Summary of Conference Call Notes Industry Overview - The focus is on the environmental protection industry, with a specific emphasis on carbon reduction efforts and upcoming earnings reports from various companies in the sector [1][2]. Key Points and Arguments - **Earnings Reports**: By January 30, 2026, 61 environmental companies have released their earnings forecasts for 2025. Among these: - 14 companies are expected to see significant positive growth in earnings - 4 companies are projected to experience a decline in earnings - 8 companies are anticipated to turn losses into profits - 35 companies are expected to report losses [1][2]. - **Notable Performers**: - **Wanyi Technology**: Expected net profit for 2025 is between 42 million to 62 million yuan, representing a year-on-year increase of 191.52% to 330.34% - **Gao Neng Environment**: Projected net profit for 2025 is between 750 million to 900 million yuan, reflecting a year-on-year growth of 55.66% to 86.79% - **Yuehai Investment**: Expected net profit growth of 43% for 2025, with an estimated profit close to 4.5 billion HKD based on 2024 figures [2]. - **Carbon Reduction Initiatives**: The year 2026 marks a significant shift towards stringent carbon emission controls, with local governments facing formal evaluations of carbon neutrality targets for the first time [2]. - **EU Carbon Tariff**: The EU has implemented a carbon tariff as of January 1, 2026, which is expected to increase the cost of exports from China to the EU. Exporting companies can mitigate these costs through the use of green energy and recycled resources [3]. Additional Important Insights - **Green Energy Demand**: The demand for green energy in global transportation is increasing, particularly with the EU's plan to mandate a rise in Sustainable Aviation Fuel (SAF) usage from 2% to a long-term target of 70% by 2025 [3]. - **UCO Pricing**: The price of Used Cooking Oil (UCO) has reached 1,075 USD per ton, marking a 9.1% increase since early 2025. This price increase is expected to enhance profit margins for companies involved in the processing of waste oils [3]. - **Companies to Watch**: - **Recycling and Resource Recovery**: Companies like Yingke Recycling, Langkun Technology, and Dadi Ocean are highlighted for their roles in the recycling sector - **Green Steam and Methanol**: Companies such as Huanlan Environment and China Tianying are noted for their contributions to green steam and methanol production [3].

Investment Rating - The report assigns a "Buy" rating to the company, indicating a positive outlook for its stock performance relative to the market index [3]. Core Views - The UCO market is characterized by a clear supply-demand logic, with long-term scarcity locked in by fundamentals. The theoretical potential for supply is significant, but actual utilization is limited due to collection and processing challenges [2]. - Demand for UCO is expected to grow significantly due to policy drivers, particularly in the EU, where SAF demand is projected to reach 264 million tons by 2030 and 825 million tons by 2035, translating to UCO demand of approximately 245 million tons and 766 million tons respectively [2]. - The company has reported record high earnings for the first three quarters of 2025, with revenue of 1.386 billion yuan and a net profit of 249 million yuan, reflecting a year-on-year increase of 0.17% and 28.89% respectively [2]. - The company is actively responding to changes in overseas policies and has implemented strategies to mitigate risks associated with EU anti-dumping investigations [2]. Summary by Sections Market Overview - The price of UCO has seen a slight increase, with the price range for UCO in China reaching 7,500-7,600 yuan per ton, up by approximately 50 yuan per ton week-on-week [1]. - The average spot price for UCO-based HVO recorded 2,642.55 USD per ton, reflecting a 1.90% increase [1]. Financial Performance - The company’s revenue projections for 2025-2027 are estimated at 1.932 billion, 2.222 billion, and 2.562 billion yuan respectively, with corresponding net profits of 289 million, 357 million, and 437 million yuan [6][7]. - The earnings per share (EPS) are projected to be 1.20, 1.48, and 1.81 yuan for the years 2025, 2026, and 2027 respectively [6][7]. Production Capacity - The company has a current raw material capacity of approximately 50,000 tons per year and is expected to enhance UCO production capacity through various projects in major cities [5]. - The Beijing Tongzhou project is anticipated to be operational by the second half of 2026, with a designed processing capacity of 2,100 tons per day [5].

