Incident review
The company announced on March 21 that it intends to use its own funds or self-raised funds to repurchase some shares through centralized bidding transactions to implement employee stock ownership plans or equity incentives.
The total repurchase capital was 1,50,300 million yuan, and the repurchase price did not exceed 180 yuan/share. Based on the upper limit of the repurchase price, it is estimated that 8333-1,6667 million shares will be repurchased, accounting for about 0.58%-1.15% of the company's current total share capital. The buyback will be completed within 12 months.
Management analysis
Diamond powder performed brilliantly, product prices declined, and the Q4 epidemic affected installation/production progress, cultivating drill revenue/gross margin falling 2H22 month-on-month. By category, the revenue from cultivating diamond/diamond single crystals/diamond micropowders in '22 was 3.9/17/320 million yuan, an increase of 97%/27%/103% respectively, accounting for 43%/19%/35%, gross profit margin of 79.25%/52.7%/54%/, compared to -2.13/-5.23/+3.98 PCT. The large decline in gross margin of industrial diamonds was mainly due to an increase in raw material costs. Among them, revenue from Cultivating Diamond 2H fell 24.9% month-on-month and gross margin fell 9.8PCT month-on-month, mainly due to a decrease in sales prices; revenue from Diamond Micro Powder 2H increased 31.8% month-on-month, and gross margin increased by 2.8 PCT month-on-month, mainly due to an increase in sales prices.
Looking ahead to 2023, production expansion is expected to accelerate, and performance is expected to continue to rise rapidly. By the end of '22, the construction progress of the second phase of the refinancing fund-raising project and the Shangqiu Power Science and Technology Center was 16.51%/4.75% respectively. Production will accelerate in '23. It is expected that the company will install 1,000 new units in 2023 and accelerate production expansion (production will expand by about 370 units throughout 2022), and it is expected that the vast majority of new presses will be invested in cultivating drill production. In terms of price, according to LGDeal's global HTHP nurturing loose diamond wholesale price data that we track, the overall steady trend since September 2022 has continued the steady trend since September 2022. As of March 23 and 19, the average price at the beginning of the year dropped by single digits/double digits. As an HTHP leader, the company has technical and channel advantages. The fluctuation in the factory price of its raw stock is expected to be less than in the midstream wholesale chain, and prices are relatively strong.
Profit Forecasts, Valuations, and Ratings
As the leading HTHP leader in press ownership and production expansion rate, the company hopes to reduce costs and increase efficiency through technology & scale advantages. The net profit returned to the mother in 2023-2025 is estimated to be 6.78/9.48/1,141 billion yuan respectively, up 47%/40%/20% respectively, and corresponding PE is 20/14/12 times respectively, maintaining the “buy” rating.
Risk warning
The construction of fund-raising projects fell short of expectations, the price of cultivating diamonds fell, and the cultivation of terminal demand fell short of expectations.