Sapphire crystal furnace revenue increased by 342% year-on-year, sapphire consumer window revenue increased by 173% year-on-year, the company accelerated the transformation of sapphire overall solution provider. The company achieved operating income of 1.15 billion yuan in 2015, an increase of 86% over the same period last year, and the net profit belonging to shareholders of listed companies was 300 million yuan, an increase of 128% over the same period last year, which is basically in line with our expectations. Sapphire crystal furnace revenue accounted for 50.3%, an increase of 342% over the same period last year, becoming the company's main growth point in 2015. The company's sapphire consumption window achieved an income of 240 million yuan, an increase of 173% over the same period last year. At the same time, subsidiary Xinhang Technology achieved a total income of 41.45 million from grinding (polishing), copying edge grinding and milling machines. The company accelerated its transformation from a simple sapphire single crystal furnace equipment provider to sapphire crystal growth, processing, grinding and polishing and other sapphire overall solutions, leading the development of the industry.

The promised profit was achieved in 2015, and the gross profit margin of major products increased by 3.66 percentage points compared with the same period last year. The company realized the promised profit of 279 million yuan in 2015, exceeding the promised profit by 21 million yuan. The gross profit margin of sapphire crystal furnace was 40.8%, the gross profit margin of consumer windows increased to 51.2%, and the gross profit margin of major products as a whole increased by 3.66 percentage points year-on-year to 41.63%, leading the world. The company takes the lead in large-size sapphire crystal technology, creating square sapphire crystals in the industry, optimizing the growth and processing process of sapphire crystals, improving the yield and material utilization of sapphire crystals, and shortening processing time. Related equipment has also been a global leader. Industrial technical barriers are high, the company will maximize benefit from the development of the industry.

The company's sapphire consumption window is gradually expanding, and the sharp marginal improvement in sapphire cost and effective production capacity has made 2016 the first year of the sapphire industry. The company's revenue from sapphire chips used for smartphone covers has reached 240 million yuan, an increase of 173% over the same period last year, in part because the improvement in sapphire production technology has led to a sharp drop in costs. According to the industry chain research, the cost of the company's consumer electronics sapphire cover has been reduced to about $30 per piece. At present, the effective production capacity of the industry can at least meet the shipments of more than 20 million mobile phones. With the expansion of consumer electronics and further improvement in price and production capacity, we expect that the price of sapphire cover will eventually fall to the region of $10-15, and 2016 is expected to be the first year of the sapphire industry.

Maintain the previous earnings forecast and reiterate the "buy" rating. It is estimated that the company's income from 2016 to 2018 will be 35.72,45.50 and 4.71 billion yuan, the return net profit will be 8.0,10.2 and 1.1 billion yuan, and the earnings per share will be 1.05,1.33 and 1.44 yuan. The current stock price corresponds to 30,24 and 22 times of PE in 2016-2018. Considering the strong endogenous growth of Ored in 2016-2018 and the strong leading position of sapphire in the world, it is conservatively valued at 0.5 times PEG in 2016, corresponding to 50 times PE and a market capitalization of 40 billion yuan.