[Matters] On August 2, Huawei Culture announced the 2017 semi-annual results forecast. It is expected that the reporting period will continue to be profitable compared to the same period of the previous year. The net profit attributable to shareholders of listed companies is expected to be 146.4502 million yuan to 173.075 million yuan, an increase of 65% to 95% over the same period last year. There is no difference from the expected semi-annual results disclosed by the company in the first quarter of 2017 report. On July 28, the company announced that Zhejiang Dream Star Film and Television Culture Co., Ltd., a wholly-owned subsidiary, has increased the capital of Dongyang Mandala Film and Television Culture Co., Ltd. by 50 million yuan and completed the business registration change procedure. Currently, Dream Star Shengyuan holds 10% of Dongyang Mandala's shares. In the future, Dream Star Garden will continue to pay Dongyang Mandala the remaining 150 million yuan in capital increases as agreed in the contract. In 2016, Huawei Culture achieved operating income and net profit of $812 million and $303 million, up 37.5% and 151.8% year-on-year respectively; in 17Q1, it achieved operating income and net profit of 220 million and 902681 million, respectively, up 25.21% and 194.92% year-on-year, respectively. Outreach mergers and acquisitions led to continued high growth in the company's performance. [Comment] Dream Star Shengyuan, a wholly-owned subsidiary, increased capital in Dongyang Mandala, strengthened film and television production and operation capabilities, and opened up the variety market. The first season of the TV dramas “The Cooking Lady”, “Lonely Sky, Spring Is Late”, “Give Up on Me, Hold Me”, and “That Sea of Stars”, which was invested, produced, and distributed in 2016, was successively invested, produced, and distributed in 2016. The premieres all won the ratings championship in the same period. Dream Star Garden has high-quality IP reserves and has gathered a number of outstanding creative talents in the field of original film and television boutique drama creation. Dongyang Mandala was founded by Zhang Yuxin, the former vice president of iQiyi (daughter of Zhang Jizhong), and Tang Rui, the former senior director of iQiyi Entertainment Center, in March '17, announcing the first batch of movies and TV shows — “Kang****,” “White Line of Life and Death,” “What If,” and “Comrades in Arms,” which sparked buzz in the industry. Zhang Yuxin created projects such as “The Old Nine Gates” and “Yu Sin”, etc., and Tang Rui created many homemade online variety shows, such as “iQiyi Scream Night,” “Entertainment Rains,” “Xiaosong Qian Tale,” and “TFBoys Idol Notes,” etc., and established a model for early Internet entertainment programs. In '17, Dream Star Garden continued to complete the second and third seasons of “That Starry Sky, That Sea” based on IP adaptations and creations, and collaborated deeply with Dongyang Mandala to enhance the overall competitiveness of the film and television business. The first wave of wholly-owned subsidiaries interacted with Fengyun to jointly build an IP game R&D and operation platform. The advantages of the first wave of IP operations, game adaptation, and copyright operations are obvious. Huawei Culture acquired the remaining shares of Sun Company Fengyun Interactive in '16 and 12. With its advantages in game research and development, it collaborated with the first wave to enhance the company's competitive position in the game business market. In 2016, the first wave of the company's wholly-owned subsidiary and Fengyun Interactive successively developed and operated 2 mobile IP games and 3 online IP games, including the “Three Kingdoms” mobile game, the “Snow Eagle” mobile game, the “Doulo Continent 3D” page game, and the “Snow Eagle Lord” page game, all of which achieved impressive results. The first wave in 2017 also established Shenzhen Huayue Culture Media Co., Ltd. with Qihu 360 to lay out the field of digital reading and provide a new development platform for IP exploration and innovation. A three-year performance commitment of 500 million dollars accelerates Dongyang Mandala's listing target. In order to achieve Dongyang Mandala's listing goal as soon as possible, Dongyang Mandala promises that as the entity to be listed, Dongyang Mandala's net profit after deducting non-recurring profits and losses is not less than RMB 50 million in 2017, not less than 200 million yuan in 2018, and no less than 250 million yuan in 2019, for a total of not less than RMB 500 million over three years. Considering Dongyang Mandala's mature operation team and rich resources within the film industry, we are optimistic about the current capital increase of Huawei Culture and the prospects of its film and television business. Moreover, Huawei's first-wave IP and game operation capabilities are guaranteed. We predict that in 2017, the company's revenue will be 1,044 billion yuan, an increase of 29%, and EPS will be 0.39 yuan/share, giving it an “increase in holdings” rating for the first time. [Risk Warning] The progress of the film and television project fell short of expectations; game streaming fell short of expectations.