Earnings Preview 1Q20 profit is expected to fall by 260%-420% year on year. Below expectations, Ciwen Media released a performance forecast for the first quarter of 2020. Net profit loss is expected to be 10 million to 20 million yuan, down 260.0%-420.0% year on year. The 1Q20 performance fell short of our expectations, mainly due to the lack of confirmation of film and television projects during the reporting period, and the year-on-year decline in game business performance. At the same time, the company released the 2019 performance report: operating income was 1,171 billion yuan, down 18.4% from the previous year; net profit was 165 million yuan, close to the lower end of previous performance forecasts and slightly lower than our expectations. Among them, 4Q19 had a net profit of 75 million yuan, mainly due to confirmed distribution revenue from projects such as the online broadcast drama “Glorious Times” and the online movie “The Great Earthquake”. Key points of focus There was a lack of project confirmation in the first quarter, and attention was paid to the progress of key dramas under the influence of the pandemic. The dramas “One River of Water” and “Trident” produced by the company have already been defeated, but they are still in post-production, so we judge that they have not contributed to distribution revenue yet. Affected by the epidemic, the 1Q20 company's production and distribution of movies and TV dramas has basically come to a standstill, and projects such as “Tianyakeke” and “Two Conjectures about Marriage,” which were originally planned to be launched within the first quarter, have been delayed. In addition, the company also has reserve projects such as “Zichuan”, “Airport”, and “Slayer the Wolf” that are yet to be launched. It is recommended to keep an eye on the progress of key dramas. On the other hand, we expect “Storm Dance” produced by the company and “Tomb Raiding Notes Restart” in the first half of the year, which is expected to increase the company's cash reserves and lay a good foundation for advancing the next stage of new projects. Valuation and recommendations We anticipate that recent project delays have not had a significant impact on the company's revenue recognition pace throughout the year. However, due to the long development cycle of film and television projects, if the impact of the pandemic continues for a long time, some series may not be able to confirm revenue in 2020. We lowered the company's profit forecast for 2019/2020/2021 by 15.5%/14.2%/5.0% to 165 million yuan/232 million/304 million yuan. The current stock price corresponds to a price-earnings ratio of 17/13 times in 2020/2021. It maintained an outperforming industry rating, but the target price was slightly lowered by 5.3% to 10.8 yuan, corresponding to a price-earnings ratio of 22/17 times in 2020/2021, with 27.4% room compared to the current stock price. Key risk projects have fallen short of expectations; downstream demand is weak; and regulations have become more stringent.