\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
Key investment points
In 2022, Q1 achieved net profit attributable to parent company of 93-103 million yuan, with a year-on-year growth rate of + 128% ~ 152%: on the evening of March 27, 2022, Henan Liliang Diamond Co.Ltd(301071) disclosed the performance forecast of Q1 in 2022. In 2022, Q1 company achieved net profit attributable to parent company of 93-103 million yuan, with a year-on-year growth rate of 128% to 152%, a month-on-year growth rate of + 18% ~ 31% compared with Q4 in 2021, and realized deduction of non net profit of 90 million to 100 million yuan, with a year-on-year growth rate of + 129% ~ 154%, a month-on-month growth rate of 24% to 38% compared with Q4 in 2021. The high outlook continued.
The high prosperity of diamond cultivation industry drives the high growth of performance: the company’s performance in the beginning of 2022 is still bright, which mainly benefits from the double prosperity of diamond cultivation and industrial diamond. At present, diamond cultivation is still in the stage of rapid increase in penetration, and the industry space is broad. At the same time, according to the import and export data of diamond cultivation in India, the cumulative export volume of diamond cultivation bare diamonds increased by more than 90% year-on-year from January to February 2022, The strong demand in the downstream continues to be verified.
Industrial diamond is also in strong demand and in short supply. In terms of industrial diamond, diamond single crystal and micro powder are widely used in the fields of building materials sawing and grinding tools, abrasive tools in mechanical and electronic industries, geological drilling tools and so on. Since 2021, the demand for industrial diamond has been strong, the supply is tight, and the price has increased significantly, which has driven the gross profit margin of the company’s industrial diamond sector to increase significantly. According to the company’s annual report in 2021, the gross profit margin of diamond single crystal has increased by 18.5pct to 58% year-on-year, The gross profit margin of diamond powder increased by 10 PCT to 50% year-on-year. In Q1 2022, the trend continues.
The company plans to start additional issuance to cultivate the diamond industry, and plans to increase the market share under the boom. On the evening of March 25, Henan Liliang Diamond Co.Ltd(301071) disclosed the fixed increase plan, and planned to issue no more than 12.07 million shares to no more than 35 Issuers (accounting for 20% of the total share capital of the company before the issuance), and the total amount of funds to be raised was no more than 4 billion yuan. The net funds raised are intended to be invested in the following projects: all of which will be used for the “construction project of cultivating diamond intelligent factory” (2.06 billion yuan), “construction project of phase II diamond and cultivating diamond intelligent chemical plant” (1.6 billion yuan), “construction project of Shangqiu Henan Liliang Diamond Co.Ltd(301071) science and technology center” (130 million yuan) and supplementary working capital (210 million yuan). The fixed increase plan is currently in the plan stage and needs to be adjusted according to the specific situation in the future. If the fixed increase is implemented, it will help the company expand its production capacity and improve its process in the future. Under the high climate of the industry, the market share is expected to increase.
Profit forecast and investment rating: the company’s Q1 performance in 2022 is brilliant, with high growth rate on a month on month basis. At present, the cultivation of diamonds is still in the stage of rapid improvement in penetration, and the supply of high-quality products is in short supply. We raised the company’s net profit attributable to the parent company from 460 million yuan / 630 million yuan / 850 million yuan to 480 million yuan / 700 million yuan / 920 million yuan from 2022 to 2024, and the latest closing price is 33 / 23 / 17 times that of PE from 2022 to 2024, maintaining the “buy” rating.
Risk tips: macroeconomic and market demand fluctuations, intensified market competition, raw material price fluctuations, R & D risks, etc.
