Matters: The company announced its 2018 financial report. In 2018, the company achieved revenue of 4.03 billion yuan (8.22% YoY), net profit attributable to shareholders of listed companies of 209 million yuan (-40.91% YoY), earnings per share of 0.29 yuan, and the company plans to distribute a cash dividend of 3.00 yuan (tax included) for every 10 shares. Ping An's view: The automotive lighting business fell short of expectations, and impairment of goodwill dragged down the company's profits: in 2018, the company achieved revenue of 4.03 billion yuan (8.22% YoY), net profit attributable to shareholders of listed companies of 209 million yuan (-40.91% YoY), gross sales margin and net profit margin were 23.09% and 4.67%, respectively; gross margin increased 2.67 pct from 2017, and net interest rate fell 4.87 pct, mainly by the company in 2018 (mainly including 0.49 of financial assets available for sale) of 328 million yuan (including 0.49 of financial assets available for sale) 100 million yuan and goodwill impairment of 210 million yuan). By business: The revenue of LED packaging, automotive lighting, and vehicle networking was $2,955 million (-5.11% YoY), $504 million (94.27% YoY), and $414 million (90.28% YoY), respectively, with revenue accounting for 73.81%, 12.59% and 10.33%, and gross margins of 22.51%, 21.40%, and 35.09%, respectively; on the cost side: 2018, the company's financial expenses rate, sales expenses rate, and management expense ratio (including R&D expenses) were 0.88%, 2.97% and 8.42% are basically the same as in 2017, and cost control is better. In 2018, Yishan's vehicle support project in Geely Boyue's headlight business was delayed for nearly half a year. The company's estimated impairment of goodwill was about 150 million yuan; its subsidiary, Gold Hardware, was affected by factors such as fluctuations in the consumer electronics industry. The company's 2018 performance promises fell short of expectations. The company's estimated impairment of goodwill by about 600 million yuan, and short-term impairment in goodwill dragged down the company's profit performance. Relying on Jinduo's investment, we wait for downstream demand to pick up: the company has strengthened internal lean production management and the capacity utilization rate of the Jiangxi LED packaging production base continues to increase. The overall yield of the company's LED packaging business products has reached more than 90%, but due to the macroeconomic impact on downstream LED demand, the revenue growth rate of the company's packaging business has slowed. In the long run, the production capacity of large packaging manufacturers continues to expand, while small and medium-sized enterprises are at a disadvantage in terms of brand, capital, technology, scale, and production capacity. Some technologically backward enterprises have gradually withdrawn from the market, and Hongli has basically achieved its own production in upstream raw materials, etc., so its market share is expected to continue to increase. Furthermore, the popularity of the LED small-pitch market is still high. At the same time, mini LED products are expected to gradually be launched in the second half of the year, which will have a certain effect on boosting the recovery of the LED industry chain. In 2018, Jinduo Investment became the largest shareholder of a listed company through equity transfer and held a total of 29.88% of the company's shares through an increase in holdings. As a wholly-owned subsidiary of Luzhou Laojiao, Hongli is backed by Jinduo Investment and can receive financial support. Investment strategy: The company implements lean management. In the context of fierce market competition, it still maintains a stable gross margin of LED packaging, and lays out the automotive lighting sector through mergers and acquisitions of Forda Signal and Yishan headlights. Considering the weakness in overall LED demand, we lowered the company's performance forecast. The company's net profit for the year 2019-2021 is estimated to be 4.40/5.49/674 million yuan (original value in 19/20 was 4.78/604 million yuan). The corresponding PE was 13/11/9 times. Considering the company's low valuation, maintaining the company's “recommendation” ” Ratings. Risk warning: 1) Risk of exchange rate fluctuations: Some of the company's main business sells overseas and uses foreign currency calculations. Exchange rate fluctuations will have a certain impact on its financial expenses. 2) Relative customer concentration risk: The company's customer concentration is relatively high. Changes in major customers or poor sales conditions will affect the company's performance. 3) Risk that the growth rate of downstream applications falls short of expectations: The company's downstream application fields include consumer electronics, automobiles, etc. When the macroeconomic economy fluctuates, the growth rate of the downstream application sector falls short of expectations and has a certain impact on the company's performance. 4) Technology replacement risk: With the development of technology, the speed of technology replacement is increasing day by day. If the company does not make good technical reserves, it will have a certain impact on the company's performance.