\u3000\u3 Jiangsu Eastern Shenghong Co.Ltd(000301) 071 Henan Liliang Diamond Co.Ltd(301071) )
Event: the company released the first quarterly report of 2022. In the first quarter of 2022, the operating revenue was 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%.
Revenue side: revenue continued to increase in the first quarter. The company realized an operating revenue of 192 million yuan in 22q1, with a year-on-year increase of 126.88%, mainly due to the increase of product volume and price. In Q1-Q4 of 21 years, the company achieved operating revenue of RMB 0.84/1.34/1.23/157 million respectively, with a year-on-year increase of 102.40% / 142.81%, 76.51% / 100.33% respectively. The revenue of 22q1 increased by 21.72% month on month. The gross profit margin of 22q1 was 69.17%, with a year-on-year increase of 5.38pct.
Expense side: the expense rate of the company during 22q1 was 8.49%, a year-on-year decrease of 1.29pct. Among them, ① the sales expense ratio was 0.69%, a year-on-year decrease of 1.32 PCT; ② The management expense ratio was 3.03%, with a year-on-year decrease of 0.09pct; ③ The R & D expenditure rate was 5.54%, with a year-on-year increase of 1.32 PCT, mainly due to the increase of R & D investment; ④ The financial expense rate was – 0.77%, a year-on-year decrease of 1.21pct, mainly due to the receipt of interest on bank acceptance deposit.
Profit side: the company’s net profit attributable to the parent company in 22q1 was 101 million yuan, a year-on-year increase of 147.81%, and the net interest rate attributable to the parent company was 52.78%, a year-on-year increase of 4.46 PCT. In 21 years, the net profit attributable to the parent company in Q1-Q4 was RMB 0.41/0.67/0.53/0.78 billion respectively, with a year-on-year increase of 324.07% / 328.00% / 193.72% / 165.10% respectively, and the net profit attributable to the parent company in 22q1 increased by 28.85% month on month. Technological R & D breakthrough + continuous expansion of production capacity help the company gradually enhance its core competitiveness. 1) The R & D end of the company has independent intellectual property rights in the key technologies and process control of synthetic diamond production, and has mastered a full set of core technologies of synthetic diamond production, including raw material formula technology. The company’s technology has gradually broken through, the rate of high-quality products and the proportion of large particles have gradually increased, and the production efficiency and cost advantages are prominent. 2) As a leader in cultivating diamonds, the company will focus on completing the construction of new plant areas in 2022 to ensure the full completion of Baojing raised investment project, the rapid production of phase II construction project and the rapid expansion of production capacity. We expect that the number of presses is expected to exceed 1000 by the end of 22, helping the accelerated growth of performance.
Supply side: the import and export volume of cultivated diamonds in India maintained a high growth year-on-year, and the import penetration rate of cultivated diamonds increased month on month. According to GJEPC data, in March 2022, India’s imports of cultivated diamond rough diamonds reached US $200 million, a year-on-year increase of 158%, a month on month increase of 31%, and the exports of cultivated diamond bare diamonds reached US $137 million, a year-on-year increase of 58% and a month on month increase of 9%. In March, the import and export volume of natural diamond rough diamonds remained basically stable month on month. According to IDEX data, the cost diamond price index began to fall from a high level in the second week of March, which stimulated market uncertainty. The middle reaches wholesalers and processors were cautious, and the inventory remained stable as a whole. The import penetration rate of cultivated diamonds increased month on month. The import penetration rate of cultivated diamond rough diamonds reached 9% and the export penetration rate of cultivated diamond bare diamonds was nearly 6%.
Investment suggestion: the company has perfect product structure and strong R & D strength. It is expected to fully enjoy the dividend of cultivating diamond industry and maintain a long-term leading position in the industry by virtue of technological progress and capacity expansion. We expect the net profit attributable to the parent company of 22 / 23 to be 460 / 730 million yuan respectively, and the corresponding PE to be 30x / 19x respectively, which is highly recommended.
Risk warning: market competition risk; Technology renewal risk; The risk that the raised investment project cannot achieve the expected benefits; Risk of product market price decline
