Event description Pegasus International (002210) today released its report for the third quarter of 2012. In the first three quarters, the company achieved operating income of 6.528 billion yuan, an increase of 46.8% over the previous year; of these, the third quarter achieved revenue of 2,682 billion yuan, an increase of 205.55% over the previous quarter, an increase of 59.02% over the previous quarter. The company's operating expenses for the first three quarters were 6.329 billion yuan, up 48.88% year on year; of these, operating costs for the third quarter were 2,634 billion yuan, up 222.66% year on year and 64.20% over the previous quarter. During the reporting period, the company achieved net profit attributable to the parent company of 60.4 million yuan and EPS of 0.1519 yuan, an increase of 19.95% over the previous year; of these, net profit attributable to the parent company in the third quarter was 12.4 million yuan, and achieved EPS of 0.0312 yuan, an increase of 76.68% over the previous year and a decrease of 39.29% over the previous year. Incident review: Revenue increased sharply from the same period last year, and the base figure rose, and the growth rate declined: We believe that the company's record high in revenue in the third quarter was due to the company's continuous expansion of coal trade execution business; otherwise, the company's overall revenue growth rate was significantly lower than the same period last year. After the low base effect, the growth rate began to gradually return to normal. Coal trade is sluggish, model profitability is poor, and gross margin continues to decline: Beginning in the first quarter of this year, the price spread in coal trade continued to narrow. In the same revenue situation, the narrowing of the price spread meant a reduction in the company's gross profit margin. We believe that since the revenue growth in the third quarter was mainly due to the expansion of the coal business, the company's port coal model profitability and barriers were low, the narrowing of the coal price gap was bound to reduce the company's gross margin space. Expense control was strong, and performance increased slightly year on year: in the first three quarters, the company's sales expenses decreased by 22.37% year on year, and financial expenses decreased by 8.54% year on year. The reduction in the absolute value of the company's three fees shows the company's good ability to control the three fees, while the reduction in the rate is related to a significant increase in revenue. During the reporting period, the company achieved net profit attributable to the parent company of 60.41 million yuan, achieved EPS of 0.1519 yuan, a year-on-year increase of 19.95%, and the growth rate was lower than our expectations. According to our estimates, after removing the impact of impairment preparations and investment income, the company's net profit after tax in the first three quarters increased 23.95% compared to the same period last year. While gross profit only increased 2.35% year-on-year, the company's strong control of the three fees is a rare highlight of the company's lack at this stage. The contribution of the new platform is still unclear, and “careful recommendation” is maintained: we believe that the coal market in the second half of the year may have improved, which will have some positive effects on the company's profit margin. However, since building a coal trading platform is a long-term project, the company is still at the stage of “exchanging profits for customers,” and the company's profit model is still focused on port coal trading, there are few intermediary charging links, and its contribution to long-term performance is still uncertain. Considering that the fundraising project for the construction of the company's coal supply chain network is expected to be completed by the end of the year, the company's revenue may increase further at that time, but model disadvantages still pose a risk of declining gross margin. The EPS for 2012-14 is expected to be 0.24 yuan, 0.29 yuan, and 0.38 yuan respectively, maintaining the “careful recommendation” rating.