Core viewpoints
The company's 22Q4 revenue and performance increased year-on-year and slowed down on a month-on-month basis, mainly affected by epidemic control and falling product prices. 22 years of cultivation diamond and industrial diamond powder continued to grow, nurturing diamond to become the largest source of income, revenue share of 42.9%/+3.32pct. The company is scheduled to increase landing, expand production and speed up growth. It is estimated that the company will have about 1000 presses at the end of 22, and it is expected that the company will expand production of 1000 presses in 23 years. The company will gradually lay out the downstream retail brand end, which is expected to achieve the layout of the upstream and downstream whole industry chain.
Event
The company released its annual report in 2022: 22-year revenue of 906 million yuan / + 81.9%, net profit of 460 million yuan / + 92.1%, net profit of 437 million yuan / + 90.5%, net cash flow of operating activities of 329 million yuan / + 14.1% (basic) of 3.57 yuan / share /-26.8% (weighted) for 38.7%/-3.68pct. The company plans to pay a cash dividend of 10 yuan (including tax) for every 10 shares and increase 8 shares for every 10 shares.
Brief comment
The full-year performance is in line with expectations, and profitability continues to improve. Benefiting from the continuous production of the company's fund-raising projects, the output has increased rapidly, and the 22-year operating income and net profit have achieved relatively rapid growth.
The gross profit margin of 63.3%/-0.78pct in 2022 is mainly due to the decline in the price of cultivated diamonds and industrial diamond single crystals; the net profit rate of 50.8%/+2.71pct in 2022 is 0.7%, 1.8%,-1.7% and 4.7%, respectively, compared with the same period last year. With the expansion of income scale, the expense rate continues to decline.
22Q4 revenue and performance increased higher than the same period last year, but slowed down month-on-month, mainly affected by epidemic control and falling product prices. 22Q4's revenue was 232 million yuan, an increase of 50.4% compared with the previous month, with a month-on-month increase of 2.3%. The net profit of 22Q4 was 110 million yuan, and the net profit of 22Q4 was 40.6% and-0.5%, respectively, deducting 96 million yuan of non-return net profit, which was + 32.8% compared with the same period last year. The slowdown in Q4 revenue and performance growth is mainly due to: 1) the installation speed slowed down month-on-month under the influence of the epidemic, and the price of diamond cultivated by 22Q4 is expected to be flat (down 20% from the previous month) and slightly increased from the previous month; 2) 22Q4 is the off-season of industrial diamond, and the price is expected to drop by single digits compared with the previous month. The gross profit margin and net profit margin of 22Q4 are 58.3% and 47.6% respectively, compared with-0.39 and-1.33pct.
The cultivation of diamonds and diamond micro-powder continues to grow, and diamonds become the largest source of income. 1) the 22-year cultivated diamond revenue is 389 million yuan / + 97.1%, accounting for 42.9%/+3.32pct, and the gross profit margin is 79.3%/-2.13pct, mainly due to the decline in the sales price of the company's nurturing diamond products in the second half of 22 years. 2) the revenue of diamond single crystal and fine powder was 1.74 and 316 million yuan, which increased by 27.0% and 103.0%, the revenue accounted for 19.2% and 30.9%, and the gross profit margin was 52.7% and 54.0%, respectively. Industrial diamond single crystal was affected by the upward cost, and the sales price of diamond powder increased under the high scene of the industry.
The company is determined to increase landing, expand production and speed up growth, layout to cultivate downstream diamond retail brands. 1) production expansion: as of the end of 22Q4's fixed assets of 998 million yuan, an increase of 48 million yuan compared with 22Q3, the company is expected to have about 1000 presses by the end of 22, and the company expects to expand production of 1000 presses in 23 years.
By the end of 2022, the investment and construction progress of the Power Phase II project and the Shangqiu Power Science and Technology Center project was 16.51% and 4.75% respectively, mainly due to the impact of the 22Q4 epidemic and the installation process. It is expected that the release of guaranteed capacity will be accelerated in 23 years. 2) Retail end: in 2022, the company established a wholly-owned subsidiary Shenzhen Komei Diamond Technology Co., Ltd. in Shenzhen, and in August 22, it set up a joint venture with Chao Acer, etc., to create and operate and cultivate diamond brands, to establish Sheng and Shengyao Technology (Shenzhen) Co., Ltd., as well as Sun Company LILIANGDIAMONDUSAINC, which is mainly responsible for the development of diamond business in the United States. It is expected that the company will gradually layout the downstream retail brand end, which is expected to achieve the layout of the upstream and downstream whole industry chain. 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 rough diamonds of US $135 million / + 7.3%. India's cultivated diamond export growth rate became positive in February 2023.
Profit forecast: the estimated revenue for 23-25 is 13.6,19.0 and 2.33 billion yuan, up 47.8%, 37.8% and 23.7% respectively, and the net profit of returning mother is 6.80,9.38 and 1.16 billion yuan, up 47.8%, 37.8% and 23.7% respectively, corresponding to 26, 19 and 15 times of PE, maintaining the "buy" rating.
Risk tips: 1) nurturing diamond demand is not as expected: 80% of nurturing diamond demand in the United States, the United States has been experiencing high inflation for 22 years, if inflation persists, it may have an impact on end demand; 2) Competition exacerbates the decline in gross profit margin: the superhard material industry has grown significantly under the influence of the rise of nurturing diamonds, photovoltaic new energy, consumer electronics and other industries. At present, under the influence of the rapid growth of demand in industries such as the cultivation of diamonds, photovoltaic new energy, consumer electronics and other factors, the company's product prices have risen in an all-round way, and the industry is in a period of high prosperity. With the continuous expansion of the production capacity of competitors in the industry, the increase in the number of new entrants to the industry, the slow growth of the nurturing diamond market and other factors, the company's products are at risk of falling prices.