Event: The company released its semi-annual report, with operating income of 23.465 billion, yoy -0.53%, net profit of 502 million yuan, yoy +2290.28%. Comment: The company is a leader in optics in China. It has beta and alpha logic in the 5G era. The touch display focuses on the main optical business, fixed growth and expansion of production continues to increase high-end optics, and profitability from a fundamental perspective continues to improve. Equity transfer+state-owned equity investment successfully relieved financial pressure, firmly optimistic about optical innovation and upgrading, and continued recommendation! The interim report was in line with expectations, and rising profits strengthened the leading position. The company's 20H1 net profit was 520 million yuan, yoy +2290.28%, of which net profit for Q2 was 389 million yuan, yoy -12.96%. In the context of divesting the touch business of non-major customers, the company's 20h1 revenue was basically flat, and the leader showed steady growth. By business: 1) Optical and optoelectronic products: revenue of 18.197 billion yuan, YOY -2.30%, mainly due to the Android touch business announcement, but the increase in orders from major international customers has led to an increase in the company's capacity utilization rate and dual camera share. Among them, Android camera module revenue is 11.712 billion, yoy -0.02%, gross profit margin 11.08%; non-Android video module revenue is 3.673 billion, yoy +95.95%, gross profit margin is 10.94%; touch revenue is 2,677 billion, yoy -44.30%; and optical lens revenue is 364 million, yoy +13.33%. 2) Microelectronics products: revenue of 4.464 billion, yoy -3.29%, including fingerprint recognition module revenue of 2,701 billion yuan, yoy -3.29%, and gross profit margin of 15.50%, mainly due to the underscreen fingerprint market penetration rate falling short of expectations; 3Dsensing business revenue of 1,763 billion, yoy +79.83%, gross profit margin of 12.23%, mainly due to increased orders from major international customers+increased product penetration rate; 3) Smart cars: revenue of 132 million yuan, yoy -35.14%, gross margin of 14.28%. The optical industry has ushered in a boom, and the leading edge is obvious. The company's competitive advantage is obvious: it has a first-mover advantage in high-pixels/multi-camera/3DSensing/ToF modules, and is a camera module enterprise that binds the two major mobile phone oligarchs of Huawei and Apple at the same time in China. In the 5G era, the company's camera sector combines beta and α logic, beta:1) 5G shipment volume repair and increased industry concentration; 2) Apple customers entered the “super cycle” of ID innovation+5G communication replacement in 2020; 3) three major optical upgrade trends: high pixel price, continuous penetration of multiple cameras, and 3Dsensing/Tof; expansion of two major application scenarios: IoT (smart TVs, etc.), VR\ AR; α: The concentration of the camera module industry has increased, and high-quality production capacity is scarce in the 5G era. And the company Shangyan Industrial Chain has acquired a lens patent, and the company's profitability has increased its elasticity. Leading fingerprint recognition companies continue to benefit from increased penetration of fingerprints under the screen. The company has achieved large-scale mass production of optical and ultrasonic underscreen fingerprint recognition modules, and is currently a scarce supplier of underscreen fingerprint recognition modules. Under the trend of full-screen fingerprinting, the penetration of off-screen fingerprints is accelerating. According to an Insight Consulting report, the market size is expected to reach around 17 billion yuan in 2023, and the CAGR is 106% in 18-23. The company will continue to benefit from the increase in the growth rate of off-screen fingerprint penetration. Investment advice: Considering the impact of the global pandemic, net profit for 20-21 is expected to be 1,675 billion yuan or 2,235 billion yuan, maintaining the “buy” rating. Risk warning: product penetration falls short of expectations, major customer progress falls short of expectations, and the competitive landscape intensifies;