Event: The company released its 2017 annual report and achieved operating income of 2,630 billion yuan, an increase of 66.21% over the previous year; net profit of 502 million yuan, an increase of 87.92% over the previous year. At the same time, the company released its 2018 quarterly report, achieving operating income of 710 million yuan, an increase of 40.17% over the previous year, and net profit of 143 million yuan, an increase of 76.84% over the previous year. The inventory was 789 million yuan. The industry is booming, and the company experienced a good harvest year. In 2017, the company developed along the two lines of scale expansion and product restructuring, and achieved fruitful results. In terms of production capacity, the annual LED chip production volume increased by 68.46% year on year, and the monthly production capacity expanded from 700,000 pieces at the beginning of the year to about 1.8 million pieces at the end of the year; in terms of product structure, the company focused on high-margin products, and the shift towards high-end was obvious. Benefiting from improved operations and industry prosperity, the company achieved the best performance in history and strengthened its position in the industry. 2018Q1 still maintained high growth, stable gross profit margin (32.87%) and net profit margin (20.12%), healthy inventory, and low impact from the off-season, indicating the company's excellent competitiveness. Excellent competitiveness comes from the company's leading technological innovation. Technology is the main reason why companies are bridging the gap with second-tier companies. Whether it's white light lighting or display chips, the company is first-class. The average level of light efficiency increased by about 6% in 2017, which is at the leading level in the industry. Excellent technical capabilities bring about the high-end of the company's products, effectively reduce production costs, and at the same time enable the company to continue to invest in cutting-edge and segmented markets. The company has already mass-produced MiniLED, and Micro LED is actively developing in close cooperation with international manufacturers. Infrared LEDs are mass-produced in small batches, and car lights are cooperating with customers to carry out full-line research and development. In addition, the company established the Semiconductor New Material Device Research Institute, which is dedicated to the research and development of key and forward-looking technologies. These leading-edge technology investments guarantee the company's continued leadership in the future. Actively cultivating overseas markets is an important growth point for the company in the future. There is a clear trend of LED chip industry shifting to mainland China. Thanks to its leading technical strength, the company is the main force in accepting overseas orders. The company actively expanded sales share in the international market through various cooperation methods. The company expanded overseas sales of epitaxial films and chips for flip-chip products through joint ventures with Korean companies; at the same time, the company completed procurement certification for high-quality foreign customers and began contributing revenue one after another, which is one of the reasons for the high revenue growth in the first quarter. The acquisition of MEMSIC was launched, and diversified extension development was carried out. MEMSIC (Meixin Semiconductor) is the only domestic company with automotive-grade accelerometer and geomagnetic sensor chips. Its automotive sensors have already entered international automobile manufacturers such as GM and Mazda, and have already achieved mass supply with partner manufacturers. The development of the company's two main businesses, supporting and complementing each other, will also significantly enhance the company's ability to withstand risks in the future. According to the acquisition performance promise, MEMSIC's net profit from 2018 to 2020 will not be less than 112 million, 133 million, and 177 million, which will effectively enhance the company's performance. Profit forecasting and valuation. Meixin Semiconductor transferred its shares to listed companies at the end of March. We expect the company's net profit from 2018 to 2020 to be 858 million/1,206 million/1,718 million, respectively. The EPS was 0.79/1.12/1.59 yuan respectively, and the corresponding PE was 22/16/11, maintaining the buying rating. Risk warning. Downstream LED demand shrinks; LED chip prices fluctuate; MEMSIC integration falls short of expectations.