Core ideas:

The company is a leading biodiesel enterprise. Q2 continues to repair with the decline of raw material prices and the warming of price spread. at present, the price gap has gradually stabilized, and with the release of production capacity, the company's performance is expected to continue to grow. At present, the company has a production capacity of 500000 tons, and in the next 2-3 years, it will reach 850000 tons of biodiesel and 400000 tons of bio-based derivatives, including 200000 tons of HVO. At the same time, the company has set up subsidiaries in Singapore and the Netherlands, which are more closely linked with the international market. In addition, the company's biodiesel and bio-based derivatives are expected to benefit from the landing of EU carbon tariffs and have great room for long-term development.

Event

The company publishes its 2023 semi-annual report

In the first half of 2023, the company's income was 1.829 billion yuan, down 19.09% from the same period last year, and the return net profit was 152 million yuan, down 42.76% from the same period last year. The non-return net profit was 166 million yuan, down 35.91% from the same period last year. The revenue of Q1 and Q2 is 8.96 yuan and 933 million yuan respectively, the net profit of returning mother is 0.71 yuan and 81 million yuan respectively, and the net profit of deducting non-returning mother is 0.68 yuan and 98 million yuan respectively.

Brief comment

The price fell, the price spread warmed up, and Q2 increased slightly compared with the previous month.

In the second quarter of 2023, the prices of palm oil, rapeseed oil and soybean oil fell, while the prices of gutter oil and biodiesel declined, but the price gap widened as a whole. According to Zhuochuang data, from April to June 2023, the price of biodiesel was 8173 yuan / ton, 8045 yuan and 7960 yuan / ton respectively, and the price of gutter oil was 5328 yuan / ton, 5202 yuan and 4957 yuan / ton respectively, and the price difference was 2845 yuan / ton, 2844 yuan and 3003 yuan / ton respectively. The average price difference between 2023Q2 biodiesel and gutter oil price was 2897 yuan / ton. In terms of exports, according to customs data, domestic biodiesel exports from April to June 2023 were 505300 tons, + 26% respectively compared with the same period last year. In the first half of the year, the company's sales increased by 10.85% compared with the same period last year. With the warming of the price gap between biodiesel and gutter oil, the company's profits gradually improved. In the second quarter, the company achieved a net profit of 81 million yuan per ton, corresponding to a net profit of about 700,800 yuan per ton. The gross profit margin is 9.57%, the month-on-month reduction of 0.94pct, the net profit rate of 8.63%, month-on-month growth of 0.68pct. Affected by the devaluation of the RMB exchange rate, the company suffered some losses in forward foreign exchange transactions, resulting in a loss of investment income of about 23.71 million yuan.

The price of oils and oils such as rapeseed oil is rising, and biodiesel is expected to rise. The World Meteorological Organization announced on July 4 that El Ni ñ o conditions have been formed in the tropical Pacific for the first time in seven years, which could lead to soaring global temperatures, destructive weather and climate patterns. The probability that an El Nino event will occur between July and September in 2023 and last until the end of the year is 90%, and the El Ni ñ o phenomenon may lead to a decline in food production. Since late June, oil prices have continued to rise. as of August 16, the futures prices of palm oil, rapeseed oil and soybean oil were 7596 yuan / ton, 9194 yuan and 8352 yuan per ton respectively, up 11%, 19% and 19% from their lows since June. The prices of rapeseed oil and biodiesel continued to rise in the first half of 2022 under the influence of the conflict between Russia and Ukraine. As the Black Sea food agreement expires and extreme weather disturbances are added, oil prices and biodiesel are expected to rise.

