Events:

The company released its semi-annual report of 2023, with revenue of 1.83 billion yuan (year-on-year-19.1%) and net profit of 152 million yuan (- 42.8%) in the first half of 2023. 2023Q2 achieved revenue of 933 million yuan (year-on-year-27.3%, month-on-month + 4.12%) and net profit of 81 million yuan (year-on-year-51.2%, month-on-month + 13.1%).

With the volume premium, the performance has improved compared with the previous month, the demand for biodiesel in Europe is strong, and the company's export volume has increased synchronously with production capacity:

2023Q1 to Q2 month-on-month ratio gradually improved, the company's biodiesel price to achieve volume, export volume and production capacity still keep pace with growth. According to the General Administration of Customs, China's biodiesel exports reached 1.18 million tons in the first half of 2023, an increase of 58 percent over the same period last year. Export prices continued to decline from a high of 12565 yuan per ton in July 2022 to 8407 yuan per ton in June 2023. After the company's 100000 tons of biodiesel production capacity was put into production at the end of 2022, the company's total production capacity reached 500000 tons in 2023. 2023H1's biodiesel sales increased by 10.85% over the same period last year. The volume growth made up for the decline in price differentials. Coupled with foreign exchange earnings, the company's quarterly net profit level continued to improve from 2023Q1. As the EU Renewable Energy Directive continues to increase the proportion of renewable energy consumption and the EU carbon border adjustment mechanism is about to come into effect, to encourage the development of biodiesel HVO, bio-aviation coal SAF and bio-ship combustion, the demand for biodiesel and UCO is expected to continue to increase. As oil prices rise, the biodiesel boom is expected to pick up.

The work of the new project will be carried out as scheduled, and the channels and R & D advantages will be continuously strengthened:

According to the company announcement, 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, and long-period equipment have been ordered one after another to promote the preparatory work for the start of the project; at the same time, we will actively expand the application and promotion of biodiesel in ships and other new fields. The company's Singapore and Dutch subsidiaries obtained ISCC certification in May 2023, and overseas teams began to play a gradual role in raw material resource development, product terminal sales and market information. In terms of technological research and development, the company has optimized the technical processes of hydrocarbon-based biodiesel, halogenated materials and synthetic resin series products, and tried to develop new products of electrolyte auxiliaries for new energy batteries.

Investment advice:

It is estimated that the company's net profit from 2023 to 2025 is 350 million, 460 million and 590 million yuan respectively, corresponding to 16.5,12.4,9.6 times of PE, maintaining the buy-A rating. It will be given 19 times PE in 2023, corresponding to the target price of 54.78 yuan.

Risk tips: product and raw material price fluctuations, production capacity construction progress is not as expected.