Core view
Multi factor resonance, the price of natural drilling rose rapidly.
According to IDEX (international diamond trading platform), the total price index of finished diamonds rose by 26.46% from January 1, 2021 to March 2, 2022. After the marginal impact of the epidemic weakened, the rapid rebound in downstream consumption combined with the demand for asset allocation under inflation boosted the continuous rise of natural drilling prices.
The order of natural drilling industry chain is reconstructed and the price center is moved up.
1) upstream: oligopoly at the supply side, Cr4 accounts for 70% of the blank supply in total, and the inventory continues to decline. At the same time, it is difficult to expand production, and the gap at the supply side is difficult to make up in the short term; 2) Midstream: the demand for finished diamonds has increased, midstream manufacturers have increased prices and prepared goods, and the separation of production place and processing place has led to active secondary transactions of blanks, boosting the price rise;
3) downstream: demand rebounded rapidly. In 2021, the total retail sales of diamonds and jewelry in the world was about 84 billion US dollars, with a year-on-year increase of 29% and 12% compared with 2019.
The price of natural drilling is high, and the permeability of cultivated drilling is expected to be further improved.
With the high demand in the downstream, the cultivation of diamond leaders is actively expanding production. It is expected that the output of cultivated diamonds will reach 29.3 million carats by 2025, and the penetration rate at the diamond production end will reach 18%. The price advantage of cultivated drill is obvious. The price of white drill is 1 / 3-1 / 4 of that of natural drill, and the price of color drill is 1 / 10 of that of natural drill. The continuous rise of the price of natural drill is conducive to the continuous improvement of the permeability of cultivated drill.
Investment suggestion: the supply of natural drilling is limited, but the downstream consumer demand is strong, and the price is expected to remain high.
At present, the penetration rate of cultivated diamonds in the world is only 4%. After the price difference between cultivated diamonds and natural diamonds is expanded, the cost performance advantage is highlighted, and the downstream demand is expected to be further improved. At the same time, the gap between natural supply and demand will create space for improving drilling permeability. It is suggested to pay attention to two investment routes:
1) production side: China supplies 40% + cultivated diamond blanks in the world, and Cr4 is as high as 80%. The rise of downstream demand will bring performance growth to the leader. It is suggested to pay attention to Henan Liliang Diamond Co.Ltd(301071) ( Henan Liliang Diamond Co.Ltd(301071) . SZ), North Industries Group Red Arrow Co.Ltd(000519) ( North Industries Group Red Arrow Co.Ltd(000519) . SZ), Henan Huanghe Whirlwind Co.Ltd(600172) ( Henan Huanghe Whirlwind Co.Ltd(600172) . SH); 2) Equipment side: high gross profit at the production side drives the growth of equipment investment demand, and the expansion of diamond cultivation in Henan "982" project has begun to take shape. It is suggested to pay attention to the supply of HPHT synthesis equipment and arrange Sinomach Precision Industry Co.Ltd(002046) ( Sinomach Precision Industry Co.Ltd(002046) . SZ) for diamond cultivation by CVD method.
Risk tip: industry competition intensifies, downstream demand is less than expected, and the supply of natural diamonds increases.
