Event: On August 27, Baichuan Energy released its 2019 interim report. From January to June, the company achieved operating income of 2,796 billion yuan, an increase of 22.54% over the previous year; net profit attributable to the mother was 514 million yuan, an increase of 2.31% over the previous year. Comment: Fuyang Guozhen Gas also led to a 22.54% increase in revenue. The company's revenue for the first half of the year was 2,796 billion yuan, up 22.54% year on year, of which revenue in the Beijing-Tianjin-Hebei region fell 0.6 billion yuan year on year, or 2.96% year on year; revenue in the Jingzhou region increased by 0.4 billion yuan, up 17.2% year on year; Fuyang Guozhen Gas Co., Ltd. was acquired by listed companies on July 25, 2018, contributing 536 million yuan in revenue in the first half of this year, driving the company's overall revenue growth of 514 million yuan. The sales volume and price of natural gas rose sharply, and the company's comprehensive gross margin increased by 2.95 pp. The company's natural gas sales volume in the first half of the year was 665 million cubic meters, an increase of 35.77% over the previous year. By type, resident/non-resident gas sales were 3.62/303 million square meters, up 21.85%/57.27% year on year; by region, Beijing-Tianjin-Hebei/Jingzhou/Fuyang gas sales volume was 4.70/0.90/105 million square meters, up 14.25%/14.74%/17.58% year on year, respectively. Excluding additional sales in Fuyang, the company's gas sales actually increased by 14.33% in the first half of the year, which is higher than the average growth rate of natural gas consumption across the country. In terms of price, the company's average natural gas sales price was 2.56 yuan/cubic meter (excluding tax), an increase of 11.42% over the previous year. The sales volume and price of natural gas rose sharply. The company achieved natural gas sales revenue of 1,702 billion yuan in the first half of the year, an increase of 51.28% over the previous year; at the same time, the gross margin for the first half of the year was 29.35%, an increase of 2.95pp over the previous year. There were 178,000 new users installed in the first half of the year, and natural gas sales are expected to increase steadily in the first half of 2019, 176,600 new residential users were developed and installed by the company, and 1,350 non-resident users were developed and installed. Among the new residential users, there are 106,300 in the Beijing-Tianjin-Hebei region, 14,400 in the Jingzhou region, and 55,900 in the Fuyang region. The company added about 300,000 new users throughout the year, and natural gas sales are expected to grow steadily. Performance in 19-20 continued to grow, undervaluations and high dividends, and continued to be strongly recommended to benefit from the increase in industrial, commercial and residential users and the Fuyang project for the whole year. The gas supply is expected to exceed 1.4 billion square meters in 2019, an increase of more than 40% over the previous year. It is expected that the company's resident connection business in '19 will be basically the same as in '18. Industrial and commercial connections will continue to grow, and the gas appliance sales business will be basically stable. For two years in a row, the company's dividends have exceeded 50% of the net profit of the current year, and no major capital expenses are expected in 2019. Assuming that the company's 2019 dividend continues to reach 50% of net profit, according to our forecast, the cash dividend will be 640 million yuan. Based on the current market value of 10.4 billion yuan, the company's dividend rate will reach 6.15%. It is expected that the company will continue to implement mergers and acquisitions projects. We expect the company to return net profit of 1.27 billion/1.47 billion yuan in 2019-20, corresponding to PE 8.16 times /7.04 times, high growth and undervaluation, and continued to be highly recommended. Risk warning: gas industry policy risk; natural gas terminal price and connection fee price fluctuation risk; market development and business development falling short of expectations