Event description
On March 10, the company disclosed its annual report for 2022 that in 2022, the company realized operating income of 906 million yuan, an increase of 81.85% over the same period last year, a net profit of 460 million yuan, an increase of 92.12% over the same period last year, and a deduction of 437 million yuan for non-net profit, an increase of 90.53% over the same period last year. The company intends to distribute a cash dividend of 10 yuan (including tax) to all shareholders and increase 8 shares to all shareholders with capital accumulation fund.
Event comment
22Q4 epidemic affected equipment installation overlay terminal demand slowed down, revenue and performance growth slowed down month-on-month. In 2022, the company achieved revenue of 906 million yuan, an increase of 81.85% over the same period last year, of which 22Q1-Q4 's single-quarter revenue was 1.92,2.56,2.27 and 232 million yuan respectively, up 126.9%, 91.4%, 80.1% and 50.4% respectively over the same period last year. In 2022, the company achieved a net profit of 460 million yuan, an increase of 92.12% over the same period last year, of which the single-quarter net profit of 22Q1-Q4 was 1.01,1.38,1.11 and 110 million yuan respectively, up 147.8%, 105.3%, 108.9% and 40.6% respectively over the same period last year. 22Q4's revenue and performance growth have slowed month-on-month, which is expected to be affected on the one hand by the slowdown in the installation progress of the company's equipment affected by the epidemic, and on the other hand by the slowdown in demand downstream of overseas diamond cultivation. By the end of 2022, the company is expected to install nearly 1000 six-sided jacking machines, and it is expected that the company will add 1000 new press equipment this year.
Nurturing diamonds is the company's largest source of revenue, with gross margins falling slightly as a result of falling sales prices in 2022. In 2022, the revenue of diamond single crystal, diamond powder and cultivated diamond reached 1.74,3.16 and 389 million yuan respectively, an increase of 27.0%, 103.0% and 97.1% respectively over the same period last year, and the three sales accounted for 19.2%, 34.9% and 42.9%, respectively. Nurturing diamond is the company's largest source of income. In half a year, 2022H1, diamond single crystal, diamond powder and cultivated diamonds achieved revenue of 0.81,1.36 and 222 million yuan respectively, an increase of 32.0%, 111.1% and 149.5% over the same period last year. 2022H2, diamond single crystal, diamond powder and cultivated diamond achieved revenue of 0.93,1.80 and 167 million yuan respectively, an increase of 23.0%, 97.3% and 54.1% over the same period last year. We expect that the average sales price of nurtured diamonds in the second half of 2022 will be about 20% lower than that in the first half of 2022. From the point of view of the profitability of each product, the gross profit margin of diamond single crystal, diamond powder and cultivated diamond in 2022 was 52.7%, 54.0% and 79.25% respectively, down 5.2% from the same period last year, up 4.0%, and declining 2.1pct.
In 2022, the growth rate of India's diamond import and export was high before and then low, and in February 2023, the growth rate of diamond export became positive.
In 2022, India imported cultivated diamond blanks of US $1.474 billion / + 31%, with a permeability of 7.4%, an increase of 1.4 pct over the same period last year, and exported cultivated diamond bare diamonds of US $1.715 billion / + 50%, with a penetration rate of 7.0%, increasing 2.4pct over the same period last year. In January 2023, India imported cultivated diamond blanks of US $132 million /-13.7%, exported cultivated diamond bare diamonds of US $103 million /-15.5%, India imported cultivated diamond blanks of US $63 million /-59.1%, and exported cultivated diamond bare diamonds of US $135 million / + 7.3%.
In 2022, the company's profitability declined slightly, and various expense rates were optimized. In 2022, the company's gross margin fell 0.8pct to 63.3% year-on-year, and the company's gross margin fell 8.0pct to 58.3% year-on-year. In 2022, the rate of expenses during the period of the company fell 4.4pct to 5.6% compared with the same period last year, of which the rates of sales, management, R & D and financial expenses were 0.7%, 1.8%, 4.9% and-1.7% respectively, a decrease of 0.5,1.2,0.5 and 2.2pct over the same period last year. By the end of 2022, the company had 80 R & D personnel, accounting for 13.45% of the total employees, and 51 patents had been authorized (including 8 invention patents). At present, large particles of high-grade cultivated diamonds of less than 15 carats have been produced in batches, and the large particles of cultivated diamonds in the stage of laboratory technical research have exceeded 30 carats. In 2022, the company's net interest rate increased to 50.8% year-on-year 2.7pct to 50.8%. The company's net interest rate fell 3.3pct to 47.6% year-on-year. In terms of inventory, by the end of 2022, the company's inventory was 205 million yuan, an increase of 58.2% over the same period last year, and the inventory turnover days were 181days, down 47 days from the same period last year. In terms of cash flow, in 2022, the net cash inflow of the company's operating activities was 329 million yuan, an increase of 14.1% compared with the same period last year. The net cash flow of operating activities was 69 million yuan, down 56.9% from the same period last year.
Investment suggestion
In 2022, the company's revenue and performance achieved rapid growth driven by the timely landing of newly installed machines and the high revenue growth of diamond and diamond powder, and the profitability remained basically stable for the whole year. In February 2023, the growth rate of India's cultivated diamond exports changed from negative to positive, the penetration rate of cultivated diamonds in the United States continued to rise, and prices continued to decline. According to Tenoris,2022, the proportion of cultivated diamond sales increased to 33.4%. In February 2023, US natural diamond sales fell 25%, nurtured diamond sales increased by 59%, and sales increased by 20%. We expect the company's earnings per share in 2023-2025 to be 4.68,6.21 and 8.20 yuan respectively, corresponding to the company's 2023-2025 PE of about 26.2,19.8,15.0 times, maintaining the "buy-A" rating.
Risk hint
The price of nurturing diamond blanks has declined; the company's capacity expansion is not as expected; downstream demand is lower than expected; and the risk that the company's 2022 profit distribution plan has not been implemented.