Event: The company released the 2018 semi-annual report on the evening of August 23, 2018: During the reporting period, the company achieved total operating income of RMB 2122.1089 million, an increase of 44.77% over the same period last year; net profit attributable to shareholders of listed companies was RMB 277.3711 million, down 35.54% from the same period last year; net profit attributable to shareholders of listed companies after deducting non-recurring profit and loss was 252.1847 million yuan, an increase of 151.29% over the same period last year. Opinion: Overall, the performance is in line with expectations. The performance of 2018H1 is mainly based on the two blockbuster movies “Fanghua” and “Former 3,” which have spanned a period of time. Although both revenue and net profit of 2018Q2 have declined seriously year over year, there is no need to panic for the film industry, which is highly related to revenue and schedule; it is necessary to pay attention to the box office performance of the company's films in the second half of the year. The company's revenue structure was optimized, operating income increased, and net profit declined mainly due to a decrease in non-recurring profit and loss, including a decrease of 90.88% in investment income over the same period last year to 492 million yuan (sale of part of Guangzhou Yinhan's shares in the same period last year and confirmation of investment income from participating companies Hero Entertainment). In terms of film, television, and entertainment, the sector contributed 1,962 billion yuan in revenue, up 94.54% year on year, and gross margin increased to 52.78% compared to 43.72% in the same period last year, mainly due to the high gross profit margin of popular movies. The main films screened in 2018H1 include the interphase “Fanghua” (grossing about 220 million yuan during the period), “Predecessors 3: Goodbye,” (grossing about 1.64 billion yuan during the period), and “It's Nice to Meet You” (51.01 million yuan) during the period. The company's film batch business also contributed to performance to a certain extent in the first half of the year. The introduction of “King Bahobali 2” received 76.83 million yuan in box office. During the reporting period, the company participated in TV series, online dramas, and major online movies to generate revenue mainly included “Hi! “Predecessors,” “Courier Man,” and “Long Time No See You.” Among them, “A Long Time No See You” premiered nationwide on March 26, 2018 on Beijing TV, Oriental TV, and iQiyi, and was broadcast simultaneously on Tencent Video and Youku. The company's plans for the second half of the year in the content section can be found in the table below. According to the company report, the top five movies and TV dramas processed by the company as inventory at the end of the reporting period were “Babai,” “The Four Kings of Di Renjie,” “The Rock, the Tibetan Mastiff,” “Mobile Phone 2,” and “Meow and the Monster,” with a total amount of 857 million yuan. Among them, “Di Renjie” ranked second, and is expected to be expensive. According to existing data, the show's box office is 603 million yuan, which is not expected to contribute significantly to the annual performance. Other aspects, the company built and put into operation 25 cinemas during the reporting period, an increase of 2 compared to the end of 2017. In terms of live entertainment and brand licensing, the company's 2018 H1 revenue was 141 million yuan, a year-on-year decrease of 28.4%. A number of projects are under construction and construction has started one after another. Huayi Brothers Film World (Suzhou) was grandly opened on July 23, 2018, and Huayi Brothers Film Town (Changsha), Huayi Brothers Movie Town (Nanjing), and Jianye Huayi Brothers Film Town (Zhengzhou) will also open one after another. Among them, the Suzhou project is the first project planned by the company for many years, and its subsequent operation deserves continuous attention. In the Internet entertainment sector, the company's 2018 H1 revenue was 32 million yuan, a year-on-year decrease of 88.12%. The sharp decline in revenue was mainly due to changes in the scope of the merger after the company sold part of its holding subsidiary Guangzhou Yinhan Technology in June 2017. Conclusion: During the reporting period, the company strengthened its traditional film and television business, net profit increased significantly after deduction, and the quality of performance improved markedly. The company's vigorously developed live entertainment and brand licensing business will achieve a breakthrough in the second half of the year. The opening of several parks will test the specific profitability of this sector, and the viability of the business model will be verified. Due to unresolved events and unresolved box office for key films such as “Di Renjie”, we believe that the company's 2018 performance is still under pressure. In the long run, the company's business structure improvement and gradual decline in investment business will help the company return to main business and focus on the development of reality projects. We expect the company's operating income from 2018 to 2020 to be 4.736 billion yuan, 5.683 billion yuan and 6.819 billion yuan respectively; earnings per share are 0.23 yuan, 0.27 yuan and 0.32 yuan respectively. The corresponding PE is 24X, 21X and 17X respectively, giving the company a “recommended” rating for the first time. Risk warning: reality projects are progressing less than expected; industry policy changes