Matters: The company announced the 2017 interim report on August 25. In the first half of the year, the company achieved operating income of 492 million yuan, a year-on-year decrease of 1.19%, net profit of 7.45 million yuan, a year-on-year increase of 0.51%, and basic earnings per share of 0.01 yuan. Main views 1. Defense business declined, optical materials grew rapidly, and overall performance remained stable. In the first half of the year, the company achieved operating income of 492 million yuan, a year-on-year decrease of 1.19%, and net profit of 7.45 million yuan, an increase of 0.51% over the previous year. Among operating income, the defense business achieved revenue of 247 million yuan, a year-on-year decrease of nearly 50 million yuan, a decrease of about 14.53%; optical materials and device products achieved revenue of 263 million yuan, an increase of nearly 30% over the previous year. Overall, the company's revenue remained stable (we think the reason why the sum of the two types of business revenue is greater than total revenue may be due to internal revenue offsets). At the same time, the company's overall operating costs and expenses were relatively stable, so net profit was also basically the same as the same period last year. 2. Defense business - Decrease in orders for large-scale weapon systems has led to a decline in revenue. Overall, R&D and production tasks have been successfully carried out. The company's defense business includes three major areas, namely the integration of large-scale weapon systems assembly, precise guidance and guidance, and photoelectric information equipment. The defense business achieved revenue of 247 million yuan in the first half of the year, a year-on-year decrease of nearly 50 million yuan, a decrease of about 14.53%, mainly affected by the decline in orders for large-scale weapons systems in 2017. Overall, the company's defense product development and production work was carried out smoothly in the first half of the year: in terms of assembly and integration of large weapon systems, although orders declined in 2017, new weapon models under development and ready to be produced continued to increase. They have gradually moved from single production to joint development, and several joint development projects are progressing smoothly. Some bidding projects have gained a leading edge, and orders will be obtained one after another in the latter half of the “13th Five-Year Plan”; in terms of precision guidance and lead production, the company's ordering tasks are full, and the production of lead heads has reached the highest level of saturation in the world. Guided artillery shells at the end of the trail, The technological innovation and model expansion of laser terminal guided missiles, guided bombs, and rockets from different launch platforms has also expanded the application fields of leading military classes. The scientific research projects have all been completed according to the plan, continuing to consolidate the company's position as the company's leading research and production base in the country; in terms of optoelectronic information equipment, on the basis of maintaining the competitiveness of the company's products such as helmet displays, video cameras and multi-function displays, through visits and technical exchanges with overall units, higher authorities and the military, proactive communication and coordination have been carried out. The development tasks and intentions of various aviation projects have been determined, and the company has been further enhanced. Competitiveness in this field. We believe that the company has maintained its competitiveness in the field of defense, and currently has sufficient reserves of research projects. As new products mature and orders are obtained, the defense business will achieve rapid growth in the future. 3. Optoelectronic materials and devices business - Revenue grew rapidly, product development and promotion progressed smoothly in the first half of the year. Optical materials and device products achieved revenue of 263 million yuan, an increase of nearly 30% over the previous year. The rapid increase in revenue is mainly due to the successful R&D and trial production of fluorophosphorus glass, remarkable development results for major customers, and rapid growth in demand; at the same time, the company's infrared chalkali glass has reached the leading international level and participated in the preparation of many national and international infrared testing standards. Currently, 7 sulfur grades are mass-produced, with a production capacity of 1.5 tons/year. It can provide a range of products from materials, blanks to aspherical lenses, and can provide a range of products from materials and blanks to aspherical lenses. The production and sales volume is at the top of the domestic market. It has also started business with many well-known international infrared application brands. It is also used in weapons and equipment such as guns in the field of national defense and military applications; the company is also actively deploying sulfur in the industrial chain, and is also actively deploying sulfur in the industry chain, with production capacity reaching 1.5 tons/year. Positive progress has been made in research on secondary molding and precision molding processes for glass; in addition, it is also cooperating with infrared material processing and lens terminal companies to achieve upstream and downstream industry alliances. We believe that the company's development and promotion of new optical materials products is progressing smoothly and is in a leading position in the country. In the future, it can benefit from the increase in demand for high-end optical materials and maintain steady business growth. 4. Investment advice: We believe that the company's defense business can maintain an advantageous position and achieve relatively rapid growth with the release of new products. The optical materials and device business can benefit from the increase in demand for high-end optical materials and maintain steady growth. At the same time, the majority shareholder of the company is the Optoelectronics Group under the Ordnance Industry Group. In addition to the Optoelectronics Group, the Laser Group and Night Vision Group also include a large number of optoelectronic information services. As the only listed company in the optoelectronic information sector under the Ordnance Industry Group, the company is expected to benefit from the restructuring of the Ordnance Industry Group's research institutes and continued asset injection in the future. 5. Risk warning: military installation progress falls short of expectations; arms industry group reform falls short of expectations.