22H1 revenue / return net profit increased by 32.66% compared with the same period last year. The company's 22H1 achieved an income of 262 million yuan, an increase of 32.66% over the same period last year, and its net profit was 89 million yuan, an increase of 82.93% over the same period last year. The increase in revenue performance was mainly due to the recovery of downstream oil and gas production and the continuous growth of precision processing business. In a single quarter, 22Q2 revenue was 136 million yuan, an increase of 28.11% over the same period last year, and its net profit was 48 million yuan, an increase of 83.25% over the same period last year. In terms of profitability, the company's gross profit margin / net profit margin is 55.15% and 33.03% respectively, with a year-on-year change of + 1.07 pct. The profitability has greatly improved, mainly due to the increase in the proportion of high gross profit margin business and the decrease in the rate of expenses during the period. In terms of period expenses, the sales / management / finance / R & D expense rates are 6.73%, 10.64%, 3.64%, 10.52%, respectively, with a year-on-year change of + 0.29 pct, 2.01, and 0.19 pct, respectively.

The trend of oil and gas composite products is improving, and the growth of precision processing products is accelerated. The company ploughs the superhard material industry. According to the downstream applications of the industry, the products are mainly divided into three categories: 1) Resource extraction / engineering construction: 22H1 realized revenue of 152 million yuan, an increase of 31.74% over the same period last year; gross profit margin was 62.50%, an increase of 0.13 pct over the same period last year. The main products are oil extraction composite, the company has the first market share in China, benefiting from the recovery of downstream oil and gas production, the company's sales of oil and gas mining composite increased; 2) Precision processing: 22H1 achieved revenue of 92 million yuan, an increase of 26.47% over the same period last year. The gross profit margin is 39.63%, a decrease of 1.39 pct compared with the same period last year. The diameter, particle size and production scale of the company's PCD blades have been leading the domestic market, and the product quality has reached the world's advanced level and is expected to maintain rapid growth. 3) CVD diamond: the main business body is Tianxuan Semiconductor. In June 2022, the company's shareholding in Tianxuan Semiconductor was increased to 53.2%.

MPCVD nurtures diamond business and is expected to open a new growth ceiling for the company. Tianxuan Semiconductor Company was established in October 2021 and has reached a cooperation with Zhengzhou University on the project "Research on MPCVD synthetic Diamond and its Semiconductor Devices". Self-developed equipment and technology have officially entered the field of MPCVD synthetic diamond. In the short term, cultivating a high prosperity in the diamond industry, Tianxuan Semiconductor has now completed the development of equipment and broken through the CVD technology for cultivating diamonds. The first phase of MPCVD equipment has been officially put into operation, and the construction of the second phase of 100,000 carat CVD diamond production line for diamond cultivation has also been started. The company cultivates the diamond business steadily, and the production capacity is expected to fully benefit from fostering the high prosperity of the diamond industry. In the long run, diamond has excellent mechanical / thermal / optical / acoustic / electrical / chemical properties, which can be used in high-end fields such as semiconductors, data storage, medical devices and so on.

Risk hint: downstream demand is lower than expected; diamond research and development progress is not as expected.

Investment suggestion: the company has accumulated in the superhard material industry for many years, leading the industry in the subdivision of applications such as oil and gas exploitation, gradually expanding to precision processing tools business, and further laying out CVD to cultivate diamond business, with great potential for growth. We increase the company's 2022-24 homing net profit to 160lb 244x307 million (the previous value is 145max 1988max 255m), corresponding to the PE value of 52-34-27. Maintain a "buy" rating.