Incident: The company announced the 2019 plan for the non-public issuance of A-shares. The total amount of capital to be raised is not more than 750 million yuan. After deduction of issuance fees, it will be used for: (1) high-speed optical module and 5G wireless communication network optical module projects; (2) supplementary liquidity projects. The construction period for the fund-raising project is 1 year. After production is reached, the company will have an annual production capacity of 1.01 million 100G optical modules, 50,000 200G optical modules, 180,000 400G optical modules, and 1.35 million 5G wireless communication network optical modules. Data centers and telecom optical modules are growing rapidly, and the industry is booming. LightCounting expects that between 2018 and 2024, the sales volume of the global optical module market will grow from US$6 billion to US$15.8 billion, with a compound annual growth rate of 17%; of these, sales of the global data communication optical module market will grow from US$4 billion to US$12 billion, with a compound annual growth rate of 20%; global 5G wireless communication network optical module sales will grow from US$300 million to US$1.3 billion, with a compound annual growth rate of 25%. As global commercialization of 5G kicks off to promote the explosion of traffic, the large increase in east-west traffic in IDC data centers has promoted the upgrading of optical modules. As the core device for optical communication, the market size of optical modules is rapidly expanding. Endogenous epitaxial invigorates the optical module business, and raises investment to expand production and enhance comprehensive capabilities. The company began focusing on and developing optical devices in 2009. In 2017, the company set up an optical device division dedicated to expanding the optical module business. In 2018-2019, the company separately acquired some assets of Macom Japan/OClaro Japan, obtained technical data, intellectual property rights, and production technology for data centers and telecom-grade 100G and higher speed optical modules and their components, and gained advantages in the 400G and optical module fields based on the latest PAM4 modulation technology. The company's fund-raising project will greatly increase the production capacity of the company's high-speed optical modules and 5G optical modules, promote the transfer of production capacity to the domestic market, thereby reducing product costs and enhancing product competitiveness, thereby enhancing the company's market share and industry position. Profit forecast: Net profit from 2019 to 2021 is expected to be 1.29/2.34/325 million yuan respectively. The current PE corresponding to the dynamic stock price is 31X/17X/13X, maintaining the “buy” rating. Risk warning: M&A integration falls short of expectations; 5G and digital communication markets fall short of expectations.