Incident On October 30, the company released its three-quarter report. The first three quarters achieved revenue of 366 million yuan, a year-on-year decrease of 14.15%, and net profit of 54.7696 million yuan, a year-on-year decrease of 22.46%. Brief review Q3 Business conditions improved significantly year over year, fee control capacity improved, and the company achieved net profit of 498.11,900 yuan after deducting non-return of net profit in the first three quarters, an increase of 8.87% over the previous year. Q3 achieved revenue of 175 million yuan in a single quarter, a year-on-year decrease of 10.99%, net profit of 34.632 million yuan, a year-on-year increase of 8.28%, a year-on-year increase of 35.4791 million yuan, a year-on-year increase of 12.05%. Q3 net profit and net profit deducted from non-return to mother both achieved a year-on-year increase from decline to growth, and growth rates increased by 56.2 pct and 57.48pct respectively. This year's Q3 operations improved markedly. The sales expense ratio for the first three quarters was 3.70%, down about 1.99pct year on year, the management expense rate was 13.80%, down about 0.38pct year on year, and the financial expense ratio was 0.90%, down about 3.00pct year on year. Expense control capabilities improved, and expenses for the period fell across the board. Q3 The company's gross margin reached 41.54%, an increase of 1.2pct over the previous year, which also confirmed the improvement in operations. The passenger flow growth rate is good. The adjustment of scenic spot ticket prices affected the major scenic spots under the company to strengthen marketing efforts and strengthen safety and quality control during the year, which achieved good results. Judging from the “Eleventh” Golden Week data, the number of people entering the mountain at one time was 171,01,000, an increase of 11.5% over the previous year. The passenger flow and revenue of its Baofeng Lake and sightseeing trams all ushered in a significant increase. The occupancy rate of Zhang International Hotel increased dramatically by about 14pct. Compared with other mountain-type scenic spots, Zhangjiajie's Golden Week performance was impressive, and its overall appeal increased. The number of ticket buyers for environmentally friendly passenger transport was basically stable in the first three quarters. Baofeng Lake Company achieved 608,700 ticket purchasers, an increase of 12.72% over the previous year, and a 14.67% increase in revenue. Shili Gallery achieved 996,600 ticket buyers, an increase of 10.56% over the previous year. The number of ticket purchasers for the Yangjiajie Ropeway reached 427,700, a year-on-year decrease of 15.46%. Overall, the passenger flow situation continued to grow steadily; during the year, the settlement price of eco-friendly vehicles by the Environmental Passenger Transport Company was reduced by about 25%, but this move also contributed to the increase in passenger flow to a certain extent, and the overall impact was limited. The ancient city of Dayong is progressing steadily, and the overall construction of Dayong Ancient City, which benefits from convenient transportation in the future, is progressing steadily. The balance of the company's projects under construction in the first three quarters increased by nearly 50% year-on-year, and is expected to open in the next two years. If the project is completed, it will further enhance the richness of tourism products in Zhangjiajie and help the transformation of scenic spots from sightseeing tours to leisure and vacation tours; at the same time, the Qianzhangchang Express Railway is expected to be completed and operated in 2019, connecting southwest Hebei and southeast Chongqing, which is expected to further release the increase in passenger traffic. The opening of Wulingshan Avenue to traffic is also expected to further boost passenger traffic. Investment advice: We believe that the company's Q3 business conditions have improved markedly, and internal and external conditions are expected to continue to improve in the future. The superposition company is the only platform for listed companies that the local government and the Zhangjiajie State Assets Administration Commission plan to expand and strengthen the scenic area. The company has a great advantage in long-term development. The EPS for 2018-2020 is expected to be 0.14, 0.19, and 0.24 yuan respectively, and the stock price corresponding to PE is 35, 26, and 21 times, respectively, maintaining the “increased holdings” rating. Risk warning: passenger flow in the ancient city of Dayong falls short of expectations; uncertainty of weather factors; geopolitical risks.