Yu Diamond: Expanding gem-quality diamonds, products continue to upgrade
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Dingzeng will expand its gem-quality diamonds on a large scale, and the continuous improvement of its product structure will improve its profitability and maintain its overweight rating.
event:
On September 16th, Wan Company announced that it plans to raise nearly 4.8 billion yuan (about 81% of the current market value) to expand the production capacity of 700 carats/year gem-quality diamonds.
Comments: Maintain an overweight rating. In the first half of the year, the EPS was diluted and the EPS forecast for 2015-2017 was maintained at 0.23/0.37/0.48 yuan. The company will continue to improve the product structure and profitability through fixed expansion and expansion. Considering the overall valuation of the industry, the target price will be lowered to 12.60. Yuan, corresponding to 2016PE 34 times, space 48%, maintaining an overweight rating.
We will increase the production of large single crystals and introduce management incentives. The proposed fund is as high as 4.8 billion yuan, accounting for 81% of the current market value. It is used to put into production 7 million carats per year of gem-quality diamonds, demonstrating that the company is extremely optimistic about the downstream market of the product, and has already reserved the capacity for low-cost mass production. Zhengzhou Holly (accounting for 6%), the target of this increase, is a management holding and is expected to achieve management interest binding.
Gem-quality diamonds have ample space and will see a significant increase in profit after expansion. 1) The annual global diamond production is about 130 million carats. Among them, we predict that the company's products can replace the small carat market with about 20%, and the market space is 26 million carats. 2) The company expects to expand production of 7 million carats per year and bring annual revenue/net profit of about 17/800 million yuan, with an average price of 250 yuan/carat. We believe that the price of synthetic diamonds in the company's traditional business is 0.2-0.5 yuan / carat. After the gem-quality diamonds are put into production, the company's product structure will be effectively improved, and the company's performance will continue to improve.
Catalyst: large orders are acquired; the increase is smooth.
Risk warning: the risk of the downstream market developing resistance; the risk of the decline in the performance of traditional super-hard materials.