High growth in demand for cultivated diamonds: India’s imports increased by 157% year-on-year in March and 105% year-on-year in the first quarter
In March 2022, India imported 203 million US dollars of cultivated diamond blanks, with a year-on-year increase of 157% and a month on month increase of 31%. The import penetration rate was 9.1%, with a year-on-year increase of 3.7 PCT; The export volume of cultivated diamond bare diamonds was 137 million US dollars, with a year-on-year increase of 60%, a month on month increase of 8.9%, and the export penetration rate was 5.9%, with a year-on-year increase of 2.0pct. The CAGR of cultivated diamond imports from 2019 to 2021 was 107%, with a year-on-year increase of 105% in the first quarter of 2022.
Cultivating the diamond industry chain is presented as: China in the upstream, India in the middle and the United States in the downstream. India accounts for about 95% of the global diamond polishing and processing market share. The import data of Indian cultivated diamond raw stones can basically reflect the industry demand. The industry has low penetration and high growth. The cultivation of leading diamond manufacturing enterprises is expected to continue to benefit.
Cultivating diamonds: the compound growth rate of China’s market will exceed 30% from 2020 to 2025; Press and process casting high threshold
From 2017 to 2019, the output of cultivated diamonds in the world will increase from 1.5 million carats to 7 million carats, with a CAGR of 116%. It is predicted that the compound growth rate of the scale of cultivated diamonds in the world will be 17% from 2020 to 2025, and the scale of China’s cultivated diamond market will increase from 8.3 billion yuan to 29.5 billion yuan, with a compound growth rate of 29%; There are capacity constraints in the supply of press equipment in the diamond industry chain, high technical barriers in raw stone production and limited capacity expansion in the short term. It is expected to maintain a good competition pattern in the next 2-3 years.
The price of industrial diamonds has increased and the profitability has been improved. It is expected to keep up with the cultivation of diamonds in the future
Henan Huanghe Whirlwind Co.Ltd(600172) issued the company’s announcement that the price of industrial diamond composite sheet will rise on April 6, 2022; Since 2020, industrial diamond prices have risen sharply due to strong downstream demand. Industrial diamond has benefited from the growth of downstream demand such as diamond wire for photovoltaic and the third generation semiconductor silicon carbide; At the same time, due to the large demand for diamond cultivation, the existing production capacity is more inclined to it, and there is a “seesaw effect” in production capacity distribution. We expect that the industrial diamond production capacity will be squeezed, the product supply will not meet the demand, the price is expected to remain high, the profitability will continue to improve, and the profitability will gradually keep up with that of diamond cultivation.
Investment suggestion: continue to recommend the cultivation of diamond raw stone manufacturing leaders – North Industries Group Red Arrow Co.Ltd(000519) , Henan Huanghe Whirlwind Co.Ltd(600172) , Henan Liliang Diamond Co.Ltd(301071)
Diamond cultivation has low penetration rate and large growth space. It is recommended to cultivate three leading diamond stones: North Industries Group Red Arrow Co.Ltd(000519) , Henan Huanghe Whirlwind Co.Ltd(600172) , Henan Liliang Diamond Co.Ltd(301071) .
(1) North Industries Group Red Arrow Co.Ltd(000519) : the global cultivation of diamond raw stones and industrial diamonds is the double leader, and the military business will turn around the loss, with great performance flexibility: the company is the world’s largest manufacturer of gem grade cultivated diamond raw stones and the world’s largest supplier of industrial diamonds with market share. It is expected to significantly benefit from the large demand for cultivated diamonds and the increase in the price of industrial diamonds in the future.
(2) Henan Huanghe Whirlwind Co.Ltd(600172) : the cultivation of diamond + industrial diamond is booming, the company’s historical burden will be gradually unloaded, the interest expense and impairment provision are expected to improve, and the performance is expected to reverse upward: the company is one of the double leaders in China’s “cultivation of diamond + industrial diamond” industry North Industries Group Red Arrow Co.Ltd(000519) and announced on April 7 that it plans to raise 800-1.05 billion yuan from the actual controller at the price of 7.14 yuan / share, It is used to cultivate diamond industrialization projects (800 million) and make-up debt repayment (250 million). This non-public offering: 1) cultivate and expand diamond production, improve competitiveness and profitability; 2) Optimize the financial structure, reduce debt and improve profitability; 3) Qiao Qiusheng, the actual controller, increased his holdings of shares to demonstrate confidence and enhance control.
(3) Henan Liliang Diamond Co.Ltd(301071) : cultivate diamond rookies to rise, plan to increase production by 4 billion, and have great flexibility in performance in the next few years: the company plans to raise 4 billion for the construction of diamond cultivation and industrial diamond production capacity, including 1500 diamond manufacturing presses; The company’s net profit attributable to the parent company in the first quarterly report increased by 128% – 152% year-on-year, reflecting the high outlook of the downstream.
Risk tip: cultivate the risk of changes in diamond competition pattern and profitability.
