Core Viewpoint - The company has approved a supplementary agreement regarding the acquisition of Zhengzhou Lvyuan Kitchen Waste Treatment Co., Ltd, which aims to enhance its strategic focus on organic waste treatment and resource utilization [4][12]. Group 1: Meeting and Decision - The company's 11th Board of Directors held its 23rd meeting on September 17, 2025, where all 7 attending directors unanimously approved the proposal regarding the acquisition [1][2]. - The meeting complied with the relevant regulations of the Company Law of the People's Republic of China and the company's articles of association [1]. Group 2: Transaction Background - The company previously approved the acquisition of 100% equity of Zhengzhou Lvyuan on November 28, 2024, with the cash purchase involving Zhengzhou Yutong Environmental Technology Co., Ltd holding 51% and Tsinghua Tongfang Co., Ltd holding 49% of the target company [4][5]. - The transfer of 49% equity was completed, and the transfer of the remaining 51% is expected to be finalized soon [5][6]. Group 3: Transaction Progress - The Zhengzhou Urban Management Bureau has approved the equity transfer, confirming that all conditions of the original transfer agreement have been met [7]. - A supplementary agreement has been proposed to address potential adjustments in service fee standards for kitchen waste treatment from 2025 to 2027, allowing both parties to share the risks and benefits of any changes [7][9]. Group 4: Payment Arrangements - The agreement outlines specific payment arrangements for adjustments in service fees, including a formula for calculating changes in the transfer price based on the impact of government audits on service fees [9][10]. - If the average daily disposal amount of kitchen waste is below 325 tons from 2025 to 2027, the transfer price will be calculated based on actual amounts [11]. Group 5: Impact on the Company - The supplementary agreement does not alter the terms of the original equity transfer agreement and is expected to facilitate the swift completion of the equity transfer and subsequent operations [12]. - The completion of this transaction is not anticipated to have a significant adverse effect on the company's main business, financial status, or operational results [12].

Investment Rating - The report assigns an "Accumulate" rating for the company, marking its first coverage [1]. Core Views - The company is a key strategic player in the renewable energy sector under the Shankao Group, focusing on the green transformation of its business model, particularly in kitchen waste treatment and heating [2][3]. - The company has returned to a growth trajectory since 2021, with significant revenue increases following its strategic pivot towards environmental and green energy sectors [4][19]. - The demand for sustainable aviation fuel (SAF) is expected to grow significantly, driven by global carbon reduction initiatives, positioning the company favorably within this expanding market [8][58]. Summary by Sections Company Overview - The company, originally established as Sichuan Meiya Silk (Group) Co., Ltd., has undergone multiple ownership changes and strategic pivots, ultimately focusing on renewable energy and environmental services [3][12]. - Following a major restructuring in 2020, the company shifted its focus to kitchen waste resource utilization, becoming the only listed company in China primarily engaged in this sector [3][19]. Financial Performance - The company reported a revenue of 827 million yuan in 2021, a year-on-year increase of 138.33% [4][19]. - In 2024, despite a reduction in trading volume, the company achieved a 47.3% year-on-year increase in net profit attributable to shareholders [21]. - The first quarter of 2025 saw revenues of 434 million yuan, reflecting a 4.21% year-on-year growth, with net profit reaching 28.27 million yuan, up 222.23% [21][30]. Market Dynamics - Used cooking oil (UCO) is a critical raw material for SAF, with China accounting for over 60% of global UCO supply, highlighting its strategic importance in the SAF production chain [5][45]. - The global demand for SAF is projected to increase significantly, with various countries implementing policies to boost its usage in aviation fuels [8][59]. Operational Capacity - The company has established a robust operational capacity in kitchen waste treatment, with a daily processing capacity of 4,380 tons as of the end of 2024, with plans to expand to 8,000-10,000 tons [9][68]. - The company employs a heavy asset operation model, maintaining a high debt ratio of over 70%, which is typical for the industry [9][71]. Profitability Forecast - The company forecasts net profits of 104 million yuan, 179 million yuan, and 299 million yuan for 2025, 2026, and 2027 respectively, with corresponding P/E ratios of 31.2, 18.1, and 10.8 [1][9].

