event:

the company released its annual performance forecast for 2023. the company's performance is expected to achieve a net profit of 0.085 billion yuan to its parent in 2023, up -81.24 year-on-year. the performance dropped sharply, mainly due to the review of biodiesel exported from China by many EU agencies, resulting in a decline in purchasing willingness of European customers due to concerns about tariff retroactive adjustment, had a negative impact on the company's biodiesel exports. However, we believe that the company actively faces and solves the problem, adjusts its sales strategy while maintaining normal production and operation, and actively sells to local customers in the EU by setting up subsidiaries overseas, and its future performance is expected to gradually recover.

investment points:

performance by the EU review of a sharp decline, through the change of sales strategy, active layout of overseas, is expected to Phoenix Nirvana. During the reporting period, the company's performance is expected to achieve a net profit of 0.085 billion billion yuan in 2023, a year-on-year 81.24. The performance has dropped sharply, mainly due to the review of biodiesel exports from China by many EU agencies. Among them, in April 2023, the ICC launched a review of Chinese biodiesel certification enterprises, and in August, the European Commission launched an anti-circumvention investigation on biodiesel exports from China and the UK to the EU, in December, an anti-dumping investigation was initiated against biodiesel products originating in China. Such investigations have caused European customers to decline their willingness to purchase due to concerns about tariff retroactive adjustments, which has a greater impact on the company's biodiesel export prices. The average selling price of biodiesel for the whole year decreased by more than 25% compared with the same period last year. However, the company actively faces and solves the problem, adjusts its sales strategy while maintaining normal production and operation, and actively sells to local customers in the EU by setting up subsidiaries overseas, and its future performance is expected to gradually recover.

raw material procurement advantages: the company has built a stable and standardized waste oil procurement system, fair quality monitoring standards and procurement channels covering the whole country and Southeast Asia, and has established a long-term and stable business mutual trust relationship with many suppliers, realizing the stable supply of raw materials and reasonable cost procurement. At the same time, in order to enhance the comprehensive operation ability and international competitiveness, the company started the establishment of two subsidiaries in Singapore and the Netherlands in the second half of 2022. At present, the two subsidiaries have been established and have successively carried out business in raw material resources, product terminals, logistics, market information and technology research and development.

production technology advantages: the company through improving their own operating capacity, improve the production process and control costs and other measures, so that the biodiesel production plant high quality product yield continued to increase, reaching more than 89.5 percent. At the same time, the company continued to increase R & D investment. In 2022, the company's R & D investment exceeded 0.2 billion billion yuan, an increase of 37.14 year-on-year, focusing on the comprehensive utilization of waste oils, biodiesel and bio-based new materials (synthetic resins, halogenated new materials and lithium battery electrolyte additives, etc.) Technology development and other fields to carry out research and development work to promote the company's continuous high-quality development on the road of "biomass energy integration.

downgraded to an "overweight" rating. Although the company was dragged down by the investigation of biodiesel in China by EU agencies in 2023, while maintaining normal production and operation, the company actively changed its sales strategy to solve the problem, and set up subsidiaries overseas to sell biodiesel to EU local customers to solve the problem of EU multi-agency review of domestic enterprises. It is expected to recover all sales and maintain growth within 1-2 years. We lowered our profit forecast, the company's 2023-2025 net profit is expected to be 0.85, 1.81, 0.334 billion yuan (3.56/5.28/0.789 billion before the downgrade), the current share price corresponds to 23-25 years PE of 39, 19, 10 times, downgraded to "overweight" rating.

Risk Warning: European market orders fell short of expectations, competition in the biodiesel industry intensified, the price of waste oil fluctuated greatly, and the continued escalation of the Red Sea crisis led to route congestion.