\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
Outstanding performance and further improvement of profitability. In the first quarter of 2022, the company achieved revenue of 191 million yuan (YoY + 126.88%), net profit attributable to the parent company of 101 million yuan (YoY + 147.81%), and deducted non net profit of 97 million yuan (YoY + 147.10%). In the first quarter, the gross profit margin increased by 5.38 PCTs to 67.17%, mainly due to the increase in the proportion of high profit margin cultivation drilling products, of which the sales expense rate decreased by 1.32 PCT to 0.69%, the management expense rate increased by 1.23 PCT to 8.57%, and the R & D expense rate increased by 1.31 PCT to 5.54%, driving the net profit margin attributable to parent company increased by 4.46 PCTs to 52.78%. We judge that the company actively optimized the product structure throughout the year, enhanced the synergy of production lines, cultivated efficient expansion of diamond production capacity and accelerated the release of performance.
The downstream orders are full and the turnover capacity is strong. 1) Cash flow: at the end of 2022q1, the net operating cash flow increased by 167.26% to RMB 8.498 billion, mainly due to the expansion of business scale and the increase of loan. Contract liabilities increased by 64.65% over the beginning of the year to 40 million yuan, mainly due to the increase in advance receipts. Therefore, it is speculated that the company's current orders are full and the downstream demand is high. 2) Construction in progress: the construction in progress at the end of the period increased by 90.78% to 52.53 million yuan compared with the beginning of the year, mainly due to the increase of construction and installation equipment of phase II capital construction project. 3) Turnover capacity: the ending inventory value increased by 7.69% over the beginning of the year to 140 million yuan, and the inventory turnover rate reached 0.44 times; Accounts receivable increased by 24.59% over the beginning of the year to 76 million yuan, and the turnover rate of accounts receivable reached 2.80 times.
The artificial diamond industry is booming, and the upstream manufacturing is in short supply. In the field of consumption, there is a broad space to improve the market scale and penetration of diamond penetration, and the high outlook of the industry continues. In 2022q1, India's imports of cultivated diamond blanks reached US $511 million (YoY + 105.52%), and the exports of cultivated bare diamonds reached US $386 million (YoY + 77.16%), corresponding to the overall diamond import and export penetration rate of 9.62% / 6.19% respectively, with a simultaneous increase of 3.58/2.38pcts. In the industrial field, the demand for diamond single crystal for traditional infrastructure is growing steadily. New applications in photovoltaic manufacturing and semiconductor field urge the outbreak of diamond micro powder. By 2025, the market scale of China's cultivated diamond blank / diamond single crystal / micro powder is expected to reach 29.5/46/2.6 billion yuan. Under the high prospect of the industry, based on the company's fund-raising and investment plan, we expect the company to add 600 six face top presses this year, and the annual cultivated drilling capacity exceeds 750000 carats.
Constant growth continued to be promoted, and the capacity planning was clear. The 4 billion fixed increase project of the company has been accepted by Shenzhen Stock Exchange. The future production capacity planning is clear. The construction cycle of the project is three years. It is planned to purchase 1500 sets of hexahedral top presses for drilling and 300 sets of presses for industrial diamond. 1) the total investment of Shangqiu Henan Liliang Diamond Co.Ltd(301071) science and technology center and R & D Center for cultivating diamond intelligent factory is 139 million yuan, the total investment of capacity construction project is 2.191 billion yuan, the predicted internal rate of return is 34.78% (after tax), and the total investment payback period is 473 years; 2) The total investment of phase II diamond and cultivation diamond intelligent chemical plant construction project is 1.72 billion yuan, the predicted internal rate of return is 30.90% (after tax), and the total investment payback period is 4.87 years; 3) It is proposed to raise 210 million yuan of supplementary working capital. The economic benefits of the two major capacity construction projects are good. According to the project benefit calculation, the total revenue from 2023 to 2024 is 577 / 1538 million yuan and the net profit is 247 / 758 million yuan. Based on the expectation of full industry demand and sufficient confidence in the company's production expansion, we predict that the company's diamond cultivation capacity will reach 1.9 million carats by 2024, and the annual revenue will increase by 35.86 PCTs to 75.44% compared with 2021.
Profit forecast and investment suggestions: the company is a high-quality synthetic diamond manufacturer with both deterministic growth and imagination. It plans to increase capital raising and investment to accelerate production capacity expansion, and there is broad room for improving marginal benefits in the future. Based on the performance of the first quarter report and the implementation progress of raised investment projects, we maintain the prediction that the company will achieve a revenue of 941 / 1411 / 2015 million yuan from 2022 to 2024, with a year-on-year increase of 88.8% / 49.9% / 42.8%, and a net profit attributable to the parent company of 489 / 748 / 1093 million yuan, with a year-on-year increase of 104.1% / 52.9% / 46.1%, corresponding to eps8.1% 10 / 12.39/18.10 yuan / share, maintaining the "overweight" rating.
Risk tips: intensified industry competition, risk of technology iteration, limited capacity expansion and less than expected demand.
