Description of the event

2024H1 achieved revenue of 1.93 billion yuan, a year-on-year increase of 5.63%; net profit to mother was 0.101 billion yuan, a year-on-year decrease of 33.3%; net profit after deducting non-attributable net profit of 0.095 billion yuan, a year-on-year decrease of 42.7%. Among them, 2024Q2 achieved revenue of 1.06 billion yuan, up 14.0% year on year and 22.5% month on month; net profit to mother was 0.072 billion yuan, down 10.4% year on year and up 148.5% month on month; net profit after deducting non-return to mother was 0.071 billion yuan, down 27.6% year on year and up 195.5% month on month.

Incident comments

2024H1 Against the backdrop of declining export volume from the biodiesel industry due to anti-dumping investigations, the company's revenue still achieved positive year-on-year and month-on-month growth. 2024H1's revenue increased 5.63% year on year, up 96.7% month on month, main reasons: 1) Quantity side: 2024H1 China's biodiesel export volume dropped significantly (43.7% year-on-year decline), while the company accelerated overseas layout, adjusted its export model from 2023Q4, established an independent sales network in Europe, maintained a high capacity utilization rate and export volume, achieved a biodiesel sales volume of 0.2001 million tons, and a capacity utilization rate of 80.0% (measured by sales volume); 2) Revenue side: revenue confirmed at EU local terminal prices (previously FOB price), corresponding increase in revenue per ton.

2024H1 achieved remarkable results in controlling the company's expenses due to a decline in the company's gross margin and a decrease in other earnings due to business model adjustments, reducing the impact of this impact on net profit. 1) Gross profit margin: The gross margin of 2024H1 sales was 6.34%, a year-on-year decrease of 3.69 pct. It is estimated that due to increases in international transportation costs and local import tariffs in Europe (6.5%), etc., the increase in comprehensive sales costs was greater than the increase in the company's unit sales price. 2) Other income: 2024H1's other revenue was 0.071 billion yuan, a year-on-year decrease of 0.037 billion yuan. On the one hand, due to the lengthening of the sales cycle, the increase in inventory balance, and the accumulation of input tax, the confirmed value-added tax was reduced; on the other hand, due to the company's strengthened management, the increase in input tax obtained from the procurement of waste oil and fat raw materials decreased, and VAT was immediately levied and refunded. 3) The company actively promoted cost reduction and efficiency. The cost rate for the period was 3.85%, a year-on-year decrease of 1.34pct, of which the financial expense ratio was -1.65%, a year-on-year decrease of 0.74pct; the R&D cost ratio was 3.22%, a year-on-year decrease of 0.77pct.

The month-on-month increase in net profit from 2024Q2 was higher than the month-on-month increase in revenue, mainly due to a further decline in expense ratios and a month-on-month increase in other earnings during the period. 1) The cost rate during 2024Q2 was 2.46%, a decrease of 3.09 pct. Among them, the financial cost rate, management cost rate, and R&D cost ratio decreased by 1.68 pct, 0.66 pct, and 0.51 pct, respectively; 2) In addition, the 2024Q2 company's other revenue was 0.045 billion yuan, an increase of 0.02 billion yuan over the previous month; the main reason was the month-on-month increase in confirmed value-added tax collection and withdrawal.

Actively respond to EU biodiesel anti-dumping sanctions. On August 16, 2024, the European Commission announced the preliminary findings of the anti-dumping investigation against Chinese biodiesel products and adopted provisional measures. The European Commission is expected to issue a final ruling in February 2025. After the results of the preliminary ruling were announced, the company actively conducted legal defense and appeal hearings, and actively adjusted strategies to expand sales markets in non-EU regions and increase the application of biodiesel in the marine fuel market; expand domestic bio-based chemical market applications. The natural fatty alcohol project is expected to be completed and put into operation by the end of the year; and built production lines in overseas markets such as Singapore and Saudi Arabia through an international layout to ensure the company's continued profitability.

Considering that the company and its subsidiary Xiamen Zhuoyue were subject to 25.4% temporary anti-dumping duties starting August 17, 2024, the 2024 results may be under pressure. The first phase of 2025Q1 Singapore is expected to be put into operation with a production capacity of 0.1 million tons, which may avoid the risk of tariffs and bring an increase in the company's performance. The company's net profit due to mother in 2024-2026 is expected to be 0.005/0.076/0.144 billion yuan, maintaining an “increase in holdings” rating.

Risk warning

1. The market pattern of the upstream raw materials industry has changed significantly, making procurement of raw materials more difficult; 2. Demand in the EU market falls short of expectations.