Description of the incident Pegasus International (002210) announced the 2012 semi-annual report. During the reporting period, the company achieved operating income of 3.846 billion yuan, an increase of 7.76% over the previous year, and an increase of 60.83% over the second half of last year; of these, the second quarter achieved revenue of 1,687 billion yuan, an increase of 9.47% over the previous quarter, and a decrease of 21.89% over the previous quarter. The company's operating expenses during the reporting period were 3.695 billion yuan, up 7.53% year on year and 68.6% over the second half of last year; of these, operating expenses for the second quarter were 1,604 billion yuan, up 8.27% year on year, down 23.28% from the previous quarter. During the reporting period, the company achieved net profit attributable to the parent company of 4,016,300 yuan and EPS of 0.121 yuan, an increase of 10.12% over the previous year; of these, net profit attributable to the parent company in the second quarter was 20.395,800 yuan, and the EPS was 0.051 yuan, an increase of 22.97% over the previous year. Incident reviews have been affected by the slump in coal trade, and revenue growth has stabilized over time: Due to the adverse effects of the macroeconomic and market environment, the gap between coal prices in Qinhuangdao and coal prices in Kengkou has continued to narrow this year, affecting customers' profit levels, reducing customers' enthusiasm to buy coal from multiple channels, and making it more difficult for the company to expand its business. Although the growth rate of the company's business is slowing down, judging from the company's market share estimates, the company's coal trade in the first half of 2012 accounted for 1.67% of the country's coal sales, and the company's share in the national market is still rising steadily. The slump in coal trade erodes the gross profit margin of the company's main business: Since the company's coal business, which accounts for the main revenue, is completed in the form of a buyout, and the value of goods is also included in revenue and costs, the calculation basis for gross margin has been expanded. The coal trade price spread continued to narrow in the first quarter of this year. In the same revenue situation, the narrowing of the price spread meant a reduction in the company's gross profit margin. We believe that this will erode the company's gross profit margin to a certain extent, while the relative recovery in coal trade price spreads in the second quarter also improved the company's gross margin in the second quarter. Business development drove up financial expenses, and the increase in the three fees narrowed: during the reporting period, financial expenses increased by 44.03% compared to the same period last year. At the same time, the company's sales expenses and management expenses fell by 18.68% and 3.82% respectively compared to the same period last year, indicating that the company's ability to control three fees has improved. Coal may continue to be sluggish in the second half of the year, and steady progress in trading business is still worth looking forward to. Maintaining “careful recommendations”: According to the opinion of our company's coal group, the continued slump in the coal market in the second half of the year or a probable event will affect the company's profitability and business expansion to a certain extent. There are strong customers upstream and downstream of the coal trading business. Building a coal trading platform is a long-term project, but the scale of trade that continues to grow will gradually become the company's moat. The company's share of electricity and coal trade in the national market has been rising steadily in recent years. The expansion and diversification of the trade scale will provide the company with more and more ability to withstand risks. At the same time, since the company's resale of inventory fell by 20 million yuan last year, it will provide a certain guarantee for the future performance of the company. The EPS for 2012-14 is expected to be 0.34 yuan, 0.42 yuan, and 0.57 yuan, respectively, to maintain “careful recommendation”.