Event: The company announced its 18-year annual report. During the reporting period, the company achieved revenue, net profit and net operating cash flow of $2,725 million, $842 million, and $800 million, respectively, up 95.17%, 113.76%, and 268.19% year-on-year respectively; achieved an EPS of 0.43 yuan. It plans to distribute a cash dividend of 0.66 yuan (including tax) to all shareholders for every 10 shares, using capital reserves to transfer 8 shares to all shareholders for every 10 shares. The company announced its quarterly report for '19. During the reporting period, the company's realized revenue, net profit, and net operating cash flow were 650 million yuan, 251 million yuan, and 272 million yuan respectively, a year-on-year decrease of 5.70% and 13.72%, respectively (net operating cash flow for the same period last year was -18.13 million yuan). Comment: The company's revenue structure changed markedly in 2018. The mobile Internet culture industry and the fine chemical industry accounted for 70.01% and 29.99% of revenue respectively. 1) 0utfit7 was officially merged in April '18, which led to a significant increase in the company's overall operating income and gross margin; 2) the company's fine chemical business operations were good, and sales prices continued to rise, achieving revenue of 817 million yuan in 2018, an increase of 16.14%. Furthermore, in 2018, the performance promises of all of the company's subsidiaries were successfully completed, and there was no impairment of goodwill; the company accrued 97.49 million yuan of asset impairment, mainly due to impairment of long-term equity investments, accounts receivable, and other bad accounts receivable. Annual reports and quarterly reports reinforce our perception and judgment of the company. After the company acquired Outfit7, the company continued to gain strength in the online and offline IP derivative business, conducting in-depth exploration and diverse applications of Tom Cat, a high-quality IP, and gradually verifying the long-term boutique IP operation logic. 1) In 2018, the company's “Talking Tom Family” series of apps had a global average MAU of more than 350 million users, an average DAU of 56.13 million users, and continued to grow (2015-2017 H1 average MAU was 2.33, 2.64, and 301 million, respectively). According to App Annie data, the total number of downloads of the company's products in 2018 ranked fourth in the global game manufacturer list, after Voodoo, Ubisoft, and Tencent. 2) The new product “My Tom Cat 2”, which was launched in November '18, performed excellently, successfully topped the role-playing mobile game list in more than 100 countries and regions around the world, and continued to maintain high popularity. According to App Annie data, “My Tom Cat 2” ranked 6th in the number of downloads in the global mobile game download list in March '19. 3) The online derivatives business is progressing smoothly. IP's original animation series, short films and miniseries have been broadcast in more than 200 countries and regions around the world, with a total broadcast volume of more than 28 billion times and more than 13 billion broadcasts in China; the IP blockbuster has reached a partnership with “Assassin's Creed” filmmaker Jean-Julien Baronnet. 4) The offline derivatives business was rapidly deployed, and the authorized derivatives business direction reached a strategic cooperation agreement with Alibaba, and launched more than 100 products at Tmall and Jingdong flagship stores; the physical park business launched two Tom Cat Family Parks in Hefei and Shangyu in the fourth quarter of '18, with a total of more than 30,000 families; the early childhood education business released children's picture books, calligraphy books, AR cards for children's early education, and smart learning machines for children. The chemical business is growing steadily, and the leading edge is stable. 1) In 2019, the SPC export market share of the company's main chemical products remained above 70% of the country's total export volume. At the same time, sales of the new product 2-ethylanthraquinone increased rapidly by 142.97% to 201 million yuan, becoming the company's second largest chemical product. 2) The company continues to explore emerging markets including mainland China, India, and Iran in addition to developed countries and regions such as Europe, America, Japan, South Korea, Australia, and the Middle East, making major breakthroughs. Investment suggestions: Based on 1) Tom Cat IP's broad user base around the world; 2) the self-amplification effect and synergy of two major data distribution platforms, Outfit7 and Hangzhou Zhexin; and 3) Tom Cat IP's full industry chain development is expected to leverage the children's derivatives market, we are optimistic about the company's development prospects within the Internet pan-entertainment industry. The company's net profit for the period 2019-2021 is estimated to be 1,071 million yuan, 1,281 billion yuan, and 1,454 billion yuan, respectively, corresponding to EPS of 0.54 yuan, 0.65 yuan, and 0.74 yuan (not considering the increase in capital transfer). We gave a target PE of 20 times in 2019, corresponding to the target price of 10.8 yuan, to maintain the “buy-A” rating. Risk warning: The pace of new game launches is lower than expected, the game industry is becoming more strictly regulated, and offline derivatives business is not progressing as expected.