Investment Rating - The investment rating for the company is "Outperform the Market" [3][5][19]. Core Views - The company has significantly turned around its performance, achieving a net profit of 40.57 million yuan in H1 2025, compared to a loss in the previous period. This improvement is attributed to cost reduction efforts, increased production, and favorable market conditions for industrial-grade mixed oil [1][7]. - The company's operating cash flow has improved significantly, reaching 60.66 million yuan in H1 2025, an increase of 72.46 million yuan year-on-year [1][7]. - The gross margin has increased to 24.04% in H1 2025, up by 5.04 percentage points year-on-year, driven by higher margins in the industrial-grade mixed oil business [2][7]. - The company has submitted a private placement application to the Shenzhen Stock Exchange, aiming to raise up to 717.63 million yuan [3][19]. Summary by Sections Financial Performance - In H1 2025, the company reported revenues of 717 million yuan, a decrease of 9.3% year-on-year, primarily due to changes in the sales structure of oils. The net profit for the same period was 40.57 million yuan, marking a significant turnaround [1][7]. - The operating cash flow for H1 2025 was 60.66 million yuan, reflecting a substantial improvement compared to the previous year [1][7]. Margin and Cost Analysis - The overall gross margin for H1 2025 was 24.04%, an increase of 5.04 percentage points from the previous year. The gross margin for the industrial-grade mixed oil business rose to 25.41%, up by 6.15 percentage points [2][7]. - The company maintained stable expense ratios, with sales, management, R&D, and financial expense ratios recorded at 0.05%, 8.12%, 0.12%, and 8.80%, respectively [2][7]. Market Conditions - The price of industrial-grade mixed oil (UCO) has been on the rise, reaching an average export price of 1,054.22 USD/ton in July 2025, a 16.75% increase year-on-year [2][13]. - The domestic demand for UCO is expected to grow as the country progresses with SAF (Sustainable Aviation Fuel) pilot programs, which may further enhance the scarcity of industrial-grade mixed oil [13][15]. Future Outlook - The company has maintained its profit forecast for 2025 while adjusting upward the profit forecasts for 2026 and 2027, expecting net profits of 88 million yuan, 154 million yuan, and 200 million yuan for the respective years [3][19]. - The current stock price corresponds to a PE ratio of 37, 21, and 17 for the years 2025, 2026, and 2027, respectively [3][19].

Investment Rating - The investment rating for the company is "Outperform the Market" (maintained) [2][14]. Core Views - The company has released a strong mid-year performance forecast for 2025, expecting a net profit attributable to shareholders of 40-45 million yuan, a significant increase from a loss of 35.0024 million yuan in the same period last year, representing a year-on-year growth of 214.28% to 228.56% [3][4]. - The company plans to raise no more than 718 million yuan through a private placement to a major shareholder, which will be used to replenish working capital and repay bank loans [3][12]. - The increase in performance is attributed to cost reduction efforts, increased waste disposal volumes, and rising market prices for industrial-grade mixed oil due to EU policy impacts [4][5]. Summary by Sections Financial Performance - The company forecasts a net profit of 40-45 million yuan for mid-2025, compared to a loss of 35.0024 million yuan in the previous year, indicating a year-on-year growth of 214.28% to 228.56% [3][4]. - The expected net profit excluding non-recurring items is projected to be 36-41 million yuan, up from 162.43 thousand yuan last year, reflecting a growth of 2116.34% to 2424.16% [3][4]. Market Dynamics - The price of industrial-grade mixed oil (UCO) has reached a two-year high, driven by increased domestic demand and the upcoming shipping season, with prices touching 7600 yuan/ton in July 2025 [5][6]. - The domestic SAF (Sustainable Aviation Fuel) trial has begun, indicating a potential increase in demand for UCO, which may enhance its scarcity in the market [6]. Capital Raising and Shareholder Confidence - The company plans to issue shares to Shandong High-speed Industrial Investment Co., Ltd., with a subscription price of 5.13 yuan per share, raising up to 718 million yuan [12][13]. - The full cash subscription by the major shareholder reflects confidence in the company's future prospects and is expected to optimize the company's financial structure and reduce financial costs [13]. Future Earnings Forecast - The company maintains its earnings forecast, projecting net profits of 88 million yuan, 125 million yuan, and 145 million yuan for 2025, 2026, and 2027 respectively, with growth rates of 576.3%, 41.3%, and 16.1% [14].

Group 1: Company Overview and SAF Production - The company completed the technical transformation for SAF in 2024, achieving a product yield of 82% and meeting 46 international standards [2] - In December 2024, the company signed a cooperation agreement with China National Petroleum International to export 4,950 tons of bio-jet fuel to international markets [2] - The company continues to optimize the SAF production process, aiming to improve yield in the future [2] Group 2: Domestic SAF Policy Landscape - China officially launched SAF application pilot work in September 2024, marking a significant milestone in the aviation industry's green transition [3] - The first phase of the pilot (September to December 2024) involved 12 flights across four airports, validating SAF's applicability and operational safety [3] - The second phase starting in 2025 will expand the network of participating airlines and airports for SAF promotion [3] Group 3: International SAF Policy Landscape - The EU has set a target for carbon neutrality by 2050 and introduced the European Green Deal, which includes policies to support SAF development [4] - The ReFuelEU plan mandates that by 2025, at least 2% of aviation fuel must be SAF, increasing to 6% by 2030, 20% by 2035, 34% by 2040, 42% by 2045, and 70% by 2050 [4] - The EU Emissions Trading System is undergoing reforms to enhance carbon reduction efforts in the aviation sector [4] Group 4: Comparative Analysis of SAF Development - SAF development is still in its early stages globally, with major economies like the EU, the US, and China issuing supportive policies [6] - China's SAF policies are primarily encouragement-based, lacking specific blending ratio requirements or clear timelines for development [6] - The Chinese government has recognized SAF as a key component of the aviation industry's decarbonization strategy, as indicated in various national plans [6] Group 5: Company Advantages and Market Position - The company operates a light asset model, utilizing site leasing and equipment refurbishment for HVO production, resulting in lower capital and operational costs [8] - The company's SAF production costs are lower compared to competitors using heavy asset investments and foreign technology [8] - The company has successfully exported SAF products, which have passed international certifications, validating quality and cost advantages [8] Group 6: Recent Business Developments - The company has secured several new water project contracts, including a water supply project in Xinjiang with a capacity of 99,000 cubic meters per day [8] - Other projects include a sewage treatment project in Henan and a water treatment equipment procurement project in Beijing [8] - The company is promoting a prefabricated water plant model that integrates renewable energy technologies, aligning with carbon neutrality goals [8]