Special topic of this week: Calculation of current output and market space of cultivated diamonds from the perspective of total amount. Henan Liliang Diamond Co.Ltd(301071) released the performance forecast for 2021, and the net profit attributable to the parent company in Q4 increased by 33% - 57% month on month. On December 9 Henan Liliang Diamond Co.Ltd(301071) , the performance forecast was released. It is estimated that the year-on-year growth range of Q4 net profit attributable to the parent company is 138% - 182%, and the month on month growth range is 33-57%. The Q4 performance growth continues to grow high. The main reasons for the improvement of the company's performance are: (1) technological breakthrough and the improvement of diamond sales; (2) the production of raised investment projects and the improvement of production capacity; (3) the diamond market is in short supply and the price increases.
From the perspective of total quantity, it is estimated that the global output of cultivated drill blanks is expected to exceed 17 million carats in 2021. The permeability is 16%. (1) In terms of supply, India's diamond imports in October maintained a high boom month on month, with a year-on-year increase of 96.5% and a month on month increase of 1.0%. We speculate that India's legal holidays in October (accounting for 20% of the number of days in October) dragged down the chain growth rate slightly, and the chain growth rate can reach about 26.2% according to the same number of days. Looking forward to the end of the year, Thanksgiving, Christmas, new year and other festivals will promote the peak consumption season at the end of the year. In 2019, the chain demand for cultivated diamonds is expected to remain high in November and December, and the import volume of cultivated diamonds is expected to maintain a strong growth trend. Through calculation, it is expected that India will cultivate diamonds in 2021 The drilling volume was USD 1.288 billion, with a year-on-year increase of 201.6%, and the cultivated drilling permeability is expected to reach 6.32%, with a year-on-year increase of 2.08pcts; (2) In terms of pricing method, at present, the wholesale price of cultivated diamonds is anchored by natural diamonds. During the epidemic period, the upstream mining and processing volume of natural diamonds decreased, and the price of polishedprice index has continued to rise since July 2020. Under the trend of large diamond and good diamond, with the improvement of synthetic technology of cultivated diamonds, the price of Henan Liliang Diamond Co.Ltd(301071) For example, the proportion of diamonds above 3 carats of the company continued to increase, accounting for 0%, 8.7% and 28.3% respectively from 2018 to 2020. At the same time, the increase in the proportion of large diamonds led to the increase in the price / gross profit margin of cultivated diamonds, and the average sales price of cultivated diamonds of the company in 2020 increased by 19.39% year-on-year; In the long run, under the influence of slow variables such as technological progress + capacity optimization, the wholesale price may decline, while the retail price may be regulated or relatively stable by brands. (3) Based on the previous conclusions and the assumption that India's diamond processing will still account for 95% of the world in 2021, we calculate that the global production of cultivated diamonds is expected to reach 17.27 million carats in 2021, yoy + 139.8%. Assuming that the global production of natural diamonds will decline by 2% year-on-year in 2021, the annual penetration rate of cultivated diamonds is expected to exceed 13% (production caliber).
The real market space for cultivating diamonds is affected by stock substitution and incremental demand, or there is poor expectation. The market generally calculates the market space for cultivating diamonds through the penetration rate (output caliber) relative to the total diamond output. Different from the market view, we believe that the market space for cultivating diamonds should be through the penetration rate relative to diamond consumption (person time caliber). The main difference between the two is that we believe that consumers at the same price will buy larger carats of diamonds → thus increasing the consumption of cultivated diamonds per capita. Calculating the penetration rate based on the output caliber essentially ignores that consumers tend to buy larger carats when buying cultivated diamonds (large carat trend), resulting in the increase of the overall diamond production, which makes there is a deviation in the calculation of the market space for cultivated diamonds. We use the person time caliber to calculate that the stock space of cultivated diamonds is expected to exceed 90 million carats. In addition, we believe that cultivated diamonds can bring incremental markets from two needs: (1) Looking back on the development of diamond wedding rings in Japan and the United States, the period when the per capita GDP exceeded US $5000 is a period of rapid penetration of diamond wedding rings. China's per capita GDP exceeded US $million in 2019. However, according to the government work report, there are still 610 million people with a monthly income of less than 1000 yuan. At present, 47% of China's penetration of diamond wedding rings still has room for growth compared with more than 55% in the United States and Japan. I They believe that the demand for new diamond wedding jewelry in the future comes from the accelerated rise of the middle class in low-line cities. McKinsey expects that the middle class in China's third and fourth tier cities will increase from 17% to 39% from 2002 to 2022. In the context of common prosperity, the middle class in low tier cities will continue to rise, with consumption upgrading, superimposed and cultivated diamond cost-effective advantages, which is expected to drive the diamond penetration in the low tier market; (2) With the increment of self pleasing and the intergenerational replacement of consumers, the proportion of new consumer groups of generation Z has increased. Their consumption preference for pursuing personality and fashion leads the demand for diamond self pleasing. There is a demand for daily wearing diamond jewelry. There is room for improvement on the basis of 32% in 2018. If the retail price of diamond is further reduced in the future, or stimulate the potential market demand.
