What happened: the company released its mid-2023 report, showing a decline in performance in the first half of 2023 and a rebound in the second quarter. In the first half of the year, the company's revenue was 1.829 billion yuan (year-on-year-19.1%), and the return net profit was 152 million yuan (year-on-year-42.8%). Of this total, the revenue in the second quarter was 933 million yuan (year-on-year-27.3%, month-on-month + 4.1%), and the return-to-home net profit was 81 million yuan (year-on-year-51.2%, month-on-month 13.1%), and the overall performance in the first half was lower than expected.
In the first half of the year, the overall performance declined significantly compared with the same period last year due to the fall in oil prices and other factors. In the first half of 2023, the export volume of the domestic biodiesel industry continued to grow, but under the influence of commodity prices, especially oil prices and sharp fluctuations in the stage, product market prices declined and fluctuated one after another. According to the General Administration of Customs, the unit price of biodiesel exports in January 2023 was $1360 / tonne, and then continued to decline, to $1176 / tonne in June 2023, down-14 per cent from the previous month, compared with $1791 / tonne in June last year, down 34 per cent from a year earlier. Affected by this, the company's performance in the first half of the year declined compared with the same period last year, but relying on the brand and channel advantages accumulated over the years, biodiesel export volume and production capacity continued to grow at the same time.
The company has remarkable advantages, ranking first in the export volume of similar domestic enterprises for many years, and continues to build an integrated biochemical industry base.
According to the company announcement, the company's biodiesel export ranked first among similar enterprises for many years, mainly relying on the following advantages: 1) technological advantages: the methyl esterification conversion rate of waste oil reached 99%. The yield of high-quality biodiesel products is higher than 90%. 2) scale advantage: by mid-2023, the company has a biodiesel production capacity of 500000 tons and a bio-based material production capacity of 90, 000 tons. In addition, the company's 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, and long-term equipment have been ordered one after another. 3) Raw material advantages: the company has a waste oil procurement network covering China and Southeast Asia, a perfect waste oil procurement management system and fair quality testing standards, and maintains a long-term and stable cooperative relationship with major suppliers. In May this year, subsidiaries in Singapore and the Netherlands obtained ISCC certification, and overseas teams began to play a gradual role in raw material resources development, product terminal sales and market information. 4) sales advantages: in addition to existing customers, the company is also actively expanding the application of biodiesel in ships and other new fields.
Investment analysis opinion: downgrade profit forecast and maintain "buy" rating. Taking into account the downward price of biodiesel, the fierce market competition and the review of domestic biodiesel in Europe, we reduced our 2023-25 net profit to 3.56 PE 5.28 / 789 million yuan (the original value is 5.29 pound 5.47 pound 792 million yuan). Considering that the company's share price has fallen 19% since the beginning of the year, the stock price corresponds to 23-25 PE of 16-11-7, with a price-to-earnings ratio of 22.68% (since listing). Valuation is still low, while the company has significant advantages, we are optimistic about the company's long-term growth and growth space, and maintain the "buy" rating.
Risk hints: the price of waste oil fluctuates greatly, the market competition intensifies, and the progress of new production capacity is not as expected.