Investment Rating - The report assigns a "Buy" rating to the company, indicating a positive outlook for its stock performance relative to the market index [3]. Core Views - The UCO market is characterized by a clear supply-demand logic, with long-term scarcity locked in by fundamentals. The theoretical potential for supply is significant, but actual utilization is limited due to collection and processing constraints [2]. - Demand for UCO is expected to grow significantly due to policy drivers, particularly in the EU, where SAF demand is projected to reach 264 million tons by 2030 and 825 million tons by 2035, translating to UCO demand of approximately 245 million tons and 766 million tons respectively [2]. - The company has reported record high earnings for the first three quarters of 2025, with revenue of 1.386 billion yuan and a net profit of 249 million yuan, reflecting a year-on-year increase of 0.17% and 28.89% respectively [2]. Summary by Sections Market Overview - The price of UCO has seen a slight increase, with the price range for UCO in China reaching 7500-7600 yuan per ton, up by approximately 50 yuan per ton week-on-week [1]. - The average spot price for UCO-based HVO recorded at 2642.55 USD per ton, reflecting a 1.90% increase [1]. Supply and Demand Analysis - The theoretical total amount of waste oil in China is about 11 million tons, but only around 3 million tons are utilized due to various constraints [2]. - The company is actively expanding its UCO production capacity, with projects in major cities like Beijing and Guangzhou, which are expected to enhance its supply capabilities [5]. Financial Projections - Revenue projections for the company are estimated at 1.931 billion yuan in 2025, 2.222 billion yuan in 2026, and 2.562 billion yuan in 2027, with corresponding net profits of 289 million yuan, 357 million yuan, and 437 million yuan [6][7]. - The expected EPS for the years 2025, 2026, and 2027 are 1.20 yuan, 1.48 yuan, and 1.81 yuan respectively, with P/E ratios of 22.43, 18.13, and 14.82 [6][7].

Company and Industry Summary Company: Langkun Technology (朗坤科技) Key Points - **UCO Price Dynamics**: The price center of Used Cooking Oil (UCO) is expected to systematically rise due to demand growth and supply constraints, indicating a high level of certainty in this trend. Compared to Shanhigh, Langkun Technology has not received significant market attention previously, suggesting a potential investment opportunity [1][1][1] - **Policy Support**: The demand for UCO is being driven by rigid policy requirements, which are expected to enhance UCO demand and lead to a revaluation of its value. The long-term scarcity of supply is becoming increasingly evident. UCO is a high-quality raw material for producing Hydrotreated Vegetable Oil (HVO) and Sustainable Aviation Fuel (SAF) via the HEFA route, with carbon reduction potential exceeding 80%, outperforming palm oil and other vegetable oils. It has received priority support from EU policies such as REDIII and ReFuelEU [1][1][1] - **Market Positioning**: Langkun Technology's focus on first-tier cities is a strategic advantage. The company has a current capacity of 3,911 tons/day from existing kitchen waste projects and holds five large-scale projects in the Guangdong-Hong Kong-Macao Greater Bay Area, Beijing-Tianjin-Hebei, and the Yangtze River Delta, ensuring stable demand and payment capabilities [1][1][1] - **Capacity Expansion**: Projects in Tongzhou and Fangshan are expected to double the kitchen waste processing capacity to 6,761 tons/day by 2026-2027. The UCO output is projected to increase from 50,000 tons to 300,000 tons (10,000 tons from self-production and 200,000 tons from channel integration), indicating strong certainty in organic growth [2][2][2] - **Financial Metrics**: As of January 23, Langkun Technology has a Price-to-Earnings (PE) ratio of 24 times, while Shanhigh has a PE ratio of 59 times. The current UCO market conditions are favorable, and with the confirmation of the company's BOT (Build-Operate-Transfer) projects, the net profit is expected to exceed 400 million yuan by 2026, corresponding to a PE of less than 15 times [2][2][2] - **Long-term Projections**: If the self-produced UCO volume reaches 100,000 tons, and assuming UCO prices rise to 9,000 yuan/ton without considering contributions from HMOs, the projected net profit could exceed 600 million yuan, resulting in a PE of only 10 times [2][2][2]