Group 1: Performance Improvement - The company's performance improved significantly in the first half of the year due to multiple factors, including a rise in UCO prices driven by new EU and UK policies, which are expected to bring an incremental demand of approximately 180,000 tons of UCO [2] - The company's refined management practices led to a continuous increase in the capacity utilization rate of kitchen waste projects, resulting in a growth in oil yield [2] - The optimization of production processes contributed to a reduction in cash costs per ton by 13.04% year-on-year [2] Group 2: Future Price Outlook - The current UCO price has reached approximately 8,000 RMB/ton, a two-year high, with strong support expected for future prices due to the implementation of bio-jet fuel blending policies and stable domestic waste oil production [3] Group 3: Strategic Development Plans - The company plans to focus on expanding kitchen waste project capacity and acquiring high-quality projects to enhance profitability, while also considering projects that synergize with its main business [3] - Future capacity expansion aims to increase kitchen waste processing capacity to 8,000-10,000 tons/day, supported by a robust project identification mechanism and collaboration with local governments and industry associations [4] Group 4: Cost Reduction Measures - The company will implement various measures to further reduce production costs, including improving collection efficiency, optimizing wastewater treatment processes, and enhancing detailed management practices [3] Group 5: Core Competitiveness - The company has established a "three-in-one" model to strengthen its competitive edge, which includes a robust network for collection and processing, a comprehensive digital platform for smart control, and a complete technical advantage for cost reduction and efficiency improvement [3] Group 6: Current Order Situation - The company currently has a substantial number of inquiries from domestic and international biofuel leaders, with a strong order backlog primarily from domestic clients, and some orders resuming from the U.S. market after previous tariff issues [3] Group 7: Accounts Receivable Management - The company emphasizes the collection of accounts receivable, achieving a nearly 100% rolling collection rate, with a projected 8.1% increase in kitchen waste processing volume in 2024, despite a year-on-year decrease in accounts receivable [3] Group 8: Dividend Policy - The company currently has negative retained earnings and does not have the conditions for cash dividends, but plans to consider dividends once retained earnings turn positive [4] Group 9: Biofuel Demand Outlook - The bio-jet fuel sector is expected to see significant growth, with pilot programs expanding and government support for green fuel production, indicating a promising future for domestic biofuel demand [4] Group 10: Competitive Strategy - The company will maintain its competitive advantage by enhancing project management, increasing capacity utilization, and absorbing high-quality projects within the industry [4]

Group 1 - The company plans to issue A-shares to specific investors to enhance its capital strength and support its strategic development in the organic waste disposal and resource utilization sector [1][3][4] - The issuance is driven by the increasing demand for kitchen waste disposal and resource utilization, as well as the government's focus on environmental protection and waste management [1][2][3] - The company has a significant debt burden, with total borrowings amounting to 1.983 billion yuan and a debt-to-asset ratio of 72.06% as of March 31, 2025 [3][4] Group 2 - The company aims to use the raised funds to supplement working capital and repay bank loans, which will help reduce its debt ratio and optimize its capital structure [4][10][21] - The issuance will also strengthen the company's financial position and enhance its ability to respond to industry trends and competition [4][10][21] - The company has established a network of projects across nearly twenty major cities in China, focusing on organic waste disposal and renewable energy [3][4] Group 3 - The issuance price is set at 5.13 yuan per share, which is not lower than 80% of the average trading price over the previous 20 trading days [11][12] - The issuance will be conducted in compliance with relevant regulations, ensuring that the process is fair and transparent for all shareholders [14][15] - The company has committed to using the raised funds exclusively for operational purposes and will not engage in financial investments [10][21]

