Incident: In the first quarter of 2018, the company achieved revenue of 638 million yuan, a year-on-year increase of 28.49%, and achieved net profit of 50.2 million, a year-on-year decrease of 21.58%. Investment promotion review: 1. Revenue maintained relatively rapid year-on-year growth. Net profit improved month-on-month during the reporting period, the company achieved a relatively rapid increase in revenue by increasing the development of new markets. Q1 revenue increased 28.49% year on year, reaching 638 million yuan. In terms of net profit, the company achieved net profit of 50.2 million, a year-on-year decrease of 21.58%. Since the second half of last year, the company has taken various measures to promote the implementation of refined management measures by adjusting the management structure; by providing new solutions to core customers, it has gradually absorbed the adverse effects of rising raw materials. Compared with the third and fourth quarters of 2017, the company's net profit for Q1 in 2018 increased significantly month-on-month, showing results in optimizing organizational operation and management. 2. The increase in raw material prices led to a year-on-year decline in gross margin. Expense rates all increased. Affected by the price increase of upstream raw materials, the company's operating costs increased by 34.91% year on year, exceeding the revenue growth rate and lowering the company's comprehensive gross margin to 26.19%, down 3.51 percentage points from the same period last year. In terms of cost ratio, new market expansion led to a 42.51% year-on-year increase in the company's sales expenses, and 0.34 percentage points year-on-year increase to 3.39%. In terms of management expenses, the increase in leasing expenses for new office buildings led to a 43.5% year-on-year increase in management expenses, and the management fee ratio increased 0.87 percentage points year-on-year to 8.35%. In addition, financial expenses increased 117% year over year due to increased bank loans and higher interest rates on loans. Combined with the above factors, the company's Q1 net profit declined year-on-year. 3. The layout of new 5G and military products progressed steadily, opening up space for growth in the next stage. The company continued to lay out around the core fields of 5G and military industry. During the reporting period, the company established three research institutes (Optical Communication Research Institute, 5G Communication Research Institute, and Connector Research Institute) and a key platform to provide strong support for commercialization. At present, some new 5G and military products and projects are progressing smoothly. In terms of high-frequency multi-layer PCB board research and development, the construction of R&D test platforms has been completed and sample development has been actively promoted; the underwater integrated defense system has obtained first-level qualification (system type), and has obtained R&D results and field verification results for subsystems and sub-modules. We believe that the company's new product development project has laid the foundation for the company to open up room for growth. 4. The quarterly inflection point is showing, the mid-term layout opportunity is here. Maintaining a strong recommendation - Looking at the A rating on a month-on-month basis, the company is entering a stage where performance is recovering quarterly, and mid-term layout opportunities are coming. In the long run, the company is in the product introduction period. In the future, as the company continues to enter emerging fields and the gradual release of new 5G and military products and new production capacity, the long-term growth space will be determined. We expect the company's net profit from 2018 to 2020 to be 188 million, 276 million, and 362 million, respectively. Corresponding to the current PE price PE is 37x, 25x, and 19x, respectively, and will continue to maintain a highly recommended -A rating. Risk warning: The development of the 5G and military goods market falls short of expectations, the promotion of new products falls short of expectations, and market competition intensifies.