I. Event Overview
The Yellow River Group, confident in the company's future growth potential, intends to incrementally increase its stake by up to 10 RMB per share over the next 12 months starting from November 29, 2012. This move represents a minor but significant adjustment, amounting to no more than 0.5% of the company’s total shares, yet signaling strong support. Additionally, while concerns persist regarding the overcapacity of single-crystal diamonds, this trend is part of the natural progression toward broader applications in novel diamond fields. The增æŒby major shareholders reflects their optimism for both the company and the industry's long-term trajectory. Recently, the company announced plans to reopen non-public fixed-income financing worth up to 773.5 million RMB, aiming to further expand its single-crystal production capacity to approximately 1.4 billion carats. Despite market fears of overcapacity impacting performance, historical data shows that domestic synthetic diamond production surged from 1.6 billion carats in 2001 to 12.4 billion carats in 2011, achieving an impressive annual compound growth rate of 22.72%. These concerns may thus be exaggerated. Moreover, the rapid expansion of production capacity in recent decades has driven down diamond costs, making them a viable alternative across multiple industries and helping maintain supply-demand equilibrium. The company’s fixed-income projects have seen improvements in both yield rates and product quality, potentially reducing costs and enhancing competitiveness. This scaling-up strategy is expected to solidify the company’s position within the industry. The company’s financial performance is anticipated to grow by approximately 30% annually, surpassing many other industrial sectors. By Q3, inventories had grown by 13% year-over-year, slightly below the 17% revenue growth rate, indicating healthy operational performance. Technological innovation remains the cornerstone of the company’s steady growth. In 2013, revenue growth will largely stem from doubled production of metal powders and composite sheets. The company’s pre-alloyed metal powders, micro-powders, composite sheets, and gem-grade large single crystals, as well as photovoltaic cutting wires and shale gas drill bits, represent cutting-edge technologies driving sustainable growth. The company is also working to refine its industrial chain, targeting a balanced 50%-50% ratio between synthetic diamondæ·±åŠ å·¥products and single crystals, moving away from a purely raw-materials-focused model. For 2013, the company expects significant contributions from the expanded production of metal powders and composite films. In 2012, these projects achieved a utilization rate of around 30%, which we expect to rise to 60-70% in 2013.
II. Analysis and Outlook
Looking ahead, the company’s fundraising initiatives appear promising, with production progressing smoothly. Post-financing, we conservatively estimate the company’s EPS for 2012-2014 to reach 0.33 RMB, 0.37 RMB, and 0.50 RMB, respectively.
III. Risk Factors
Potential risks include uncontrolled production capacity leading to severe overcapacity and prolonged sluggishness in the macroeconomy, which could weaken downstream demand. These challenges must be carefully monitored as they could impact the company’s performance trajectory.
Jiangmen Nichiyo Decorative Material Co.,Ltd. , https://www.nichiyopt.com