Incidents Helitai released its 2018 semi-annual report. 2018H1 achieved operating income of 8.502 billion yuan, an increase of 40% over the previous year, and realized net profit of 698 million yuan and 511 million yuan, respectively, up 37% and 22% year-on-year respectively. The company expects net profit of 11.82 to 1,275 billion yuan from January to September, an increase of 30% to 40% over the previous year. Revenue and net profit continued to grow, and gross profit margin and expense ratio remained stable. 2018H1 achieved operating income of 8.502 billion yuan, an increase of 40% over the previous year. 2018Q2 achieved revenue of 4.848 billion yuan, an increase of 31% over the previous year. The company achieved net profit of 698 million yuan, an increase of 37% over the previous year. Net profit after deducting non-return to the mother was 511 million yuan, an increase of 22% over the previous year. 2018Q2 achieved net profit of 407 million yuan, a year-on-year increase of 34%. Net profit after deducting non-return to the mother was 313 million yuan, an increase of 14% over the previous year. The period fee rate was 8.98%, an increase of 0.55 percentage points over 2017, mainly due to the increase in the financial expense ratio. The management fee rate was 5.75%, an increase of -0.55 percentage points compared to 2017. The sales expense ratio was 1.02%, an increase of 0.06 percentage points over 2017. The financial expense ratio was 2.22%, an increase of 1.05 percentage points over 2017. The cost rate for the 2018Q2 period was 9.3%, an increase of 1.5 percentage points over the previous year and an increase of 0.73 percentage points over the previous year. The management expense ratio was 5.44%, up -0.33 percentage points year on year, and -0.72 percentage points over month. The sales expense ratio was 1.07%, up 0.16 percentage points year on year and 0.11 percentage points month on month. The financial expense ratio was 2.79%, up 1.67 percentage points year on year and 1.33 percentage points month on month. The company's gross profit margin was 17.04%, an increase of -0.1 percentage points compared to 2017. The net profit margin was 8.04%, an increase of 0.32 percentage points. The gross profit margin of 2018Q2 company was 17.12%, up -0.4 percentage points year on year and 0.19 percentage points month on month. The net profit margin was 8.24%, up 0.06 percentage points year on year and 0.47 percentage points month on month. The new production capacity was gradually released, and the penetration rate of first-line customers increased rapidly. Cameras, e-paper, biometrics, and FPC circuit boards for the new projects invested by the company in the early stages were gradually put into production. Production capacity was further released, product structure and customer structure were further optimized, and sales volume and profit increased year-on-year. The integration of supply chain resources has been strengthened, procurement mechanisms have been optimized, and the industrial chain layout has become more reasonable. The company develops COF products combined with FPC to help customers develop to full screens while expanding markets in automotive, industrial control, and medical fields. The company expanded camera production capacity and upgraded technology, built a new single-camera, dual-camera, and triple camera production line in Nanchang, and established an industrial control and vehicle camera production base in Shandong. The company's touch display business has the highest domestic shipment volume in the industry. The company has expanded FPC production in Shenzhen, Wan'an, Xinfeng, etc., and is in a leading position in China in terms of production capacity, and has provided products and services to important customers around the world. In the field of 5G materials, the company's subsidiary acquired Andinuo, further mastered the core processes of LCP materials, high-frequency composites and COF, and improved the 5G ecosystem layout. Nanocrystalline materials, wireless charging modules, finished products, and absorbent materials have been mass-produced, providing products and services to first-tier customers at home and abroad. The company expects net profit of 11.82 to 1,275 billion yuan from January to September, an increase of 30% to 40% over the previous year. The net profit of 2018Q3 was 484-577 million yuan, an increase of 22% to 45% over the previous year. The company strengthens its position as a leading enterprise in the core components of smart terminals in China through the supply of 1+N full core components. The company's penetration rate among first-tier customers at home and abroad has increased rapidly, focusing on high-tech barriers and high-margin products. The product range is becoming more and more rich, and we are optimistic that the company will develop rapidly under smart terminal innovation and 5G trends. Profit forecasts and investment recommendations expect the company's EPS from 2018 to 2020 to be 0.55, 0.82, and 1.04 yuan respectively, corresponding to 12, 8, and 6 X PE, respectively. It was covered for the first time, and a “increase in holdings” rating was given. Risk warning 1. Risk of new product development progress falling short of expectations; 2. Risk of major customer penetration falling short of expectations; 3. Risk of new application promotion falling short of expectations; 4. Risk of smart terminal shipments falling short of expectations.