Incident: The company released its 2017 Q1 quarterly report. The company achieved revenue of 1,142 million yuan, an increase of 11.62% year on year; realized net profit of 116 million yuan, an increase of 15.68% year on year; deducted non-net profit of 112 million yuan, an increase of 30.09% year on year; corresponding to EPS of 0.08 yuan. Comment: 1. The revenue growth rate rebounded for 3 consecutive quarters, and management efficiency improved significantly. Q1 revenue increased 11.62% year on year, achieving 3 consecutive quarters of revenue growth recovery. It also increased 1% month-on-month, which is basically in line with our previous judgment. The gross profit margin was 26.2%, down 2.9 percentage points from month to month, which is basically the same as the same period last year. Management capacity improved markedly, and the management expense ratio was 8.8%, down 2.9 percentage points from the previous year. The company continued to increase its investment in sales, and the sales expense ratio increased by 0.6 percentage points. Net profit increased 15.7% year over year, and net profit margin increased 0.4 percentage points to 10.2%. Non-operating income, asset depreciation, and exchange gains were high during the same period last year. Excluding related effects, non-net profit increased 30% year-on-year, and the quality of operations also improved markedly. 2. The revenue growth rate is expected to increase steadily throughout the year, and the company's product cycle is quite obvious. The revenue growth rate has been increasing quarterly for 3 quarters, and annual revenue may grow by about 20-25%. The company continues to promote an increase in automation rate and improvement of operating efficiency. Management efficiency has also improved to a certain extent, employee shareholding has been achieved at the subsidiary level, and employee enthusiasm has further increased. Although rising costs of packaging materials, hardware, etc. are putting some pressure on operations, we expect exceeding the company's 467 million yuan guideline as a probable event, and profits will continue to grow by 15-20% throughout the year. 3. LED integration continues. Long-term optimism is that leading companies will increase their market share. After long-term development, the LED industry chain will enter a stage of accelerated integration. On the one hand, industry concentration will increase significantly, and the market share of advantageous enterprises represented by the company will continue to rise. On the other hand, advantageous enterprises will accelerate the integration of the industrial chain and accelerate market development for brands, sales channels, and application segments. Among them, brands and channels are mainly overseas, including regional brands and channels, and even global brands such as Osram and Philips; most of the segmented applications are mainly domestic markets, such as engineering lighting. In the process of integration, the company will fully benefit from industry development and continue to drive performance growth. Valuation and investment recommendations We adjusted our 17-19 net profit forecast of 5.20/6.48/773 million yuan, corresponding to 0.36/0.45/0.53 yuan. The current stock price corresponds to 17 times 19 times. The valuation is relatively low, and the “Highly Recommended - A” rating is maintained. Risk suggests a sharp drop in prices and lower business expansion than expected.