Performance Brief Review Driven by a sharp 56% year-on-year increase in Eleven Technology's cleanroom turnkey business, Taiji announced a 30% year-on-year increase in revenue last year (6% higher than the previous estimate), superior to Tongfu Microelectronics's 11% year-on-year increase and Huatian Technology's 1% year-on-year increase. Coupled with a better gross profit margin, Taiji announced that the parent company's net profit increased by 37% last year (25% higher than estimated), reaching 0.27 yuan EPS, and ROE also increased from 6.8% in 2017 to 8.9% in 2018. Operating analysis's gross margin was better than expected: due to engineering design gross margin (47.5% vs. 45% previously estimated) and Haitai and Taiji Semiconductor's memory sealing gross margin ratio (16.7% vs. 12.5% previously estimated), Taiji Industrial announced a gross margin of 13.3% in 2018 (higher than the previous estimate of 12.6%). Better free cash flow than peers: The ratio of capital expenditure to revenue fell sharply from 12% in 2017 to 6.5% in 2018. Instead, it was lower than (net profit+depreciation and amortization) of 8.1% of revenue. This enabled Taiji to generate nearly 1 billion yuan in additional cash in 2018, which outperformed the industry's cash outflow. The profit adjustment takes into account short-term downside trends in the memory industry. We lowered profits by nearly 5% in 2019 and raised profits by nearly 2% in 2020. We expect revenue to decline by 8% in 2019 and increase by 16% in 2020, which is lower than Wande's 4% and 29% year-on-year growth. We expect profits to decline by 13% in 2019 and increase by 43% in 2020. Investment advice While investors are already looking forward to the recovery of the semiconductor and memory industry in 2020-2021, and benefiting from mass production by Hefei Changxin and Changjiang Storage, we raised the target price from CNY$9.4 in the average valuation to CNY$11.7 in the upward cycle valuation. We believe that with an ROE of 10-15%, the stock price should remain 3.0-4.0 times the net assets per share. Looking at the updated target price of CNY$11.7, the stock price is 3.2 times the net assets per share in 2021. We estimate that ROE will increase from 8.9% in 2018 to 12% in 2021. Risks indicate the risk of excessive customer concentration, the risk of the downturn in memory cycles to cash costs, the risk of inflexible management mechanisms of state-owned enterprises, and the performance risk caused by weak follow-up orders for clean room engineering and design business.