The semiyearly reports of all 1,439 listed companies in the Shanghai market were released on August 31. Statistics show that rapid growth has been seen in the performance of these companies, with the operation revenue and net profit both growing by over 10%. In particular, their management quality has kept improving, with the performance growth of entity enterprises far exceeding that of the financial industry; traditional middle and upper stream industries like petroleum, iron and steel, nonferrous metals and chemical engineering have presented the largest growth as benefited from the supply-side structural reform; and rapid growth has also been seen in a group of enterprises in advanced manufacturing, innovative technology, emerging services and consumption. Meanwhile, some enterprises have encountered difficulties in operation as affected by several factors, and they need to adapt to the market changes and the orientation of national strategy so as to keep boosting the reform and make transformation and upgrading in time.
I. Rapid performance growth has been seen in SSE-listed companies, with more rapid growth in entity industries than in financial industry.
In the first half of this year, the listed companies in the Shanghai market have focused on entity industries, strived to improve their operation, taken the initiative to adapt to the requirements on national economic structural adjustment, and actively responded to the external and internal challenges. As a result, rapid growth has been seen in their performance. They realized the total operation revenue of RMB15.4 trillion, up by 11% year-on-year, and the net profit of RMB1.6 trillion, up by 14%, presenting double-growth in both operation revenue and net profit.
The quality and efficiency of entity companies in the Shanghai market have both been improved in the first half of the year. They realized the operation revenue of RMB12.1 trillion, up by 13% year-on-year, and the net profit of RMB0.6 trillion, up by 25% year-on-year; and companies in the financial industry realized the operation revenue of RMB3.4 trillion, up by 7%, and the net profit of RMB0.9 trillion, up by 7%. It shows that the net profit growth of companies in entity industries has far exceeded that in financial industry. Besides, the entity industries' overall contribution to profit has increased, taking up 41% among all listed companies in the Shanghai market. This number is 4 percentage points higher than that in the same period of last year and shows the preliminary results of the national strategy of promoting the development of real economy.
Big-cap blue chips are still the "ballast stone" to the net profit contribution of the Shanghai market. SSE-50 companies realized the net profit of RMB0.9 trillion, up by 14% year-on-year and taking up 56% of the total profit in the Shanghai market; SSE-180 companies achieved the net profit of RMB1.3 trillion, up by 13% year-on-year. Judging from enterprises' ownership, state-owned enterprises realized the net profit of RMB1.4 trillion, up by 13%, and private enterprises achieved the net profit of RMB0.2 trillion, up by 22% year-on-year. Small in business volume, private enterprises have presented more rapid net profit growth than state-owned enterprises.
II. Outstanding performance has been seen in middle and upper stream supply-side industries, with downstream demand-side industries' performance growth lower than the overall level.
The upper stream industries have presented outstanding performance as benefited from the supply-side structural reform. In the first half year, the operation revenue of the petroleum industry was RMB2.4 trillion, up by 13% year-on-year, and the net profit RMB69.6 billion, up by 75% year-on-year; the nonferrous metals industry realized the operation revenue and net profit of RMB152.8 billion and 8.8 billion, growing by 14% and 75%, respectively; however, as affected by such factors as the coal price and electricity price linkage, the coal industry realized the operation revenue of RMB384.8 billion, up by only 6%, and its net profit was RMB46 billion, up by 4%.
With the deepening of the supply-side structural reform and the intensifying of the environment constraints, listed companies in the middle stream industries with standard operation and advanced technologies have shown greater competitive edge and outstanding net profit growth. The chemical engineering industry realized the operation revenue and net profit of RMB261.7 billion and RMB27.2 billion, up by 11% and 63%, respectively, and those of the iron and steel industry were RMB426.5 billion and RMB29.6 billion, up by 15% and 134%, respectively.
Some polarization has been seen in the performance of enterprises in the downstream industries. The net profit of the pharmaceutical industry was RMB23.9 billion, up by 22% year-on-year; the automobile industry RMB40.3 billion, up by 16% year-on-year; the household appliance industry RMB7 billion, up by 14% year-on-year; and the wholesale and retail industry RMB21.2 billion, only up by 4% year-on-year and lower than 25%, the overall growth of entity enterprises. It is analyzed that the price increase of raw materials in the middle and upper stream industries and the short of expectation of the consumer demand expansion have influenced the growth of major consumption sectors in downstream industries.
It's worth noting that rapid growth has also been seen in a group of listed enterprises of advanced manufacturing, innovative technology, emerging services and consumption in the Shanghai market. The special equipment manufacturing industry realized the net profit of RMB9.5 billion, up by 58% year-on-year; the information transmission, software and information technology service industry achieved the net profit of RMB10 billion, up by 25% year-on-year; and the leasing and commercial service industry made the net profit of RMB8.3 billion, up by 36% year-on-year.
III. In terms of investment, entity enterprises focus more on main business and less on investments abroad.
Statistics show that entity enterprises have focused more on endogenous growth in investment and their cash outlay on foreign merger and acquisition have dropped significantly. In the first half of this year, the cash paid for buying and constructing long-term assets by entity enterprise totaled RMB706.6 billion, up by 11% year-on-year; the corresponding expenditure on research and development was RMB130 billion, up by 22% year-on-year; and the cash paid for merger and acquisition was RMB74.5 billion, down by 21% year-on-year.
