Henan Liliang Diamond Co.Ltd(301071) (301071)
1、 Event overview
The company released the performance forecast for 2021 on December 9. During the reporting period, the company is expected to realize a net profit attributable to the parent company of RMB 232 ~ 245 million, a year-on-year increase of + 217% ~ + 235%; Among them, it is estimated that the company’s Q4 single quarter performance is 70.4325 million yuan ~ 83.4325 million yuan, a year-on-year increase of + 138% ~ + 182%; It is expected to achieve basic eps4 72 ~ 4.98 yuan.
2、 Analysis and judgment
The end of production line adjustment + steady technological breakthrough, and the company’s performance has achieved rapid growth since Q4
Affected by the flood and the upgrading of the production line of the old plant, the performance growth rate of 2021q3 company is slightly lower than the market expectation. Since Q4, with the completion of production line upgrading, the company’s production and operation has entered a stable stage. At the same time, thanks to the increase in the proportion of high-grade cultivated diamonds of more than 3 carats, the product structure is improved, and the demand for superimposed diamond single crystal price rise + photovoltaic driven micro powder is increased. The company’s Q4 performance is expected to achieve high elastic growth, and the annual performance also exceeds the previous market expectations.
Steady landing of raised investment capacity + development of new press suppliers. Next year’s capacity expansion is worth looking forward to
Since Q4, the company’s raised and invested production capacity has been steadily implemented. We estimate that the number of six sided top presses of the company has reached more than 600. At the same time, although the supply of the upstream hexahedral press is relatively tight, the company signs long-term orders with the original suppliers and actively develops new suppliers to ensure the speed and quality of production expansion. In addition, the company’s new press can realize the flexible switching between cultivated diamond and industrial diamond production in a short time, so as to ensure that the production efficiency is always at a high level.
Cultivate diamond + industrial diamond, maintain high prosperity, and continue to be optimistic about the company’s long-term growth attributes
The cultivation diamond industry continues to maintain a high momentum: according to giepc data, India’s cultivation diamond rough import and bare diamond export in October were + 98% and + 81% year-on-year respectively, which continues to confirm the strong demand for cultivation diamonds in midstream processing and downstream retail; Lightmark, anndia and other brands continue to promote consumer education and continuously improve the awareness of Chinese consumers. We judge that the cultivation of diamond terminal retail in China next year is expected to contribute a considerable increase. In terms of industrial diamond, affected by the transfer of press equipment into diamond production and the rapid growth of micro powder demand, the supply is tight, driving the price rise, which also shows a high boom trend. We believe that the synergy of the company’s diamond + Diamond Single Crystal + micro powder business is prominent, and the growth attribute is worthy of long-term optimism.
3、 Investment advice
We raised the company’s profit forecast. It is estimated that from 2021 to 2023, the company’s net profit attributable to the parent company will be RMB 239 million, RMB 456 million and RMB 756 million, corresponding to 70, 37 and 22 times of PE. The comparable company ( Henan Huanghe Whirlwind Co.Ltd(600172) , North Industries Group Red Arrow Co.Ltd(000519) ) wind has an average consensus expectation of 109 times of PE in 2021. Considering the smooth business expansion and outstanding performance elasticity of the company, the “recommended” rating is maintained.
4、 Risk tips:
The demand for diamond cultivation is lower than expected, the production capacity of upstream press continues to be tight, and the competition pattern of the industry deteriorates.
