\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
Core view
The company issued the plan for issuing A-Shares to specific objects in 2022:
On March 25, the company announced that it planned to issue no more than 120744 million shares to no more than 35 specific objects, with a total fund-raising of no more than 4 billion yuan. It is proposed to be used in “Shangqiu Henan Liliang Diamond Co.Ltd(301071) science and technology center and diamond intelligent factory construction project (2.191 billion yuan)”, “power phase II diamond and diamond intelligent chemical plant construction project (1.599 billion yuan)” and “supplementary working capital (210 million yuan)”.
The equipment investment exceeds 3 billion yuan, corresponding to about 2200 six face top presses:
The equipment investment for capacity construction in the raised investment project exceeds 3 billion yuan, corresponding to about 2200 six face top presses (see the attached table for the calculation process). The construction period of the project is 3 years, with an average annual increase of more than 700. We estimate that in 2021, the company will have about 600 presses, and the capacity utilization rate has reached more than 95%. After all the raised investment projects are put into operation, the capacity will be greatly increased and the market share will be further expanded.
Cultivate diamond and diamond single crystal simultaneously, and fully enjoy the industry Dividend:
1) diamond Cultivation: the new production capacity is expected to exceed 2 million carats, of which the “Shangqiu power science and Technology Center Project” is expected to cultivate 1.5 million carats of diamonds per year, realizing an output value of 3 billion yuan / year. Meanwhile, the company’s R & D center has invested about 139 million yuan, and the yield and production efficiency are expected to continue to improve, driving the growth of performance.
2) diamond single crystal: the “power phase II project” will expand the production capacity of diamond single crystal. Since 2021, photovoltaic and other fields have driven the demand for diamond single crystals. At the same time, some production enterprises have switched to diamond cultivation, resulting in insufficient supply, and the price of diamond single crystals remains high. In 2021, the gross profit margin of the company’s diamond single crystal products reached 58%. This expansion is conducive to making up the company’s capacity gap and maintaining high-quality customer resources. Investment suggestion: the company’s main products are diamond, diamond single crystal and diamond micro powder. The downstream demand is strong, which drives the continuous improvement of performance. The net profit of the company from 2022 to 2024 is increased to 496 / 716 / 971 million yuan, corresponding to the current PE valuation of 34x / 24x / 17x respectively, maintaining the “buy” rating.
Risk tip: the company’s production capacity is less than expected, the market competition is intensified, and the downstream demand is less than expected
