Event: The company released its 2019 three-quarter report. The first three quarters achieved operating income of 3.637 billion yuan, a year-on-year increase of 17.67%, net profit of 657 million yuan, a year-on-year decrease of 8.71%; the revenue for the July-September quarter was 841 million yuan, an increase of 3.93% over the previous year, and net profit of 144 million yuan, a year-on-year decrease of 34.13%. The core view is that gas sales increased by 38.22% year on year, profit declined due to increased income tax: due to the increase in gas sales volume and the Fuyang project, the company's revenue rose steadily in the first three quarters, up 17.67% year on year; the revenue structure is gradually being optimized. Among them, total natural gas sales volume was 836 million cubic meters, up 38.22% year on year, and is expected to exceed 1.25 billion cubic meters for the whole year. The gross profit margin for the first three quarters was 30.10%, which is basically the same as last year, but since the coal-to-gas project (village to village project) enjoyed income tax relief in the same period last year, and the scale of coal-to-gas settlement has been drastically reduced since this year, income tax has increased by 100 million yuan compared to the same period last year (190 million yuan in the first three quarters of this year, 92.63 million yuan last year). The company's net interest rate for the first three quarters was 18.29%, down 5.12 percentage points from the same period last year. External mergers and acquisitions and endogenous growth initiatives are fueled by multiple initiatives: in 2017 and 2018, the company successively acquired Jingzhou Natural Gas and Fuyang projects. In October 2019, the company acquired 100% of the shares of Zhuolu Dadi and Suizhong Dadi in cash. The company's business map has gradually expanded from Beijing-Tianjin-Hebei to the whole country; at the same time, since the gasification rate of the project acquired by the company has room for improvement, new connected users will bring the company one-time connection revenue and subsequent gas sales revenue. Financial forecasts and investment recommendations Due to a decrease in the revenue ratio of village coal-to-gas projects that enjoy income tax relief and adjustments to the income tax rate, we lowered the company's profit forecast. Net profit for 2019-2021 was 10.9/12.9/1.44 billion yuan (previously 12.1/14.5/1.64 billion yuan, respectively). According to comparable company valuations, 14 times PE in 2019, with a target price of 10.64 yuan (previously 18.81 yuan), maintaining the purchase rating. Risks suggest that the expansion of the project falls short of expectations; poor natural gas prices in winter have led to a decline in gross margin.