Summary of Key Points from the Conference Call Industry Overview - The conference call discusses the current status and outlook of the Sustainable Aviation Fuel (SAF) and biodiesel markets, particularly focusing on the global and European markets [1][6]. Core Insights and Arguments - **Global SAF Market Growth**: The global SAF market is expected to grow by 300,000 to 400,000 tons in 2026, with significant contributions from the CORSIA mechanism in 2027, which mandates equal carbon emissions at both ends of flight routes [1][6]. - **European Market Demand**: The European market is experiencing high demand for Hydrotreated Vegetable Oil (HVO) due to the EU's RED3 legislation and double carbon credit policies in countries like Germany [1][4]. The total demand in Europe and non-EU regions is projected to be around 1.8 million tons in 2026 [2]. - **Domestic Supply Constraints**: In China, the supply of waste cooking oil is tight, estimated at 4-4.5 million tons, which is insufficient to support planned production capacities [1][10]. The potential for new capacity must be assessed cautiously to avoid oversupply due to raw material shortages [1][10]. - **Raw Material Viability**: Palm oil and agricultural waste are technically feasible as raw materials, but certification issues and high costs limit their large-scale application [1][11]. The demand for palm-based products in Europe is noteworthy [1][11]. - **Impact of Restructuring**: The restructuring of China National Aviation Fuel (CNAF) and Sinopec is not expected to have a significant short-term impact on the domestic aviation fuel market, but long-term implications could arise if Sinopec leads SAF applications [1][12]. Additional Important Insights - **Price Dynamics**: The price of HVO in Europe is currently around $2,500, while soybean prices have dropped below $2,100 [4]. The market is expected to stabilize in 2026, with less volatility in procurement structures [9]. - **Regulatory Factors**: The implementation of the EU ID3 legislation and potential changes in carbon credit policies could significantly impact supply gaps and cost burdens for airlines [3][13]. - **UCO and Plant Oil Price Correlation**: There is a moderate correlation between UCO (Used Cooking Oil) and plant oil prices, with a correlation coefficient of approximately 0.6 [21]. - **UCO Production and Export**: China produces over 4 million tons of UCO annually, with about 2 million tons exported [22]. Future growth in UCO production may slow as potential resources are fully developed [22]. Conclusion The conference call highlights the complexities and dynamics of the SAF and biodiesel markets, emphasizing the importance of regulatory frameworks, supply constraints, and price stability in shaping future market conditions. The potential for growth in these sectors remains significant, but careful monitoring of raw material availability and regulatory changes is essential for stakeholders.

Investment Rating - The report maintains an investment rating of "Outperform the Market - A" for the environmental and public utility sector [7] Core Insights - The report highlights significant price increases for second and third-generation biodiesel (HVO and SAF) in 2025, with HVO reaching a peak of $2853.38 per ton and SAF at $2900.95 per ton, reflecting increases of 69.2% and 69.1% from their lowest points respectively [1][17] - The demand for SAF is driven by the EU's ReFuelEU Aviation Regulation, which mandates a gradual increase in SAF content in aviation fuel, leading to an estimated demand increase of approximately 1.4 million tons in 2025 [1][19] - The report emphasizes the scarcity of used cooking oil (UCO) as a raw material for HVO and SAF, suggesting that companies with waste oil resources and production capacity should be closely monitored [3][39] Summary by Sections 1. Special Research - The report discusses the upward trend in biodiesel prices due to downstream demand, particularly for SAF and HVO, with significant price increases observed in 2025 [1][17] - It notes that multiple countries are implementing policies to increase biodiesel blending ratios, with global biodiesel consumption expected to exceed 75.77 million tons by 2030 [2][25] - UCO is identified as a critical raw material with limited supply, highlighting the need to focus on companies that can efficiently utilize waste oil resources [3][39] 2. Market Review - The report provides a market performance overview, indicating that the Shanghai Composite Index rose by 4.06% from December 26 to January 9, with various sector performances detailed [4][42] 3. Industry Dynamics - The report outlines recent legislative progress in the EU regarding renewable energy, particularly the RED III directive, which aims to increase the share of renewable energy in the EU's energy consumption to 42.5% by 2030 [19][20] - It highlights the growing demand for advanced biofuels and the expected increase in biodiesel consumption in developing countries, which may take over as the main growth area for biofuels [2][23] 4. Investment Portfolio and Recommendations - The report suggests focusing on companies with strong capabilities in waste oil production and technology, such as Shanhigh Environmental, Longkun Technology, and Zhuoyue New Energy, due to the anticipated growth in SAF and HVO demand [3][39]

Investment Rating - The industry investment rating is maintained at "Outperform the Market - A" [4] Core Views - The sulfur price is experiencing fluctuations due to supply-demand dynamics, with a short-term supply guarantee not fundamentally altering the long-term tight resource situation. The expected global sulfur supply-demand gap for 2026 is projected to be -5.13 million tons, indicating a strategic revaluation of sulfur resources in the long term [2][16] - The recent restructuring between Sinopec and China Aviation Oil is expected to enhance the integration of oil refining and distribution, potentially accelerating the commercial use of Sustainable Aviation Fuel (SAF) in China [3][7] Summary by Sections 1. Core Insights of the Week - The market is witnessing a rebound in oil prices, with Brent crude reaching $63.05 per barrel, reflecting a 3.7% increase. This is driven by geopolitical tensions affecting supply expectations [14] - The chemical sector is gaining attention due to a better-than-expected Producer Price Index (PPI) recovery, indicating potential for upward valuation in the sector [15] 2. Chemical Sector Performance - The basic chemical industry index increased by 3.7% in the week, outperforming major indices like the Shanghai Composite and ChiNext [21] - Among 26 sub-sectors, 25 experienced gains, with the top performers being modified plastics (+9.5%) and inorganic salts (+7.2%) [26] 3. Stock Performance in the Chemical Sector - In the basic chemical sector, 373 out of 424 stocks rose, with notable gainers including Prit (42.6%) and Sanfu (32.3%). Conversely, stocks like Evergrande High-Tech saw declines of 13.1% [28][29] 4. Investment Focus Areas - The report suggests focusing on four main investment lines: 1. Upstream resource assets with strong profit certainty, particularly in phosphorus and sulfur [16] 2. Supply-side optimization under "anti-involution" policies, targeting sectors with high concentration and price elasticity [17] 3. Low-valued leading stocks in the sector, as capital expenditure cycles slow down [18] 4. New productivity investments aligned with green energy and advanced materials [20]

