\u3000\u30 Shenzhen Fountain Corporation(000005) 19 North Industries Group Red Arrow Co.Ltd(000519) )
Events: (1) the company released its 2021 annual report, realizing a revenue of 7.514 billion yuan, a year-on-year increase of 16.26%; The net profit attributable to the parent company was 485 million yuan, a year-on-year increase of 76.77%. The company also issued the 2021 profit distribution plan, which plans to distribute a cash dividend of 0.50 yuan (including tax) for every 10 shares to all shareholders. (2) The company released the first quarterly report of 2022, realizing a revenue of 1.382 billion yuan, a year-on-year increase of 1.15%; The net profit attributable to the parent company was 282 million yuan, a year-on-year increase of 191.03%.
Benefiting from the prosperity of the diamond industry, the profits of diamonds in central and southern China increased significantly. According to the announcement, the company’s superhard materials and products achieved a revenue of 2.407 billion yuan in 21 years, with a year-on-year increase of 25.21%; The gross profit margin was 43.45%, with a year-on-year increase of 6.14 PCT; Zhongnan diamond, a wholly-owned subsidiary, realized a net profit of 657 million yuan, an increase of 60% year-on-year; The obvious increase in profit margin is due to (1) the increase in the proportion of diamond cultivation income; (2) The price rise of some industrial diamond models.
Diamond cultivation has broad development space, and the company is expected to continue to benefit. After the epidemic, the supply of natural diamonds was significantly affected, especially in some small mines. According to Bain data, the output of natural diamond rough in 21 years was 116 million carats, an increase of only 5%, 16.5% lower than 139 million carats in 19 years before the epidemic. However, the global sales of rough diamonds have reached 137 million carats in 21 years, more than 135 million carats in 19 years. This shortage of natural diamonds has also accelerated the development of the diamond cultivation industry. According to the data of India’s import and export website, from January to march of 22 years, India imported 511 million US dollars of cultivated diamond, with a year-on-year increase of 105%. We expect the cultivated diamond industry to continue to grow at a high speed under the resonance of various factors. Zhongnan diamond ranks first in the world in terms of production and sales, comprehensive competitive strength and technical capacity in the field of industrial diamond. It occupies a technical dominant position in cultivating large-scale products of diamonds and is expected to benefit from the continued rapid growth of the industry.
Profit forecast and investment suggestions: it is estimated that the operating revenue of the company from 2022 to 2024 will be 8.897 billion yuan, 10.233 billion yuan and 11.35 billion yuan respectively, and the net profit attributable to the parent company will be 1.131 billion yuan, 1.520 billion yuan and 1.810 billion yuan respectively, corresponding to EPS of 0.81 yuan, 109 yuan and 130 yuan respectively. Maintain the “buy” rating, and the six-month target price is 26.73 yuan, which is equivalent to 33 times the dynamic P / E ratio in 2022.
Risk tip: the demand for military industry is unstable, and the competition for cultivating diamonds is intensified.
