Henan Liliang Diamond Co.Ltd(301071) (301071)
Investment logic
As a mainstream supplier of superhard materials, cultivating diamond is expected to become a new growth engine: the company is a head supplier of superhard materials in China. It is mainly engaged in three major businesses: diamond single crystal / micro powder / cultivating diamond. Among them, cultivating diamond grows rapidly, with 1h21 revenue accounting for 41% and becoming the largest business. 21.9.24 the net amount raised by listing on the gem was 274 million yuan, which was used to purchase press equipment, expand production capacity (with a total investment of 516 million yuan and a construction period of 3 years) and technology R & D (with a total investment of 45 million yuan and a construction period of 1.5 years).
The promotion of recognition of cultivated drilling terminals promotes the prosperity of the industrial chain and is beneficial to the upstream head manufacturers with technology and equipment advantages: China accounts for 40% of the global cultivated drilling capacity, and the high temperature and high pressure (HTHP) technology is the world leader. Benefiting from the opening of downstream demand and midstream processing, India's import and export has continued to increase at a high rate in the past 19 years, and the import and export have increased by 173% / 100% respectively from January to November in 21 years. Head manufacturers such as Henan Huanghe Whirlwind Co.Ltd(600172) / Zhongnan diamond / Henan Liliang Diamond Co.Ltd(301071) / Henan diamond account for 70% of the national production and sales. The competitiveness of upstream manufacturers lies in technical strength / holding of press equipment (first mover advantage) / financial strength.
The company has advanced technology and relatively new equipment, with excellent profitability: 1) equipment: it has been put into operation at the end of 20 years φ 800/ φ 750/ φ 700 type press accounts for 37% / 11% / 43%, and the industry φ Models of 650 and below account for 81%, and the company's equipment capacity / yield is higher; 2) Technology: the proportion of large particle / high-grade production and marketing has increased significantly, driving the average price of cultivated drill 1q21 to increase by 141% compared with 20 years. Compared with peers, the company has low expense rate and high gross profit margin. Due to the limited supply of press and a certain period from ordering to production, the company has strong certainty of equipment growth; The overall price of cultivation drill has declined, but high-grade single crystals are still relatively scarce and the price is strong. The company's production technology advantage is reflected in its superior profitability.
Investment advice
The upstream manufacturing enterprises have achieved outstanding performance in the past 21 years & the import and export volume of Indian Diamond Trade in the middle reaches has increased rapidly. We judge that the retail boom of diamond terminal is expected to rise, and the manufacturers of artificial diamond stone department welcome the opportunity. At the company level, Henan Liliang Diamond Co.Ltd(301071) has the dual barriers of technology and equipment. At present, the production progress of the press is in line with expectations and the certainty of performance growth is strong. It is expected to achieve rapid performance growth & profitability improvement by cultivating drilling business.
Profit forecast and valuation
We expect that the company's revenue in the 21st-23rd years will be 519 / 951 / 1345 million yuan respectively, with an increase of 111.8% / 83.3% / 41.5% and EPS of 3.84/6.99/9.81 yuan. Give 45 times PE for 22 years, corresponding to the target price of 314.39 yuan / share, and give a "buy" rating for the first coverage.
Risk statement
The press was put into operation less than expected, the price of drill fell, the terminal demand was weak, and the turnover of accounts payable slowed down.
