\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
Key investment points
Performance overview: 22q1 revenue + 127% year on year, net profit attributable to parent company + 148% year on year
22q1 showed strong performance cashability, and strong downstream demand promoted the continuous high growth of income. 22q1 company achieved revenue / net profit attributable to parent company / deduction of net profit not attributable to parent company of RMB 190 / 1.0 / 100 million, with a year-on-year increase of + 127% / 148% / 147%. The previous performance forecast was that the net profit of Q1 increased by 128% – 152%, and the actual net profit increased by 148%, close to the expected upper limit. The high increase in revenue is mainly due to the strong demand for cultivated diamonds and industrial diamonds and the rise in both volume and price. The gross profit margin was 69.2% and the net profit margin was 52.8%. The proportion of product price rise + high gross profit diamonds increased, and the profit reached a new high. 22q1’s gross profit margin / net profit margin was 69.2% / 52.8%, year-on-year + 5.4/4.5pp. The rates of sales / management / R & D expenses were 0.7% / 3.0% / 5.5% respectively, with a year-on-year increase of – 1.3 / – 0.1 / + 1.3pp. The increase of gross profit margin and the overall improvement of period expenses promote the increase of net profit, and the continuous increase of R & D investment contributes to long-term development.
The demand for cultivating diamonds continued to be strong, and the company actively expanded its production and maintained growth
India’s diamond data increased and its penetration rate further improved. In March 22 / Q1, the import volume of Indian cultivated diamond rough was US $203 million (+ 157%) / US $511 million (+ 106%), and the import penetration rate reached 9.1% (+ 3.7pp) / 8.8% (+ 3.1pp); The export volume of open hole drilling is 137 million US dollars (+ 59%) / 385 million US dollars (+ 77%), and the export penetration rate is 5.9% (+ 2.0pp) / 5.8% (+ 2.2pp), which is still in the stage of steady growth as a whole. Set an increase of 4 billion yuan, actively expand production and grasp the dividends of the industry. 22q1 construction in progress increased by 91% compared with the beginning of the period, mainly due to the construction of phase II capital construction and the increase of equipment under installation. In March 22, the company announced that it planned to raise 4 billion yuan for production expansion and planned to purchase about 1800 presses (1500 for diamond cultivation + 300 for industrial diamond). It is expected that after the gradual implementation of fixed growth in the future, the company will enjoy the double dividend of capacity release + price rise.
Profit forecast and Valuation:
It is estimated that the net profit attributable to the parent company in 22-24 years will be RMB 500 million, RMB 760 million and RMB 1.02 billion respectively, with a year-on-year increase of 110%, 50% and 35%, a compound growth rate of 62% in 21-24 years, and PE will be 28, 18 and 14 times respectively, maintaining the “overweight” rating.
Risk tips
Changes in the competition pattern of diamond industry, risks of macroeconomic and market demand fluctuations, R & D risks, etc.
