Sarine Tech's net profit plummeted 68.7% to $3.8m in Q2

More pain ahead as diamonds lose shine.

Sarine Technologies reported that its net profit plunged by 68.7% year-on-year to $3.8m (US$2.7m) in the second quarter.

According to Maybank Kim Eng, the group's profit dropped on back of low polished diamond prices, excess inventory, mixed demand and limited credit availability for Indian manufacturers.

Maybank Kim Eng warned that more pain is ahead for Sarine Tech as the diamond market continues to lose lustre.

“While we believe the earnings bottom had passed in 1Q15, we now see sales normalising in 1Q16 instead of 2H15," the report noted.

Despite this, Sarine Tech expects the industry to recover once leading diamond company De Beers softens its pricing stance.

“But with pent-up demand and higher installed Galaxy base, we forecast FY16E earnings will easily surpass FY14’s USD27.2m as it emerges from the short-term industry blip. We remain confident that an eventual adoption of its game-changing technologies would lead to strong earnings growth, which is still the stock’s key investment thesis,” Maybank Kim Eng said.