The core view is that the first-quarter results exceeded market expectations: The company announced that 18Q1 achieved net profit of 125 million to 146 million yuan, an increase of 55%-80% over the previous year, and the median value in the range was 135 million, up 67% year on year and 4% month on month, exceeding market expectations. Among them, the company's non-recurring profit and loss is 55 to 75 million. If the median value is 65 million, the median value of the range after deducting non-return net profit is 70 million, an increase of 58% over the previous year. Rapid expansion of production and improvements in customer and product structure led to high growth in the company's performance: the first quarter was a traditional low season, and the company's performance was still growing at a high rate due to two reasons: first, the company's rapid expansion of production; second, significant improvements in the company's customer and product structure. The 17Q1 company explores mainstream domestic packaging customers and increases the proportion of terminal products. By 18Q1, the top ten customers of the company were all top domestic packaging manufacturers and major overseas customers, and the company's share of high-end products had increased significantly. As a result, we expect that the future price and gross margin of the company's products will have an advantage, and the company has become a first-tier company with the ability to withstand industry risks. 10 billion investment refers to advanced technology: the company signed a project investment framework agreement with the Yiwu Industrial Park Management Committee. The total investment amount will reach 10.8 billion in the next 7 years. The investment projects include: 1) LED chips and extensions of advanced technology, including LED epitaxial and chips, sapphire substrates, ultraviolet LEDs, infrared LEDs, and micro LEDs; 2) advanced semiconductor fields: MEMS sensors, VCSEL lasers, GaN-based power electronic devices, etc. This project investment reflects the company's development strategy. In addition to maintaining the current scale advantage, the future focus will be on the blue ocean market represented by new technology. Compared with the existing market, vast space and good competition, this reserve will lay a high-quality foundation for the company's next rapid growth. Financial forecasting and investment recommendations We forecast the company's EPS for 17/18/19 to be 0.61, 0.96, and 1.31 yuan respectively. According to comparable companies, the company was given a P/E valuation of 23 times in 2018, and the corresponding target price was 22.10, giving a buying rating. Risks suggest that the LED chip industry is highly competitive; there is some uncertainty about the growth of the sapphire business; and the progress of investment in new businesses may fall short of expectations.