\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
The company issued the 2021 annual report:
Business performance doubled: in 2021, the company achieved an operating revenue of 498 million yuan, 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 cultivation of diamond, diamond micro powder and diamond single crystal achieved operating revenue of 197 million yuan, 156 million yuan and 137 million yuan respectively, accounting for 40%, 31% and 28% of the current operating revenue. The revenue of diamond cultivation business with high gross profit increased by 25 PCT compared with that in 2020.
Substantial improvement in profitability: in 2021, the company achieved a gross profit of 319 million yuan, a year-on-year increase of 199.08%; The comprehensive gross profit margin increased to 64%, with a year-on-year increase of + 20 PCT, of which the gross profit margins of cultivated diamonds, diamond micro powder and diamond single crystal were 81%, 50% and 58% respectively. Thanks to the excellent management ability, the expense rate of the company remained at about 10% in 2021, and the net interest rate increased significantly to 48%, with a year-on-year increase of + 18pct.
Low base and high growth of the company: as a cutting-edge in the industry, the company has a low equipment base. The Baochang project invested by raising funds is gradually put into operation, with 20-30 new presses per month. At the same time, with high profits, the company has sufficient funds in hand to ensure the subsequent production capacity improvement. The company has entered the diamond production echelon of 3 carats, and the value of its core products has been greatly improved.
Investment suggestion: at present, the C-end penetration rate of the global cultivation diamond market is only 4%, and the high cost performance advantage drives the rapid growth of downstream demand. Chinese manufacturers supply 40% of the world’s cultivated diamond blanks, which will significantly benefit from the rise of downstream demand Henan Liliang Diamond Co.Ltd(301071) as a cutting-edge in the industry, the equipment capacity base is small and the growth rate is fast. With the new capacity put into operation in the future, the performance will maintain high-speed growth. It is estimated that the net profit of the company from 2022 to 2024 will be RMB 438 / 630 / 827 million respectively, corresponding to the current PE valuation of 39x / 27x / 21x respectively, which is rated as “buy”.
Risk tip: the company’s production capacity is less than expected, the market competition is intensified, and the downstream demand is less than expected.
