Main points of investment:

The company's performance fell 13.01% in the first three quarters, which was lower than we expected. In the first three quarters of 17 years, the company actively opened up the market, LNG trade distribution continued to volume, achieving operating income of 2.719 billion (YoY+92.05%), revenue growth mainly from the main business LNG trade and transportation business income growth. The company's operating cost in the first three quarters was 2.567 billion (YoY+100.55%), and the net cash flow generated by operating activities was 80.45 million yuan (YoY-11.58%), belonging to the parent company's net profit of 38.84 million yuan (YoY-13.01%). The decline in growth rate was mainly due to the lower-than-expected 17Q3 performance.

17Q3 is affected by the decline in gross profit margin and the growth of three fees. The company's 17Q3 single-quarter operating income is 1.171 billion yuan (YoY+119.52%,QoQ+38.53%), which belongs to the parent company's net profit of 8.72 million yuan (YoY-47.31%,QoQ-38.5%). This is mainly because the company's market development is mainly based on the increase in sales volume. In the process of opening up the market, the price difference was affected, and the sales gross profit margin fell to 4.24%, 5.03% lower than the same period last year and 1.3% lower than the previous year. In addition, 17Q3 sales expenses and management expenses increased significantly, sales expenses increased by 131% year-on-year, and management expenses increased by 1.76 million compared with the same period last year.

Natural gas ushered in the peak consumption season, optimistic about the certainty of plate demand. From January to August 2017, China's natural gas production was 97.77 billion cubic meters, an increase of 9.2% over the same period last year, while imported natural gas performed well, up 25.5% from the same period last year. According to the China Natural Gas Development report (2017) released by the National Energy Administration and other departments in August, LNG imports are expected to reach 44.9 billion to 45.9 billion cubic meters this year, with an increase of 32.8% to 35.8%. We believe that the demand of the natural gas sector is determined: 1), with the beginning of heating in the north in winter, environmental protection gives birth to the downstream "coal to gas", which brings a great increase in demand; 2), the international energy giants bet heavily on the natural gas industry. Overseas long-term supply increases in the future (such as Gauguin in Australia, Yamal project in Russia, etc.); 3), diversification of price formulas, increase in Asian pricing discourse 4) the sharp rise in the price of LPG, the embodiment of the substitution effect of LNG in some areas.

The company benefits from the LNG industry's rapid development of the scarce target, mainly due to 1, the lack of branch pipe network, LNG cargo transport volume growth; 2, overseas spot price advantage, the increase in import volume of LNG transport magnification; 3, good regional layout, stable distribution in Shandong area, expand Guangxi, the future layout of Tianjin area, good growth. In addition, the company plans to raise 458 million non-public shares, of which 321 million yuan will be used for the LNG logistics project. The fixed increase plan has been held on September 12, which will contribute to the development of the company's long-term strategy in the future.

Downgrade the profit forecast and maintain the "overweight" rating: at present, the company's LNG trade logistics business is developing steadily, although the profit is less, but the trade volume has increased significantly. By giving full play to its advantages in the field of logistics, it is expected to become the leading enterprise in the LNG logistics distribution industry in the future. Considering that the demand for natural gas is expected to improve in the long run, the company will benefit from the current peak season, and is optimistic about the long-term development of the company, and the future gross profit margin will be more flexible. Regardless of dilution, we downgrade the company's earnings per share forecast for 2017-2019 to be 0.55,0.85 and 1.00 yuan respectively (before adjustment: 0.63 yuan, 0.90 yuan and 1.11 yuan respectively), corresponding to 49X, 32X and 27x PE for 17-19 respectively, maintaining the "overweight" rating.