Haixin Energy Technology is one of the first pioneers in R&D, production and sales of hydrocarbon-based biodiesel in China.

The company was founded in 1997 and listed on the Shenzhen Stock Exchange GEM in 2010. In 2019, the company implemented a strategic transformation focusing on the core business of biofuels to achieve suspended bed processing of hydrocarbon-based biodiesel. In 2022, the “hydrocarbon-based biodiesel” standard, which the company participated in drafting, was officially implemented. In 2024, the company was approved to implement pilot promotion and application of biodiesel in Haidian District, Beijing and Ju County, Rizhao.

The company's hydrocarbon-based biodiesel business is under pressure from EU anti-dumping and is currently actively exploring overseas markets in Africa and Europe. On July 19, 2024, the European Commission issued a pre-disclosure notice on the preliminary ruling on the anti-dumping investigation of Chinese biodiesel products, which imposed a provisional anti-dumping duty of 23.70% on the biodiesel products involved by the company. Currently, the company is actively developing markets outside the EU, such as Japan, South Korea, Singapore, Hong Kong, and Australia. On September 10, 2024, the company mentioned in an interactive question and answer session with investors that it recently signed an order for 10,000 tons of hydrocarbon-based biodiesel for the African European market.

Domestic hydrocarbon-based biodiesel market demand is expected to be gradually released under policy impetus. China's biodiesel industry started relatively late, and in recent years, the country has introduced a number of policies to actively encourage biodiesel development and promotion pilot projects. In August 2024, the Standards and Technology Department of the General Administration of Market Regulation decided to solicit public comments on 5 proposed mandatory national standard projects including “Vehicle Diesel”. The national standard plan “Bio-based Vehicle Diesel Blend” was proposed by the National Energy Administration and commissioned by TC280SC1 to establish mandatory national standards for biodiesel applications.

The new bio-aviation coal circuit is expected to be fully opened. 1) EU: The “ReFuel EU Aviation Regulation” adopted by the EU Council proposes that SAF will be added to aircraft fuel at EU airports from January 1, 2025, 2% in 2025, and 20%/34%/42%/70% in 2035/2040/2045/2050. 2) Domestic: The domestic bioaviation coal industry is in the early stages of development, and related policies continue to be promoted. On September 18, 2024, the SAF application pilot was launched, and 12 flights departing from 4 airports including Beijing Daxing, Chengdu Shuangliu, Zhengzhou Xinzheng, and Ningbo Lishe Airport will officially add SAF.

The company actively lays out SAF to open up new growth space. The company has produced bio-aviation coal components in industrialized installations, with a current production capacity of 0.05 million tons; the company's bioaviation coal components have obtained HEFA international certification under ISCC CORSIA and ISCC-EU, and are promoting domestic airworthiness certification work; at the same time, the company's Shandong 3-poly 0.2 million tons/year biodiesel heterogeneous project is expected to be put into operation in the second quarter of 2025. After the project is put into operation, it will add about 0.2 million tons of bio-aviation coal and bio-light oil products every year.

Investment advice: We expect the company's 2024-2026 revenue to be 2.369/3.364/5.223 billion yuan, net profit to mother of -0.785/0.012/0.299 billion yuan, corresponding EPS of -0.33/0.00/0.13 yuan, and corresponding PE of -/747.95/29.41X, covered for the first time, giving a “buy” rating.

Risk warning: Competition intensifies, EU anti-dumping policies, and performance and valuation judgments fall short of expectations.