Main points of investment:

The company released its semi-annual report for 2013 and the company's performance was lower than expected. The company announced that its operating income in the first half of 2013 was 753 million yuan, a sharp increase of 93.84% over the same period last year. The net profit of shareholders belonging to listed companies was 5.1763 million yuan, compared with a loss of 38.6268 million yuan in the same period last year. The company's touch screen business continued to improve on the basis of reversing losses in the first quarter, but the reversal was lower than previously expected. At the same time, the company forecasts a net profit of-5 million yuan-million yuan from January to September 2013.

A turnaround was achieved in the first half of the year, and the improvement of profit margins was still limited. Last year, the company was in the "running-in period" of product research and development, production line debugging and team building, and the large-scale fixed capital investment in the early stage of the product line, as well as the increase in personnel and expenses during the period, led to a sharp decline in the company's performance in 2012. In the first quarter of 2013, the company has turned losses into profits on the basis of a loss of 55.71 million yuan in the fourth quarter of last year, and the overall performance in the first half of the year continued a positive growth trend, but due to the continuous extension of the scope of the company's product line layout, the slope climbing of production capacity and the improvement of yield were delayed, and the improvement of profit margin was obviously suppressed. In the case of a sharp increase in revenue in the first half of 93.84 per cent (accounting for 74.77 per cent of revenue in 2012), only 5.1763 million of net profit was achieved, while the company may lose money in the first three quarters due to the impact of the off-season in the third quarter.

SEO helps to build small and medium-sized integrated touch screen suppliers, and the increase in short-term expenditure has led to the postponement of the performance release period. From the revenue side, the high growth of sales revenue on the one hand confirms the high prosperity of the touch screen industry, and at the same time shows that the company's touch screen business has initially achieved market development. However, the changes of different technical standards in the touch screen industry have a great impact on the competition pattern of the industry. Therefore, on the basis of forming the product and technical layout of GG/OGS/GFF, the company began to expand to On-cell products, and the successful additional issuance in the first half of the year laid a financial foundation for the construction of "small and medium-sized capacitive touch screen production line project" and "ultra-thin super cover glass production line project". The deepening of the long-term business layout has led to an increase in the company's short-term expenditure and a slowdown in the improvement of yield capacity, which suppresses short-term performance and the performance release period will be postponed.

Maintain the "overweight" rating. Taking into account the impact of the delayed performance of the company, the profit forecast of 2013-2014 is lowered, and it is expected to achieve earnings per share of 0.27,0.61,0.85 yuan in 2013-2015 (the original forecast 2013-2014EPS is 0.52 yuan and 0.76 yuan respectively). The current stock price corresponds to 2013-2015 71-31-22 times PE. The advantage of the integration of the company's industrial chain is conducive to coordination and integration, improve efficiency and reduce costs, and the rapid growth of performance is expected to be achieved after the completion of product line layout and the improvement of yield and production capacity.