Profitability has been achieved for many consecutive quarters, and profitability has continued to improve. From the second quarter of 2019 to the second quarter of 2020, the company achieved net profit attributable to the owners of the parent company in a single quarter of 278 million yuan, 160 million yuan, 329 million yuan, 141 million yuan, and 361 million yuan, respectively. In the first half of 2020, the company achieved operating income of 23.465 billion yuan, a year-on-year decrease of 0.53%, mainly due to the independent development of the Android touch business. In the first half of the year, the company achieved net profit attributable to shareholders of listed companies of 502 million yuan, a sharp increase of 2,290.28% over the previous year. The company has achieved positive earnings for 5 consecutive quarters. In particular, in the face of the impact and impact of the COVID-19 pandemic this year, the company has maintained good profitability. Overall, the company's operations have returned to a steady state. In the first half of 2020, the company's gross margin was 10.77%, an increase of 0.69 percentage points over the previous year. Its major international clients contributed greatly to the increase in gross margin, benefiting from the increase in mobile phone product sales volume and further deepening cooperation among major international customers. The company's non-Android video module product sales revenue was 3.673 billion yuan, up 95.95% year on year, shipment volume was 55 million units, up 30.34% year on year, and comprehensive gross margin was 10.94%, up 11.24 percentage points year on year, mainly because the increase in orders from major international customers led to increased capacity utilization Also, the share of dual camera modules has increased. Focus on the optical circuit, focus on high-margin product business breakthroughs, and the company is on the optical circuit. The number of camera module shipments is number one in the world. Smartphones have moved from a single camera to the era of multiple cameras, and the market space is constantly opening up. Yole predicts that the global camera module market will maintain a compound annual growth rate (CAGR) of 9.1% from 2018 to 2024, and is expected to reach 45.7 billion US dollars in 2024. The company's technology research and development team has made continuous breakthroughs. The self-developed high-pixel super-resolution algorithm has been recognized and applied by customers, the super EIS anti-shake algorithm has reached the top level in the industry, CMP's new packaging process products have been mass-produced, and the technology development of 5x periscope zoom and 10x continuous zoom technology has been completed. The company also continues to deepen cooperation with major international customers to achieve an upgrade from a single front camera to a dual rear camera project. As one of the key breakthroughs in the vertical integration of the company's industrial chain, the company's optical lens business is progressing smoothly. In 2019, it achieved revenue of 685 million yuan, and the comprehensive gross margin of lens products was 25.52%. Judging from industry experience, there is still plenty of room for improvement. The company has successfully developed and mass-produced 48 megapixel 6P optical lenses, as well as multi-performance products such as telephoto lenses, macro lenses, and ultra-wide-angle lenses, and has successively entered the lens supply chain of mainstream domestic mobile phone manufacturers. High-margin products such as the lens business are expected to bring great flexibility to the company's business performance. The microelectronics business grew rapidly, and market space continued to open up the company's off-screen fingerprint business developed rapidly in 2019. Underscreen optics is expected to continue to achieve rapid growth along with the rapid penetration of OLED-screen smartphones. In terms of OLED panel production lines, mainland China is actively putting into production. According to statistics from the CCID think tank, the AMOLED production line that has been put into production or construction worldwide in the past three years has mainly been the 6th generation AMOLED (flexible) panel production line. Mainland China has the largest production capacity. By 2022, after all AMOLED production lines currently under construction are completed and fully produced, the total production capacity is expected to reach 33 million square meters/year, of which the total production capacity in mainland China will reach 19 million square meters/year, accounting for 58% of the world. With the gradual release of OLED production capacity, the market space for off-screen fingerprinting is expected to continue to open up. The off-screen ultrasonic fingerprint solution has formed a technical barrier due to the company's advantages in piezoelectric materials, manufacturing processes, etc. Currently, the off-screen ultrasonic fingerprint module company accounts for the first place in supply volume. The competitive pattern of industry segments is relatively good, and the gross margin level of business is high. As the off-screen ultrasonic solution begins to be tried to be introduced among domestic manufacturers, it is expected that the company will fully benefit. The company has a comprehensive layout in terms of structured light and ToF solutions, and has already begun mass production and shipment in various brand manufacturers. In the first half of 2020, the company's 3D sensing business achieved rapid growth. Revenue was 1,763 billion yuan, up 79.83% year on year, shipment volume was 44 million units, up 80.80% year on year, and comprehensive gross margin was 12.23%, up 12.53 percentage points year on year, mainly due to increased orders from major international customers and increased penetration rate of 3D sensing products in the Android market. The market expects that the two Pro/Max rear-facing cameras in the new generation iPhone in 2020 will be equipped with ToF cameras. At that time, the penetration of 3D Sensing is expected to accelerate, and the related industry chain is expected to enter a period of explosion. Promote non-public offering and build new momentum for performance growth On June 3, 2020, the company issued the “Non-public offering of A Shares Plan”. The number of A-shares for the current non-public offering does not exceed 808,421,797 shares (including 808,421,797 shares), not more than 30% of the company's total share capital before this non-public offering, and the total capital raised is no more than 6758 million yuan. The capital raised is mainly used for high-resolution optical lens construction projects, 3D optical depth sensor construction projects, high-resolution miniature camera module construction projects, R&D center construction projects and additional working capital. The company has long been engaged in the production and sale of optical optoelectronic products such as camera modules, optical sensors, and optical lenses. Most of the products are used in mobile terminals such as smart phones, tablets, and smart wearables, as well as new terminal applications such as in-vehicle cameras and security monitoring. In recent years, there has been a clear trend of upgrading demand in the terminal application market, leading to increasing demand for high-pixel lenses, high-precision optical sensors, and high-end camera modules from downstream manufacturers of the company. Assuming that the company's non-public offering is successfully implemented, the company's competitiveness and profitability are expected to reach a new level. The investment proposal remains unchanged from the previous forecast. The company's revenue for 2020 to 2022 is estimated to be 53,014 billion yuan, 69.66 billion yuan, and 68.282 billion yuan, respectively, and net profit of 1,599 billion yuan, 2.130 billion yuan, and 2,546 billion yuan respectively, corresponding to PE 36.58 times, 25.91 times, and 21.67 times, maintaining the “buy” rating. Risks suggest the continued adverse effects of the pandemic; the risk of corporate revenue falling short of expectations and falling gross margin due to increased competition in the industry; macroeconomic downturn, systemic risks; 5G commercial progress is below expectations; and the company's non-public offering falls short of expectations.