\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
Event overview: the company released the first quarterly report of 2022 on April 26. During the reporting period, the company achieved a total operating revenue of 192 million yuan, a year-on-year increase of + 126.88%; The net profit attributable to the parent company was 101 million yuan, a year-on-year increase of + 147.81%. The company’s performance in the first quarter of 2022 is close to the previous forecast ceiling.
The boom and the super hard material industry have benefited from high-speed growth. In Q1 2022, the company achieved a total operating revenue of 192 million yuan, a year-on-year increase of + 126.88% and a month on month increase of + 24.20%; The net profit attributable to the parent company was 101 million yuan, with a year-on-year increase of + 147.81% and a month on month increase of + 28.85%. The revenue and performance maintained a high growth rate in both year on year and month on month dimensions. We believe that the high prosperity of the superhard material industry is the main driving factor: in terms of cultivating diamonds, the layout of terminal brands is accelerated, and the substitution process of cultivating diamonds is accelerated under the background of the conflict between Russia and Ukraine. The industry continues to maintain a high growth trend. GJEPC data shows that in 2022q1, India’s imports of cultivated diamond blanks and exports of bare diamonds are + 104.97% and + 77.72% year-on-year respectively; In terms of industrial diamond, due to the cultivation of diamonds in the industry occupying the production capacity of industrial diamond and the indirect pull of photovoltaic micro powder on the demand for industrial diamond, the gap between supply and demand continues to widen, resulting in rising prices. During the reporting period, the company steadily expanded its production capacity, with fixed assets increasing by 82 million yuan month on month and projects under construction increasing by 25 million yuan to 53 million yuan month on month, resulting in a more stable order undertaking capacity and contract liabilities + 64.65% month on month. Therefore, there is sufficient potential for subsequent income and performance growth.
The profit margin rose steadily, the superimposed expenses were well controlled, and the profitability of the company continued to improve. The gross profit margin of 2022q1 company reached 69.17%, with a month on month ratio of + 2.83pct / a year on year ratio of + 5.38pct. We speculate that there are two main reasons: 1) the price of cultivated diamonds and industrial diamonds continues to rise; 2) Technological breakthroughs drive the growth of single unit output value and dilute fixed costs. In terms of cost rate, the cost rate during the period was -2.93pct month on month / -1.30pct year on year, of which the cost rates of sales / management / R & D / finance were -0.05 / – 1.31 / – 0.90 / – 0.67pct month on month and -1.32 / – 0.09 / + 1.31 / – 1.20pct year on year respectively. With steadily rising gross profit margin and excellent expense control, the profitability of the company continued to strengthen, and the net profit margin reached 52.78%, mom + 1.90pct / yoy + 4.46pct.
The medium and long-term performance elasticity may be more prominent by increasing the size and cultivating the diamond production capacity layout. Previously, the company issued the plan for issuing A-Shares to specific objects in 2022 on March 26, which was accepted by Shenzhen Stock Exchange on April 25. It plans to raise no more than 4 billion yuan, of which about 3.01 billion yuan is the equipment purchase cost for capacity expansion. A total of about 1800 six-sided top presses were added, of which about 1500 are used for diamond production and about 300 are used for industrial diamond production. The production capacity will be put into operation in about three years. According to what we said in “revisiting” Cara freedom “and the supply of three questions and three answers to cultivate the diamond industry”, at present, the number of presses used to cultivate diamond production in the industry is about 3500, and mainly 650 and other old models of presses. Therefore, with the implementation of the company’s fixed production capacity, the voice of the industry will be further improved, and the elasticity of medium and long-term performance is more worthy of expectation.
Investment suggestion: it is estimated that the company will achieve operating revenue of 956 million yuan, 1436 million yuan and 2.017 billion yuan from 2022 to 2024, with a year-on-year increase of + 91.8%, + 50.2% and + 40.5% respectively; The net profit attributable to the parent company was 481 million yuan, 732 million yuan and 1.026 billion yuan, with a year-on-year increase of + 100.6%, + 52.4% and + 40.1% respectively; Achieve eps7 96, 12.13 and 17.00 yuan. The closing price of PE on April 26 was 29, 19 and 14 times respectively, maintaining the “recommended” rating.
Risk tip: the industry demand has fallen sharply, the competition pattern has deteriorated, and the fixed increase project has not been passed.
