Henan Liliang Diamond Co.Ltd(301071) recently announced that it plans to raise more funds to cultivate diamond business. After disclosing its outstanding performance in 2021 earlier, it immediately threw out a fixed increase plan of 4 billion yuan, which made the cultivation of diamonds attract widespread attention in the market.
Industry analysts believe that the current demand for cultivated diamonds is growing rapidly, driving the high performance growth of relevant listed companies; Limited by the capacity of equipment manufacturers, it is difficult to release the upstream capacity of diamond cultivation in the short term, and the phenomenon that the industry is in short supply is expected to continue, but it still depends on whether the downstream demand can rise in the long term.
cultivate the rapid growth of diamond market demand
In recent years, as GIA, IGI and HRD, the three international authoritative diamond appraisal institutions, have corrected the name of cultivated diamonds and successively launched graded testing services for cultivated diamonds, top brand retailers, such as old diamond brand De Beers and fast fashion brands such as Swarovski and Pandora, have actively arranged and gradually formed a consensus on cultivating diamond market.
Compared with natural diamonds, cultivated diamonds are cheaper and cheaper. At the same time, special-shaped diamonds are easier to produce and have strong plasticity. They are suitable for making fashion jewelry products. At present, retail brands that cultivate diamonds, such as vrai, Lightbox, signet and Swarovski, have begun to sell, focusing on meeting the needs of marriage and taking into account the daily wearing of jewelry products.
Henan Liliang Diamond Co.Ltd(301071) said in the annual report of 2021 that the demand for cultivated diamonds increased rapidly in 2021, and China's mainstream production enterprises significantly increased the production capacity of cultivated diamonds. However, due to the slow construction progress of new production capacity, the production capacity of industrial diamond single crystal decreased significantly; At the same time, with the growth of China's demand for industrial diamond single crystal in the fields of photovoltaic new energy and consumer electronics, the supply of industrial diamond single crystal market is tight, and the sales price increases significantly.
Benefiting from the high prospect of cultivating diamonds, the annual report of 2021 released by Henan Liliang Diamond Co.Ltd(301071) in early March showed that the company achieved a revenue of 498 million yuan, a year-on-year increase of 103.50%; The net profit attributable to the parent company was 240 million yuan, a year-on-year increase of 228%. Meanwhile, signet, an American diamond and jewelry retailer, recently disclosed that as of January 29, 2022, its annual sales had increased by 49.7% year-on-year to US $7.8 billion. It can be seen that the demand for cultivating overseas retail end of diamonds is also relatively strong.
The latest Indian diamond import and export data released by the Indian gem and jewelry export promotion committee (GJEPC) once again confirms the high prosperity of the industry. According to GJEPC data, in February 2021, the import / export volume of cultivated diamonds in India increased significantly by 84.4% / 114.6% year-on-year respectively.
Liu Yuenan, chief analyst of Guotai Junan Securities Co.Ltd(601211) trade and social service industry, believes that with the active layout of Chinese jewelry brands, consumer touch is expected to increase significantly, and the diamond industry is expected to continue to grow at a high rate. First, the supply of upstream production capacity increased steadily in a step-by-step manner, and the supply of high-grade products continued to be in short supply. Second, the first batch of single store model data on the consumer side continue to be verified, and Chinese traditional jewelers and emerging brands are expected to gradually enter the stock cycle. Third, the uncertainty of downstream consumer demand has gradually increased, and the capital investment has driven the upstream equipment manufacturers to expand production faster than expected, and the performance is expected to be released gradually.
Zheng Chenghuai, an analyst at Debang securities, believes that cultivating diamonds can not only cut part of the stock demand from the existing natural diamond market, but also obtain incremental space from the fashion jewelry market originally dominated by gold and gemstones. It is predicted that the total space for cultivating the diamond market will reach US $18.29 billion in 2025.
According to Bain consulting data, the global cultivated drilling penetration rate was 8% in 2021, an increase of 2.1% compared with 5.9% in 2020, and it is expected to reach 15.8% in 2025. The penetration rate of cultivated drilling in China was 6.7% in 2021, an increase of 2.7% over 4% in 2020, and it is expected to reach 13.8% in 2025.
production is difficult to increase in a short time
It is understood that the diamond cultivation industry chain is divided into four links: equipment production link, upstream diamond cultivation production link, midstream processing and polishing link and downstream terminal retail link. At present, the investment value of the industry chain is mainly concentrated in the upstream diamond production and downstream terminal retail.
Zheng Chenghuai said that according to the process route, China mainly adopts high temperature and high pressure method, and overseas mainly adopts chemical vapor deposition method. At present, the production process of high-temperature and high-pressure equipment in China is divided into forging and casting. The annual output of all forging and casting presses in China is about 1500, which is limited, which limits the production expansion speed of upstream diamond producers to a certain extent.
The total amount of "diamond factory" and "diamond factory" will not be raised for the first time after the announcement of the plan for the construction of "Shangqiu" and "smart diamond factory", which will not be used for the construction of smart diamond factory "in March. It is worth mentioning that in the two construction projects, the total equipment purchase cost for capacity expansion is about 3.01 billion yuan.
Liu Wenzheng, an analyst at Minsheng securities, said that at present, the price of a single six sided press used to cultivate diamond production in the industry is about 1-2 million. If the median value is 1.5 million, the equipment purchase cost in Henan Liliang Diamond Co.Ltd(301071) this fixed increase fund-raising corresponds to about 2000 six sided presses.
At present, except that Henan Liliang Diamond Co.Ltd(301071) plans to raise funds to promote capacity expansion, Henan Huanghe Whirlwind Co.Ltd(600172) and other enterprises are increasing equipment investment expenditure. Will production capacity be released too quickly, resulting in oversupply? Zheng Chenghuai believes that the core components of the equipment have technical barriers and need technical accumulation, which makes it difficult for new players to enter. Limited by the capacity of equipment manufacturers, it is difficult for diamond producers to produce large quantities in the short term. At the same time, in addition to jewelry, there is also a shortage of industrial diamond supply, and the phenomenon of short supply is expected to continue.
Take China's high-temperature and high-pressure production as an example. At present, there are about 3000 diamond six sided top presses in China. The leading manufacturers led by Henan Huanghe Whirlwind Co.Ltd(600172) , Zhongnan diamond and Zhongnan diamond have contributed most of China's diamond output and contracted most of the newly produced equipment, which makes it more difficult for new enterprises to expand production. On the premise that the output of a single equipment cannot be greatly increased in a short time, it is difficult to release the upstream production capacity of diamond cultivation in a short time.
In Zheng Chenghuai's view, cultivating the diamond industry is demand-oriented. At present, although the overall supply is in short supply, the long-term logic still depends on whether the downstream demand can rise. At present, the main competition is the capacity expansion speed of upstream manufacturers. Upstream manufacturers with first mover advantage, large overall capacity and perfect technical R & D team have high investment value.
