Event: The company released its 2019 annual report. The company achieved revenue of 2,796 billion yuan in the first half of the year, an increase of 22.5% over the previous year, and achieved net profit of 514 million yuan to mother, an increase of 2.3% over the previous year, in line with Shen Wan Hongyuan's expectations. Key investment points: Endogenous+epitaxial continued to expand the scale of gas sales. The company's gas sales volume increased 35.77% year-on-year in the first half of the year. Benefiting from increased demand for natural gas and the Fuyang project in August 2018, the company achieved sales of 665 million cubic meters of natural gas in the first half of 2019, an increase of 35.77% over the previous year. Among them, residential gas sales volume was 362 million cubic meters, up 21.85% year on year, and gas sales volume for non-residents was 303 million cubic meters, up 57.27% year on year. Looking at the subregions, the original Beijing-Tianjin-Hebei supply area and the Jingzhou and Fuyang projects, all achieved high gas sales growth. The Beijing-Tianjin-Hebei region achieved 470 million cubic meters of gas sales in the first half of the year, an increase of 14.25%; the Jingzhou project sold 89.8 million cubic meters of gas, an increase of 14.74% year on year; and the Fuyang project sold 105 million cubic meters of gas, an increase of 17.58% year on year. The company added 176,600 new residential users in the first half of the year, including 106,300 in the Beijing-Tianjin-Hebei region, 14,400 in Jingzhou, and 55,900 in Fuyang. Operating margins declined, and the new Fuyang merger and acquisition project performed well. Currently, the price of pipeline gas used by residents in China has been changed from price management at the highest gate station to price management at the benchmark gate station. The price of gas used by non-residents is the same as the price of gas used by non-residents, and the price of pipeline valve stations has risen significantly during the heating season. However, the increase in consumer prices requires hearing. Poor transmission has led to a reduction in the price difference between purchase and sale, reducing the company's profit margins. The company's comprehensive gross margin for the first half of the year was 29.35%, an increase of about 3 percentage points over the previous year. The main reason was that government subsidies for LNG during the heating season at the beginning of this year were no longer included in other income, but instead directly reduced operating costs, and the cost ratio declined during the period. From an overall perspective, the company's 2019H1 operating profit margin decreased by about 1 percentage point compared to the same period last year. At the same time, due to a decrease in non-taxable income, the company's income tax expenses increased sharply year-on-year in the first half of the year, resulting in a limited increase in the company's net profit. The company's Fuyang project, which was consolidated in August 2018, performed well. Net profit of 91.69 million yuan was achieved in the first half of the year, which is the source of the company's net profit growth. Currently, the tight gas supply in China has caused a large number of local gas companies to show losses, providing favorable and objective conditions for the company's epitaxial mergers and acquisitions. The company is expected to further expand its profit scale and regional layout through acquisitions in the future. The Suizhong LNG terminal is progressing steadily and is strategically significant in the context of tight air supply. Currently, there is still a bottleneck in China's natural gas supply. The price of pipeline gas has clearly risen during the heating season, greatly increasing gas purchase costs for gas companies. The company plans to invest 3.5 billion yuan to build the Suizhong LNG terminal project with an annual turnover of 2.6 million tons to guarantee the gas demand in the company's business area, which is of strategic importance in the current context. At present, the project has been included in the “Special Plan for Natural Gas Storage Construction Facilities in Liaoning Province” (2018-2022) and reported to the National Development and Reform Commission for review. The company is actively promoting project approval and preparation, and aims to start construction within the year. Profit forecast and rating: Based on the performance of the first half of the year, we lowered the company's net profit forecast for 19-21 to 10.98 billion yuan, 11.89 billion yuan, and 1,314 billion yuan (12.96 billion yuan, 14.13 billion yuan, and 1,537 billion yuan, respectively before adjustment). The current stock price corresponds to PE 9, 9, and 8 times. As a gas leader in Beijing-Tianjin-Hebei, the company is expected to maintain rapid growth in gas sales in the current supply area, and the epitaxial merger and acquisition strategy is expected to further expand the company's development space and maintain a “buy” rating.