Summary Event: The company released its 2022 annual report, achieving operating revenue of 906 million yuan, an increase of 81.85% over the previous year; achieving net profit of 460 million yuan to the mother, an increase of 92.12% over the previous year; after deducting net profit of 437 million yuan, an increase of 90.53% over the previous year. Q4 alone achieved operating income of 232 million yuan, an increase of 47.36% over the previous year and an increase of 2.31% over the previous year; the net profit of the returned mother was 110 million yuan, an increase of 40.55% over the previous year, a decrease of 0.47%; after deducting net profit of the non-return mother was 96 million yuan, an increase of 32.82% over the previous year, a decrease of 9.84% over the previous year.
The company's production capacity continues to be released, and the driving performance of cultivating diamond and diamond monocrystals has increased. In 2022, the company achieved revenue of 389 million yuan from cultivating diamonds, an increase of 97.12% over the previous year; revenue of diamond monocrystals was 174 million yuan, an increase of 27.04% over the previous year; and revenue of diamond micronized powder was 316 million yuan, an increase of 103.03% over the previous year. It is expected that as new equipment is put into operation one after another, production capacity will continue to be steadily released to achieve rapid growth in revenue and performance.
The overall gross profit level remained stable. The gross profit of cultured diamonds and single crystals of diamonds declined slightly, and the gross profit of diamond micronized diamonds increased. Affected by changes in market supply and demand, the gross margin of cultivated diamonds was 79.25%, down 2.13 pct from the previous year; affected by the price of raw materials, the gross profit margin of a single diamond crystal was 52.70%, down 5.23 pct from the previous year.
Affected by rising downstream prosperity, the gross profit margin of diamond powder was 54.00%, an increase of 3.98 pct over the previous year. The overall gross margin was 63.29%, down 0.78PCT from the previous year, maintaining a steady trend.
Overseas markets continue to send signs of recovery, waiting for terminals at home and abroad to blossom in spring. According to GJEPC's February 2023 data, the import value of cultivated drilled rough diamonds reached 63 million US dollars, -59.3% year on year and -52.27% month on month; cultivated drilled loose diamond exports reached 135 million US dollars, +7.2% year on year and +31.1% month on month.
Compared to the month-on-month export growth rate in January (0.98%), overseas jewelry demand is sending a marginal positive signal. Considering that midstream inventories are still high, transmission to the import side will still take time. It is expected that domestic jewelry brands will accelerate the deployment and cultivation of the diamond market this year, and the volume of domestic cultivation of diamonds is expected to increase further.
Investment advice: We expect the company's EPS to be 5.12/7.38/9.45 yuan/share from 23 to 25, and the latest stock price corresponding to PE is 24.0/16.7/13.0 times, respectively, maintaining the “increase in holdings” rating.
Risk warning: Overseas market recovery falls short of expectations; upstream competition intensifies; domestic market falls short of expectations