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].