In 2018, revenue increased by 59.90%, net profit increased 17.29%. In line with expectations, the company released its 2018 annual report, with revenue of 4.753 billion yuan, +59.90% year-on-year; net profit of 1.06 billion yuan, +17.29% year-on-year, in line with company guidelines. The company announced that it plans to distribute a cash dividend of RMB 5 (tax included) for every 10 shares, while also using capital reserves to increase share capital by 4 shares for every 10 shares. Mergers and acquisitions have become the biggest growth point in performance. Regional expansion is worth expecting that the company's main growth point in 2017 was the coal-to-gas connection in rural Hebei, and the main growth point in 2018 was the merger and acquisition of urban fuel projects. Jingzhou Gas's net profit was 93.1 million yuan in November 2017, and Fuyang Gas contributed 55.24 million yuan in net profit in August 2018. The company's ability to execute mergers and acquisitions has been verified year after year, and the business area has expanded from a single Beijing-Tianjin-Hebei region to many points throughout the country. Cash on hand is 891 million yuan, balance ratio of 48.25% is lower than that of peers, and operating cash flow is +38.77% to +1,219 billion yuan. There is still plenty of room for subsequent regional expansion. The gross margin of both gas sales and connections declined, mainly due to the gas price policy and mergers and acquisitions of new projects, and the comprehensive gross profit margin was 31.55%, a sharp drop of 10.60 pct over the previous year. The main reason was that the share of gas sales operating revenue with low gross margin increased 13.97 pct to 50.62%. Gas sales revenue was +120.87% to $2,406 billion, and gas sales volume was 970 million square meters, mainly driven by mergers and acquisitions; gross margin of -4.74 pct to 8.33%, mainly increased residential gate prices and winter gate prices in 2018, leading to an increase in the revenue denominator, and the unsettled gross margin of subsidies was also affected. Connection revenue was +26.82% to 1,439 billion yuan, mainly connection volume +25% to 330,000 households; gross margin -5.51 pct to 72.63%. Judging that the profit margin for overseas connections was lower than that of Hebei. The overall gross margin of Hebei was -11.02 pct to 31.35%. It is the region with the biggest decline. It is judged that the pressure on upstream price increases in Beijing-Tianjin-Hebei during the winter supply period was greater than that of foreign countries. It is planned to invest in the construction of a receiving station in Suizhong, Liaoning, and build a full-industry chain gas platform. The company will actively build a full-industry chain gas platform. It is planned to invest 3.5 billion yuan to build a 3 million tons/year LNG receiving station in Suizhong, Liaoning. The project has been included in the “Special Plan for Natural Gas Storage Construction Facilities in Liaoning Province” (2018-2022) and is yet to be approved by the state. Five peak-shifting gas storage stations have been built, and two have been put into operation to enhance peak-shifting capabilities. The company continues to expand distributed energy projects, and the Guanghuan New Network project already has the conditions for production and operation. Investment advice: Add a 2021 profit forecast and maintain a “buy” rating. We expect the company's net profit of 1,203/13.93/1,552 billion yuan in 2019-2021, corresponding dynamic PE to be 11.9x/10.2x/9.2x, and a reasonable valuation range of 16.33-17.49 yuan. I am optimistic about the company's ability to execute mergers and acquisitions in urban areas and the layout of upstream receiving stations, and maintain a “buy” rating. Risk warning: gas demand falls short of expectations, cost increases exceed expectations, and connection volume falls short of expectations