\u3000\u30 Shenzhen Fountain Corporation(000005) 19 North Industries Group Red Arrow Co.Ltd(000519) )
Event overview: the company released the first quarterly report of 2022 on April 25. During the reporting period, the company achieved a total operating revenue of 1.382 billion yuan, 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%. The company’s performance slightly exceeded the previous forecast ceiling.
The growth rate of revenue performance slowed slightly, and the net profit attributable to the parent increased by + 191.03% year-on-year, showing a bright performance. On the revenue side, in 2022q1, the company achieved a total operating revenue of 1.382 billion yuan, a year-on-year increase of + 1.15%, and the performance growth rate slowed down. However, combined with the balance sheet, the company’s Q1 contract liabilities are still as high as 850 million yuan, indicating that the company has full orders on hand. Therefore, on the whole, the growth potential of the company’s revenue side is sufficient, and there is no need to worry too much about the apparent growth rate of Q1. On the profit side, in 2022q1, the company realized a net profit attributable to the parent company of 281 million yuan, a year-on-year increase of + 191.03%, or mainly benefited from the high boom growth of the diamond cultivation and industrial diamond industry.
During the period, the expense rate increased slightly by 0.42pct year-on-year, and the optimization of product structure drove the rapid rise of profitability. In terms of expense rate, during 2022q1, the expense rate increased slightly by 0.42pct to 12.02% year-on-year, and decreased significantly by 1.92pct month on month compared with 2021q4; In terms of splitting, the sales expense ratio of 2022q1 company was -0.26pct to 0.91%, the management expense ratio was -0.16pct to 6.77%, the R & D expense ratio was + 0.82pct to 5.18%, and the financial expense ratio was + 0.02pct to -0.84%. In terms of profitability, benefiting from the rise in product prices driven by the shortage of supply in the cultivation diamond + industrial diamond industry, the profitability of 2022q1 company has been significantly improved, including the year-on-year gross profit margin of + 16.11pct to 36.76% and the year-on-year net profit margin of + 13.29pct to 20.37%.
Cultivate diamond + industrial diamond and maintain a high boom. The company has steadily expanded its production and continues to enjoy the growth dividend of the industry. Since 2022, the cultivation diamond industry has experienced high economic growth. According to GJEPC data, in Q1, India’s cultivation diamond rough imports and bare diamond exports were + 104.97% and + 77.72% year-on-year respectively. In the dimension of the whole year, the industry is expected to maintain rapid growth under the background of accelerated layout of terminal brands and limited supply of natural diamonds caused by Russia Ukraine conflict. In terms of industrial diamonds, due to the impact of the occupation of production capacity by cultivated diamonds + the growth of demand for micro powder for photovoltaic, the supply is in short supply, and the price continues to rise. At present, the company’s monetary capital + trading financial assets are as high as 5.992 billion yuan, and sufficient cash reserves are expected to escort the company’s steady expansion of production, thus bringing more considerable performance flexibility.
The automobile sector has achieved remarkable results in cost reduction and efficiency increase, waiting for the profit inflection point of special equipment under the background of pricing mechanism reform. By taking a series of cost reduction and efficiency enhancement measures, the company’s automobile sector will basically turn losses into profits in 2021. Considering that the company’s automobile business mainly adopts the strategy of small profit and quick turnover, so the subsequent contribution to performance elasticity is relatively limited, the core should still pay attention to the improvement rhythm of the special equipment sector. As the three-year reform action plan of state-owned enterprises enters the last year, the superposition pricing mechanism reform will be gradually implemented, The loss range of the company’s special equipment performance is expected to narrow.
Investment suggestion: it is estimated that the company will realize revenue of 9.164 billion yuan, 11.140 billion yuan and 13.437 billion yuan respectively from 2022 to 2024, with a year-on-year increase of + 22.0%, + 21.6% and + 20.6%; The net profit attributable to the parent company was 1.035 billion yuan, 1.408 billion yuan and 1.769 billion yuan respectively, with a year-on-year increase of + 113.3%, + 36.0% and + 25.6%; Realize eps0 74, 1.01 and 1.27 yuan. The closing price of PE on April 25 was 23, 17 and 14 times respectively, maintaining the “recommended” rating.
Sharp rise in raw material demand and other risks.
