Summary of Key Points from the Conference Call Industry Overview - The conference call focuses on the Sustainable Aviation Fuel (SAF) industry, particularly in the context of biodiesel and its growth driven by policy initiatives in regions like the EU and China [1][4]. Core Insights and Arguments - **Global SAF Demand Growth**: The global demand for SAF is expected to reach approximately 48 million tons by 2050, with an average blending level of 11.4%. If the International Air Transport Association (IATA) targets are met, demand could soar to 358 million tons [1][4]. - **China's SAF Demand**: China's SAF demand is projected to reach 2.49 million tons by 2030, despite having more lenient targets compared to the EU [1][4]. - **SAF Price Increase**: The price of SAF has surged due to high demand and limited production capacity, with high-end offshore prices in China reaching $2,500 per ton, a nearly 40% increase since the beginning of the year [1][5]. - **UCO Supply Constraints**: The supply of used cooking oil (UCO), a key raw material for SAF, is limited, with actual collection in China around 2 million tons, indicating its scarcity [1][7]. Company Highlights - **Shangao Environmental Energy**: As a leading player in the UCO industry in China, Shangao plans to increase its waste processing capacity from 5,660 tons per day to between 8,000 and 10,000 tons per day over the next three years. The company has seen rapid growth in net profit and operating cash flow [1][3][10]. - **Jiaao Environmental Protection**: The subsidiary of Jiaao has obtained SAF export licenses and has partnered with BP and China Aviation Oil as strategic shareholders. The company is expected to achieve SAF mass production and export by mid-2025 [1][3][16]. Policy and Market Dynamics - **Global Policy Initiatives**: Various regions, particularly the EU, have implemented SAF blending policies, with the EU aiming for a 2% blending ratio by 2025, leading to a demand increase from 61,000 tons in 2024 to 190,000 tons in 2025 [4]. - **Future Supply and Demand Forecast**: Short-term supply is expected to remain tight due to delays in new production lines and aircraft deliveries. By 2030, global SAF production capacity is projected to be between 14 million and 20 million tons, with demand potentially reaching 20 million tons, indicating a continued supply-demand imbalance [1][9]. Financial Performance and Outlook - **Shangao's Financial Health**: The company reported a significant increase in net profit, with a projected growth of over 200% in net profit for the first half of 2025 compared to the previous year [1][13][14]. - **Jiaao's Financial Recovery**: Jiaao's subsidiary turned a profit of 26 million yuan in the first half of 2025, recovering from previous losses, and is expected to benefit from the scaling of SaaS delivery and price increases [1][16]. Additional Considerations - **Industry Competition**: The biodiesel industry is relatively fragmented, and while demand for UCO is high, the entry of new players is limited due to low profit margins. Shangao is expected to maintain profitability through efficiency improvements [1][11]. - **Strategic Partnerships**: The collaboration between Jiaao and major players like BP and China Aviation Oil is seen as a strategic move to secure market position and enhance operational capabilities [1][3][16]. Conclusion - The SAF industry is poised for significant growth driven by policy support and increasing demand, with key players like Shangao and Jiaao positioned to capitalize on these trends. The supply constraints and rising prices indicate a robust market environment, although challenges remain in terms of production capacity and competition dynamics [1][9][17].

Investment Rating - The report maintains a "Strong Buy" rating for the sustainable aviation fuel (SAF) industry, indicating a positive outlook for investment opportunities [1]. Core Insights - SAF is identified as a key pathway for carbon reduction in the aviation industry, with the potential to reduce carbon emissions by up to 85% compared to traditional aviation fuels. Its physical properties are similar to conventional jet fuel, eliminating the need for significant modifications to existing infrastructure and aircraft engines [3][8]. - The report anticipates that 2025 will mark the beginning of substantial progress in SAF blending policies across multiple countries, with mandatory blending ratios set to be implemented in regions such as the EU, UK, and Indonesia [4][24]. - The demand for SAF is projected to grow significantly, with estimates suggesting an increase from 50,000 tons in 2020 to 6.3 million tons by 2025, and further to 18.35 million tons by 2030, representing a rise in its share of total aviation fuel consumption from 2% in 2025 to 5% in 2030 [4][28]. Summary by Sections SAF as a Key Pathway for Carbon Reduction - SAF is recognized as a feasible solution for achieving carbon neutrality in aviation, with various production methods available, including HEFA, ATJ, FT, and PtL. HEFA is currently the most mature and cost-effective method, although it faces limitations due to the availability of feedstock [8][9][11]. - The report highlights that the production cost of SAF varies significantly based on the yield from feedstock, with estimates ranging from $1,940 to $3,200 per ton. The profitability of SAF production is contingent on achieving higher yields and reducing costs through technological advancements [20][21]. Global Policy and Market Dynamics - The report outlines that several countries have established clear timelines for SAF blending ratios, with the EU and UK implementing mandatory blending policies starting in 2025. This is expected to catalyze demand and support SAF prices [4][24]. - The International Civil Aviation Organization (ICAO) has mandated that all member countries participate in the CORSIA mechanism for carbon offsetting starting in 2027, further driving the adoption of SAF [25]. Regional Developments - In China, the demand for SAF is projected to reach 2.81 million tons by 2030, with several airlines actively pursuing SAF pilot projects. The country is expected to become a major supplier of SAF globally [4][36]. - The EU aims to reduce the price gap between SAF and traditional jet fuel through carbon credit allocations and subsidies, with consumption expected to reach approximately 910,000 tons by 2025 [4][24]. Investment Recommendations - The report suggests focusing on companies that are leading in SAF production and have received necessary certifications, such as嘉澳环保, 海新能科, and 鹏鹞环保, as they are well-positioned to benefit from the anticipated growth in SAF demand [4][36].