Henan Liliang Diamond Co.Ltd(301071) (301071)
Performance review
The company expects that the net profit attributable to the parent company in 2021 will be + 217% – 235% year-on-year, highlighting the high growth. On December 9, 2021 Henan Liliang Diamond Co.Ltd(301071) the company released the performance forecast for 2021. The company expects to realize the net profit attributable to the parent company of RMB 232-245 million in 2021, with a year-on-year increase of 217% – 235%. In 2021, the company expects that the impact of non recurring profits and losses on the net profit attributable to the parent company will be about 8.5-9.5 million yuan. In 2021, the net profit deducted by the company from non attributable to the parent company will be about 137-160 million yuan, with a year-on-year increase of 103-137%. The company’s outstanding performance is mainly due to the significant increase in the proportion of cultivation diamond business with high gross profit and high growth.
In terms of splitting, the net profit attributable to the parent company in 2021q4 was + 138% – 182% year-on-year. In a single quarter, the net profit attributable to the parent company in the first three quarters of 2021 is 161 million yuan. The company expects that the net profit attributable to the parent company in Q4 in 2021 will be about 70-83 million yuan, a year-on-year increase of 138% – 182%; In the second half of 2021, the net profit attributable to the parent company was about 124-137 million yuan, with a year-on-year increase of 159% – 186%.
The proportion of the company’s diamond cultivation business has increased, driving performance growth, and technological breakthroughs have led to an increase in the proportion of large carat high unit price diamond sales. In the first half of 2021, the proportion of the company’s revenue from diamond cultivation business increased significantly to 41%. At the same time, the gross profit margin of diamond cultivation business reached 67% in 2020, and the proportion of high gross profit business further led to the rapid growth of the company’s performance. In addition, the company increased its technological research and development efforts, increased the proportion of large carat cultivated diamond sales, and brought about a year-on-year increase in the average sales price of cultivated diamonds. In the case of short supply of cultivated diamonds, we expect the company’s profit margin of cultivated diamonds to remain high.
The company’s fund-raising projects continue to roll out, and the production capacity will increase rapidly after the diamond cultivation equipment is gradually in place. As of 2021h1, the company has 483 sets of hexahedral top presses, and by the end of 2020, φ Press models above 650 account for 91.3%, of which φ Model 800 press accounts for 37.1%, exceeding the industry average. The advanced equipment with large cylinder diameter improves the production efficiency of the company. By the end of 2020, the company has 79 six sided top presses for cultivating diamonds. We expect that in the future, with the gradual arrival of new presses and the continuous progress of the company’s technology, the company’s single output and product quality will be further improved, and the performance can grow at a high speed.
Cultivate the prosperity of the diamond industry, improve the production capacity of extruded industrial diamond, and raise the price of industrial diamond. The upstream equipment supplier has limited press supply. The diamond production enterprises have squeezed the traditional industrial diamond business to a certain extent due to the substantial growth of diamond cultivation business, while the demand of the downstream terminal industry is rigid. Therefore, the price of industrial diamond shows an upward trend, resulting in the increase of the company’s industrial diamond business income.
Profit forecast and investment rating: the company is a leading enterprise in cultivating upstream diamond producers. It has excellent technology in the field of artificial diamond and has stable expectations for capacity expansion. Cultivating diamond is in the stage of rapid development of the industry and its penetration rate is increasing rapidly. This annual performance forecast exceeds our expectations, We raised the net profit attributable to the parent company from 2021 to 2023 from RMB 210 / 4.0 / 590 million to RMB 240 / 4.5 / 700 million, with a year-on-year growth rate of 226% / 91% / 55%. The latest closing price corresponds to 71 / 37 / 24 times of PE from 2021 to 2023, maintaining the “buy” rating.
Risk tips: macroeconomic and market demand fluctuations, intensified market competition, raw material price fluctuations, R & D risks, etc.
