The performance was in line with expectations, and 2019 entered a period of accelerated growth.

In 2018, the operating income was 1.169 billion yuan, 25% of the same period last year, and the net profit was 72 million yuan, down-11.8% from the same period last year. In 2019, Q1 achieved revenue of 231 million yuan, an increase of 16.5 percent over the same period last year, and net profit of 12 million yuan, an increase of 76.8 percent over the same period last year. The company's performance is within the scope of the forecast, in line with market expectations. The company's 2019Q1 gross profit margin has improved relative to 2018Q4, and higher than the 2018Q1 gross profit margin level, the profitability has improved steadily. In March 2019, the company began to deliver a batch of fingerprint lenses under the phone's optical screen, and the company's fundraising capacity will be released in the middle of the year. We believe that the company will enter a period of accelerated growth in 2019.

The ultra-high definition video policy catalyzes the security lens to enter a new stage of rising volume and price.

In March 2019, the Ministry of Industry and Information Technology, the State Administration of Radio and Television and the Central Radio and Television General Station jointly issued the Action Plan for the Development of Ultra High definition Video Industry (2019-2022). The Action Plan puts forward the development goals of China's UHD video industry by 2022. Under the guidance of policies and the active input of resources from all parties, the overall size of the industry is expected to exceed 4 trillion yuan, the number of UHD video users has reached 200 million, the 4K industrial ecosystem has been basically improved, and breakthroughs have been made in the R & D and industrialization of 8K key technology products, forming a good pattern of coordinated development of technology, products, services and applications. We believe that the launch of the "Action Plan" will directly benefit the high-end security lens suppliers represented by United Optoelectronics. In the future, with the continuous upgrading of the security video surveillance system, the security lens will enter a new stage of development with both quantity and price rising.

Cut into the fingerprint market under the optical screen, and the growth space opens quickly.

The first quarterly report of United Optoelectronics in 2019 revealed the development of new business, the stable delivery of ultra-short focus laser projection lenses, and the mass production and delivery of fingerprint lenses under the optical screen of mobile phones in this quarter. We believe that 2019 is the year of the outbreak of fingerprints under the optical screen, United Optoelectronics can quickly cut into the domestic brand mobile phone industry chain and seize the opportunity of industrial explosion, reflecting the company's strong R & D capability and industrial chain status.

Investment advice: upgrade to "buy" rating

We are optimistic about the company's entry from the traditional security lens market to the under-screen fingerprint market, and the company's growth space is expected to double. It is predicted that the net profit of the company from 2019 to 2021 will be RMB 1.71 billion, respectively, and the current stock price corresponding to PE will be 46.3 pound, 25.1 and 19.3X respectively. Upgrade to "buy" rating.

Risk Tips:

Customer demand is lower than expected, upstream raw material prices fluctuate.