Loss-making companies in 2019 announced 2019 results: operating income of 420 million yuan, down 10% year on year; net profit of $0.6 billion, down 7.9 times/$0.7 billion, corresponding profit per share of -0.09 yuan, which is basically in line with the performance report. The large year-on-year decline in profit was mainly due to declining volume and prices and sharp increases in expenses and impairment. 4Q19 revenue was 86 million yuan, -41% y/y /17 percent; net profit was 48 million yuan; year-on-year net profit was 48 million yuan, and -46 million yuan/month over year - 46 million yuan. The decline in volume and price suppresses profit performance. In 2019, the average price of germanium oxide in China fell 24% year on year, and the company's overall gross profit margin (excluding taxes and surcharges) fell 4.9ppt year on year. In 2019, sales of infrared grade, optical fiber grade and photovoltaic grade products fell 43%, 25%, and 53% year on year. Although sales of material-grade germanium products increased 17% year on year, their gross profit still fell by 8.81 million yuan year on year. Expenses and impairments have increased significantly. In 2019, the company's sales+management+R & D+financial expenses increased 20% /0.2 billion yuan year-on-year, of which financial expenses increased significantly. Asset+credit impairment losses increased 9 times y/11 million yuan year-on-year, mainly due to a decline in inventory value due to a correction in germanium prices. The development trend in 2020 led to a year-on-year increase in production. The company guided production of 26.5 tons of material-grade germanium products, 6.5 tons of infrared-grade germanium products, and 26 tons of fiber-grade germanium products in 2020, up 3%, 45%, and 41% year-on-year. New chip projects create profit growth points. The company recently announced that it plans to build a germanium chip production line for solar cells and an indium phosphide single chip production line. The production capacity is 200,000 pieces of 6-inch germanium single wafer/year and 150,000 4-inch indium phosphide single wafers per year, respectively, which will provide the company with new profit growth points. 5G construction in 2020 is expected to support germanium prices. 2020 is a year of overall acceleration of 5G construction. Connecting acer and micro base stations to existing network topologies will generate new optical fiber demand. CICC Electronics Group expects the national fiber demand to grow 21% year-on-year in 2020. Nearly 1/3 of the world's germanium is used in the field of optical fibers. We believe that 5G is expected to have a strong supporting role in germanium prices. Profit Forecast and Valuation We maintain our 2020 profit forecast of 100 million yuan and introduce a 2021 profit forecast of 0.2 billion yuan. The current stock price corresponds to a net market ratio of 4.3 times that of 2020. The neutral rating is maintained, but 5G is expected to support the germanium price. We raised the target price by 20% to 9 yuan, corresponding to 4.1 times the net market ratio in 2020, which is 5.5% lower than the current stock price. Demand for risky products fell short of expectations, and the price of germanium fell sharply.