Key investment points:
Cultivated diamonds belong to real diamonds, and their product properties are no different from natural diamonds. Both cultivated diamonds and natural diamonds are crystals formed by carbon element, which have exactly the same chemical and physical properties. They can be comparable with natural diamonds in the integrity, transparency, refractive index and dispersion of crystal structure. They can not be distinguished only from the naked eye.
In recent years, the market penetration rate of cultivated diamonds in the world has increased rapidly. In the context of reduced supply of natural diamonds and unabated demand for diamond jewelry consumption, as a substitute for natural diamonds, the penetration rate of cultivated diamonds has increased rapidly. From 2018 to 2020, the global output of cultivated diamonds increased from 1.44 million carats to 7.20 million carats, and the CAGR reached 123.61%. In 2020, the global market penetration of cultivated diamonds will reach 6.30%. Looking forward to the future, the scale of the global diamond raw stone market is increasing year by year.
Global diamond jewelry sales are increasing year by year. From 2015 to 2019, the global diamond jewelry sales increased from US $73.5 billion to US $79 billion year by year, with a compound annual growth rate of 1.82%. It can be seen that although the global production of natural rough diamonds is decreasing, the global consumption demand for diamond jewelry is on the rise, and the natural diamond market is in short supply. Thus, the substitutes of natural diamonds have attracted more and more attention of producers and consumers.
China is the world’s largest diamond producer. According to the data of China economic intelligence network, in 2020, the total output of cultivated diamond rough in the world will reach 7.2 million carats; Among them, the output of cultivated diamond blanks in China is 3 million carats, accounting for the largest proportion of the total output of cultivated diamond blanks in the world, reaching 42%; The output of rubble in India and the United States is 1.5 million carats and 1 million carats respectively, accounting for 35% in total; The output of rubble in other areas is 1.7 million carats, accounting for 24%. It can be seen that by 2020, China has become the world’s largest producer of cultivated diamonds, occupying the largest market share in the upstream core profit link.
Investment strategy: give recommended rating to the industry for the first time. The chemical and physical properties of cultivated diamonds are no different from those of natural diamonds. With its advantages in high price performance price ratio, quality and environmental protection, cultivated diamonds have become a good substitute for natural diamonds. In recent years, under the background of the reduction of global natural diamond supply and the unabated demand for diamond jewelry, the penetration rate of global diamond cultivation has increased rapidly. With the continuous improvement of synthetic technology and the cognitive acceptance of the younger generation of consumers, the development of the diamond industry will become more and more mature, and there is a huge space for development in the future. China is the world’s largest producer of cultivated diamonds, mainly using HPHT production method. At present, China has become a mature enterprise in the upstream core profit link of cultivated diamonds, and the upstream competition pattern is relatively stable; The downstream brand has not yet formed a mature listed company. Looking forward to the future, the domestic diamond brand is expected to rise. Optimistic about the development of diamond upstream enterprises in China, it is suggested to focus on HPHT producers: Henan Liliang Diamond Co.Ltd(301071) (301071), North Industries Group Red Arrow Co.Ltd(000519) (000519), Henan Huanghe Whirlwind Co.Ltd(600172) (600172), etc.
Risk warning: the risk of repeated global epidemic; Cultivate the risk that the capacity expansion of diamond manufacturers is less than expected; The risk that the downstream demand expansion is less than expected; Risks of intensified industry competition; Risks of macroeconomic downturn and policy adjustment; Risks of continuous R & D and innovation.
