Company News The company released its 2018 semi-annual report. In the first half of the year, the company achieved operating income of 2.122 billion yuan, an increase of 44.77% over the same period last year; net profit attributable to shareholders of listed companies was 277 million yuan, down 35.54% from the same period last year, and non-net profit of 252 million yuan, a sharp increase of 151% over the previous year, with an EPS of 0.10 yuan per share. Comment on the matter, the main film and television industry is picking up, and investment returns are declining. The company's 2018 interim results fell short of expectations. By business, the revenue of film and television entertainment was 1,962 billion yuan, an increase of 94.54% over the previous year. The main films screened by the company in the first half of 2018 include the interissue film “Fanghua”, “Former 3: Goodbye to the Ex”, and the film “Nice to Meet You”. Among them, “Fanghua” grossed about 220 million yuan during the reporting period, and “Predecessors 3: Goodbye” grossed about 1.64 billion yuan during the reporting period. TV series “Long time no see”, “predecessor series”, web drama “Hi! He has performed well in many films such as “The Last Man” and the online movie “The Courier”, and has also participated in investments in many TV dramas, online dramas, and online movies such as “July and Ansheng,” “The Frontier,” “Top Secret,” “Life and Death Rescue,” “Meow, and Monster,” “A Girl's Fantastic Diary,” “A Girl's Magical Diary,” “Love Your Love,” “Memories of Murder,” “The Legend of the White Snake: Saving Jade Emperor”, and “The Hero of Gaiba”. In terms of variety shows, there are a series of variety shows such as “Let's Run Season 2”, “Ace vs. Ace Season 3,” and the first domestic drama-style reality show “Battle for Supremacy,” which focuses on the robot fighting global league. There was a clear recovery trend in the company's film and television business in the first half of the year. Relying on films such as “Fanghua” and “Former 3”, it achieved high profits. Revenue from the Brand Licensing and Live Entertainment segment was $142 million, down 28.40% from the same period last year. Mainly because there is a time difference in the progress of each project, the various live entertainment businesses are progressing smoothly and in an orderly manner. Many projects have entered a state of construction and started construction one after another, while Huayi Brothers Film World (Suzhou) was grandly opened on July 23, 2018. Investment income in the first half of this year declined sharply year on year due to the high income from the sale of shares in Yinhan Technology in the same period last year. In the second half of the year, the three major development strategies will continue to be implemented in depth. The company will continue to adhere to the three major development strategies: the “strong core” strategy, the “big entertainment ecosystem” strategy, and the internationalization strategy, which are the foundation of the company's foothold, the way of operation, and the only way to expand. From the perspective of a “strong core” strategy, the company will gather top domestic and foreign creative talents through innovative incentive mechanisms and provide attractive platforms to continuously reserve and develop high-quality content; from the “big entertainment ecosystem” strategic perspective, the company has now covered various entertainment content formats such as movies, TV series, online movies, online dramas, comics, animation, games, variety shows, live streaming, etc., and will continue to enhance the IP circulation and value-added capabilities of the entire industry chain in the future; from the perspective of international strategy, the company will continue to expand on the content side. Risk warning companies include, but are not limited to, the following: market risk of sales of film and television products produced by the company, industrial policy risk, piracy risk, risk of rising production costs, etc. The investment recommendation is to maintain a “prudent increase in holdings” rating for the next six months. The company is expected to achieve EPS of 0.199 and 0.217 yuan in 2018 and 19. Based on the closing price of 5.69 yuan on August 23, dynamic PE is 28.57 times and 26.25 times, respectively. Listed companies in the WIND media industry predicted a median price-earnings ratio of 20.54 times in 2018. The company's valuation is higher than the median price-earnings ratio of the industry. The company's performance in the first half of 2018 fell short of expectations. Despite the recovery in the revenue growth rate of the film and television business, investment income and reality entertainment business declined. We are still optimistic about the development prospects of the company's film, television and reality entertainment business for a long time. Considering the development of the company's film listings and live entertainment projects in the second half of the year, we maintained the company's “prudent increase in holdings” rating.