This week's view.
Household sector: on December 8, the national development and Reform Commission proposed to encourage the implementation of subsidies for furniture and home decoration to the countryside, promote the upgrading of durable consumer goods for rural residents, and benefit the recovery of terminal demand in the household sector on the policy side. In addition, at the central economic work conference on December 10, it was once again emphasized that housing should not be speculation, accelerate the development of long-term rental housing market, promote the construction of indemnificatory housing, support the commercial housing market to better meet the reasonable housing needs of buyers, and promote the virtuous circle and healthy development of the real estate industry due to urban measures. With the gradual release of real estate credit risk and the recent reduction of reserve requirements by the central bank, the pessimistic expectation of the market for real estate will be alleviated, and the valuation of the home sector is expected to be repaired.
Paper sector: (1) cultural paper: Recently, the price of cultural paper has been stable and slightly increased. Large scale paper mills have strong willingness to support the price, but the downstream transactions are limited, the power to make up for the price is insufficient, and the game situation between market supply and demand appears; the pulp price fluctuates at a high level, and the cost side support remains. (2) Box tile paper: the price of box tile paper is stable, the market still has expectations for the traditional peak consumption season, and large-scale paper mills tend to support the price; however, the willingness of downstream packaging plants to prepare goods is general, and the performance of terminal orders is less than expected; in addition, the price of waste paper is partially upward, and the supporting role of cost side remains.
Textile and clothing: (1) Textile manufacturing: under the background of repeated epidemic, we believe that the textile manufacturing sector with high export prosperity and mainly export manufacturing may have structural opportunities, and its overall prosperity is better than that of brand clothing dominated by domestic demand, and the high prosperity of Q3 orders of leading companies continues. The overall expectation of the sector is pessimistic + the fund is in a low position state + the current valuation of the sector is low In comparison, we believe that the current market as a whole or the left layout of industry segmentation leaders is a better time point. (2) Sports shoes and clothing: Recently, the epidemic situation in some areas has been repeated, and the valuation of brand clothing has continued to decline under the exogenous impact of short-term lack of catalysis + repeated epidemic situation. We believe that the left layout can be appropriate at present. The overall prosperity of the follow-up plate needs to wait for the epidemic situation and economic catalysis. (3) Down jacket: from the online data, the market share of Q4 down jacket online sales category has increased significantly this year, the concentration of head brands has increased, and the subsequent cold winter is expected to boost down jacket sales. (4) Outdoor sports: the growth of overseas outdoor sports demand has led to the improvement of China's export volume of corresponding products. The performance of professional outdoor sports equipment and product enterprises in China has been outstanding since 2020, and the industry boom has been upward.
Investment advice
It is recommended to give priority to companies with strong ability to bring high growth through channel change and category expansion under the current industry background. It is recommended to pay attention to the leading Oppein Home Group Inc(603833) of customized home furnishings, maintain high growth of decoration income, continue to strengthen the front-end traffic entrance under the background of differentiation of home consumption traffic, and gradually smooth out the business model of new channels at present. Software home continues to recommend Jason Furniture (Hangzhou) Co.Ltd(603816) , and it is recommended to pay attention to Minhua holdings. Jason Furniture (Hangzhou) Co.Ltd(603816) the channel reform is gradually realized to the performance. Based on the original strong sofa channel, new categories such as mattresses and customized home began to increase; Minhua holdings is in the stage of continuous high-speed store opening in the domestic sales channel, the market share and performance are in a relatively strong upward channel, and there is still much room for improvement in the medium and long-term functional sofa penetration.
The company continues to recommend wood pulp as the leading papermaking industry Shandong Sun Paper Co.Ltd(002078) . The company has diversified operation and leading cost control industry. The current valuation has been at the bottom of history. It is recommended to configure it on the left; In addition, it is suggested to pay attention to the box board leading Shanying International Holdings Co.Ltd(600567) with overseas production line layout and national waste channel construction.
Highlight Shantou Wanshun New Material Group Co.Ltd(300057) , the pioneer of lithium battery aluminum foil production, and enter a new era of high-quality growth. The current market has poor expectations, and the bottom is firmly recommended.
Risk statement
Macroeconomic growth is less than expected, resulting in the decline of residents' purchasing power; Severe real estate regulation has a negative impact on the downstream home demand. The intensified competition in the diamond industry led to price fluctuations, and the increase of industry penetration was less than expected.
