This report is read as follows:
Tianxuan, a subsidiary, has signed a strategic cooperation framework agreement with Hainan Jewelry, or hopes to deepen cooperation in business areas such as drill design, marketing, cutting and grinding, etc. We look forward to accelerating the growth of drill business.
Main points of investment:
Maintain and increase holdings. Maintain the pre-forecast EPS of RMB 0.31 for 2022-24, and maintain a growth rate of 64% of 61max. Taking into account the increased risk appetite of the industry, raise the target price to RMB 21.08, and maintain an increase in holdings.
Strategic cooperation with Hainan Jewelry to promote the development of nurturing diamonds. 1) Tianxuan, a subsidiary, signed the Strategic Cooperation Framework Agreement with Hainan Jewelry on July 28; 2) Hainan Jewelry is a Hainan provincial state-owned enterprise with gold, diamond, jewelry and jade as its main business, and is an important participant in the policy formulation of Hainan provincial jewelry industry. 3) the two sides will give full play to their respective advantages and join forces to innovate cooperation mechanisms in the business areas related to the whole industry chain and promote the rapid development of diamond-related links; 4) the two sides will deepen cooperation in diamond design, marketing, cutting and grinding and other business areas. Hainan Jewelry will actively assist Tianxuan in the feasibility demonstration of building and cultivating diamond production capacity in Hainan Free Trade Port.
Tianxuan's first batch of 100 MPCVD equipment has entered the stage of commissioning and operation, and its production capacity is expected to continue to expand.
1) the company increases capital to control Tianxuan in May and currently holds a 53.22% equity stake; 2) Tianxuan has strong R & D capability in cultivating the core technology of the drilling industry chain, independently mastering the MPCVD equipment manufacturing and nurturing diamond production technology, and can steadily produce colorless CVD cultivated diamonds and break through the Eram F color. 3) according to the plan, the first phase of 100,000 carat cultivated diamond production line (100sets of MPCVD equipment) has entered the commissioning and operation stage, the construction of the second phase of 100,000 carat cultivated diamond production line has been started, and the production capacity is expected to expand rapidly in 2023-24.
China News exceeded expectations and is optimistic about the performance of nurturing and thickening. 1) the company's H1 return net profit is 0.86-94 million yuan, with a growth rate of 76.2-92.5%; deducting non-net profit of 0.69-75 million yuan, with a growth rate of 76.2-90.2%; 2) the high growth is mainly due to the continuous recovery of downstream demand for oil and gas mining products; the precision processing business maintains a stable and sustained growth trend; 3) it is optimistic that the cultivation drilling business will develop rapidly and increase its overall performance.
Risk hint: RMB exchange rate appreciates sharply, crude oil price falls sharply, nurturing drill is lower than expected.