Event: the company released a semi-annual report that its revenue in the first half of the year was 1.622 billion yuan, up 35.97% over the same period last year; the net profit was 313 million, up 45.1% over the same period last year; and the net profit after deducting non-return was 191 million, up 50.15% from the same period last year. Of this total, Q2 had revenue of 912 million per quarter, an increase of 32.86% over the same period last year, and the net profit after deducting non-return was 122 million, an increase of 46.25% over the same period last year.

Profitability exceeded expectations, Q2 single-quarter data set a record. Q2's single-quarter revenue of 912 million, net profit of 171 million, net profit of 122 million after deducting non-return, and gross profit margin of 3.752 billion all hit record highs, which are particularly rare in the industry's downward cycle. Through the improvement of the luminous efficiency of chip products and the advantage of new expansion and efficient production capacity, the company keeps its profitability rising against the trend. In terms of LED chip products, Blu-ray chip gross profit margin is 32.27%, year-on-year-2.39pct; green chip gross profit margin is 29.44%, year-on-year + 5.5pct. Under the background of the chip price reduction and the general loss of second-tier enterprises, the company's Blu-ray gross profit margin remained stable, and the green chip gross profit margin even increased significantly, exceeding market expectations.

Overseas business and new products continue to expand. In the first half of the year, the business in the overseas market continued to grow steadily, and the sales of overseas OEM and high-end epitaxial wafers in the Korean market continued to increase (for example, in the first half of the year, a joint venture company was established with SemiconlightCompanyLtd of Korea to expand the overseas sales of flip wafers and chips), which will continue to contribute to the company's sales growth in the future. There are also some bright spots in product line expansion. First, on the basis of stabilizing the output of blue and green chips, RGB and MiniLED,RGB increased the output of red light products in the first half of the year, making the matching advantages of panchromatic RGB chip suppliers more obvious; MiniLED products first entered the market and released volume, and the current shipments are stable and the market share is steadily increasing. In terms of white light chip, the company's five chip-level series (high-efficiency lighting, high voltage, flip, filament and backlight) are recognized by packaging customers and terminal application customers, and the company's chip market share ranks among the top two in China. and enter the international first-line lamp brand factory. In terms of business, the company is in an upward trend, and given the excellent performance of the past eight quarters, it is reasonable that Q2 is only a continuation of the trend.

Integrate Maxin Semiconductor to open new high-growth business. The United States and New Zealand achieved partial consolidation in the second quarter, contributing 27.0823 million of the mother's net profit. In the field of MEMS, the technical and market barriers are high, and there are high barriers to entry. The main competitors are foreign leading semiconductor companies. Mexin Semiconductor is the leading domestic MEMS sensor company with strong technical strength and strong profitability (the net interest rate reached 30% in the first three quarters of 2017). It will continue to benefit from the outbreak of downstream demand and import substitution. In the first half of the year, the United States launched a variety of new products, such as single-chip ultra-small size three-axis AMR magnetic sensor, high-performance geomagnetic sensor, integrated three-axis AMR sensor, etc., among which the major mobile phone manufacturers have completed the evaluation of the single-chip ultra-small size three-axis AMR magnetic sensor, and some are doing small batch production, which can be expected to continue to seize the share of foreign competitors.

Profit forecast and valuation. When the LED chip is in the doldrums, the company still maintains a high profit level, and when the industry recovers, the company's position in the industry will be more stable, and profits will continue to be released; MEMS business will bring new and stable profit growth, and we expect the company to maintain high growth in the next few years. We estimate that the company's revenue from 2018 to 2020 will be 37.37 pounds 51.08 / 6.916 billion, and the net profit of return to the mother will be 7.9 hundred and fifty-six million.

Risk hint. The downstream demand of LED shrinks; the price of LED chip fluctuates; MEMSIC integration is not as expected.