Q: How did the results compare vs. expectations? A: 9M16 revenue/profit was Rmb2.36bn/280m, up 76%/28%. Profit growth was inline with Huace's pre-announced 15-35% range. Q: What were the most noteworthy areas in the results? A: 3Q revenue was up 97% YoY to Rmb807m and profit was up 573% YoY toRmb8.7m due to the following: 1) 3Q was a revenue peak for the company's moviebusiness. In 3Q, Huace distributed 5 movies, realising box office of Rmb1.15bn vs. Rmb164m in 1H16. 2) However, 3Q gross margin was merely 17.6% vs. 33.5% in1H16. We believe Huace's 3Q revenue structure is more skewed to movies, rather thanTV dramas, while its movies did not deliver decent profitability despite high box office. Q: Has the company's outlook/guidance changed? A: No. Huace expects 7 TV drama projects to book revenue in 4Q, including a projectwith per-episode ASP over Rmb10m. This makes 4Q a peak season in terms of profit. Q: How do we expect investors to react? A: We expect the market to react neutrally to the results.

Q: How did the results compare vs. expectations? A: 3Q revenue/profit was up 61%/16% YoY to Rmb984/145m. 9M revenue/profit wasup 34%/15% YoY to Rmb2.5bn/438mn. That was in line with pre-guided 9M bottomlinegrowth of 0-30%. Q: What were the most noteworthy areas in the results? A: Key points: 1) revenue growth accelerated notably from 6%/34% in 1Q/2Q, drivenby new launches of toy products; 2) gross margin contracted 5ppt YoY to 52% due toproduct mix changes; and 3) operating profit growth reached 34%. Net profit growthwas far lower than the top line, as the tax rate was 17% vs. 2.7% in 3Q15 due to alower tax refund. Q: Has the company's outlook/guidance changed? A: We remain optimistic about Alpha Group, especially its earnings outlook in moviemonetization. Q: How would we expect investors to react? A: We expect the market to react neutrally to 3Q earnings.

H1 net profit up 24% YoY, within pre-announced range H116 revenue was Rmb1.55bn, up 67% YoY; net profit rose 24% YoY (within the preannounced15-35% range) to Rmb271m, accounting for 40% of our full-year forecastvs 45% in H115. Key points in the results: (1) revenue was up 67% YoY mainly due tomovie and variety show revenue of Rmb90.87m and Rmb338m, vs. Rmb6.37m andRmb1.75m in H115. TV drama revenue was Rmb1.03bn, up 27% YoY, which wasslower than our 2016 growth estimate of 33%, as most revenue from some hit dramaswas already booked late last year; and (2) gross margin on TV drama was 42%, up5ppt YoY. However, gross margin on movie s/variety shows was only 9.8%/8.5% asthe project quality was relatively poor. In particular, gross margin on variety shows wasfar below the 24% level in 2015, in our view indicating the company did not exertgood control over variety show projects. TV drama distribution pace slower, but presales good In H116, Huace received distribution licenses of six multi-channel dramas (254episodes), much lower than in H115 (10). At this distribution pace, revenue per dramawould have risen c112%, faster than our estimated 40% rise in per-episode ASP forthe full year. According to our previous channel checks, the slower distribution pacemay be attributable to regulatory factors rather than the company’s intentions. Thecompany's preliminary results showed that presold movies & TV dramas reachedcRmb1.5bn as of end-June, which could drive revenue growth in H216 Movies & variety shows: Skill honing In H116, Huace Pictures produced and released five movies, and distributed four ofthem. These movies fell into different genres, which honed the skills of the productionteams. The company expects to release seven movies and shoot five others in H216.The company has changed from outsourcing its variety shows to controlling its varietyshows while sharing revenue with other investors. However, cost factors, which thecompany stressed, contributed to the low margin. Valuation: PT of Rmb19.77 We maintain our earnings forecasts, price target and Buy rating. Our price target isbased on a DCF model (WACC=7.7%).

