Key investment points:
Market review this week: SW light industry manufacturing industry outperformed Shanghai and Shenzhen 300 this week. From February 7 to February 11, 2022, 80.65% of shenwanyi industry recorded positive earnings; SW light industry manufacturing industry index rose 1.10%, outperforming the Shanghai and Shenzhen 300 index by about 0.28 percentage points in the same period. 75% of the secondary sub industries of SW light industry manufacturing recorded positive earnings, while SW papermaking, SW packaging and printing and SW household products rose by 2.03%, 1.41% and 0.72% respectively; Only SW entertainment products recorded a negative return (- 0.18%). Over 60% of the stocks in the industry recorded positive returns.
Key industry news: (1) in 2021, the original diamond sales of De Beers and erosa, the world’s two major natural diamond miners, increased significantly, reaching US $4.82 billion and US $4.17 billion respectively, with a year-on-year increase of 41% and 49% respectively. These two companies account for more than 60% of the global raw diamond market share. At the same time, the unit price of the original drill has also increased. In 2021, De Beers’ crude diamond price per carat increased by 13% year-on-year to US $135. The average price of raw diamonds in the whole diamond industry increased by 23% year-on-year in 2021. (2) According to the latest statistics, in 2021, the import of diamond processing trade in Guangzhou was 16.8 billion yuan, a year-on-year increase of 73.4%, accounting for about 50% of the diamond import in Guangdong Province. The diamond import volume under processing trade remained the first in China. China is the second largest diamond consumer market in the world. More than 70% of the diamond and jewelry processing and production in China are concentrated in Guangdong, especially in Guangzhou, Panyu and surrounding areas. (3) According to the latest statistics of China Customs, China’s pulp imports in December 2021 were 1.907 million tons and 29.691 million tons from January to December, a decrease of 2.7% compared with the same period last year. (4) According to wind data, as of February 9, 2022, 20 of the 45 home furnishing enterprises have issued performance forecasts, with 6 companies pre reduced and 7 losing. This has something to do with the debt problem of the real estate industry and the explosion of real estate enterprises. Including Mengtian home, Markor International Home Furnishings Co.Ltd(600337) , Jason Furniture (Hangzhou) Co.Ltd(603816) , Nanjing Olo Home Furnishing Co.Ltd(603326) , Jiangshan Oupai Door Industry Co.Ltd(603208) , Elegant Home-Tech Co.Ltd(603221) and many other listed home enterprises have to solve the problem of difficult payment collection, which restricts the company’s performance.
Maintain the recommended rating of the industry. According to the latest data of the industry, as the global economy stabilizes and recovers from the covid-19 epidemic and the demand for finished drilling products in the downstream picks up strongly, the volume and price of natural drilling all over the world rose in 2021, and the market showed a situation of short supply. China is the second largest diamond consumer in the world. Recently, the consumption of gold, diamonds and jewelry on Chinese Spring Festival plus Valentine’s day has warmed up. It is suggested to pay attention to Chinese high-quality jewelry brands: Chow Tai Seng Jewellery Company Limited(002867) (002867), Guangdong Chj Industry Co.Ltd(002345) (002345), etc. In addition, as a good substitute for natural diamonds, the high consumption of natural diamonds will also drive the development of the cultivated diamond market. China is the world’s largest producer of cultivated diamonds. At present, it has become a mature enterprise in the upstream core profit of cultivated diamonds. It is suggested to focus on cultivating upstream diamond 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 tips: covid-19 epidemic continues to repeat, the capacity expansion of diamond manufacturers is less than expected, the downstream demand expansion of diamonds is less than expected, the industry competition intensifies, the price fluctuation of raw materials, policy risk, exchange rate fluctuation intensifies and other risks.
