Main points of investment
The company achieved a net profit of 460 million yuan in 2022, in line with market expectations: the company disclosed its annual report on March 10, 2023, that the company's revenue in 2022 was 910 million yuan, an increase of 82 percent over the same period last year, and a net profit of 460 million yuan, an increase of 92 percent over the same period last year. Realized deduction of non-return net profit of 437 million yuan, + 90.5% compared with the same period last year. From the perspective of dismantling Q4 alone, the company achieved an income of 230 million yuan, a year-on-year growth rate of 50%, and a net profit of 110 million yuan, + 41% over the same period last year.
The upstream prosperity of nurturing diamond and diamond powder is relatively high, which mainly drives the growth of performance, in which cultivating diamond has become the company's first major business. According to the sub-block business, the revenue of diamond single crystal in 2022 was 174 million yuan, + 27% compared with the same period last year, the income of diamond powder was 320 million yuan, + 103% compared with the same period last year, and the income of cultivating diamond was 390 million yuan, + 97% compared with the same period last year. Nurturing diamond is still in the development stage of rapid increase in permeability, and the company's production capacity has been landed one after another after listing, and the performance has been realized.
At present, the company has fixed additional funds in place, new equipment has been put into production, we expect the follow-up production capacity will continue to be steadily released, driving the performance to increase.
Benefiting from the high prosperity downstream, the gross profit margin of diamond powder has increased to a certain extent compared with the same period last year, and the overall gross profit margin has basically remained stable. According to the split, the company's overall gross margin in 2022 was 63.3%, a year-on-year decline of 0.8pct. Among them, the gross profit margin of diamond single crystal is 52.7%, which is down 5.23pct from the same period last year. The gross profit margin of diamond powder is 54%, which is + 4pct compared with the same period last year. The gross profit margin of cultivated diamonds is 79.25%, which is down 2.13pct from the same period last year, mainly due to certain fluctuations in ex-factory prices.
The downstream brand-end retail of the company also began to lay out. In the downstream brand end, the company is also in the layout one after another. In 2022, the company set up a wholly-owned subsidiary Shenzhen Komei Diamond Technology Co., Ltd., in cooperation with Chao Hongji and others to participate in the establishment and operation of diamond jewelry brands, the establishment of Sheng and Shengyao Technology (Shenzhen) Co., Ltd., and Sun Company LI LIANG DIAMOND USA INC, which is mainly responsible for the development of American business. We expect that the company will continue to develop its downstream brands in the future. It is expected to open up the upstream and downstream industrial chain and directly realize the offline cultivation of diamond retail stores.
Profit forecast and investment rating: cultivate a high degree of prosperity in the diamond industry, the company is making smooth progress, raising funds has been in place, and production capacity has expanded steadily. The performance in 2022 has been disturbed to a certain extent by the epidemic in the second half of the year. We downgrade the company's 2023-2024 net profit from 830 million yuan / 1.25 billion yuan to 760 million yuan / 1.21 billion yuan, and the net profit is expected to be 1.48 billion yuan in 2025. The latest closing price for 2023-25 PE is 24-15-12 times, maintaining the "buy" rating.
Risk tips: cultivating diamonds to expand production is not as expected, overseas demand is not as expected, and so on.