Core view: High growth in sales volume and lack of subsidies led to a decline in gross margin, which dragged down the company's operating income of 4.753 billion yuan in 2018, an increase of 59.90% year on year, and net profit to mother of 1,006 billion yuan, an increase of 17.29% year on year. Among them, offsite projects in Jingzhou and Fuyang contributed 0.93 million yuan and 0.55 billion yuan in profits. The company's gas sales revenue was 2.4 billion yuan, accounting for more than 50%. Among them, the Beijing-Tianjin-Hebei region sold 760 million m3 of gas, an increase of about 65% over the previous year. However, due to the high proportion of residents and the lack of subsidies in place that year, the gross margin of the gas sales business fell 5 percentage points to 8.33%. The connection was completed to 330,000 households, an increase of 27% over the previous year. The growth rate of industrial and commercial users was even higher, but due to structural changes, gross margin fell to 71%. The growth potential of the headquarters has been underestimated; it will enjoy the “Beijing spillover” effect. The gas supply areas of the company's headquarters are all distributed in the core area of Beijing-Tianjin-Hebei, and the long-term growth in its gas sales volume is underestimated by the market. For example, the Beisan County area (Sanhe, Shahe, Dachang, Yanjiao), which is exclusively supplied by the company, is close to Beijing's Tongzhou. The Beijing Municipal Government moved eastward in 2019, the “integration” policy of Tongzhou+Beisan County continued to be introduced, and unified planning plans for transportation, energy, and environment continued to be introduced. According to estimates, in 2018, the gas supply in the region accounted for nearly 50% of the gas supply of the company headquarters, about 374 million square meters. Along with the “integration” process, there is plenty of room for future gas sales, especially for non-residential gas growth. Beijing Airport 2 will be put into operation during the year, and sales volume of supporting industrial and commercial gas in Gu'an, Yongqing and other places is expected to maintain strong growth. The company is currently in a stage of high connectivity and high residential popularity. After three rounds of peak demand for connections, residents and non-residents in the future, there is still plenty of room for stable gas sales during the operation period. Continued growth is underestimated, and the extension is still accelerating. The “buy” rating is estimated to be 1.39, 1.69, and 1.87 yuan/share for the company's 2019-2021 EPS, 10.72X, 8.81X, and 7.93X, respectively, according to the current price of 14.86 yuan/share. The company's Beisan County, Gu'an, Yongqing and other regions enjoyed the “Beijing spillover” effect. The three rounds of continuous growth between connected residents and non-residents are still accelerating, and there is still plenty of room for future gas sales growth. At the same time, the pace of epitaxial mergers and acquisitions continues. Comparing comparable company valuations in the industry, the company was given 14 times PE in 2019, corresponding to a reasonable value of 19.32 yuan/share, maintaining a “buy” rating. Risk warning: The price of natural gas sales and connection fees is affected by policy fluctuations; the growth rate of the connection business falls short of expectations; and the share of the ban lifted in the later stages is large.