\u3000\u3 Jointo Energy Investment Co.Ltd.Hebei(000600) 172 Henan Huanghe Whirlwind Co.Ltd(600172) )
Core view
In 2021, the company turned losses into profits, the cash flow increased greatly, and the leader of cultivating diamond + industrial diamond rose again
Turning losses into profits in 2021: the company achieved an operating revenue of 2.65 billion yuan in 2021, an increase of 8% year-on-year, of which superhard materials achieved a revenue of 1.65 billion yuan, an increase of 39% year-on-year; The net profit attributable to the parent company was RMB 40 million, which turned losses into profits compared with the loss of RMB 980 million in 2020; The net profit deducted from non return to parent was 120 million, an increase of 746 million over 2020.
The net cash flow increased significantly and the gross profit margin improved: the company’s net operating cash flow continued to improve, reaching 980 million in 2021, a year-on-year increase of 128%; The gross profit margin in 2021 was 31%, an increase of 11 percentage points over 2020, mainly for the company to cultivate large quantities of diamond products with high gross profit; In the later stage, with the company’s fixed increase and expansion of production and cultivation of diamond production capacity, the proportion of profit contribution of diamond cultivation is expected to continue to increase, and the improvement of gross profit margin caused by the change of business structure is expected to increase significantly.
The historical burden is gradually reduced: the company’s asset disposal loss, asset impairment loss and credit impairment loss totaled 99 million yuan in 2021, a significant decrease compared with 750 million yuan in 2020.
Interest expense: the company’s interest expense in 2021 was 339 million yuan, an increase from 319 million yuan in 2020. If the refinancing is successful in 2022 and the profitability of the main business is improved, it is expected that the interest expense will gradually decrease in the future.
Vigorously increase the production capacity of diamond cultivation; Express confidence in the actual controller’s release of fixed increase
The company plans to raise 800-1.05 billion yuan from the actual controller at the price of 7.14 yuan / share for the expansion of diamond production capacity and replenishment debt repayment, of which 910 million yuan is planned to be invested in the cultivation of diamond project for the purchase of equipment, with a construction period of 3 years and a production capacity of 590000 carats per year; After the fixed increase, Qiao Qiusheng’s direct and indirect shareholding will rise from 20.36% to 27.73% at most.
Through this fund-raising and expansion, the company has vigorously improved the production capacity of diamond cultivation, and achieved a significant increase in the company’s operating revenue and net profit; Effectively reduce the level of assets and liabilities and financial risks by supplementing working capital and repaying debts; At the same time, reduce the scale of debt financing, and the financial expenses are expected to continue to decrease, significantly contributing to the improvement of profits.
Foster accelerated diamond production expansion + debt improvement + reduction of financial expenses, jointly promote the release of performance, and the performance is flexible
Low penetration and high growth of cultivated diamond industry: cultivated diamond is one of the few “immune” growth tracks less affected by the epidemic. From 2019 to 2021, India’s imports of cultivated diamond raw stones cagr107%, with a year-on-year increase of 105% in the first quarter of 2022; We estimate that the output penetration rate of cultivated diamonds in 2021 is about 7%, and the output penetration rate is 5%. There is a large room for growth in the future.
Welcoming the east wind of the industry, the leader rises again: the company is one of the double leaders of China’s “cultivating diamond + industrial diamond” industry comparable to North Industries Group Red Arrow Co.Ltd(000519) (Central South diamond). It is one of the enterprises with the largest number of presses, the strongest technology and the most complete industrial chain in the industry. In the later stage, with the strong downstream demand, the increase of the company’s production capacity and the gradual reduction of historical burden, the cultivating diamond + industrial diamond leader is expected to rise again.
Profit forecast and valuation
It is estimated that the company’s net profit attributable to the parent company from 2022 to 2024 will be 5.1/7.7/1.03 billion, with a growth rate of 1079% / 52% / 34% and PE of 26 / 17 / 13 times, maintaining the buy rating.
Risk tip: the risk of changing the competition pattern and profitability of diamond cultivation
