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　　 Changjiang Securities

Event description:

The company announced the performance forecast for the first three quarters of 2012. During the reporting period, the company realized a net profit attributable to shareholders of the listed company of about 123.0911 million yuan - 138.0911 million yuan, compared with 87.3994 million yuan in the same period last year, an increase of 48% - 58% year on year.

Event comment:

High growth continued in the third quarter. According to the mid report data, the net profit attributable to listed shareholders in the third quarter can be extracted as about 32.4148 million yuan - 47.4148 million yuan, compared with 29.0043 million yuan in the third quarter of last year, an increase of about 12% - 63% year-on-year, continuing the growth trend in the first half of the year. Based on the current rapid and healthy development of the company, we are optimistic about maintaining a high growth rate throughout the year.

Non recurring gains and losses helped to improve performance. The forecast shows that the contribution amount of non recurring profit and loss to the company's net profit in the first three quarters is estimated to be about 18.36 million yuan, while according to the semi annual report, the non recurring profit and loss of 6.8148 million yuan in the first half of the year are all government subsidies, so we infer that government subsidies still accounted for the main part in the first three quarters. On the one hand, government subsidies help the company's profits. The greater significance is that they reflect a supportive attitude, and the company's business is easier to carry out.

The whole industry chain covering all screens has a huge imagination space for future development. On September 19, the company held a press conference called "Disruption Day" to announce its entry into the field of smart TV, and formed the coverage of "the fourth screen" TV after the PC, pad and mobile phone screens, so as to completely improve the business system of the whole industry chain of "platform+content+terminal+application", open a new blue ocean for business development, and the future growth space is difficult to measure.

The advantages of copyright content resources will be amplified with the expansion of the industrial chain. letv The copyright library of film and television plays has the online copyright of 90000 episodes of TV dramas and 5000 movies, as well as the support of "LeTV Self made" and rich content of LeTV Pictures. With the expansion of Internet TV business in the future, the content advantage will be further expanded.

Investment suggestions: The company has the advantage of content resources, and the video business and advertising business on it have the potential for continuous expansion; The business model is gradually maturing, and the expansion of Internet TV business will provide a huge space for future development. We expect the company's EPS in 2012, 2013 and 2014 to be 0.54 yuan, 0.75 yuan and 1.08 yuan respectively. The current share price corresponds to 46 times, 33 times and 23 times of PE in 2012, 2013 and 2014 respectively, maintaining the "recommended" rating.