Incident: The company released its 2022 annual report. In 2022, the company achieved revenue of 906 million yuan, an increase of 81.85% over the same period, and achieved net profit of 460 million yuan, an increase of 92.12%. Among them, the 2022 Q4 company achieved revenue of 232 million yuan, an increase of 50.36%, and achieved net profit of 110 million yuan, an increase of 40.55% over the same period.
Revenue side: The company achieved revenue of 906 million yuan in 2022, an increase of 81.85% over the same period. The company mainly coordinated resources from various parties to effectively overcome the impact of the epidemic, implemented closed-loop management, ensured stable production and operation, and made every effort to promote the construction of new production capacity. Fund-raising projects were put into operation one after another, and production increased rapidly.
Gross margin side: The company's gross margin in 2022 was 63.29%, a decrease of 0.75pct. By category, the gross margins of diamond single crystal/diamond microne/cultivated diamond/other were 52.70%/54.00%/79.25%/10.71%, respectively, compared to -9.03/+7.95/-2.62/-37.01pct respectively, mainly due to rising prices of diamond single crystals/rising sales prices of diamond microns/falling sales prices of cultivated diamonds.
Expense side: The company's fee rate for 2022 was 5.63%, a reduction of 4.63 pct. Among them, ① sales expense ratio was 0.67%, down 0.45pct; ② management expense ratio was 1.84%, same decrease of 1.23pct; ③ R&D expense ratio was 4.86%, same decrease of 0.47pct, R&D expenses increased 65.91%, mainly due to an increase in R&D projects; ④ Financial expense ratio was -1.73%, a decrease of 2.22pct, mainly due to an increase in interest income and exchange income.
On the profit side: The company achieved net profit of 460 million yuan to the mother in 2022, an increase of 92.12%; the net interest rate to the mother was 50.78%, an increase of 2.71 pct. The company's performance continues to grow rapidly. The forward-looking production capacity layout of major companies has seized a period of industry opportunity. At the same time, they pay attention to R&D investment, have experienced R&D teams, and have sufficient technical reserves.
The production capacity of cultivating diamonds is expanding rapidly. Next year, the company will concentrate on completing the construction of the new plant area, ensure that the Force Phase II and the Shangqiu Power Construction Project are put into operation quickly, rapidly expand the scale of production capacity, and meet the strong demand for cultivating diamonds and other products in the market. The company has maintained the rapid expansion of presses since '22. At present, the company has mass-produced high-grade cultured diamonds with large grains of 15 carats or less. Large-grained cultured diamonds in the laboratory technology research stage have exceeded 30 carats. In the future, there is plenty of room for the company to further improve the production efficiency and yield of cultivated diamonds.
Investment suggestions: The company's technology is gradually breaking through, the proportion of excellent yield and large particles is gradually increasing, and production efficiency and cost advantages are outstanding. With technological progress and capacity expansion, it is expected that it will maintain its leading position in the industry for a long time in the future. At the same time, the company is actively promoting retail layout. It is expected to see new breakthroughs in 2023, and may fully enjoy the dividends of cultivating the entire diamond industry chain. Our previous forecast was that the company's 23/24 net profit of the company was 91/1.36 billion yuan respectively. Since the growth rate of 2022 revenue and Fumo's net profit was lower than expected, we lowered our forecast. We estimated the company's 23/24 net profit of the company's 23/24 to be 78/980 million yuan respectively, adding 25 years of revenue/net profit of Fumo to 3,09/1.12 billion yuan. Corresponding to PE for the next 3 years was 21x/17x/15x respectively, maintaining the “buy” rating.
Risk warning: production capacity expansion falls short of expectations, terminal sales fall short of expectations, increased industry competition, etc.