Earnings largely in line H116 revenue was Rmb6.099bn, up 15.74% YoY; net profit attributable to the parentrose 21.52% YoY to Rmb634m, accounting for 43% of our full-year forecast vs 48%in H115. Earnings were largely in line, with the following differences: 1) LanhaiInternational Trade’s net profit of Rmb90.54m exceeded our full-year estimate ofRmb30m, mainly because Lanhai collected overdue payments and wrote back assetimpairment provisions; 2) subsidiary CUPM Lanhai International Investment Co., Ltd. nolonger controlled Beijing Art Finance Mingsheng Co., Ltd, with accounting changesleading to a Rmb87.067m provision for long-term equity investment impairment; and3) subsidiary Elex-Tech posted H116 net profit of Rmb177m (up 52% YoY) and netmargin of 7.3%, which was lower than our full-year forecast of 11%. Elex-Tech’s Q2 marketing expenses’ share down, full-year margin likely to rise The new business segment posted revenue of Rmb2.5bn (up 136.37% YoY) in H116,with outstanding performance compared to other business segments. Of this segment,Elex-Tech logged revenue of Rmb2.43bn, which accounted for 97% of the segment’stotal revenue. In H1, Elex-Tech continued to increase game marketing and R&Dexpenditure, pushing up its selling and administrative expenses. However, thecompany’s Q2 operation data shows that its major game Clash of Kings (COK) hadARPU of Rmb900, breaking Q1’s record of Rmb800. Meanwhile, the company’s Q2promotion and marketing expenses fell 33.9% from Q1 and their share of revenuedropped 13ppt from Q1 to 39.2%. Therefore, we believe Elex-Tech’s margin couldcontinue to rise in H2. The company has a rich game product line, with self-developedClash of Queens and Age of Empires already launched. Traditional publishing/distribution business stable, business mix reasonable The publishing/distribution business posted revenue of Rmb1.18bn/1.64bn in H116, up4.51%/17.64% YoY. Traditional businesses grew steadily, with publishing anddistribution revenue accounting for 6% of the company’s total revenue, showing areasonable business mix. Valuation: Price target of Rmb29.39 We derive our price target of Rmb29.39 using DCF-based methodology (7.4% WACC).

H116earnings in line; films/variety shows contributed incremental revenue H116revenue was Rmb547m, up 26% YoY; net profit was Rmb116m, up 5.8% YoY,in line with the 2-15% range Shanghai New Culture (SNC) preannounced earlier.Highlights from the semi-annual report include:(1) Revenue rose 26%, largely becausethe film/variety show segment contributed revenue of Rmb79.62/23.7m, whereas nosuch revenues were recognized in H115. Revenue from TV series/advertising rose1%/15% (relatively weaker growth in TV series);(2) gross margins on TVseries/advertising fell 21/11ppts YoY, the main reason net profit growth was slowerthan revenue growth. TV series: transition will take time SNC's revenue from TV series was Rmb180m in H1. Major projects included LurkingBefore Dawn, Fight the Dawn, Two Women in the War and others in the traditionalgenre. For new TV series, the TV version of The Clouds of Han, jointly produced by SNCand Softstar, has begun shooting, while Softstar has given SNC the rights to shoot theTV version of Chinese Paladin 4. However, those series will not premiere until 2017,meaning the transition will still take time. Waiting for new Purity acquisition plan The CSRC previously rejected SNC's Purity acquisition plan, which we mainly attributeto the following:(1) The 2016earnings forecast for Purity is focused on H2. H1dataadd little persuasive weight to the earnings pledge (2) the CSRC recently moved tostrictly regulate the working capital replenishment section of fundraising plans. Weexpect SNC to make adjustments in the above two areas before resubmitting its planfor regulatory review. Valuation: Price target of Rmb37.84 Our price target is based on DCF methodology (WACC 7.0%). We are reviewing ourearnings estimates, PT and rating for the company.