Summary of Conference Call on UCO Industry and Company Insights Industry Overview - The UCO (Used Cooking Oil) market is driven by carbon attributes and green premiums, with prices currently around 7,700-7,800 RMB/ton, reflecting a 500-600 RMB increase since early June [2][5][25] - The market dynamics have shifted due to mandatory bio-jet fuel (SAF) blending policies in Europe and the commissioning of large domestic plants, enhancing the bargaining power of domestic producers [2][5] - The annual production of UCO from regulated kitchen waste treatment plants in China is approximately 800,000 to 900,000 tons, with slow capacity expansion due to strict project approvals [2][3][8] Company Positioning - The company specializes in kitchen organic waste treatment and UCO resource utilization, processing about 4,700-4,800 tons of waste daily with a design capacity of 5,400 tons, achieving an 88% utilization rate [3] - The company’s UCO production is around 90,000 tons annually, positioning it as a leader in the domestic UCO sector [3] Market Dynamics - UCO pricing has been influenced by the European SAF blending mandate, which requires a 2% addition by 2025, leading to increased domestic demand [5][17] - The company’s UCO sales have transitioned from international clients to domestic SAF producers, with major clients including Hai Xin Neng Ke and He Nan Jun Heng [11][12] Production and Supply Chain - UCO is categorized into several types based on quality, with the highest quality sourced from kitchen waste treatment plants, followed by mixed oils and lower-quality oils like gutter oil [9][10] - The company plans to expand its UCO production capacity to 200,000 tons annually through acquisitions and projects like "urban oil fields," targeting a daily processing capacity of 8,000 to 10,000 tons [4][15][16] Regulatory Environment - The UCO industry faces significant regulatory hurdles, with project approvals requiring local government consent and operational experience, limiting the emergence of new large-scale producers [8][9] Future Outlook - The demand for UCO is expected to grow, particularly with European policies mandating higher SAF blending ratios, which could lead to a supply shortage if domestic production does not keep pace [21][22] - The company anticipates a substantial improvement in performance in 2025, driven by cost reductions and increased oil extraction rates, with a focus on monitoring oil price fluctuations [25] Key Risks and Considerations - Oil price fluctuations significantly impact profitability, with a 1,000 RMB increase in oil prices affecting profits by approximately 90 million RMB [25] - The company is advised to keep an eye on UCO price trends and the prices of palm oil and rapeseed oil, as they are closely linked to UCO pricing [25]

Core Insights - Oklin has successfully won the NEOM food waste treatment project, showcasing its technological advantages in the field of food waste management and receiving international recognition for its innovative solutions [1][4]. Group 1: Project Overview - NEOM is a futuristic city being developed under Saudi Arabia's Vision 2030, emphasizing sustainability and innovation [3]. - The NEOM food waste treatment project is set to meet the daily food waste processing needs of the area and is scheduled to commence operations in October 2025 [4]. Group 2: Technology and Innovation - The project utilizes Oklin's third-generation microbial degradation technology, integrating various processes such as pretreatment, fermentation, gas treatment, and wastewater management into a complete closed-loop system [4]. - A dual-end intelligent control system allows for digital management of the entire process, enhancing efficiency and ensuring environmental friendliness [4]. Group 3: Environmental Impact - The project aims to produce specialized organic fertilizers that improve sandy soil structure and enhance water and nutrient retention, contributing to the greening of NEOM and surrounding areas [4]. - The successful implementation of this project establishes a resource recycling ecosystem that supports sustainable agricultural development in Saudi Arabia [4][6]. Group 4: Company Profile - Oklin is a high-tech enterprise focused on organic solid waste treatment and resource utilization, offering a comprehensive solution that includes R&D, equipment manufacturing, engineering construction, and operational management [6]. - The success of the NEOM project demonstrates Oklin's adaptability to different regional environments and provides a replicable environmental solution for other cities globally [6].