Earnings are under pressure in 2023. In 2023, the company achieved revenue of 2,812 billion yuan, or -35.29% year-on-year; realized net profit of 78.61 million yuan, or -82.60% year-on-year. Looking at a single quarter, 1Q23-4Q23 achieved net profit of 71.2 million yuan, 80.5 million yuan, 1.34 million yuan, and -74.44 million yuan, respectively. The decline in the company's profits was mainly affected by the European Union's launch of several trade friction investigations with China on biodiesel. The EU is the company's main export destination for biodiesel, and the company's biodiesel exports have been greatly affected. The company plans to distribute a cash dividend of 2.70 yuan (tax included) for every 10 shares to all shareholders.

Earnings improved month-on-month in the first quarter of 2024. In the first quarter of 2024, the company achieved operating income of 868 million yuan, -3.09% year-on-year, and +217.24% month-on-month; realized net profit of 29.03 million yuan, or -59.23% year-on-year, reversing losses from month to month.

Biodiesel sales declined year over year in 2023. In 2023, the company produced 432,200 tons of biodiesel, +5.6%; however, starting in the fourth quarter of 2023, the company actively responded to anti-circumvention and anti-dumping investigations brought by the European Union against China's biodiesel industry, focusing on high-quality markets and building an independent sales network in Europe. Due to the early launch of the independent sales network business, a large number of products were in transit and could not be sold during the year, so the company's annual sales volume was 351,900 tons, -13.1% year over year.

The price per unit of biodiesel declined year over year in 2023. Affected by the fall in international crude oil and vegetable oil prices and EU trade friction investigations, the company's biodiesel unit price in 2023 was 7,397 yuan/ton, -26.0% compared to the same period last year.

Production capacity will expand steadily in the future. By the end of 2023, the company's biodiesel production capacity reached 500,000 tons/year, and the bio-based materials production capacity was 90,000 tons/year. The company's production capacity will expand steadily in the future. The main projects include 100,000 tons/year hydrocarbon-based biodiesel, 50,000 tons/year fatty acid project, and 100,000 tons/year synthetic resin project. By the end of 2023, the project was in the early stages of construction.

Profit forecasting and investment ratings. We expect EPS to be 1.39, 1.93, and 3.18 yuan for 2024-2026, and 23.36 yuan for BPS in 2024. Referring to the valuation level of comparable companies, they were given 25-30 times PE in 2024, corresponding to a reasonable value range of 34.75-41.70 yuan (corresponding 1.5-1.8 times PB in 2024), maintaining a “superior to market” investment rating.

Risk warning: EU trade policy changes; biodiesel demand growth falls short of expectations; product prices fluctuate sharply; raw material prices have risen sharply; planned project progress and profits fall short of expectations.