Key points of the report describe the events of Pegasus International (002210) announced the 2011 first quarter report. The main contents are as follows: in the first quarter of 2012, the company achieved operating income of 2.159 billion yuan, up 6.46% year on year and 42.67% over the fourth quarter of 2011; expenditure and operating costs for the first quarter were 2,091 billion yuan, up 6.96% year on year, up 52.04% from the fourth quarter of 2011; the company's comprehensive gross margin for the first quarter was 3.15%, up 5.97 percentage points from the previous quarter, down 0.45 percent from the same period last year One percentage point; the company achieved net profit attributable to the parent company of 276.205 million yuan, an increase of 2.24% over the previous year, a decrease of 4.63% over the fourth quarter of 2011, and achieved an EPS of 0.0903 yuan. The pressure to comment on the incident is beginning to show, and the growth of the coal business is slowing down. The company's revenue is mainly the coal supply chain business based on coal trade, which accounts for more than 90% of revenue. We believe the sharp decline in revenue growth this year may be due to a slowdown in the growth rate of the coal trading market. This year, the price difference between coal prices in Qinhuangdao and coal prices in Kengkou (5,800 kcal in unified conversion) continued to narrow, and fell markedly from the same period last 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. Costs have increased rapidly, and gross margin has declined slightly compared to that. Since the company's coal trade is the main source of 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 affect the company's gross profit margin to a certain extent. Three fees have been effectively controlled, and exchange earnings have increased performance. The company's expenses rate for the first quarter of this year was 1.67%, a decrease of 0.07 percentage points over the same period last year, and the company's three fees were well controlled. In order to avoid exchange rate risks, the company uses forward foreign exchange contracts during trade to avoid the risk of exchange rate changes. In the first quarter of this year, the company's profit from changes in the fair value of its transactional financial assets was 6.285,000 yuan, increasing performance by 0.02 yuan. Although the coal business was blocked, the month-on-month improvement still brought about a driving factor for performance growth, and “careful recommendations” were maintained. Price spreads in coal trade are cyclical to a certain extent. Prices in the first and second quarters are usually low, but the first quarter of this year was also relatively low compared to the same period in previous years. We believe that the month-on-month improvement in future price spreads will be the driving factor driving the company's revenue growth rate and improving gross margin. At the same time, since the company's resale inventory price dropped by more than 20 million yuan last year, this will also provide a certain guarantee for the company's future performance in the future. The EPS for 2012-14 is expected to be 0.359, 0.49, and 0.672 yuan respectively, maintaining the “careful recommendation” rating.