Yu Diamond: The steady development of the single crystal industry is expected to break through the cutting line

The main business of Yu Diamond is located in diamond single crystal. The company's production in 2010 is about 600 million carats, and the production scale is the third in the industry. The first and second Zhongnan diamonds and the Yellow River cyclone (15.80, -1.04, -6.18%) are 2.5 billion carats, 1.5 billion carats, and 3 oligarch markets. The total share is nearly 80%. The company plans to continue to expand production and sales according to changes in the market situation. In 2011, the target output will exceed 1 billion carats. It is expected to reach a production of 1.3 billion carats in 2012. Advanced and unique equipment and formulation technology is the core advantage of Yu Diamond to maintain higher than the industry average gross profit margin. First, the conversion rate of the large press is high. The conversion efficiency of the company's 650MM top press is about 20%, which is in the leading position in China. Secondly, the top press used by the company adopts the combination of cylinder and beam and unique hinge design. The centering precision is very high, which can effectively reduce the cost. Thirdly, the company's advanced formula and process technology make the proportion of high-grade diamond products higher, so the average sales unit price is also higher. The recent rise in single crystal prices is due to increased demand, but the decline in costs and capacity expansion will keep prices down. With the improvement of press technology and the improvement of conversion rate, diamond cost is expected to continue to decrease significantly. On the other hand, from the perspective of supply, the Central South Diamond and the Yellow River whirlwind also have faster expansion plans, all of which may cause the price of diamond single crystals to further decline. However, the decline in diamond prices will facilitate the promotion of super-hard materials. The diamond cutting line is expected to become the company's future profit growth point. The diamond cutting line for polysilicon is a high value-added product that the company is currently researching and developing. The project is actively promoting. Currently, it is in equipment debugging and process matching and improvement. The production scale will be adjusted according to the downstream acceptance. It is expected to be in June, July or the second half. There will be output. We will wait and see what will happen in the future. The EPS of the company in 2011-2013 is 0.40, 0.49, and 0.53 yuan, respectively, and the corresponding PE is 41.0, 33.4, and 30.9. Given the current market environment, we give a cautious overweight rating.

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