The core view is that the 2018 performance is in line with expectations, and gross margin is expected to increase: the company released its 2018 annual report, achieved revenue of 4.753 billion yuan in 2018, an increase of 59.9% over the previous year; realized net profit of 1,006 billion yuan, an increase of 17.3% over the previous year, in line with expectations; and gross margin was 31.4%, a decrease of 10.6 pct over the previous year, mainly due to the decline in natural gas sales and connection margin. The rapid increase in revenue was mainly affected by the combination of coal-to-gas in the business region and the addition of new projects in Jingzhou and Fuyang. The company's newly connected coal-to-gas users in 2017-2018 led to a high increase in natural gas sales. The company's gas sales volume in 2018 reached 970 million square meters, up 108% year on year; natural gas sales revenue was 2,406 billion yuan, up 120.9% year on year. The gross margin of natural gas sales was 8.3%, a year-on-year decrease of 4.7 pct, mainly due to increased costs due to the purchase of some unplanned high-priced natural gas during the winter heating season. In 2019, the company is expected to obtain more planned gas from CNPC, so gross margin is expected to return to the historical average of around 15%. In 2019, the company connected 330,000 new users, up 65% year on year; connection fee revenue was 1,439 billion yuan, up 26.8% year on year. The gross margin of gas connections was 72.6%, a year-on-year decrease of 5.5 pct, mainly due to an increase in the share of single-opening users with lower gross margins compared to 2017. Since the company is expected to connect more double-opening users with heating needs in Jingzhou and Fuyang, the gross margin of connection may increase in 2019. With a number of initiatives, future performance is highly certain: in 2019, the company plans to achieve revenue of 6.5 billion yuan, an increase of 37% over the previous year, and net profit of 1.2 billion yuan, an increase of 19% over the previous year. We believe that the main growth points of the company's performance are: 1) Endogenous growth: Continue to promote the Jingzhou and Fuyang projects to increase the local gasification rate. New connected users will bring the company one-time connection revenue and subsequent gas sales revenue; 2) Outreach mergers and acquisitions: Small gas companies lack scale effects. The company is focusing on Beijing-Tianjin-Hebei, Yangtze River Delta, Pearl River Delta and other regions to accelerate its industrial layout across the country, achieving a breakthrough in growing from a regional gas company to a national clean energy service provider; 3) the increase in gross margin of natural gas sales and connection fees; 4) the increase in performance brought about by the Fuyang project throughout the year (only September-December in 2018). Financial forecasting and investment recommendations We forecast the company's net profit for the year 2019-2021 to be $12.1/14.5/$1.64 billion (previously $12.3/1.37 billion in 2019-2020). According to Comparable Company's 2019 16.0x PE target price of 18.81 yuan (previously 18.89 yuan), the purchase was maintained. Risks suggest that project expansion falls short of expectations; poor natural gas prices in winter have led to a decline in gross margin