Core view
Events
1) superhard materials branch of China Machine Tool Association: the price of industrial diamond has increased by 50% in the past year, and some products have increased by more than 70%.
2) Henan, Shandong, Anhui, Inner Mongolia and other places successively announced the list of key construction projects in 2022, and a number of diamond cultivation / industrial diamond production and industrial supporting projects were selected.
The gap between supply and demand has led to a sharp rise in diamond prices: affected by the hot market of cultivated diamonds, many companies have gradually tilted their production capacity to cultivated diamonds, resulting in a decline in industrial diamond production capacity and inability to meet market demand. At the same time, the downstream demand for photovoltaic, electronics and other products has increased, resulting in a sharp rise in prices. In the short term, it will take some time for the production capacity to be put into operation, and the price is expected to remain high.
Under the high prosperity of the industry, all localities have accelerated the layout of production capacity: as an important direction of industrial transformation and upgrading, the superhard material industry has been included in the list of key projects by the governments of Henan, Shandong, Anhui, Inner Mongolia and other places. At present, among the key projects under construction (including projects announced by enterprises), there are 30 diamond cultivation / industrial diamond related projects, with an investment of tens of billions of yuan. 1) Cultivation of diamonds: the leader leads the expansion of production. It is expected to add more than 6000 six sided top presses and CVD equipment within 3-4 years, with a total expansion of diamond blank production capacity of more than 10 million carats; 2) Industrial diamond and supporting facilities: it is estimated that the new industrial diamond production capacity will exceed 8 billion carats in 2-4 years. At the same time, manufacturers will increase the supporting construction of upstream equipment and raw and auxiliary materials of the industrial chain.
Obvious leading advantages and enjoy the rising dividend of the industry: in the field of diamond single crystal, Cr4 Central South diamond, Henan Huanghe Whirlwind Co.Ltd(600172) , Zhengzhou Huajing, Henan Liliang Diamond Co.Ltd(301071) occupy 70% of the national market share. The first four enterprises have good cooperation with the press manufacturers and can stably obtain their press supply. At the same time, they can purchase parts and assemble the press by themselves to ensure the improvement of production capacity and performance growth.
Investment suggestion: the cultivated diamond leaders are also the leaders in China's industrial diamond field. Since 2021, the market has been in short supply, resulting in the rise of industrial diamond price and significant improvement of profitability. With the strong support of Henan provincial government, the leading enterprises actively expand their production capacity and enjoy the dividends of the rising period of the industry. It is suggested to pay attention to two investment routes: 1) production end: cultivating Diamonds & the hot demand in the downstream of industrial diamonds. It is suggested to pay attention to the main production enterprises Henan Liliang Diamond Co.Ltd(301071) ( Henan Liliang Diamond Co.Ltd(301071) . SZ), North Industries Group Red Arrow Co.Ltd(000519) ( North Industries Group Red Arrow Co.Ltd(000519) . SZ), Henan Huanghe Whirlwind Co.Ltd(600172) ( Henan Huanghe Whirlwind Co.Ltd(600172) . SH); 2) Equipment side: the investment demand for high gross profit driven equipment at the production side has increased, and the expansion of production in various provinces and cities has begun to take shape. It is suggested to pay attention to the supply of HPHT synthetic equipment and lay out Sinomach Precision Industry Co.Ltd(002046) ( Sinomach Precision Industry Co.Ltd(002046) . SZ) for diamond cultivation by CVD method.
Risk tip: the expansion of production is less than expected, the industry competition intensifies, and the downstream demand is less than expected.
