Investment Rating - The report maintains a "Positive" investment rating for the industry [11] Core Insights - The domestic SAF (Sustainable Aviation Fuel) market has seen a significant price increase of 46.7% year-to-date, which is higher than the 9.4% increase in UCO (Used Cooking Oil) prices, indicating improved profitability for companies in this sector [2][6][18] - The demand for biodiesel in the Asia-Pacific region is driving a notable increase in China's biodiesel exports, particularly in Q3 2025, which saw a 15.0% year-on-year growth [7][25] - The report suggests focusing on raw material suppliers and processing companies, such as Zhuoyue New Energy, as the industry shows an upward trend in profitability and demand [2][9] Summary by Sections SAF & HVO - Four domestic companies have received export approval for a total capacity of 1.16 million tons of SAF, with the second batch of export whitelist being established in October 2025 [6][17] - The price of European FOB SAF has increased by 46.7% this year, leading to a favorable outlook for company profitability as the price gap between products and raw materials continues to widen [6][18] Biodiesel - China's biodiesel exports reached 647,000 tons in the first three quarters of 2025, a decrease of 27.5% year-on-year, but Q3 2025 saw a significant recovery with a 15.0% year-on-year increase [7][25] - The average export price of biodiesel in Q3 2025 was $1,152 per ton, reflecting an 11.7% year-on-year increase [7][25] UCO - In Q3 2025, China's UCO exports totaled 635,000 tons, a decrease of 11.2% year-on-year, attributed to the cancellation of export tax rebates in December 2024 [8][37] - The average export price for UCO in Q3 2025 was $1,082 per ton, up 19.7% year-on-year, driven by increased international demand due to EU regulations [8][37] Market Outlook - The report anticipates further supportive policies for the domestic market, particularly in renewable energy consumption targets, which will benefit the biodiesel sector [9][47] - The SAF industry is expected to grow significantly as multiple countries implement blending targets and incentives, transitioning from planning to actual demand [9][47]

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].