Key elements of the report: As a leading enterprise in the domestic germanium industry chain, Yunnan germanium is rich in germanium ore resources, and has the highest sales volume of germanium products in the country. It is currently the largest manufacturer and supplier of germanium series products in China. The company accelerated the expansion of the downstream industry chain and established subsidiaries to sell downstream germanium products and non-germanium semiconductor materials. Driven by the rise of 5G, demand for downstream germanium products and rising germanium prices, the company's future development will improve. Investment points: The price of germanium is expected to rise, and the operating income of the company's material-grade germanium products will rise somewhat: China is the largest producer of germanium ore, but in recent years, due to the impact of environmental protection policies and strategic resource protection for rare metals, China's germanium ore production has declined year by year. At the same time, germanium is widely used in civilian and military applications. Coupled with the increase in demand for germanium products by 5G, germanium consumption is increasing year by year, and germanium prices are expected to rise in 2020. The company's material-grade germanium products have always accounted for a large share of the company's revenue sources. Affected by the recovery in germanium prices, the company's operating income is expected to increase. 5G will drive sales of the company's fiber-grade germanium products: The application and demand for 5G mobile communications will continue to deepen in 2020. It is expected that 600,000 5G base stations will be built by the end of the year, which will also drive demand for germanium for optical fiber. According to estimates by the China Industrial Information Network, the demand for germanium in optical fiber is expected to reach 110 tons in 2021. The company currently has a production capacity of 60 tons/year of germanium tetrachloride for optical fibers, and has stable customers such as Changfei Optical Fiber and Fenghuo Communications. The development of 5G will benefit the sales of the company's fiber-grade germanium products. Demand for gallium arsenide has increased dramatically in the 5G era, which will drive a sharp increase in corporate profits: the three key technologies facing the 5G era, millimeter wave, large-scale array antenna technology, and small base stations, will make extensive use of RF (radio frequency components), which will be widely used in gallium arsenide. According to Yole's forecast, the global market for gallium arsenide components will reach $15.71 billion in 2024. The company currently has a gallium arsenide single-chip production line with a production capacity of 800,000 pieces/year (equivalent to four inches). The product structure has also gradually changed from the original LED grade products to low misalignment and semi-insulation levels, which are more in line with market demand. It is expected that 5G development will drive the company's gallium arsenide profit to increase dramatically. Profit forecast and investment advice: We expect that in 20-22, the company's net profit will be 2426, 12.8 million, and 24.82 million yuan respectively. Benefiting from downstream 5G development, the company's germanium product sales and company performance will improve expectations, giving it a “wait-and-see” rating. Risk factors: fluctuations in germanium prices; declining sales of germanium products; demand for fiber-grade germanium products and non-germanium semiconductor material grade products falls short of expectations.