\u3000\u30 Shenzhen Fountain Corporation(000005) 19 North Industries Group Red Arrow Co.Ltd(000519) )
22q1 realized a net profit attributable to the parent company of 281 million yuan, a year-on-year increase of + 191.03%. The company realized an operating revenue of 1.382 billion yuan in 22q1, a year-on-year increase of + 1.15%; The net profit attributable to the parent company was 281 million yuan, a year-on-year increase of + 191.03%, slightly exceeding the upper limit of the previous performance forecast; The gross profit margin / net profit margin was 36.76% / 20.37%, with a significant year-on-year increase of 16.11/13.29 PCT. Under the slight increase of revenue, the net profit attributable to the parent company and profitability increased, which was mainly due to the structural improvement caused by the significant increase in the proportion of high gross profit margin cultivation diamond business.
During the period, the expense rate was generally stable and the assets were in good condition. The company’s sales / management / Finance / R & D expense rates were 0.91% / 6.77% / – 0.84% / 5.18% respectively, with a year-on-year change of -0.26 / – 0.16 / + 0.02 / + 0.81 PCT, and the overall control of the expense rate was stable during the period. In terms of asset quality, at the end of the first quarter, the company’s cash assets were about 6 billion yuan, accounting for more than 43% of the total assets. With abundant self owned funds, the company has excellent anti risk ability and production expansion conditions. The net operating cash flow of the company was about -558 million yuan, with a year-on-year increase of – 289.28%, and the accounts receivable was + 78.87% / + 32.13% year-on-year / month on month. This was mainly due to the year-on-year decrease in the collection of sales business and the year-on-year increase in the payment for material procurement. There was no abnormality in the operating capacity of the company.
Cultivate the diamond industry to maintain a high boom, and the monthly data of import volume reached a new high for four consecutive months. From the historical data of India’s cultivated diamond import and export, the global cultivated diamond industry has shown explosive growth in the past two years. Under the natural annual caliber, the import volume of Indian rough diamonds in 20192021 was USD 263 / 4.40/1.130 billion respectively, with a year-on-year increase of + 66.89% / 156.99% in 2020 / 2021, a CAGR of 107.10% in 19-21, and a penetration rate of 2.07% / 4.56% / 6.38% respectively. From 2019 to 2021, the export volume of India’s bare diamonds was USD 381 / 529 / 1144 million respectively, with a year-on-year increase of + 38.91% / 116.05% in 2020 / 2021, a CAGR of 73.24% in 19-21 and a penetration rate of 1.85% / 3.61% / 4.80% respectively. According to the latest data released on April 16, in March 2022, India’s imports of cultivated diamond rough diamonds amounted to US $203 million, with a year-on-year increase of + 157.08% and a month on month increase of + 30.97%, reaching a record high in a single month; In March 2022, India’s exports of cultivated diamond bare diamonds amounted to 137 million US dollars, with a year-on-year increase of + 59.45% and a month on month increase of + 8.90%. In the first quarter of 2002, the import volume reached US $511 million, a year-on-year increase of + 105.39%; The export volume was 385 million US dollars, a year-on-year increase of + 77.35%. The high prosperity of the industry has been continuously verified.
Risk warning: industry competition intensifies; The expansion of diamond production capacity is less than expected; Downstream demand was lower than expected.
Investment suggestion: the company is a leader in the superhard material industry and will fully benefit from the high outbreak of the diamond industry. The short-term drag on the performance of the special equipment business makes the company significantly underestimated, and the later profit is expected to be gradually repaired. We expect the net profit in 202224 to be RMB 1.172/15.27/1.899 billion respectively, with a corresponding PE value of 21 / 16 / 13 times, maintaining the “buy” rating.
