\u3000\u30001. Why pay attention to the biodiesel industry chain?
The “biodiesel” industrial chain mainly involves three categories of products: 1) ester based biodiesel; 2) Hydrocarbon based biodiesel, also known as “renewable diesel”; 3) Bio aviation kerosene is a kind of sustainable aviation fuels (SAF). In order to limit the temperature rise to less than 1.5 ℃ by 2050, countries need to transition to a low-carbon economy. Biodiesel is widely used in transportation and other fields because of its diverse raw materials, strong carbon reduction ability and low cost as an alternative fuel. The EU is a major producer and consumer of biodiesel in the world. Its own production capacity is in short supply all year round, and imports are needed to supplement the gap. The rapid rise of China’s exports to the EU has brought new opportunities to China’s biodiesel industry.
\u3000\u30002. Industrial development mainly depends on the downstream demand of the EU to drive the global midstream production and upstream raw materials
Downstream · consumer: 1) it is widely used in the EU transportation sector. In 2020, the use of biodiesel in blended diesel will reach 12.74 million tons. In the field of road transportation, the use of biodiesel is expected to be about 14.7 million tons in 2021; In the field of air transportation, bio aviation kerosene, as one of the sustainable aviation fuels (SAF), can be further produced from the raw materials and process path of hydrocarbon based biodiesel. Saf is regarded by the global aviation industry as the key to achieve a breakthrough in emission reduction, or hundreds of millions of tons, corresponding to the trillion RMB market scale. At present, there is a large gap between production and demand. In 2020, the global saf output is only about 100000 tons. The giants of international oil companies are accelerating the transformation of carbon reduction, focusing on increasing the production capacity of renewable diesel and saf dominated by bio aviation kerosene in an endogenous + epitaxial way; 2) Biodiesel in China is mostly used in the field of fine chemicals.
Midstream · production side: benefiting from downstream demand, manufacturers have entered a period of rapid development, and the performance of independent biodiesel producers has also benefited: 1) Neste (total renewable diesel production capacity of 3.2 million tons / year): the world’s largest renewable diesel supplier + the world’s leading saf manufacturer, committed to becoming a global leader in renewable energy and recycling solutions; 2) Longyan Zhuoyue New Energy Co.Ltd(688196) (the total capacity of ester based biodiesel is 400000 tons / year): the capacity of biodiesel ranks first in China, has been deeply cultivated for more than 20 years, and its technical strength is leading in the industry; 3) Zhejiang Jiaao Enprotech Stock Co.Ltd(603822) (150000 tons / year of ester based biodiesel): Dongjiang energy, a wholly-owned subsidiary, is a leading enterprise producing biomass energy with gutter oil in the Yangtze River Delta. As the new production capacity of Chinese enterprises is still under construction and the production capacity of hydrocarbon based biodiesel has not been scaled up, the performance growth mainly comes from the increase of the price of ester based biodiesel.
Upstream · raw material end – the total supply of biodiesel will eventually be subject to the output of raw materials. Used cooking oil (UCO) has become the second largest and the only raw material with obvious growth trend in the EU, contributing to the increment of biodiesel. UCO is favored by the market because it is the secondary utilization of waste, can double calculate carbon emissions, can be processed into ester based & hydrocarbon based biodiesel and bio aviation kerosene, and has low price. China is the largest producer of UCO in the world, and its consumption is mainly exported to the EU, with rapid growth in recent years. Moreover, due to the special attribute of kitchen waste, UCO price is expected to rise for a long time. China has 6-8 million tons / year of waste cooking oil resources available for collection. At present, the collection and utilization amount is about 3 million tons. As a resource with an upper limit of output, food waste is a battleground for raw material collectors. In the future, with the strengthening of supervision, UCO raw material biodiesel production enterprises with kitchen waste plant resources are expected to enjoy long-term dividends. The United States has a mature case Dar: the leader of waste oil and grease in the United States, jointly established DGD, the largest renewable diesel company in North America, with Valero, the world’s largest independent refiner; Only Bece Legend Group Co.Ltd(000803) : the leader of Chinese kitchen waste oil, and Shandong Binhua joint venture to build a renewable diesel production project.
\u3000\u30003. Investment suggestions: we believe that companies related to the biodiesel industry chain with the following competitive advantages are expected to share the dividends of the general trend of global carbon reduction for a long time: 1) take the lead in enterprises with resource qualification related to waste oil raw materials and leading UCO production capacity; 2) Hydrocarbon based biodiesel and / or saf’s bio aviation kerosene technology is leading and is expected to take the lead in large-scale mass production; 3) Ester based biodiesel is an enterprise with leading production capacity and mature business model. Key recommendations: Bece Legend Group Co.Ltd(000803) (leading UCO in China, with a capacity of 400000 tons of hydrocarbon based biodiesel + 300000 tons of ester based biodiesel); It is suggested to pay attention to: Longyan Zhuoyue New Energy Co.Ltd(688196) (China’s leading ester based biodiesel, with 400000 tons at present, 100000 tons of hydrocarbon based biodiesel will be proposed in 2022, and the production capacity is expected to be Shanghai Pudong Development Bank Co.Ltd(600000) tons in 2025) Zhejiang Jiaao Enprotech Stock Co.Ltd(603822) (China’s leading environmental friendly plasticizer, with 150000 tons of ester based biodiesel, is expected to have a total capacity of 350000 tons in the future).
Risk tips: international war risk, global carbon reduction policy change risk, the production capacity and production progress of projects outside China does not meet expectations, the research and development progress of bio aviation kerosene technology of renewable diesel & saf in China is less than expected, and there is a risk of new technology substitution
