period, with an average daily flow of 30,000 people for three consecutive days and nearly 200000 people clocking in for seven days. At the same time, the total number of seven-day tourists from Huayi Brothers Film World (Suzhou), Haikou Mission Hills Huayi Feng Xiaogang Film Commune and Huayi Brothers (Changsha) Film Town reached 300000, which was recognized by the market.

(3) under the background of macro deleveraging, financial expenses have increased.

During the reporting period, financial expenses increased compared with the same period last year. As the overall macro environment is in the deleveraging stage, treasury bond yields and Shibor are relatively high, and the total corporate debt and structure remain basically stable, we predict that the increase in financial costs is mainly due to the increase in loan interest rates.

III. Investment suggestions

It is estimated that the company's 18-19 net profit is 750 million yuan / 880 million yuan respectively, corresponding to EPS 0.27 0.31, corresponding to PE 16.5x/14.1x respectively, given recommended rating.

IV. Risk hints

Industrial policy risk, tax preference and government subsidy policy risk, work review risk and so on.