Event: according to the company's semi-annual report of 2023, the company achieved operating income of 1.829 billion yuan in the first half of 2023, down 19.09% from the same period last year. The net profit attributed to the parent company was 152 million yuan, down 42.76% from the same period last year. The net profit after deduction was 166 million yuan, down 35.91% from the same period last year, and the basic earnings per share was 1.26 yuan.

The fall in biodiesel prices weighed on results and improved in the second quarter compared with the previous quarter. The company is not only the leading enterprise in the field of biodiesel in China, but also the largest manufacturer of biodiesel in domestic production, sales and export volume. Since 2023, the export volume of the domestic biodiesel industry has continued to grow, and the European market demand has maintained a good momentum, but affected by factors such as the economic recession, the decline in commodity prices, especially oil prices and sharp fluctuations in the stage, product market prices have declined and fluctuated one after another. According to customs data, China's biodiesel exports in the first half of 2023 were 1.1751 million tons, up 58.13 percent from the same period last year; the export value was 1.54 billion US dollars, up 21.16 percent from the same period last year; and the average price was 1311 US dollars per ton, down 23.36 percent from the same period last year. In terms of sales volume, the company maintained a good situation in production and sales in the first half of the year, with sales increasing by 10.85% compared with the same period last year. Under the superposition of the two factors, the company achieved 1.829 billion yuan in revenue in the first half of the year, down 19.09 percent from the same period last year.

In terms of profitability, the company's comprehensive gross profit margin in the first half of the year was 10.03%, down 2.64 percentage points from the same period last year, mainly due to the decline in product prices, while the decline in raw material prices was relatively small in the same period. During the period, the expense rate was 5.19%, a slight decrease of 0.28 percentage points compared with the same period last year, mainly due to the increase in interest income and the decrease in exchange gains and losses. In addition, investment losses changed greatly in the first half of the year compared with the same period last year due to forward foreign exchange trading losses. Under the influence of many factors, the company achieved a net profit of 152 million yuan in the first half of the year, down 42.76% from the same period last year, while the net profit after deducting Fei was 166 million yuan, down 35.91% from the same period last year.

Judging from the single-quarter results, the company achieved operating income of 933 million yuan in the second quarter, down 27.31% from the same period last year, an increase of 4.12% from the previous month, and a net profit of 80.5 million yuan, down 51.19% from the same period last year, an increase of 13.07%. The net profit after deducting Fei was 98.25 million yuan, down 39.15% from the same period last year and up 44.41% from the previous year.

Biodiesel price spreads rose in the second quarter, driving the company's performance to improve month-on-month.

The trend of global carbon emission reduction is clear, and biodiesel has a broad prospect. Biodiesel is a typical "green energy", with a wide range of raw materials and renewable, good combustion performance, remarkable environmental protection and other characteristics. In March this year, the European Council and Parliament reached an interim agreement on the revision of the renewable energy directive "RED III" to increase the share of renewable energy in the EU's total energy consumption to 42.5% by 2030. Increase the indicative supplementary target by 5% to 45%. At the same time, the EU carbon Border Adjustment Mechanism (CBAM) will come into effect on October 1, 2023, with a transitional period from 2023 to 2026 and a full collection of "carbon tariffs" from 2027. The EU's rising renewable energy targets will continue to promote the use and promotion of biodiesel. The demand for biodiesel in the European market, especially biodiesel produced from various types of waste oils, is expected to continue to grow.

Under the background of China's "3060-year Plan" dual-carbon strategic goal, "vigorously develop non-food biomass liquid fuels" is proposed in the National "14th five-year Plan" renewable energy development plan. Support the R & D and promotion of advanced technology and equipment in biodiesel, bio-aviation kerosene and other fields. The national "14th five-year Plan" mentions the need to actively promote the application of biodiesel and other bio-energy, promote the transformation of fossil energy to green and low-carbon renewable energy, and emphasize "to carry out pilot promotion of biodiesel in areas where conditions permit, and to promote the demonstration and application of bio-aviation fuels". With the implementation of national and local supporting measures, it is expected to bring huge development space for China's biodiesel industry.

The new projects will be put into production in an orderly manner, and the future performance growth will be guaranteed. The company now has a production capacity of 500,000 tons / year of biodiesel and 90,000 tons / year of bio-based materials.

The company has more planning projects in the future, and its production capacity expands in an orderly manner, which brings sufficient impetus for subsequent performance growth. 200,000 tons / year hydrocarbon-based biodiesel (and bio-aviation coal) production line and 50,000 tons / year natural fatty alcohol production line have completed land exploration, long-term equipment have been ordered one after another, and make every effort to promote the preparatory work for the start of the project. Hydrocarbon-based biodiesel has excellent performance, such as better low temperature fluidity, cetane number and oxidation stability.

A series of new projects are expected to promote the healthy, sustained and stable development of the company. With the gradual commissioning of the project in hand, the company's annual production capacity of biodiesel will reach 850000 tons, and the annual production capacity of bio-based materials will reach 425000 tons, nearly doubling the existing production capacity, which will guarantee the company's future performance growth.

Profit forecast and investment rating: the company's EPS in 2023 and 2024 is expected to be 2.94 yuan and 4.02 yuan, respectively. Based on the closing price of 46.30 yuan on August 16, the PE is 15.76 times and 11.52 times, respectively. Taking into account the industry prospects and the company's industry status, maintain the company's "overweight" investment rating.

Risk tips: demand is lower than expected, raw material prices are rising, and industry competition is intensified.