Core Viewpoint - The company is focusing on the production of Sustainable Aviation Fuel (SAF) derived from various waste materials, aiming to reduce carbon emissions in the aviation industry [2] Group 1: Company Operations - The company specializes in the resource utilization of organic waste, including the treatment of leachate, kitchen waste, biogas, bio-natural gas, biofuels, and VOCs recovery [2] - The company has accumulated rich project resources through its initial kitchen waste treatment operations [2] Group 2: UCO Business - The company's Used Cooking Oil (UCO) business is divided into two main segments: self-operated kitchen waste projects producing approximately 20,000 tons of waste oil annually, and investment partnerships to establish processing plants [2] - The company plans to achieve a production capacity of approximately 280,000 tons of waste oil by 2026, with a target of 300,000 tons [2] Group 3: Supply Chain Strategy - The company aims to secure raw material resources through its strategies, establishing a stable supply system for raw materials [2] - The company will process waste oils into UCO that meets the production standards for SAF, ensuring stable supply and product quality [2]

Core Viewpoint - The company is actively engaged in the production of Sustainable Aviation Fuel (SAF) using various raw materials, including used cooking oil (UCO), and aims to enhance its capacity and resource stability in this sector [2]. Group 1: Company Operations - The company specializes in the resource utilization of organic waste, with operations including the treatment of garbage leachate, kitchen waste, biogas, and biofuels [2]. - The UCO business is divided into two main segments: self-operated kitchen waste projects producing approximately 20,000 tons of waste oil annually, and investment partnerships aimed at establishing processing plants with a future capacity of 280,000 tons of waste oil [2]. - The company plans to achieve a production capacity of 300,000 tons by 2026, focusing on securing raw material resources and establishing a stable supply system [2]. Group 2: Industry Context - Sustainable Aviation Fuel (SAF) is produced from agricultural and forestry waste, catering to the aviation industry's need to reduce carbon emissions [2]. - The company aims to process waste oils into UCO that meets SAF production standards, ensuring stable supply and product quality for SAF manufacturers [2].

Group 1: Fixed Income Market - The issuance of perpetual bonds (二永债) increased in November, with a total of 268.3 billion yuan issued, marking a month-on-month increase of 212.3 billion yuan and a year-on-year increase of 103.7 billion yuan [7][8] - Net financing for banks' perpetual bonds in the first eleven months of 2025 was primarily from state-owned banks, totaling 275 billion yuan, which is historically low due to high redemption levels [8][9] - The secondary market for perpetual bonds showed a downward trend in yields and credit spreads, with opportunities identified in AA+ rated bonds and above, particularly focusing on 5Y AAA-rated perpetual bonds [11][12] Group 2: Environmental Industry - The municipal environmental sector is expected to benefit from the expansion of insurance capital, with a focus on cash flow and dividend yield as key selection criteria for investment [13][14] - The growth of biofuels is anticipated due to intensified carbon reduction policies starting in 2025, with SAF (Sustainable Aviation Fuel) and UCO (Used Cooking Oil) prices expected to rise [15][16] - Recommendations include focusing on companies with positive cash flow and increasing dividend expectations, such as 兴蓉环境 and 光大环境 [14][15] Group 3: Real Estate Market - The real estate sector saw a 1.9% increase in the index, with new home sales in 42 key cities rising by 9.9% week-on-week, totaling 2.61 million square meters [19][20] - The Ministry of Housing and Urban-Rural Development outlined key tasks for 2026, including stabilizing the real estate market and promoting urban renewal [20][22] - Policy adjustments in major cities like Beijing and Shanghai aim to support housing demand, particularly for families with multiple children, and to enhance the overall housing supply [20][22] Group 4: Company Analysis - 桂冠电力 - 桂冠电力 plans to acquire 大唐西藏公司 and 大唐 ZDN公司 for 2.025 billion yuan, which includes clean energy assets in Tibet [24][25] - The acquisition is expected to solidify 桂冠电力's position in the hydropower sector and enhance its development rights in the Nu River basin [25][26] - The projected net profit for 桂冠电力 from 2025 to 2027 is estimated at 2.8 billion, 3 billion, and 3.2 billion yuan, with a maintained "buy" rating due to long-term investment value in the hydropower sector [25][26]