Private placement-funded acquisition not given go-ahead New Culture announced on 27 July that its plan to buy assets and raise funds through ashare issue did not pass at the 2016 54th working conference of the CSRC's reviewcommittee for merger, acquisition and reorganization of listed companies, citing anotification from the regulator. Earnings pledge likely to be behind failure to get regulatory approval In New Culture's acquisition and fundraising plan via private placement, counterpartyPurity pledged 2016-19 net profit attributable to the parent of at least Rmb140/190/230/276m excluding one-offs. The pledged 2016 figure is 6.9x 2015 profit excludingone-offs (Rmb20.25m). In the Notice of the CSRC on Feedback of First Round Review ofAdministrative Approval Application, the regulator required New Culture to disclose therealizability of projected 2016 revenue/net profit and the rationality of revenueforecasts for 2017 and beyond. Although New Culture published its replies to thesequestions and detailed the contract situation of Purity's various programs for 2016, theregulator recently stated Purity's earnings pledge is the focus of concern. We believethe earnings pledge may be an important reason behind the failure to get regulatoryapproval. 2016-18E EPS in our downside case 10%/40%/44% lower than in base case We estimate New Culture will revise its private placement plan to advance its goal ofacquiring Purity. Excluding a private placement-funded acquisition, our downside caseassumes 2016 production is 24% lower than the planned 370 episodes and perepisodeprice is unchanged. Our downside 2016-18E EPS are Rmb0.63/0.74/0.86,10%/40%/44% lower than in our base case. We estimate downside valuation ofRmb17.09 per share, implying a 30% downside potential from the current level. Valuation: Rmb37.84 price target Our price target is based on DCF methodology (WACC 7.0%). We are reviewing ourearnings estimates, PT and rating for the company.

Preliminary net profit up 15-35% in H116, slightly lower than expected. Huace announced H116 preliminary results on 14 July: net profit increased 15-35%YoY to Rmb251-295m, 37-43% of our full-year forecast, slightly lower than ourexpectations. We estimate its net profit YoY growth was in the range of 2-36% inQ216. Slow revenue booking dragged results, presold dramas to drive H216 growth. We believe the company's slow results growth in Q216 could be attributable to: 1) "Lesinterprètes" was first aired in Q216 with a high audience rating of 2.05, but somerevenue was already booked in Q415; and 2) revenue cannot be booked for somedramas as per accounting principle, as the company has not obtained distributionlicenses for them yet. According to Huace's preliminary results, presold films & TVdramas reached cRmb1.5bn, or 58% of our full-year forecast for the company's TVdrama revenue (Rmb2.6bn). The company said that revenue booking after the grant ofdistribution licenses could become major drivers for revenue growth in H216. Remain positive on IP competition, TV drama ASP expected to surge. Video sites have bought more multi-channel dramas year to date due to tighteningregulation. They have also strengthened collaboration with traditional TV dramaproducers in the area of Internet dramas. In addition, tier-1 satellite TV stations remainstrong competitors, and we estimate per episode ASP for single channel dramas willincrease to Rmb2-4m. As such, we remain positive on Huace due to the competition forIP. Valuation: Maintain PT of Rmb19.77 and Buy rating. We maintain our EPS forecasts, PT and Buy rating. Our PT is based on DCF model(WACC=7.7%).

Initiating coverage with Buy rating, driven by game and publishing segment Chinese Universe Publishing & Media (CUPM) is one of the largest publishers in China,as it owns eight publishing houses and Jiangxi Xinhua Publishing Group, whichdominates the text book and supplemental education material market in Jiangxiprovince. The company's publishing business is a steady cash cow. In early 2015, CUPMsuccessfully acquired mobile game publisher and developer Elex-Tech, turning the gameand publishing segments into two drivers. We believe CUPM's profit will increase 38%in 2016 due to Elex-Tech's rapid growth and turnaround of the trade segment. Elex-Tech's total game income/margins will continue to increase quickly in 2016 The income of Clash of Kings (COK), a game developed by Elex-Tech, increased 550%YoY in Q116. Elex-Tech is still developing the market in China and Japan, and weestimate COK's income will reach Rmb3.96/4.80/5.04bn in 2016-18, up 57%/21%/5%YoY. Elex-Tech's net margin in 2015 was only 10.3%, far below the 20-40% of foreignpeers. We estimate Elex-Tech's net margin will rise 0.7/2/2ppts in 2016-18 after its salesstabilize. Trade segment likely to turn around In 2015, Lanhai International Trade, CUPM's trade subsidiary, posted a loss ofRmb140m, mainly due to Rmb79.11m of bad debt provision for account receivables tobe collected from major client Honglei Holdings. We think CUPM is likely to collect thereceivables, as the chairman of Honglei Holdings is selling shares in Honglei Copper (alisted company controlled by Honglei Holdings). In addition, as CUPM is scaling backthe trade segment and the commodity market is recovering, we estimate Lanhai willrecord a net profit of cRmb30m in 2016 and 20/20m in 2017/18, much smaller thanthe profit in normal years before 2015. Valuation: Initiating with Buy rating, price target of Rmb29.39 Our 2016-18E EPS are Rmb1.06/1.32/1.56, up 36%/25%/18% YoY. We are initiatingcoverage on CUPM and derive our price target of Rmb29.39 using DCF-basedmethodology (7.4% WACC). Considering the game segment continues to grow quicklyand there is ample cash flow at the publishing segment, we think CUPM's ROE willcontinue to improve, while its 2016E PE is in line the with the historical average. This,along with a PEG 21% below the historical average, causes us to assign a Buy rating.

