\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
In 2021, the net profit reached the forecast center, and the development potential of the industry was sufficient under the high boom, maintaining the “buy” rating
The net profit of the company reached 217% – 235% of the forecast range in 2021. The revenue in 2021 was 498 million yuan (+ 103.50%), mainly due to the rapid expansion of production capacity under the background of strong downstream demand. The net profit attributable to the parent company was 240 million yuan (+ 228.17%), mainly due to the price increase of the three major products and the significant increase of gross profit margin. In a single quarter, the revenue of 2021q4 was 157 million yuan (+ 100.33%), and the net profit attributable to the parent company was 78 million yuan (+ 165.10%). In order to optimize the share capital structure and enhance stock liquidity, the company plans to distribute cash dividends of 10 yuan to all shareholders for every 10 shares, and the provident fund will be converted into 10 shares. The company’s profit under business collaboration is highly flexible, but considering the possible intensification of market competition, we maintain the profit forecast for 2022, reduce the profit forecast for 2023 and add a new profit forecast for 2024. It is estimated that the net profit attributable to the parent company from 2022 to 2024 will be RMB 442, 656 (- 0.16) and 946 million, corresponding to EPS of RMB 732, 10.87 (- 0.27) and 15.68, and the corresponding price of PE from 2022 to 2024 will be 38.5, 25.9 and 18.0 times, Maintain the “buy” rating.
Cultivating the high prosperity of diamond industry drives the high growth of three major businesses, and cultivating diamond business has become the largest business
(1) the revenue from cultivating diamonds was 197 million yuan (+ 428.11%), accounting for 24.32 PCT to 39.57%, surpassing diamond single crystal and micro powder to become the largest business of the company. It is expected that the proportion of cultivating diamonds will further increase in the future; (2) The income of diamond single crystal is 137 million yuan (+ 38.14%), accounting for 27.55%. The downstream market demand of industrial diamond single crystal is stable. Due to the extrusion of cultivated diamonds, the supply of industrial diamond single crystal is tight, pushing up the price significantly; (3) The income of diamond micro powder was 156 million yuan (+ 54.54%), accounting for 31.25%.
The price of products increased significantly, significantly improved profitability, increased R & D investment and consolidated competitive advantage
In 2021, the overall gross profit margin was 64.07% (+ 20.71 PCT), which was mainly due to the substantial price increase of products. The gross profit margins of diamond single crystal, diamond powder and cultivated diamond were 57.93% (+ 18.49 PCT), 50.02% (+ 9.66 PCT) and 81.38% (+ 14.56 PCT) respectively; The net interest rate is 48.1% (+ 18.3pct). Expense side: the sales / management / R & D expense ratio is 1.12% / 3.07% / 5.33% yuan respectively, with -0.81pct / – 0.34pct / + 1.26pct respectively. The slight decrease in the sales and management expense ratio is mainly due to the scale effect caused by the substantial increase in sales scale, and the significant increase in R & D expenses is mainly due to the increase in R & D investment caused by the company in order to develop new products and reserve production technology. Operating capacity: net operating cash flow of 288 million yuan (+ 187.47%), covering 1.2 times of net profit.
The existing production capacity will be further expanded in 2022, and it is expected to continue the trend of increasing volume and price
The total output of the company increased by 42.18% to 1.333 billion carats, mainly due to the continuous operation of the company’s new plant areas, the significant growth of installed capacity and the gradual release of production capacity; The production and sales rate of 99.08% (+ 6.37pct) remains high. It is expected to continue to break through the capacity bottleneck through the purchase of new equipment, the full completion of Baojing project and the rapid production of phase II in 2022.
Risk tip: the production capacity is less than expected, and the development of diamond market is less than expected.
