In 2018, the company achieved operating income of 3.156 billion yuan, an increase of 26.94% over the previous year, and realized net profit of 76.78 million yuan to mother, an increase of 26.69% over the previous year. Key points supporting the rating The company's revenue has grown steadily, and the optical module business has performed well. The company's operating conditions continued to improve in 2018. Operating revenue increased 26.94% year on year and net profit to mother increased 26.69% year on year. The performance was in line with expectations. In the new business area, the company's integration of technology, personnel, and customers of the acquired MACOM Japan is progressing smoothly. The annual sales revenue of high-speed optical modules is 53.3 million yuan, accounting for 2% of the company's overall revenue, and the product gross margin exceeds 31%. It will then be merged into the newly acquired Oclaro Japan Asset Company. The company is rapidly rising as a new force in the optical module field. New and old businesses develop collaboratively to open up room for future growth. The company continues to accelerate internal business adjustments. While consolidating the steady growth of traditional broadband access devices, the company is actively promoting business development such as switches, wireless products, and high-end optical modules. Sales of the company's small base station products increased significantly in 2018, and stable supply channels have been formed in Japan and South Korea. In terms of optical modules, the company has completed localized production of some products, and the product yield and efficiency are superior to similar industry levels at home and abroad. Through the integration of optical communication product lines, the company is expected to stimulate more synergy effects and open up room for growth. Overseas technology is beginning to take shape, and the 5G layout seizes market opportunities. After the merger and acquisition of Oclaro's assets, the company has the ability to develop and produce communication optical modules that meet 5G requirements. Currently, the Shanghai production base has deployed a 100G LR4 production line, and it is expected that future communication optical module product series will also be launched. At the same time, the company is also continuously increasing R&D investment in 5G and 4/5G compatible indoor small base stations. In 2018, more than 40,000 4/5G compatible small base stations were shipped, and the estimated delivery volume is expected to be between 100,000 and 200,000 units in 2019. The company's advance layout will prepare it to seize the new opportunities brought by the 5G era. The valuation is based on 2018 results. We raised the company's EPS forecast for 2019-2021 to 1.06, 1.55, and 2.06 yuan, corresponding price-earnings ratios of 37 times, 25.2 times, and 19.1 times, respectively, maintaining the purchase rating. The main risks faced by ratings: Market macro risk; competition risk; management risk; new technology risk.