Initiating coverage with a Buy rating. We are initiating with a Buy rating on Shanghai New Culture (SNC). After recentacquisitions in variety show production, we think the company has a strong bargainingposition with downstream channels and a more balanced business structure. We expectSNC's TV series segment to bottom out in 2016, posting moderate growth in thenumber/prices of TV series, while Purity should contribute Rmb240/311m of profit in2017/18E, with SNC's net profit up 51%/95%/ 25% in 2016-18E. TV series: Launching A-list IP projects; moderate quantity/price growth in 2016. SNC's TV series revenue decreased 22% YoY in 2015 and the number of its TV seriesfell 37%, as market changes affected TV series distribution. However, we expect SNC'sTV series revenue to increase 43% in 2016: 1) After adjusting its TV series businessstrategy, SNC will roll out more A-list IP projects, which could be much more appealingto downstream players, and we estimate its TV series production will rise 24% in 2016. However, that is 5% less than SNC's plan. 2) Based on viewership ratings and follow-upplans of SNC's TV series launched in 2016, we estimate a moderate increase of 15% inprice per episode. We believe the acquisition of Purity will drive up 2017/18 EPS 34%/36%. Acquiring Purity enables SNC to expand into variety show production. In 2016, Purity isshifting to an exclusive operation model and producing seven tier 1 shows, amongwhich Zhandouba Nanshen, an outdoor show with stars competing against each otherand debuting in July, is likely to have an outstanding viewership rating. We estimatePurity will post net profit of Rmb168/240/311m in 2016-18 (to be consolidated intoSNC's financial statements from 2017) and drive up SNC's 2017/18 EPS 34%/36%. Valuation: Price target of Rmb37.84. We derive our price target of Rmb37.84 using DCF-based methodology (7.0% WACC). SNC's share price corrected 40% following its trading resumption. We believe thisreflects a valuation correction of the whole A-share market during SNC's tradingsuspension. Currently, SNC is trading at 30x 2016E forward PE, 23% lower than itshistorical average, which we think is appealing. We are initiating with a Buy rating.

华策向晨熹科技增资5000万,持股比例0.36%。 华策影视5月16日公告,华策及其他投资人与杭州晨熹多媒体科技有限公司(晨熹科技,旗下拥有互联网售票平台“淘宝电影”)及其原股东签订《增资协议》,公司拟以自有资金5000万元人民币向晨熹科技增资,持股比例为0.36%。 淘宝电影是中国一线的在线购票平台。 淘宝电影于2014年底上线,目前提供全国超过5000家影院在线购票服务。 2015年,淘宝电影以发行、票务合作等多种方式与包括《碟中谍4》、《寻龙诀》等84部影片进行合作。根据易观智库数据,2015年,中国在线票务平台票房290亿元,对整体票房市场渗透率达到66%。2015年4季度,淘宝电影市场份额9.47%,排在猫眼、微票、百度糯米之后。 此项投资有助于华策影视强化电影发行资源。 华策影视于2014年成立华策影业进军电影发行、投资业务。我们认为借助对淘宝电影的投资,华策将能在其发行的影片上与淘宝电影形成线上、线下的合作,强化发行优势。我们对华策影视2016年电影业务收入预测为3.96亿元,同比增长26%。 估值:维持31.63元目标价。 我们维持基于DCF法(WACC7.7%)的目标价31.63元不变。重申买入评级。

