Event: The company released its 2020 semi-annual report on August 4. In the first half of 2020, the company achieved operating income of 23.465 billion yuan, a year-on-year decrease of 0.53%, gross margin of 10.77%, a year-on-year increase of 0.69pct, and net profit of 502 million yuan, an increase of 2290.28% year-on-year. Q2's single-quarter revenue was 13.699 billion yuan, up 5.93% year on year, gross margin was 11.15%, down 0.45 pct year on year, and net profit was 361 million yuan, up 30.12% year on year. Product revenue declined, and gross margin benefited from increased utilization rates. (1) Optical and optoelectronic products: Achieved revenue of 18.197 billion yuan, a year-on-year decrease of 2.3%, and gross margin of 10.06%, an increase of 1.15 pct over the previous year. Among them, camera revenue was 15.385 billion yuan, up 7.81% year on year, gross margin was 11.05%, up about 2 pct year on year. The increase in gross margin mainly benefited from changes in the product demand structure of Android terminal manufacturers, as well as full demand for non-Android orders, and increased capacity utilization and share. During this period, the gross margin of non-Android customers changed from negative to positive, rising from -0.3% to 10.94%; the touch business changed due to independent development of the Android touch business, product structure changed, and revenue was 2,677 billion yuan, down 44.3% year on year; camera business revenue was 364 million yuan, up 1.3% year on year, and internal self-supply ratio further increased. (2) Microelectronics products: Achieved revenue of 4.464 billion yuan, a year-on-year decrease of 3.29%, and gross margin of 14.21%, a year-on-year decrease of 0.22pct. Among them, the fingerprint identification module was intensified by market competition, and the penetration rate fell short of expectations, and revenue and gross margin both fell year-on-year; 3D sensing revenue was 1,763 billion yuan, up 79.83% year on year, and gross margin also changed from negative to positive, from -0.3% to 12.23%, mainly benefiting from increased orders from major international customers and rapid growth in the penetration rate of related products in the Android market; smart car business revenue was 132 million yuan, down 35.14% year on year, mainly due to a decline in automobile sales. Expenses have declined due to the pandemic, and the company's profitability has improved. The company's expense ratio declined during the period due to the pandemic. Among them, the sales expense ratio was 0.33%, down 0.12pct year on year, mainly due to the reduction in travel expenses; the management expense ratio was 2.08%, down 0.02pct year on year, the R&D expense rate was 3.04%, down 0.26pct year on year, and the financial expenses rate was 1.93%, down 0.33pct year on year. Give a “buy” rating. We are optimistic about the long-term benefits brought to the company by optical innovations such as multi-imaging, 3D sensing, and fingerprint recognition. It is estimated that the EPS in 2020-2022 will be 0.54/0.74/0.90 yuan, and the corresponding PE will be 37.86/27.50/22.72 times. First coverage, giving a “buy” rating. Risk warning: The epidemic has not been controlled as expected, and customer product sales have fallen short of expectations.