\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
Event: the company released the annual report of 2021. The company achieved an operating revenue of 498 million yuan in 2021, with a year-on-year increase of 103.50%; The net profit attributable to the parent company was 240 million yuan, a year-on-year increase of 228.17%. Among them, the operating revenue in 2021q4 was 157 million yuan, a year-on-year increase of 100.33%; The net profit attributable to the parent company was 78 million yuan, a year-on-year increase of 165.10%.
Comments:
The company achieved a year-on-year growth of 10.34 billion yuan, driven by strong demand in the downstream market. In 2021, Q1-Q4 achieved operating revenue of RMB 0.85/1.34/1.23/157 billion respectively, with a year-on-year increase of 102.54% / 142.81% and 76.51% / 100.33% respectively; The operating revenue of diamond single crystal / diamond micro powder / cultivated diamond series was 137 / 156 / 197 million yuan respectively, with a year-on-year increase of 38.14% / 54.54% / 428.11% respectively, accounting for 27.55% / 31.25% / 39.57% of the operating revenue respectively. Gross profit margin: the company’s gross profit margin in 2021 was 64.07%, with a year-on-year increase of 20.69pct, mainly due to the significant increase in gross profit margin caused by the increase of product price. Among them, the gross profit margin of diamond single crystal was 57.93%, with a year-on-year increase of 18.49 PCT; The gross profit margin of diamond powder was 50.02%, with a year-on-year increase of 9.66 PCT; The gross profit margin of cultivated diamonds was 81.38%, with a year-on-year increase of 14.56pct.
Expense side: the expense rate of the company during 2021 is 10.00%, with a year-on-year decrease of 0.21pct. Among them, the sales expense ratio was 1.12%, a year-on-year decrease of 0.81 PCT; The management expense ratio was 3.07%, with a year-on-year decrease of 0.34 PCT; The R & D expense rate was 5.33%, with a year-on-year increase of 1.26pct, mainly due to the rapid development of the industry, the company increased R & D investment, reserved production technology and developed new products; The financial expense ratio was 0.49%, a year-on-year decrease of 0.33pct.
Profit side: in 2021, the company realized a net profit attributable to the parent company of 240 million yuan, a year-on-year increase of 228.17%, and a net interest rate attributable to the parent company of 48.07%, a year-on-year increase of 18.26pct. In terms of quarters, Q1-Q4 achieved a net profit attributable to the parent company of RMB 0.41/0.67/0.53/0.78 billion in 2021, with a year-on-year increase of 324.07% / 328.00% / 193.72% / 165.10% respectively. Supply side: the prosperity of diamond cultivation remains unchanged, and the company’s production capacity is expected to continue to break through in 22 years. According to GJEPC data, in 2021, the import / export volume of cultivated diamond rough diamonds / bare diamonds in India reached US $1.13/1.14 billion respectively, with a year-on-year increase of 83.40% / 79.65%; In January 2022, the prosperity of the industry continued to increase, and the downstream demand was strong. India’s imports of cultivated diamond rough diamonds / exports of bare diamonds reached US $153 / 122 million respectively, with a year-on-year increase of 77.34% / 70.06%. As the leader of diamond cultivation, the company will focus on completing the construction of new plant area in 2022, ensure the full completion of Baojing raised investment project and the rapid production of phase II construction project, rapidly expand the production capacity and meet the strong demand of the market for diamond cultivation and other products.
Investment suggestion: the company’s brand has high recognition, perfect product structure and strong R & D strength, and is in an advantageous position in the superhard material industry. With the gradual rise of diamond cultivation, the company is expected to fully enjoy the dividends of diamond cultivation industry and maintain a long-term leading position in the industry by virtue of technological progress and capacity expansion. We expect that the net profit attributable to the parent company from 2022 to 2023 will be 450 / 650 million yuan respectively, and the corresponding PE will be 37x / 26x respectively, maintaining the buy rating.
Risk tips: market competition risk, technology renewal risk, risk that the raised investment project cannot achieve the expected benefits, and risk of product market price decline
