Educational publishing is thriving in the main book business, and Watanabe Junichi's overseas copyrighted works have the potential to explode. Since its backdoor listing in 2015, the company has exceeded its three-year performance promise, and its operating profit margin has steadily increased. At the level of gross margin of the segmented business, although the gross margin of the company's general book business declined slightly compared to before listing, it continued to stabilize at around 28%; the gross margin of the textbook and teaching aids business continued to increase steadily before and after backdoor listing, with a cumulative increase of nearly 14 percentage points in 2017 compared to 2011; at the level of its own copyright assets, the company's accumulated potential increased, and the team of authors gathered. In particular, for overseas literary works, the company successfully signed the full copyright of all types of Watanabe Junichi, and gradually formed a Japanese book and copyright cluster centered around Watanabe Books and the Watanabe Museum of Literature. Watanabe's works revolve around the theme of urban love, and have continued to ignite momentum. Increasing the construction and operation of offline-themed bookstores is expected to drive book distribution and surrounding consumption. At the industry level, under the national reading wave, physical bookstores also got rid of the negative growth trend and achieved a year-on-year growth rate of 2.33%. We believe that the “theme-based and conceptualized” development and operation of physical bookstores is expected to continue to drive the recovery of offline channels. The company's themed bookstores include “Han Yong · Compound Reading Space”, Zhanqiao Bookstore, etc., and are jointly expanding BCMix themed bookstores with Dangdang and Jingdong, while the “shared bookcase” perfectly integrates the concept of sharing with reading for all. Replicating the business model of Eslite Bookstore, the company-themed bookstore has a lot of room for imagination in derivative businesses such as rent, restaurants, and shopping. Copyright assets have entered the stage of film and television development, and it is expected that IP multi-dimensional channel monetization and complementarity will be realized. The company acquired 51% of Yueduji's shares in the early stages, starting the development of a female literary IP film and television; the popular novels “If You Don't Meet Jiang Shaoling”, “The Lighter and the Princess Dress”, and “I Heard You Like Me” are about to launch film and television projects, which are expected to drive a new sales climax. The company also established a film and television culture subsidiary in June 2016. Currently, it has invested in 9 film and television projects. The next step is to increase the development of its own copyrighted film and TV series products and transform it into a film and television production and IP incubation company. Invest in Himalaya FM to help spread and monetize content with audiobooks. The company invested 60 million yuan in indirect investment in Himalaya FM in June 2016 and obtained 1.45% of the shares. Himalaya FM is the fastest growing and largest online mobile audio sharing station in China. It is the builder and leader of the mobile Internet audio ecosystem. The company signed a strategic cooperation agreement with the Himalayas and invested in the establishment of the Jiangsheng Network. Relying on the company's high-quality food, health, children, culture and other content resources, the company is expected to further develop the audiobook market. Profit forecast: We expect the company to achieve net profit of 375/442/531 million yuan in 2018-2020, corresponding EPS of 0.53/0.63/0.76 yuan, respectively; based on the closing price of 8.65 yuan on June 8, 2018, the corresponding PE for 2018-2020 will be 16/14/11 times, respectively, while the 2018 valuation center of comparable companies in the same industry will be 17 times. In view of the company's strong book publishing and distribution business, the accelerated accumulation of high-quality copyright resources, and the rapid development of new business formats and new media, related projects have been accelerated and covered for the first time, giving the company a “recommended” rating. Risk warning: management risks due to business expansion; risk of increased market competition and price fluctuations of book raw materials; risk of additional depreciation affecting performance; risk of changes in preferential tax policies.