What happened: the company released its third quarter report for 2022. In the first three quarters, the company achieved revenue of 394 million yuan, an increase of 26.60% over the same period last year, a net profit of 129 million yuan, an increase of 83.01% over the same period last year, and a net profit of 110 million yuan, up 88.97% over the same period last year.

The performance continued to maintain a rapid growth rate, and the profitability was enhanced: in the third quarter alone, the company achieved revenue of 132 million yuan, an increase of 16.09% over the same period last year; net profit of 39.9174 million yuan, an increase of 83.19% over the same period last year; and net profit of 37.6982 million yuan, an increase of 99.62% over the same period last year. In the first three quarters, the company's gross profit margin on sales was 54.99%, an increase of 0.5 pct over the same period last year; the net profit margin on sales was 31.50%, an increase of 8.77pct over the same period last year. The company's expenditure rate for the first three quarters was 24.49%, down 7.96 pct from the same period last year; the management expense rate was 11.11%, down 4.03 pct from the same period last year; the sales expense rate was 7.12%, up 0.49 pct from the same period last year; the R & D expense rate was 11.107%, up 0.40 pct from the same period last year; and the financial expense rate was-4.86%, which decreased 4.81pct compared with the same period last year.

Cultivate a broad diamond market, the company's in-depth layout, is expected to benefit from the industry expansion: the company continues to plough around superhard materials, has formed a composite superhard materials as the core, precision diamond tools as a new business growth point of strategic product system. With the increase of per capita disposable income and the formation of diamond value cognition and purchase preference, millennials + Z generation has gradually grown into the main force of diamond consumption. Their daily demand for diamond jewelry and their demand for pleasing themselves can better represent the trend of diamond jewelry consumption, giving birth to the vigorous development of the jewelry market. The change of low price + consumption concept promotes the rise of diamond industry. In July this year, the company announced that its holding subsidiary Tianxuan Semiconductor (CVD nurtures diamond rough production enterprises, has strong R & D capability in cultivating the core technology of diamond industry chain, and has large high-quality CVD to cultivate diamond rough supply capacity) signed a "Strategic Cooperation Framework Agreement" with Hainan Jewelry, which will deepen cooperation in diamond design, marketing, cutting and grinding and other business areas in the future. Promote the rapid development of diamond-related links. At the same time, high-quality and large-size ultra-pure CVD diamond can also be used in high-end advanced manufacturing fields, such as precision cutting tools, optical windows, chip heat sink, semiconductors and power devices.

Investment suggestion: as the leading company of superhard materials, the oil and gas market may recover in the future, as well as the rich application scenes of superhard tools, which is expected to thicken the company's performance. at the same time, the company's layout of CVD diamond preparation technology is expected to create a new growth point for future performance. We estimate that the EPS of the company from 2022 to 2024 is 0.33,0.44,0.56 yuan respectively, and the corresponding PE is 39 times, 29 times and 23 times respectively. Maintain a "buy" rating.

Risk hints: oil and gas market recovery is not as expected risk; exchange rate fluctuation risk; new product market development risk; macroeconomic fluctuation risk; COVID-19 epidemic situation leads to performance fluctuation risk; CVD diamond preparation technology research and development is not as expected risk.