Incident: The company issued an announcement. Revenue for the first half of '16 was 611 million yuan, up 11.37% year on year, and net profit was 25.9 million yuan, up 34.54% year on year. Q2 net profit was 17.2 million, up 49.41% year over year. China Investment Electronics's view: High-end products are gradually being released, and the product structure has been significantly upgraded, and it is expected to enter the automotive sector. The gross profit margin of H1 in 2016 was 23.78%, an increase of 1.3 pct over the previous year. Adhering to the “craftsman” spirit of strengthening and refining power semiconductors, the company promoted the continuous expansion of the company's product line into high-end fields such as sixth-generation IGBT, and now gradually has the ability to provide customers with one-stop overall solutions. The company successfully passed the TS16949 system certification in the first half of the year (the full name is “Quality Management System - Special Requirements for Implementing ISO9001:2008 for Organizations Producing Unrelated Service Parts in the Automobile Industry”). The passing of this system certification laid the foundation for the company to enter the automotive sector, enable the company to stand on the same competitive platform as internationally renowned companies, and the company is expected to benefit deeply from the new energy vehicle explosion in the future. Division reforms are progressing at an accelerated pace, and investment in R&D of high-end products such as IGBT has been further increased, and development momentum is strong. The company continued to push forward division reforms in the first half of the year. The IGBT product team focused on serializing sixth-generation IGBT and MOS products; the high-end transistor team focused on serializing TRENCHSBD and FRD products; and the bipolar product team focused on promoting the serialization of SCR and discharge tube products for middle and high-end applications. By further promoting the expansion of module technology to high-end application fields, the company has achieved technology promotion extending from chips to modules and from a single product to a solution, maximizing its comprehensive advantages in the field of technology, and rapidly expanding its key target application fields. With the gradual mass production of the company's new products, the company's development momentum has been strongly guaranteed, and the annual performance is still guaranteed. Continue to strengthen the construction of process platforms, and further enhance process technology transformation capabilities. The ability to control process technology is the core competitiveness of power semiconductor companies in the continuous development of power semiconductor companies. The company has continuously optimized the process technology platform on the basis of the original technology accumulation. Currently, the integration of 4-inch wire to plane, TRENCH high-end electrodes, and CMOS process technology platforms is not optimized, and the integration and optimization of the 6-inch wire with MOSFET and IGBT process technology platforms; the company's comprehensive process technology “control ability” has been fully reflected. Actively promote the R&D and manufacture of third-generation new material devices, so as to overtake leading international companies in the field of power semiconductors, strive to be the first in the domestic power semiconductor device industry to enter the ranks of leading international companies at the end of the 13th Five-Year Plan period, and establish a national brand with international influence. Key investment points: The company is a leading “chip-level” power semiconductor company with design+material innovation and special processes. It is also a scarce “autonomous and controllable” target for A-shares with more than 50 years of technology accumulation. With long-term technology and market accumulation, the company will achieve a breakthrough in the industry, coinciding with the investment and financing boom of leading local companies and the “golden cycle” of rapid development of international industry leaders such as Infineon; actual controller changes and equity incentive plans indicate that internal governance has come to an end, and it is expected to usher in a sustainable rapid development cycle. The explosion of high-growth industries and autonomy and control have collectively spawned the rapid growth of high-end power semiconductors such as IGBTs and intelligent module IPM. New energy vehicles and their charging equipment are in strong demand for IGBT chips and module products, accounting for about 10% of the cost of power modules, and local demand alone reached 60 billion yuan; historically, the company has provided strong guarantees and support for construction related to the national military industry. Today, under the obvious development trend of electromagnetization of high-end weapons and equipment, it is urgent for domestic replacement to achieve autonomous and controllable; the company's capabilities have reached the international level, and it is expected that the profit level will increase rapidly by relying on strong demand to achieve high-value-added products. Third-generation power devices welcome a huge potential market, and the company has sufficient subjective and objective conditions to meet new opportunities. Third-generation power semiconductors do not currently have high-end products. They have obvious inheritance in core areas such as materials/structure/process/packaging. Under the company's IDM model, they can fully meet the development needs of new materials and devices. The technology is gradually being extended, and expectations for high-end capacity expansion and technology upgrades are very strong. Give it a “Highly Recommended” rating, and the target price is 14 yuan. Net profit for 16-18 is expected to be 0.95/2.05/350 million yuan, EPS 0.13/0.28/0.47 yuan, a year-on-year growth rate of 121%/115%/71%. The trend of industry resource integration gives the company strong endogenous epitaxial development expectations; military/new energy sources urgently need breakthroughs, and high-value-added products continue to optimize profitability; under the emerging pattern of power semiconductor strategies, the current situation of “big industry and small companies” gives sufficient space; in view of high future performance growth and PEG considerations, it has shown a trend of increasing sales revenue and gross margin, and potentially breaking through the high valuation center of the industry and the scarcity of targets, giving 50 times PE in 17 years, with a target price of 14 yuan. Risk warning: Localized substitution of local semiconductors and the risk that the expansion of new application fields will fall short of expectations.