一季度净利润同比增长41%,符合预期 4月24日,华策影视公布了2016年1季报。1季度,公司实现营业收入5.04亿元,同比增长63%,远高于我们30%的预期;净利润1.17亿元,同比增长41%,基本符合之前预告的30-50%范围,也符合我们预测的全年44%的利润增速。扣非利润约1.1亿元,同比增长56%。 1Q收入增长63%:期内共七部全网剧首播 1季度收入增长较快,主要因为报告期内《翻译官》、《医馆笑传2》、《好运来临》、《怒江之战》4部全网剧、综艺《谁是大歌神》和两部电影贡献收入,而去年同期仅有2部电视剧结算收入。1季度首播的全网剧共有7部,包括《美丽的秘密》、《新婚公寓》、《潜行者》等重点剧目,同时,《三生三世十里桃花》、《射雕英雄传》、《极品家丁》等SIP剧启动运营。 利润率略降:SIP剧尚未大规模贡献利润 1季度毛利率41.4%,较去年同期48.3%的水平低7个百分点,净利润率23.2%较去年同期低3.6个百分点。我们认为这主要是因为2015年1季度有高毛利率的《何以笙箫默》,当时的毛利率也远高于2015年全年37.2%的水平,而2016年1季度项目较多,整体毛利率有所摊薄。 估值:目标价31.63元 我们仍然维持目标价31.63元不变,基于DCF方法推导目标价(WACC7.9%)。

建议理由。 我们将东方明珠评级从中性上调至买入,新目标价为人民币49.37元,对应32%的上行空间。1)重组后,东方明珠已成为业务覆盖全产业链的综合传媒娱乐巨头,我们认为其庞大的用户规模、货币化机会、上游内容储备以及播控牌照方面的政府支持将为公司带来竞争优势。2)盈利增长势头强劲,2015-17年预期增速为33%,多项业务处于快速增长阶段,且管理层正在积极寻找并购机会。3)估值具有吸引力,当前股价对应的2016年预期市盈率为26倍,而中国传媒行业平均为35倍。 推动因素。 (1)盈利增长。管理层计划未来三年内将盈利翻番。我们预计2015-17年对公司盈利贡献最大的IPTV和电视购物业务收入的年均复合增速将分别达30%和14%,同一期间互联网电视和网游等新业务也将加速发展。我们认为通过交叉销售以及超过5,000万用户基础和内容的进一步货币化,百视通和东方明珠的合并将带来协同效应。(2)并购。管理层表示将积极寻找全产业链并购机会,以扩大用户规模、对内容进行货币化以及进入新的娱乐子行业。(3)激励计划。管理层计划在年底前推出员工和管理层激励计划。如果实施,这将通过将员工薪酬和公司业绩挂钩而促进公司长期增长。 估值。 我们将百视通和东方明珠并表。我们将2015-2016年每股盈利预测微调1%,但将2017年预测下调14%以反映下调的电视游戏增速——我们依然预计该业务将快速增长,但下调了增速预期。我们将2018-20年预测下调4%-20%以反映投资收益的下滑。我们因此将12个月目标价格下调8%(采用18倍的全球同业市盈率和人民币3.73元的2020年每股盈利预测,然后再贴现回2016年,股权成本为8%)。 主要风险。 新业务(电视游戏等)及出版业务增长慢于预期。

