Event: on August 16, the company released its half-yearly report on 2023, showing that in the first half of 2023, the company realized operating income of 1.829 billion yuan, down 19.09% from the same period last year; realized net profit of 152 million yuan, down 42.76% from the same period last year; and realized net profit of 166 million yuan after deduction, down 35.91% from the same period last year. Of these, the company's operating income in the second quarter was 933 million yuan, down 27.31 percent from the same period last year, up 4.12 percent from the previous quarter; and the net profit from the home was 81 million yuan, down 51.19 percent from the same period last year, up 13.07 percent from the previous year.

The decline in biodiesel prices led to a decline in the company's second-quarter performance compared with the same period last year. Biodiesel prices were in a downward channel in the first half of 2023 due to the weakness of the global economy and the decline in commodity prices, especially oil prices. According to Zhuochuang data, the ex-factory price of biodiesel dropped from 8900 yuan / ton at the beginning of the year to 7900 yuan / ton at the end of June. The average price of biodiesel in the second quarter of 2023 was about 8053.23 yuan / ton, down 32.05% from the same period last year and 7.57% from the previous month. The average export price of biodiesel in China from April to June in 2023 was US $1314, US $1266 and US $1176 / ton, respectively, which was significantly lower than that in April-May 2022 at US $1711, US $1781 and US $1791 / ton. compared with January-March 2023, the average export price of 1360, 1342 and 1351 US dollars per ton also decreased. The decline in biodiesel prices is the main reason for the decline in the company's business in the first half and second quarter compared with the same period last year. In the first half of 2023, China exported 1.1751 million tons of biodiesel, an increase of 58.14 percent over the same period last year, mainly due to the strong demand for biodiesel in Europe, and the increase in export volume partly made up for the adverse impact of falling product prices. In a single quarter, the company achieved a net profit of 81 million yuan in the second quarter, an increase of 13.07% over the previous quarter, and the profit maintained the trend of repair.

Biodiesel prices have picked up recently. With the recent rebound in the prices of rapeseed oil and palm oil, biodiesel prices have picked up slightly recently. According to Zhuochuang data, as of August 17, the ex-factory price of biodiesel was about 8100 yuan / ton, up 200 yuan / ton from the July low.

The orderly commissioning of the new project will drive the steady growth of the company. According to the company's 2022 annual report, the Meishan biodiesel production line with an annual output of 100000 tons was completed and put into trial production at the end of 2022, with a biodiesel production capacity of 500000 tons and a bio-based material production capacity of 90,000 tons. At present, the company's 200,000 tons / year hydrocarbon-based biodiesel production line and 50,000 tons / year natural fatty alcohol production line project have obtained the property right certificate of construction land and construction project planning license, and all the preliminary work is being carried out in an orderly manner. New projects have been put into production to ensure the long-term growth of the company.

Investment advice. As the company's new biodiesel production capacity has been built to reach production, and the prosperity of the biodiesel industry has rebounded, we are optimistic about the company's long-term growth. It is estimated that the company's earnings per share from 2023 to 2025 are 2.98,3.90,6.21 yuan respectively, corresponding to PE 15.91,12.18,7.64 respectively, maintaining the "buy" rating.

Risk hint: downstream demand is not as expected, project construction progress is not as expected, product price fluctuation risk.