Under the background of the general trend of global carbon emission reduction, the continuous promotion of domestic and foreign policies, and the green development of EU targets, countries around the world strive to achieve the goal of "carbon peak" and "carbon neutralization". The general trend of biodiesel to replace traditional fossil diesel and aviation kerosene. In July 2021, the latest proposal of the European Commission proposed that the EU's greenhouse gas emission reduction target should be raised from 40% to 55% by 2030 and carbon neutral by 2050. The overall share of renewable energy in total final energy consumption has increased from 32% to 40%, and the share of renewable fuels in transport has increased from 14% to 26%. According to the "RED" amendment passed by the European Parliament in September 2022, the European Union has raised its target of renewable energy as a share of total energy consumption to 45% in 2030, and is determined not to change its carbon emission reduction, of which the share of renewable fuels in the transportation industry has increased to 29%. At the same time, it is proposed that the proportion of PME using palm oil as raw material and soybean oil as raw material should not exceed the 2019 ratio until 2023, and gradually reduce to 0% by the end of 2030. With the increase of blending ratio and the phasing out of biodiesel with high ILUC feedstock, waste oil methyl ester will become the main force to replace palm oil methyl ester, and the demand is expected to remain strong. In addition, the European proposal "Fit for 55" mentioned increasing the proportion of sustainable aviation fuel from 2% in 2025 to 63% by 2050. At present, countries such as France and Norway have put forward blending targets, and there is also a wide space for bio-aviation coal. The domestic biodiesel policy has been promoted one after another, and it is mentioned in the Carbonate Action Plan before 2030 to actively expand the application of new and clean energy such as advanced bioliquid fuels and clean energy in the field of transportation; we will vigorously promote advanced bioliquid fuels and sustainable aviation fuels to replace traditional fuels and improve the energy efficiency of terminal fuel products. On February 10, 2022, the National Development and Reform Commission and the Energy Bureau issued opinions supporting the involvement of clean fuels such as biofuel ethanol, biodiesel and biogas in oil and gas pipelines. The policy of the 14th five-year Plan for Renewable Energy Development clearly mentions supporting the development and market application and promotion of biodiesel, bio-aviation kerosene and other industries. Domestic biodiesel and bio-aviation coal have the same huge space.

Capacity expansion and industrial chain continue to advance steadily, increase investment in hydrocarbon-based biodiesel, and actively distribute overseas markets the company currently has a production capacity of 500000 tons of biodiesel. the company has successfully developed the preparation of hydrocarbon-based biodiesel using waste oil as resources by fixed-bed catalytic hydrodeoxidation and hydroisomerization process. 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. Compared with ester-based biodiesel, hydrocarbon-based biodiesel has better low-temperature fluidity, higher cetane number, better oxidation stability and other performance indicators, and can better adapt to the cold climate of northern Europe. Through the depth of isomerization, hydrocarbon-based biodiesel can be fractionated to produce biodiesel, aviation coal, solvent oil and so on.

On January 1, 2022, the company plans to invest 1.05 billion yuan to build a biodiesel and bio-based plasticizer construction project in Silla Bio-Fine Chemical Industry Park. The completion of the project is expected to achieve an annual output of 200000 tons of biodiesel and bio-based plasticizer. On September 24, 2022, the company plans to invest 380 million yuan to add "an annual production of 100000 tons of hydrocarbon-based biodiesel and an annual production of 50, 000 tons of fatty acids" to the first phase of the hydrocarbon-based biodiesel project. the company plans to invest 500 million yuan to build a 100000-ton synthetic resin project to extend the industrial chain with self-produced bioglycerol, fatty acids, epichlorohydrin and other products. Produce waterborne modified alkyd resin, acrylic resin, epoxy resin and high-end epoxy resin, which can be used in high-end special fields such as environment-friendly coatings, heavy anticorrosive coatings, automotive coatings, semiconductors and wind power. in the next 2-3 years, the company will reach 850000 tons of biodiesel production capacity and 400000 tons of derivatives production capacity, entering a period of rapid growth. In addition, the company plans to set up subsidiaries in Singapore and the Netherlands, which will help the company to obtain the latest information in a timely manner and provide support for the rapid development of overseas business. At the same time, the EU carbon tariff policy has been gradually implemented, and the company's biodiesel and a variety of bio-based derivatives will benefit from the carbon tariff policy.

Profit forecast and valuation: it is estimated that the return net profit of the company from 2023 to 2025 is 3.58,4.56 and 691 million yuan respectively, the EPS is 2.98,3.80,5.76 yuan respectively, and the corresponding share price PE is 15.5X, 12.2X and 8.0X respectively. Maintain a "buy" rating.

Risk hint: the implementation of the policy is not effective (if the European biodiesel blending policy is not as expected, it will affect the biodiesel demand and the company's sales) The price of raw materials fluctuates greatly (the price fluctuation of waste oil is the main factor affecting the company's production cost, and its acquisition involves many links such as raw material collection, processing, transportation and so on. at the same time, it will also be affected by crude oil, vegetable oil commodity prices, return to other areas, etc., so there are many influencing factors, there is price risk, if the price fluctuates sharply, it will affect the profitability of the company) Exchange rate fluctuation risk (the company's biodiesel is mainly exported, and if the exchange rate fluctuates sharply, it will affect the company's profitability); the company's production capacity will not meet expectations (if the company's project construction does not meet expectations, it will affect product sales, which in turn affects profitability).