调整理由 我们将华策评级由买入下调至中性,因其风险回报状况变得更加均衡。我们仍看好华策向着国内领先综合娱乐集团的长期发展战略,并认为新业务将很快启动。 然而,该股当前股价对应35倍的2016年预期市盈率(行业均值为35倍),我们认为当前估值已充分,而且5%的潜在上行空间在研究范围内股票中吸引力不足。自从我们于2013年10月7日将华策加入买入名单以来,该股上涨了27%,而同期沪深300指数上涨了58%。我们认为该股表现落后的原因是盈利增速低于预期以及电视剧行业表现平淡。 当前观点 我们认为华策仍在致力于成为一家全价值链娱乐集团,管理层目标是三年内非电视剧业务在总收入中的占比达到50%。我们认为三项新业务将在很快启动:(1)超级IP。华策的内容资源已经大大超越了传统电视剧,扩展到了纯网络剧、电影和综艺节目等其它娱乐形式。公司将在2015-16年引入12个以上超级IP。我们认为,华策凭借北京市政府推出的这一新概念,能够实现IP和内容价值的最大化。(2)电影。华策成立了一个由100逾位电影制作和发行领域专业人士组成的电影团队。今年公司将发行10余部电影,明年发行15部,计划在2016年实现人民币20亿元票房。我们认为公司将在电影业务全产业链上继续投资。(3)综艺节目。华策制作的首个收入分成综艺节目将于8月初在浙江卫视首播。此外,公司还在寻找综艺节目的其它新业务模式,例如担当某些电视台的电视节目独家运营商。估值:我们将2015-20年每股盈利预测上调了6%-33%以体现新业务的长期发展,并将基于市盈率的12个月目标价格上调36%至人民币37.3元(2020年预期市盈率仍为18倍)。不过,由于新目标价格隐含的潜在上行空间为5%,我们对该股评级为中性。风险:新业务发展快于/慢于预期。

建议理由 我们将凤凰传媒的评级由中性上调至买入,12个月目标价格为人民币18.58元,隐含30%的上行空间。我们的积极看法是基于:1) 强劲的盈利增长。我们预计2015-17年净利润年均复合增长22%,得益于强劲的传统出版/发行业务以及迅速扩张的新业务(如在线教育与娱乐);2) 强劲的数字业务扩张。2014年来自数字出版业务的收入增长了30%以上,达到人民币6.1亿元,占全年总收入的6%。我们预计2017年数字出版业务收入将达到总收入的10%;3) 具吸引力的估值。该股当前对应20倍的2016年市盈率,而行业均值为35倍,表明风险回报具吸引力。 推动因素 在线教育业务加速。凤凰传媒于5月22日宣布以人民币3900万元收购凤凰学易52%的股权。凤凰学易是一家领先的K12在线教育平台,主要帮助教师整理考试材料并推动与学生的在线互动。该公司在中国累积了1300万用户,覆盖80%的K12教师。在我们看来,此次收购将有助于凤凰传媒更好地利用其K12教育材料以及实施其成为领先在线教育平台的战略。与中国的主要互联网企业潜在战略结盟。管理层表示,公司将在数字出版/在线教育/游戏等领域寻求与百度、阿里巴巴及腾讯的合作。 估值 我们将2015-20年每股盈利预测调整了-7%至0%,因为我们小幅下调了对出版业务增长的假设。因此我们的12个月目标价格下调6%至人民币18.58元(根据基于全球同业18倍的2020年预期市盈率、并以8%的行业平均股权成本贴现得出)。 主要风险 出版业务/在线教育的增速低于预期。投资新业务机会带来的销售管理费用压力高于预期。

最新事件 蓝色光标于7月14日发布了2015年上半年业绩预告,收入增长20-30%但净利润下降67%-75%。我们将基于2020年预期市盈率的12个月目标价格下调16%至人民币18.67元。但维持对该股的买入评级,因为我们仍看好公司的数字化及全球化战略,并认为2016年其将展开新业务而且利润率得到改善。 潜在影响 净利润大幅下降的主要原因在于其海外参股子公司Huntsworth商誉减值以及对新业务大规模投资导致费用上升。我们认为商誉减值属于一次性事件,不会影响到公司未来的增长势头。对新业务(如大数据、电子商务、移动互联)的大力投资将影响短期利润率。但我们认为该成本是有必要付出的,因为公司需要迅速适应其业务模式并在数字营销领域扩大地盘。 数字化战略的进展依然良好。公司于6月8日宣布收购了两家企业,分别是领先的移动广告公司多盟和营销公司亿动。加上其数字营销子公司SNK,公司将成为最大的移动广告/营销企业,交易完成后在中国的市场份额将达到8%左右。在我们看来,这两项交易体现了清晰的数字化战略以及稳健的执行情况。 估值 我们将2015-20年每股盈利预测下调了16%-22%,原因在于高于预期的销售管理费用抵消了收入增长。我们将基于2020年预期市盈率的12个月目标价格下调16%至人民币18.67元(仍基于2020年市盈率折让估值)。 主要风险 广告业务增速低于预期,数字业务进展慢于预期。