Core view 18Q1 performance exceeded expectations, and many indicators remained at a good level: 1) Achieved revenue of 7.1 billion yuan, an increase of 40% over the previous year. Expansion of production capacity and improvement of customer structure were the main drivers of growth. At the end of '17, the company's new chip and substrate production capacity was basically released in 18Q1, which led to a significant increase in the company's sales volume. Furthermore, the completion of the certification of qualified suppliers for overseas customers in '17 also led to a year-on-year increase in the company's overseas business revenue. 2) Achieved net profit of 140 million yuan, an increase of 77% over the previous year, and net profit of 70 million yuan after deducting non-return net profit of 70 million yuan, an increase of 57% over the previous year. Previously, the company predicted a 55%-80% year-on-year increase in net profit for 18Q1, so the performance was at the upper limit of the forecast and exceeded expectations. 3) The overall gross margin was 33%, which was basically the same month-on-month and year-over-year, and the overall net profit margin was 20%, up 4 percentage points from 17Q1. 4) The inventory level is low. The 18Q1 inventory increased by only 100 million yuan month-on-month. 5) Operating cash flow is 150 million yuan, which is higher than net profit from the mother. Operating cash flow has remained at a good level since 17Q4. The 17-year performance was in line with expectations: the company achieved revenue of 2.63 billion yuan in '17, an increase of 66% over the previous year, a net profit of 500 million yuan, an increase of 88% over the previous year, and net profit of 270 million yuan after deducting non-return to the mother, an increase of 970% over the previous year, in line with the expectations of the previous performance forecast. The company's overall gross margin was 33.2% and net profit margin was 19%. Although 17Q4 experienced price cuts for some low-end products, the company maintained a good level of gross margin, which shows that the company is more resilient to risk. The company's inventory in '17 was 690 million yuan, an increase of only 65 million yuan over the previous three quarters. At the end of '17, the inventory had reached a low level. Meixin Semiconductor is a high-quality sensor company: Meixin's acquisition has been completed. The company's products are mainly accelerometers and geomagnetic sensors, and the downstream includes consumer electronics and automobiles. The promised profit was not less than 110 million yuan in 2018, no less than 250 million yuan in 18-19, and not less than 4.2 billion yuan in 18-20. Financial forecasts and investment recommendations Since we assume that Meixin Semiconductor will be consolidated in mid-April this year (currently the company has not announced the same date), the profit forecast is adjusted. The current forecast for EPS for 18/19/20 is 0.81/1.15/1.50 yuan (the original forecast for EPS for 18/19 is 0.96/1.31 yuan). According to comparable companies, the company was assessed 30 times PE for 18 years, and the corresponding target price was 24.30 yuan, maintaining the purchase 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.