Industrial Securities: Policy Initiates, SAF Enters the Year of Volume Growth, Both Volume and Price Rise to Shape Industry Chain Performance Elasticity

According to the Zhitong Finance APP, Industrial Securities has released a research report stating that the domestic SAF (Sustainable Aviation Fuel) capacity layout is continuously advancing, with upstream raw material supply becoming a key link. It is recommended to pay attention to SHREG, which has scarce edible waste oil resources. The implementation of the EU's mandatory blending policy is driving rapid growth in international SAF demand, and pilot refueling at provincial airports in China is also about to start. The demand space for SAF is vast, and the growth process of demand is clear. It is suggested to focus on JAHB, which has a production line of 500,000 tons/year and has obtained export qualifications. The continuous advancement of the "dual carbon" policy is expected to accelerate the replacement of domestic marine bio-clean fuels, potentially opening up the domestic sales space for traditional biodiesel.

The main viewpoints of Industrial Securities are as follows:

Mandatory blending policies in multiple regions drive high growth in SAF demand, marking the beginning of a volume expansion year for the market

SAF (Sustainable Aviation Fuel) is a type of broadly defined biodiesel, positioned as aviation fuel. Due to the significant challenges of carbon reduction in the aviation industry, SAF has become a key factor for deep decarbonization in aviation due to its significant carbon reduction capabilities and compatibility with traditional aviation fuels. Currently, SAF blending guidelines have been issued globally, promoting growth in SAF market demand. Among them, the EU's blending policy has been implemented this year, significantly boosting SAF market demand: the mandatory blending ratio for EU SAF is set at 2% for 2025, with plans to gradually increase to 6%/70% by 2030/2050; the EU's SAF consumption is expected to be about 610,000 tons in 2024, and the implementation of the blending policy in 2025 is expected to bring about 1.3 million tons of demand increase locally. China's SAF policy is primarily guiding, with domestic demand being relatively small, and SAF production mainly relying on exports. If China's blending ratio reaches the IATA-recommended 4.7% by 2030, it is estimated that the annual SAF demand for the civil aviation industry will increase to about 2.49 million tons. However, compared to the planned SAF production line scale in China, exports will still be an important way to digest capacity. Overall, global SAF supply and demand will continue to be tight, and under the impetus of high market demand, SAF prices will also rise significantly. As of October 18, 2025, the offshore high-end price of SAF in China is $2,500/ton, an increase of 38.9% compared to the beginning of the year, remaining at a historical high.

Upstream UCO has scarcity due to limited supply of kitchen waste oil, driving high prosperity in the SAF industry

Currently, the raw materials that can achieve large-scale commercial production of SAF are vegetable oils and kitchen waste oil. However, due to restrictions on plant-based SAF in some regions (such as the EU's plan to phase out soybean oil and palm oil for SAF), kitchen waste oil is irreplaceable in SAF preparation. In the domestic market, due to the stable total population and per capita oil consumption in China, there is an upper limit on the supply of kitchen waste oil. Kitchen waste oil is usually processed into industrial mixed oil (UCO) for SAF production. Currently, UCO in China is mainly for domestic sales, and prices have also risen under the demand pull of SAF. SHREG is the industry leader in UCO in China, with a total operational waste treatment capacity of 5,660 tons/day by the first half of 2025, and plans to increase capacity to 8,000-10,000 tons/day within the next three years. The company's projects are mostly located in densely populated areas with high restaurant oil consumption, and its franchising model provides a certain degree of regional monopoly. The company continues to optimize operational efficiency, with a capacity utilization rate of 79.1% in 2024 (up 6.7 percentage points year-on-year), an oil yield of about 4.5% (up 0.2 percentage points year-on-year), and a year-on-year decrease of 7.1% in cash production costs per ton In the same period, the gross profit margin of UCO business increased by 7.98 percentage points year-on-year to 20.11%. In the first half of 2025, benefiting from the demand for SAF, the company's net profit attributable to the parent company increased by 216% year-on-year to 40.57 million yuan, and operating cash flow turned positive to 60.66 million yuan from -11.80 million yuan in the same period last year.

China's SAF production capacity is globally leading, and large-scale delivery drives the release of industry performance elasticity

As of the end of 2024, China's total SAF production capacity is approximately 1.05 million tons/year, accounting for about 50% of the global total, with substantial planned capacity for the future. Among them, JAHB is in the first tier of the industry, with businesses covering environmentally friendly plasticizers and biodiesel, with SAF production managed by its subsidiary Lianyungang JAHB. Lianyungang JAHB has now put into operation a production line with a capacity of 500,000 tons/year and has planned another 500,000 tons/year under construction, with a project product conversion rate of approximately 74%. It has also been the first to obtain an export license for 372,400 tons/year and achieved the first batch of SAF delivery in May 2025. In addition, Lianyungang JAHB has introduced BP as a strategic shareholder and reintroduced China National Aviation Fuel (holding 10%) in October 2025, deeply binding with core customers. Driven by the increase in SAF volume, JAHB's operating revenue in the second quarter increased by 78.00% quarter-on-quarter, with a net profit attributable to the parent company reducing losses by 15.84 million yuan to -31.20 million yuan. In the third quarter, as the company's production line entered a full batch shipment quarter and SAF prices rose, the net profit attributable to the parent company increased to 52.87 million yuan for the single quarter.

Risk Warning: Policy change risk, capacity construction not meeting expectations risk, emerging technology substitution risk, exchange rate fluctuation risk