2022 performance is in line with our expectations
The company announced its results in 2022: realized income of 906 million yuan, an increase of 81.9% over the same period last year, a net profit of 460 million yuan, an increase of 92.1% over the same period last year, and a deduction of 437 million yuan of non-net profit, an increase of 90.5% over the same period last year, which is in line with market expectations. At the same time, the company plans to distribute a cash dividend of 10 yuan for every 10 shares, with a dividend ratio of 31.5%, and use the capital accumulation fund to increase 8 shares for every 10 shares of all shareholders.
On a quarter-by-quarter basis, 1Q/2Q/3Q/4Q22 achieved revenue of RMB 1.92 million, respectively, up 126.9%, 91.4%, 80.1%, 50.4% and 147.8%, respectively, with a year-on-year increase of 105.3%, 108.8% and 40.6%, respectively.
Trend of development
1. Nurturing diamond business continues to grow, accounting for a steady upward trend. From the perspective of business, 1) cultivate diamonds: achieve revenue of 389 million yuan, an increase of 97.1% over the same period last year, accounting for 42.9% of revenue, an increase of 2.7ppt, a year-on-year decrease of 2.1ppt to 79.3%, mainly due to a decline in 2H22 sales prices; 2) Diamond single crystals: realized income of 174 million yuan, an increase of 27.0% over the same period last year, and a decrease of 5.2ppt to 52.7% over the same period last year, mainly due to the rise in the price of raw materials 3) Diamond powder: the revenue reached 316 million yuan, an increase of 103.0% over the same period last year, and the gross profit margin increased by 54.0% over the same period last year. We expect it to be mainly due to strong customer demand in downstream photovoltaic new energy, consumer electronics and other industries.
2. The scale effect appears and the profitability continues to improve. The company achieved a gross profit margin of 63.3% in 2022, a slight decrease in 0.8ppt compared with the same period last year, mainly due to a decline in the price of cultivated diamonds and an increase in the price of raw materials for diamond single crystal business. In terms of the period expense rate, the sales expense rate in 2022 was 0.7%, a year-on-year decrease of 0.5ppt, and the management + R & D expense rate was 6.7%, a year-on-year decline of 1.7ppt, and the scale effect gradually appeared; the financial expense rate was-1.7%, a decrease of 2.2ppt over the same period last year, mainly due to the increase in interest income. Under the combined influence, the company's net interest rate increased by 2.7ppt to 50.8% compared with the same period last year, and its profitability continued to improve.
3. The two ends of industry and research continue to make efforts, and the leading position is constantly strengthened. 1) Technology research and development: the company's R & D expenses increased by 65.9% to 44.06 million yuan in 2022, and product research and development in industrial areas such as ultra-fine powder for polishing electronic products and special powder for third-generation semiconductor materials continued to advance. We expect the company to further meet the subdivision needs of downstream customers. In terms of accessories, the company has mass produced large particles of high-grade cultivated diamonds of less than 15 carats, and the large particles of cultivated diamonds in the stage of laboratory technical research have exceeded 30 carats. 2) capacity investment: during the construction of Shangqiu Power Diamond Technology Center and Power Phase II, the investment progress reached 4.75% 16.51% respectively at the end of the year. We believe that with the steady release of follow-up production capacity, the company is expected to strengthen the cultivation of the leading position in the diamond industry and continue to be optimistic about the company's growth prospects in the broad track.
Profit forecast and valuation
We maintain the 2023max 2024 homing net profit forecast of 732 million RMB 980 million. The current share price corresponds to 2023Universe 2024 24xPmax E, maintaining an outperform industry rating and target price of 170 yuan, corresponding to 2023Universe 2024 3425x Pmax E, with 38% upside space.
Risk
Capacity investment is not as expected; consumer acceptance is not as expected.