Specifically, state-owned enterprises' expansion motive has been reduced while that of private enterprises is still vigorous. In the first half year, the cash paid for buying and constructing long-term assets and for the research and development of state-owned enterprises only grew by 4% and 18% year-on-year respectively while that of private enterprises rose sharply by 38% and 33% year-on-year respectively.
With regard to different industries, high-quality companies in such cyclical industries as petroleum, nonferrous metals and chemical engineering have expanded their cash paid for buying and constructing long-term assets and for the research and development. The iron and steel and the coal industries have been cautious in investment as affected by the de-capacity policy, showing the growth in single digit. In addition, the investment of some listed companies in public utilities like electric power, gas and transportation has been reduced, which is possibly the result of the slowdown of the capital construction investment in the first half of the year.
IV. In terms of financing, growth has been seen in both direct and indirect financing of entity enterprises, but financing structure needs to be improved.
Reports show that the total financing amount of entity enterprises reached RMB4.5 trillion in the first half of the year, up by 9% year-on-year. In particular, RMB528.2 billion was for direct financing, up by 12% year-on-year. Among direct financing, RMB259.7 billion was by issuing shares, taking up 49%, and RMB268.5 billion was by issuing bonds, taking up 51%. In terms of financing structure, their direct financing still took up a small proportion and more efforts should be made on creating conditions for the direct financing of listed companies and keeping optimizing their financing structure.
Reports show that the overall financing of private enterprises was RMB1.1 trillion, up by 11% year-on-year, and that of state-owned enterprises RMB3.5 trillion, up by 9% year-on-year. In particular, the direct financing of private enterprises totaled RMB216 billion, up by 19%, while that of state-owned enterprise RMB312.2 billion, up by 7% year-on-year. On the whole, the private enterprises have shown a more rapid growth in financing than state-owned enterprises.
In particular, the direct financing of SSE 50 companies was RMB121.9 billion, up by 8% year-on-year; that of SSE 180 companies RMB258.3 billion, up by 6% year-on-year; and that of SSE 380 companies RMB100.9 billion, up by 8%. Enterprises of different scales have shown basically the same growth in direct financing on the whole.
V. In terms of liabilities, stable asset-liability ratio has been seen in entity enterprises, with more obvious deleveraging effect seen in key de-capacity industries.
The overall asset-liability ratio of enterprises in entity industries went up from 61.24% to 61.84% in the first half of the year, remaining stable on the whole with a slight increase by 0.6 percentage point. Statistics show that the asset-liability ratio of state-owned enterprises was 62.22%, slightly higher than 60.53% of private enterprises. The asset-liability ratio of state-owned enterprises increased by 0.62 percentage point, from 61.60% in the end of last year to the present 62.22%; and that of private enterprises by 0.53 percentage point, from 60% to 60.53%, showing that the growth of the former slightly higher than the latter.
Among major sectors, obvious deleveraging effect has been seen in key de-capacity industries whose performance has increased rapidly and asset-liability ratio has kept dropping. While maintaining performance growth, the asset-liability ratio of such traditional production industries as iron and steel, coal, petroleum and natural gas extraction, nonferrous metals and chemical manufacturing was down by 0.81, 0.36, 0.24, 0.05 and 1.49 percentage points, respectively.
Among other sectors, the asset-liability ratio of the software and information technology service industry, the computer, communication and other electronic equipment manufacturing industry, and the railway, shipping, aerospace and other transportation equipment manufacturing industry dropped by 4.61, 1.77 and 1.12 percentage points respectively compared with that at the end of last year, showing a rapid decrease. Besides, the asset-liability ratio of the real estate, which is of great market concern, was 79.22%, up by 1.06 percentage points compared with that at the end of last year.
VI. Some companies encountering great difficulty in production and management should adapt to market changes and make timely transformation and upgrading.
Some companies have encountered difficulties in production and management under the current macro-environment with complicated external factors, great pressure on economic restructuring and upgrading and uncertainty in China-US trade dispute. Statistics show that 149 listed companies in the Shanghai market suffered loss in the first half of this year, with the proportion staying the same with last year, and most of their net cash flows were negative, showing that their operation quality needs to be improved. Among entity enterprise (excluding traditional industries with high liabilities like construction, real estate and public utility), the asset-liability ratio of 98 companies exceeded 70%.
These companies are of small quantity and their operation revenue and net profit took up a small proportion among the total of all listed companies in the Shanghai market. However, their operation has reflected some actual problems enterprises have encountered in economic restructuring, such as the upgrading difficulty, the insufficient technological innovation and the increased cost for environment protection constraints. On the whole, the policy orientation of finance serving real economy should be adhered to, thus supporting the good and restricting the bad, bolstering enterprises to adapt to market changes, accelerating the upgrading and resources integration, actively introducing in superior assets, and striving to improve operation. At the same time, the strict and comprehensive regulation according to law should be carried out on companies that have not focused on their main businesses, lost operation capacity, and even engaged in inappropriate market value management, so as to keep improving market ecology and order and promote the sound development of the capital market.