FY19 and 1Q20 results were in line with expectations Ciwen Media announced 2019 results: revenue of 1,171 billion yuan, a year-on-year decrease of 18.4%; net profit of 165 million yuan, net profit of 165 million yuan, net profit of 161 million yuan, turning a year-on-year loss into a profit, in line with previous performance reports. In 2019, the company confirmed first-round distribution revenue, such as “Storm Dance,” “Glorious Times,” “Under the Golden Coat,” and “The Boy Who Rides the Wind,” and also completed multiple rounds of distribution of top dramas such as “Liangsheng, Can't We Stop Being Sad”, driving performance to reverse losses. In addition, the company's annual sales expenses decreased by 71.7% year-on-year to 65.96 million yuan, mainly due to a decrease in business distribution fees and traffic procurement costs. However, the performance of the company's game business was poor. In 2019, game revenue fell 81.1% year on year to 33.44 million yuan. At the same time, the company announced 1Q20 results: revenue of 1,419,000 yuan, a year-on-year decrease of 99.1%; net loss of 15.383 million yuan, a year-on-year decrease of 346.2%, in line with the performance forecast. The 1Q20 company's revenue and profit declined markedly, mainly due to the fact that the company's film and television production and distribution business basically stopped under the influence of the epidemic, and there was a lack of confirmation of film and television projects during the reporting period. Development trends The pace of progress of new projects has been delayed, but the medium- to long-term positive trend has not changed. Affected by the epidemic, the launch of some of the company's key projects has been delayed. “Zichuan” and “Tianyakeke”, which were originally scheduled to start in the first quarter, may be postponed to the second quarter. “Airport” and “Two Conjectures on Marriage” are scheduled to launch in the second half of the year. We judge that it will be difficult to confirm income during the year. But on the other hand, the company still has plenty of project reserves, and plans to launch 8 TV series and 4 web series throughout the year. The types of content also tend to be diversified, including modern legendary themes such as “Breaking Waves” and “Fish in the Bottom of the Sea,” and modern and contemporary themes such as “There are so many beautiful rivers and mountains.” We believe that the company, as an industry leader with leading premium drama production capabilities, is expected to benefit from the improvement in the supply and demand pattern of the industry in the long term; while the company continues to invest in C-side premium content, online movies such as “Mouse King” and “Kirin Fantasy Town” to be broadcast, it is also expected to bring some profit elasticity. Profit forecasting and valuation. Considering the long production cycle of film and television projects, delays in some projects may affect revenue recognition in 2020, we lowered our 2020 net profit forecast by 9.7% to $209 million, but kept the 2021 profit forecast unchanged. The current stock price corresponds to a price-earnings ratio of 17.4 times /12.0 times in 2020/2021. Maintaining an outperforming industry rating, the target price was lowered by 10.2% to 9.70 yuan, corresponding to 22.0 times the 2020 price-earnings ratio, and there is room for growth of 26.5% compared to the current stock price. Key risk projects have fallen short of expectations; downstream demand is weak; and regulations have become more stringent.