The consumer electronics industry is pessimistic. The company has a large expectation gap. In the context of the weakening of the smartphone industry's “volume and price increase” logic, the market is generally pessimistic about the future of consumer electronics. It is also generally pessimistic about the competitive 3C metal parts, which in turn ignores the differences in individual stocks from the bottom up. We believe that this is exactly where Cosen Technology's expectations are different: On the one hand, the company successfully achieved a breakthrough from small to large parts by supplying the iPhone X middle frame last year. small. On the other hand, the company carried out large-scale R&D investment and production capacity construction in 2017, and this year is entering the harvest period, as evidenced by the 18Q1 net profit surging 156.14% year on year. At the same time, the company is actively promoting mass production of new products such as smart pens, e-cigarettes, and smart speakers, and maintaining the purchase rating. It successfully achieved a leap from small metal parts to large parts. It was less affected by the decline in the growth rate of the smart phone industry. In 2017, the company successfully entered the iPhone X stainless steel frame supply chain through Jeep, achieved a leap from small metal parts to large metal parts in iPhone products, and completed a breakthrough from 0 to 1. We believe that with the expansion of the company's production capacity and the improvement of technical standards, it is expected to take on a larger share of the supply of metal middle frames for new iPhones this year, so its performance will be less affected by fluctuations in the smartphone industry. Production capacity and R&D investment dragged down 17 years of performance. Entering the 18-year harvest period, the company's R&D expenses reached 114 million yuan in 2017, and its share of revenue was still 0.43 pct higher than in 2016, reaching 5.27%. Meanwhile, the company's capital expenditure in 2017 exceeded 1.3 billion yuan. We believe that considering the small appearance of products such as Apple phones, smart pens, and pads this year, the company's corresponding technology and production capacity reserves have been completed, and the performance is expected to enter a harvest period. The company achieved revenue of 448 million yuan in 18Q1, up 45.58% year on year, net profit of 52 million yuan, up 156.14% year on year, exceeding market expectations, and performed well in the consumer electronics industry. Epitaxial strengthens the die-casting process and enters the high-margin electronic cigarette metal parts supply chain. On March 30, the company announced that it plans to acquire 100% of Yuancheng Electronics's shares with its own capital of 230 million yuan. According to the announcement, the company is currently developing supporting precision metal structural parts products for a well-known e-cigarette brand. The completion of this acquisition will help improve the company's die-casting process. In addition to continuing to expand die-casting products in consumer electronics fields such as mobile phones and tablets, the company will also expand its layout in high-end e-cigarette products to achieve new business growth points. Research and Markets expects the global e-cigarette industry to grow at a CAGR of 18.99% in 2017-25. The product achieved a harvest period of 18 years from 0 to 1, and maintained the purchase rating. We believe that the company's stainless steel middle frame has achieved a breakthrough from 0 to 1, and production capacity and R&D investment in 2017 are expected to reap benefits this year. Without considering the merger of Yuancheng Electronics, which the company plans to acquire, and maintain a stable cost rate forecast, we expect the company's revenue for 2018-20 to be 3,071 billion yuan, 3,567 billion yuan, and 4.08 billion yuan, with corresponding net profit of 404 million yuan, 493 million yuan, and 601 million yuan respectively. Referring to the 2018 average PE valuation of key companies in the Apple industry chain, combined with the company's high performance growth expectations, 20-22 times PE valuation was given for 18 years, with a target price of 19.44-21.38 yuan to maintain the purchase rating. Risk warning: Demand for iPhones fell short of expectations, and gross margins fell short of expectations due to deteriorating competitive landscape.