Wenzhou Shenghong Metal Products Co.,Ltd , https://www.shenghonglock.com
**Abstract**
Yu Diamond released its 2012 performance forecast, indicating that the company maintained a net profit attributable to listed shareholders between RMB 120.389 million and RMB 148.7579 million, which was roughly in line with the same period last year. In 2013, the price of single crystals rebounded, leading to improved business performance across several areas, and the company's overall results showed signs of recovery. As a result, the investment rating remains "Strongly Recommended - A."
In 2012, the net profit attributable to listed companies increased by -15% to 5%, with the company expecting a net profit range of RMB 120.3839 million to RMB 148.7579 million, translating to an EPS of RMB 0.20 to RMB 0.24 per share. After ex-rights adjustments, the Q1-Q3 EPS stood at RMB 0.055, RMB 0.063, and RMB 0.061 respectively, while Q4 is expected to range from RMB 0.02 to RMB 0.06. During the reporting period, non-recurring gains and losses had an impact of approximately RMB 6-8 million, and the equity incentive cost for the year was around RMB 17 million.
The company’s "high-quality diamond project" was included in the national industrial revitalization and technological transformation plan, and it received a special fund of RMB 16.5 million in the 2012 central infrastructure budget. These funds are recorded as deferred income and will be gradually recognized as non-operating income as the project progresses.
For the fourth quarter, the single-quarter profit ranged from RMB 11.1 million to RMB 39.43 million, reflecting a decline of -70.27% to an increase of 5.63%. This can be attributed to the low prices of single crystals throughout most of the quarter, especially for low-end materials with a production ratio over 30%, which saw a drop of more than 50% compared to 2011. Additionally, the company exceeded its initial production target of 2 billion carats but failed to meet the expected sales volume of 1.5 billion carats, which affected the full-year performance.
If market demand picks up, the company has the capacity to scale up and deliver strong results, as the diamond single crystal industry shows high flexibility. Currently, the diamond sector appears to be approaching a bottom.
Traditional applications are growing fastest, with 70% of building materials showing an upward trend. Infrastructure sectors like railways are also showing promise, with 2013 investment estimated at RMB 650-700 billion, up at least 15% from 2012’s RMB 560-600 billion. The growth in diamond demand in 2010 was largely driven by the shift of Foshan ceramic industries to Tangshan and Shijiazhuang in Hebei.
Emerging applications are also gaining momentum. For example, the demand for diamond drill bits in oil and gas drilling is robust, and the industry is in the process of replacing traditional hard alloy bits. Similarly, the mobile phone polishing industry is expanding. If synthetic diamond prices continue to fall, it could open up new market opportunities. The price decline has benefited Yu Diamond significantly, as it leads in cost, technology, and product quality.
The micron powder business is set for growth in 2013. The production line was moved to Zhengdong New District in April 2012, and the city's financial, customs, and tax systems are now well-established. Significant growth is expected in 2013, with monthly sales reaching 100-150 million carats.
Cutting wire saws were impacted by the downturn in the photovoltaic industry. The low price of polysilicon led to weak demand for wire saws in 2012, resulting in poor profitability. However, as polysilicon prices stabilize and the company improves its wire saw technology and introduces new business models, the segment is expected to recover in 2013.
As one of the few companies in China mastering the production of large single-crystal cores and supplying them in bulk, Yu Diamond holds a key position in the supply chain. Henan Huajing Company owns 51% of Jiaozuo Dajing Project Company, whose downstream applications include mobile phone grinding tools and gemstone machining tools. Major customers include Apple, Foxconn, Samsung, and Sony. Products are primarily sold in China through direct sales, with a small portion exported to Korea, India, Japan, and Vietnam. With the installation of new equipment, production is expected to ramp up significantly in 2013.