Demand was sluggish in the first half of the year, and North American customers ushered in the volume phase in the second half of the year: the company achieved revenue of 16.972 billion yuan in the first half of 2022, down 14.4% from the same period last year. The gross profit margin fell to 20.8% from 24.9% in the same period. The home net profit was 1.358 billion yuan, down 49.5% from the same period last year, in line with the company's forecast of a 45% to 50% decrease in net profit in the previous earnings report, with a big drop in profit, mainly due to the depressed global smartphone demand, intensified competition and continued optical downdistribution in the first half of the year, resulting in a decline in shipments of mobile phone-related products and ASP compared with the same period last year. In terms of business, the revenue of optical parts business increased by 1.3% to 4.399 billion compared with the same period last year; mobile phone lens shipments reached 652 million pieces, down 9.1% from the same period last year, but 6p and above lens shipments increased by 20% year-on-year, accounting for 30.1% from 22.8% in the same period, demonstrating the competitiveness of the company's high-end products. Lens ASP declined by about 10-15 per cent year-on-year, mainly due to continued downgrading in the lens industry; car lens shipments increased by 0.8 per cent year-on-year to 37.61 million, mainly due to a shortage of automotive chips affecting the pace of shipments; segment gross profit margin fell from 42.9 per cent to 35.5 per cent. In the optoelectronic products business, the company's lens module shipments fell 20.1% to 289 million pieces compared with the same period last year, but the shipments of Perpetual and large image modules rose against the trend, rising 56.2% to 39.71 million pieces compared with the same period last year. Segment gross margin fell from 14.8% to 11.6%. In the first half of this year, the mobile phone market continued the downturn of the second half of last year. At present, the de-inventory pressure of downstream Android phone manufacturers is still great, and the overall shipping situation is expected to improve in the fourth quarter. In the short term, the company's shipments to North American customers will usher in the volume phase, backing the volume and price of the lens business, while the share of South Korean customer modules is also increasing, which is expected to hedge against the declining demand of domestic Android customers. In the medium to long term, we believe that optical upgrading is still the main line.

Continue to carry out R & D and innovation, build competition barriers, target price of HK $140.00, and maintain buying rating: although the downgrading trend may continue, the company's high-end products have high competition barriers and shipments of high-quality optical products will remain stable. With the continuous innovation of the company's R & D side, the continuous introduction of higher-end mobile phone optical products will significantly improve the company's gross profit margin. We are still optimistic about the medium-and long-term growth space of the optical track. The smart car will bring a significant increase in demand for related optical products, and the on-board business will become the company's second growth curve in the future. We expect the company's 22 -, 23-and 24-year net profit to be 3 billion, 4.3 billion and 5.6 billion, respectively, giving the company a target price of HK $140.00 and maintaining a buy rating at 30 times PE valuation in 2023.