“Sweet pastry” has become “chicken ribs”? Power diamond intraday approaching the limit

On March 20, the synthetic diamond leading power diamond plunged sharply in the intraday market, and once approached the daily limit in the intraday market. As of the close, the stock fell more than 14%.

It is worth noting that the power diamond has been falling all the way since it hit a record high on August 15, 2022, and has fallen by about 60% so far, hitting a new low in nearly a year. With such a big drop, why did the power diamond drop so much? Is the lab-grown diamond industry not good?

Over 24 million shares lifted

Judging from the news, the fluctuation of Power Diamond’s stock price today may be affected by the lifting of the ban on stocks today.

On March 17, Power Diamond issued an announcement stating that the company will have 24.1488 million restricted shares lifted, accounting for 16.667% of the company’s total share capital.

Shareholders were very worried when they heard the ban was lifted. Although the lifting of the ban is only a time window, the lifting of the stock ban means that the restricted shares have passed the sales restriction commitment period, and then the shares can be freely traded in the secondary market.

The lifting of the ban on the stocks of listed companies will most likely lead to large-scale reductions in the holdings of shareholders who have sold their shares before the deadline, which will increase the number of tradable shares in the market. Therefore, investors take it for granted that the lifting of the ban is fiercer than a tiger, and the lifting of the ban on restricted shares is negative for stock prices, and large-scale lifting of the ban will also have an adverse impact on the market.

If calculated based on the closing price of Power Diamond at 114.5 yuan per share on the day of the announcement (March 17), the market value of this unlocked stock may be as high as 2.7 billion yuan, which is not a small sum.

In the past year, 18.9155 million shares have been lifted, accounting for 13.05% of the total share capital. After the lifting of the ban, the company still has 71.6425 million restricted shares, accounting for 49.45% of the total share capital.

The restricted shares released by Power Diamond this time came from a previous fixed increase of the company. On March 26, 2022, Power Diamond released a fixed increase plan, planning to raise an additional 4 billion yuan for project construction and replenishment of working capital.

In September 2022, Power Diamond completed the private placement, raising a total of 3.912 billion yuan. Participating private placement institutions include Caitong Fund, China Europe Fund, Southern Fund and other public offering companies.

According to Power Diamond’s fixed increase price of 162.01 yuan per share, judging from the decline in the stock price of Power Diamond since the second half of 2022, investors participating in this fixed increase have serious floating losses.

There are many uncertainties in the industry

In addition to market sentiment, the decline in industry demand and power diamonds’ deep suspicion of counterfeiting are also important reasons for its stock price drop.

It is reported that Power Diamond is an enterprise specializing in the research and development, production and sales of synthetic diamond products. Its main products include diamond single crystal, diamond micropowder and cultured diamond.

The so-called lab-grown diamonds are diamonds grown in laboratories. Their product attributes are almost the same as natural diamonds, and their quality is even better than artificial diamonds, but they are relatively cheap.

Since India controls more than 90% of the diamond processing business in the market, its import and export data may be a leading indicator of the industry’s prosperity. In December last year, the import value of India’s cultivated diamond rough showed negative growth for the first time, which means that the cultivated diamond industry is cooling down.

At the same time, the wholesale price discount of lab-grown diamonds and the discount of retail prices to natural diamonds are also falling. According to the announcement of Anglo American, the retail price of lab-grown diamonds accounted for 65% of the price of natural diamonds dropped from 65% at the end of 2017 to 25% at the end of June 2022.

Power Diamond also stated in its 2022 annual report that the decline in the gross profit margin of cultivated diamonds was mainly due to the decline in sales prices. Paul Kinniski, a well-known analyst in the industry, also said that the price of loose diamonds has dropped by about 20%.

CITIC Securities pointed out in the research report that this is mainly due to the price reduction of cultivated diamonds caused by the expansion of production, and at the same time the price increase of natural diamonds is superimposed. As the lab-grown diamond production technology matures, the retail price of lab-grown diamonds will continue to decline.

At present, many domestic jewelry brands are creating cultured diamond brands, people’s awareness of cultured diamonds is also increasing, and the cultured diamond industry is developing well. In addition to Power Diamond, there are also listed companies such as Huanghe Cyclone, Zhongbing Red Arrow, Sifangda, and Huifeng Diamond that are involved in the cultivated diamond business.

Many listed companies in the head jewelry industry have expressed their views recently to actively promote the cultivated diamond business. For example, China Gold stated that the company plans to incubate diamond-grown and new material research and development projects to find new growth points for performance.

On the other hand, Power Diamond is also deeply involved in the suspicion of financial fraud. Some media have questioned that Power Diamond may be suspected of fabricating overseas customers and financial fraud, including doubts about the sales channels of overseas downstream customers, and the mystery of the transaction volume of the largest domestic customer. .

In general, the stock price fluctuations of Power Diamond are not only affected by the lifting of the ban on restricted shares, but also by factors such as declining industry demand and the company’s deep suspicion of counterfeiting.

Source: Securities Star