Investment Rating - Investment rating: Positive (maintained) [5] Core Insights - 2025 marks the first year for mandatory SAF (Sustainable Aviation Fuel) blending in Europe, with the EU requiring 2% SAF in aviation fuel and the UK aiming for at least 2% SAF in total aviation fuel demand [6][12] - The UK has reported a 70% compliance rate for SAF blending from January to October 2025, with total fuel consumption of 10 billion liters and SAF consumption of 1.63 million liters [7][13] - The supply of SAF is tight due to high profitability of HVO (Hydrotreated Vegetable Oil) products in Europe, leading to limited SAF production capacity [7][13] - HVO prices are expected to remain high, influencing SAF prices to also stay elevated in the short term [8][16] Summary by Sections Environmental Policy - The EU's ReFuelEU Aviation mandates a gradual increase in SAF blending from 2% in 2025 to 70% by 2050, with penalties for non-compliance [6][12] - The UK plans to implement SAF directives starting January 1, 2025, aiming to reduce CO2 emissions by 2.7 million tons by 2030 [6][12] Market Performance - The UK’s fuel consumption for 2025 is projected at 12 billion liters, with a remaining target of 0.77 billion liters to be achieved by the end of the year [7][13] - The tight supply of SAF is attributed to the higher profitability of HVO production, causing some facilities to shift focus from SAF to HVO [7][13] Future Outlook - Demand for HVO is expected to rise, further supporting high SAF prices, with a projected global SAF demand of 15.5 to 30.9 million tons by 2030 [8][16] - The actual supply of SAF may fall short of demand due to project delays in the EU and the US, leading to a significant supply-demand gap in the long term [8][16] Investment Recommendations - Focus on SAF production companies, particularly those that have received export whitelist status, such as Hai Xin Neng Ke, Jia Ao Environmental Protection, and Zhuo Yue Xin Neng [9][19] - As downstream capacity expands, upstream oil demand is expected to grow, suggesting attention to companies like Shan Gao Huan Neng and Lang Kun Technology [9][19]