Summary of events: the company released its 2022 annual report on March 10. The company realized operating income of 906 million yuan, year-on-year + 81.9%, net profit of 460 million yuan, + 92.1%, and non-return net profit of 437 million yuan, + 90.5% over the same period last year. Among them, 4Q22 achieved operating income of 232 million yuan, + 50.4% year-on-year; net profit of 110 million yuan, + 40.6% year-on-year; and non-return net profit of 96 million yuan, + 32.8%. Profit growth slowed down in the fourth quarter or was mainly affected by the disturbance of epidemic factors and the decline of product prices.
We will promote production capacity construction and attach importance to R & D investment, and the income of the three major product sectors has achieved relatively rapid growth. The company has formed three core product systems of diamond single crystal, diamond powder and cultivated diamond, with rich product structure and obvious synergistic effect, which can quickly respond to market demand. From the perspective of ① products, in 2022, the income of cultivated diamond products was 389 million yuan, which was + 97.1% compared with the same period last year, accounting for 42.9% of the total income. Affected by the decline in the sales price of nurtured diamonds, the gross profit margin was 79.25%,-2.1 PCT. The revenue of diamond powder was 316 million yuan, which was + 103.0% compared with the same period last year, accounting for 34.9% of the total income. In 2022, the sales price of diamond powder increased, realizing a gross profit margin of 54.00%, and a year-on-year income of 174 million yuan for + 4.0 PCT; diamond single crystals, accounting for 19.2% of the total income. Due to the impact of rising raw material prices and rising costs, the gross profit margin was 52.70%,-5.2 PCT. ② sub-regional point of view, domestic income accounted for 68.5%, overseas income accounted for 31.5%; ③ sub-sales model, direct sales model contributed to the main operating income, accounting for 81.0%, distribution mode accounted for 19.0%.
Affected by the price adjustment of superhard materials, profitability narrowed compared with the same period last year, and the ability to control costs was enhanced. In terms of ① gross profit margin, in 2022, the company's gross profit margin is 63.29%, year-on-year-0.78 PCT,4Q22 gross margin is 58.30%, year-on-year-8.04PCT, month-on-month-0.39 PCT, profitability is under short-term pressure ② expense rate, due to the increase in interest income and exchange gains and losses, the financial cost in 2022 is-16 million yuan, the increase in R & D projects led to the upside of R & D expenses, the company has mass produced large particles of high-grade cultivated diamonds below 15 carats, and the large particles cultivated diamonds in the stage of laboratory technology research can reach 30 carats. In 2022, the rates of sales expenses, management expenses and R & D expenses were 0.67%, 1.84% and 4.86% respectively, and the rates of sales expenses, management expenses and R & D expenses were 0.41%, 2.45% and 5.65% respectively, which were 0.41%, 2.45% and 5.65% respectively compared with the same period last year. The rates of-0.45 PCT,-1.23 PCT and-0.47 PCT;4Q22 were 0.41%, 2.45% and 5.65% respectively, which were-0.33 PCT,-1.89PCT and-0.79 PCT. In terms of ③ net interest rate, the net interest rate in 2022 is 50.78%, year-on-year + 2.71 PCT;4Q22 net interest rate is 47.56%, year-on-year-3.32 PCT, month-on-month-1.33 PCT.
With the steady expansion of production capacity, the new plant has been put into production, and the market share and competitiveness are expected to continue to improve. In 2022, total product sales were 1.917 billion carats, + 42.5% year-on-year, and total product output was 1.997 billion carats, + 49.8% year-on-year.
By the end of 2022, the company has invested a total of 560 million yuan in fund-raising projects, of which 244 million yuan has been invested by its own funds and about 3.331 billion yuan has been raised. In 2023, the company will focus on completing the construction of the new plant, ensuring that the second phase of the force and Shangqiu power construction projects will be put into production quickly, and continue to expand the scale of production capacity to meet the strong market demand for nurturing drills and other products.
It is expected that after the fund-raising project reaches production, the production capacity of growing diamonds and diamond single crystals will increase by 277.20 million carats per year and 1.507 billion carats per year, and the production capacity of superhard materials is expected to continue to increase to consolidate the company's core competitiveness in the field of synthetic diamonds.
Foreign investment to set up Zhengzhou subsidiaries to accelerate the layout of the whole industry chain. On March 10, the company plans to invest 300 million yuan to set up a wholly-owned subsidiary Power Diamond Zhengzhou Co., Ltd., covering technical services, technical development, technical consultation, technical exchange, transfer and promotion, manufacturing and sales of non-metallic mineral products, import and export of goods, etc. The establishment of subsidiaries will better meet the needs of the company's strategic development and business operation, and further accelerate and improve the layout of its whole industry chain.
Investment suggestions: from 2023 to 2025, the company is expected to achieve operating income of 14.20,19.38 and 2.425 billion yuan, respectively, which is + 56.7%, + 36.5% and + 25.2% respectively compared with the same period last year. The net profit of returning home is 7.15,9.61 and 1.19 billion yuan respectively, and the year-on-year net profit is + 55.3%, + 34.4% and + 23.9% respectively, corresponding to the PE of 25-19-15, maintaining the "recommended" rating.
Risk tips: industry demand is lower than expected, the competition situation is deteriorating, fund-raising plans to expand production is not as expected, and so on.