1. The incident company released its 2018 semi-annual report. Operating income for the first half of the year was 8.502 billion yuan, up 39.51% year on year; net profit from net profit of 698 million yuan, up 36.67% year on year; net profit after deducting net profit of 511 million yuan, up 21.52% year on year; and EPS was 0.22 yuan. The company expects net profit of 1,182 million yuan to 1,275 million yuan in January-September, a year-on-year increase of 30.21% to 40.45%. 2. Our analysis and judgment (1) Module product production capacity release. FPC was slightly lower than expected in the first half of the year. The company's touch display products achieved revenue of 5.358 billion yuan, a year-on-year increase of 33.76%, a year-on-year decrease of 14.99%, a year-on-year decrease of 1.74%, mainly due to the increase in the company's first-tier brand order share, industry competition was intense, and gross margin was under pressure; camera modules achieved revenue of 956 million yuan, an increase of 90.98% over the previous year, mainly because the company successfully became a first-tier brand supplier and production capacity was released last year; FPC products achieved revenue 526 million yuan, an increase of 19.84% over the previous year, slightly below expectations. Mainly due to the long certification period for customers with new production capacity, the release of production capacity at the Jiangxi Xinfeng Plant did not meet expectations. (2) Growth throughout the year is highly certain, and the material layout is waiting for the company to continue to expand major customer resources, such as cooperating with Xiaomi to build a factory in India, etc., and is expected to further increase the share of first-tier customers in the second half of the year, helping the touch display business achieve steady growth of about 20%; camera modules are expected to continue to increase, capacity utilization is further increased, and is expected to achieve growth of about 110% throughout the year; the new production capacity of the FPC business is already in place. After customer certification is passed in the second half of the year, it is expected that production capacity will gradually be released, achieving growth of about 50%; the company will lay out the materials sector ahead of schedule, in EMI absorption and EMI Leading technology in the fields of shielding materials and wireless charging, it is expected to receive product development cooperation projects and orders from major international customers, and it is expected that 5G will explode after speeding up. In the first half of the year, the company spent 277 million yuan on R&D, an increase of 42.58% over the previous year. It continued to lay out and deepen R&D cooperation with major customers in the field of materials. Overall, we expect the company to achieve a revenue growth rate of around 26% throughout the year, with high performance certainty. 3. Investment recommendations The company's share of revenue from major customers has further increased. The growth of the module business is highly certain, and the prospects for FPC and materials businesses are promising. The company's net profit for 2018-2019 is estimated to be 1,755 billion yuan and 2,321 billion yuan respectively, and corresponding earnings per share are 0.56 yuan and 0.74 yuan respectively. The current stock price corresponds to a price-earnings ratio of about 11 times in 2018. The company has broad room for growth, low valuation, and maintains a “recommended” rating. Risk warning: The risk that downstream applications fall short of expectations and that R&D progress falls short of expectations.