\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
The company issued the first quarter report of 2022:
In 2022q1, the company expects to realize a net profit attributable to the parent company of 93-103 million yuan, with a year-on-year increase of 127.89% – 152.40% and a month-on-month increase of 18.49% – 31.23%; It is expected to realize a net profit of 90-100 million yuan, a year-on-year increase of 128.71% – 154.12%.
The volume and price of main products increased simultaneously, driving performance growth:
1) diamond Cultivation: in 2022q1, the proportion of diamond cultivation business sales of the company increased significantly. With the company’s raised investment projects put into operation one after another, the company’s diamond cultivation capacity continued to grow. At the same time, technological progress led to the increase of product yield and the proportion of large carat rough, resulting in structural price increases, which helped to improve the company’s performance.
2) industrial diamond: in 2022q1, some manufacturers switched production to cultivate diamonds, resulting in insufficient supply. At the same time, the downstream demand for photovoltaic, electronics and so on increased, and the price of the company’s industrial diamond products increased significantly year-on-year.
In 2021, the gross profit margin of the company’s cultivated diamond and industrial diamond products has reached 81% and 58% respectively. Under the mismatch of supply and demand, the profitability is expected to remain high.
Speed up production capacity layout and fully enjoy industry dividends:
The downstream demand of the company’s main products is hot. The capacity utilization rate has reached more than 95% in 2021, and there is still a large gap. On March 25, the company proposed to raise no more than 4 billion yuan for capacity construction, of which the equipment investment was more than 3 billion yuan, corresponding to about 2200 six face top presses. After all the raised investment projects are put into operation, the company’s production capacity will be greatly improved and its market share will be further expanded.
Investment suggestion: the downstream demand of the company’s main products is strong, and increasing the capacity layout is expected to drive the continuous growth of performance. It is expected that the company will realize the net profit attributable to the parent company of 496 / 716 / 971 million yuan from 2022 to 2024, 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.
