Company News: The company released the 2018 interim results report. In the first half of the year, the company achieved operating income of 881 million yuan, an increase of 13.5% over the previous year, net profit attributable to shareholders of listed companies of 74.79 million yuan, a year-on-year increase of 30.4%, a gross profit margin of 27.1%, a year-on-year decrease of 0.9 percentage points, and earnings per share of 0.18 yuan, a year-on-year decrease of 15.22%. The second quarter achieved sales revenue of 433 million yuan in a single quarter, a year-on-year decrease of 7.7%, and net profit attributable to shareholders of listed companies was 22.946 million yuan, a year-on-year decrease of 38.2%. Comment: The first half of the year grew steadily, and the second quarter was relatively weak: in the first half of the year, the company achieved operating income of 881 million yuan, an increase of 13.46% over the previous year, and net profit of 74.79 million yuan, an increase of 30.38% over the previous year. The increase in the company's revenue and net profit mainly comes from products such as the “precision forged+CNC” process stainless steel middle frame developed and put into production last year. The company's position in the industry in the field of large precision metal structural parts has been stabilized. At the same time, the small mobile phone, tablet (including supporting smart pens), and laptop business continued to maintain steady growth from the original. Q2 achieved sales revenue of 433 million yuan, a year-on-year decrease of 7.7%, and net profit of 22.946 million yuan, a year-on-year decrease of 38.2%. The second quarter was a traditional low season. Coupled with the delay in mass production of new products in the laptop project due to supply chain reasons, the company maintained a high level of research and development, which dragged down the overall performance of the second quarter. Gross margin was under pressure in the short term, and R&D projects continued to be reserved: In the first half of the year, the company's overall gross profit margin was 27.1%, down 0.9 percentage points from the previous year. Among them, the Q2 gross profit margin was 24.1%, down 3.3% year on year. The order volume in the second quarter was small, and the short-term gross margin pressure was high. The sales expense ratio for the first half of the year was 2.9%, 17.9%, and 2.8%. Overall, the three fees increased 4.5% year on year, and R&D expenditure increased 35% year over year. Mainly, the company has reserved more R&D projects for consumer electronics. At the same time, sales and management personnel expenses increased as the company expanded in size. Wait for the release of new products in the second half of the year, and e-cigarettes light up growth: Major customers have an active pricing strategy for new products in the second half of the year, and the company, as the main target of Apple's appearance innovation, is expected to benefit from the new product launch in the second half of the year. Furthermore, in the first half of the year, the company wholly acquired Kunshan Yuancheng to improve processes such as precision die-casting and introduce e-cigarette business. According to Research and Markets data, the global e-cigarette market is expected to reach US$61.4 billion by 2025, with a compound growth rate of 18.99% in 2016-2025. With the completion of this acquisition, 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. Investment advice: Our company predicts earnings per share for 2018 to 2020 to be 0.76, 0.98, and 1.12 yuan, respectively. The return on net assets was 16.0%, 18.0%, and 18.0%, respectively, giving a buy-B recommendation. Risk warning: New product shipments from major customers fall short of expectations; delays in project progress due to supply chain twists and turns; technology replacement risks.