2021 Semi-annual Reports of STAR Companies Disclosed
By August 31, 2021, all 331 companies on the Science and Technology Innovation Board (the STAR Market) had disclosed the information on their main business performance for the first half of 2021 through semi-annual reports, listing announcements and other means. On the whole, the companies on the STAR Market (the “STAR companies” for short) have shown strong resilience and vitality. Compared with the situation characterized by the severe impact of the pandemic in the same period last year, the operation of the companies was resumed steadily with rapid growth achieved in the first half of this year, and significant year-on-year increases were recorded in operating income and net profit. In addition, with the R & D investment remaining at a high level and the achievements in sci-tech innovation emerging continuously, the STAR companies have become an important force in implementing the innovation-driven development, preliminarily demonstrating a good momentum in relying on scientific and technological innovation to realize high-quality development.
1. The overall performance maintained a rapid growth, and specific types of enterprises developed well.
In the first half of 2021, the STAR companies recorded a total of RMB304.050 billion in operating income and RMB43.319 billion in net profit attributable to the owners of the parent company, up by 55.14% and 105.24% year-on-year respectively. Over 90% of the companies achieved growth in operating income, 56 companies doubled their operating income, and 20% of the companies posted an operating income of more than RMB1 billion; over 70% of the companies registered increases in the net profit attributable to the owners of the parent company, and 30% of the companies saw their net profit grow by more than 100%, with the highest growth at 743 times. On the other hand, the performance of some companies declined, mainly due to the factors such as the changing pandemic situation overseas, rising prices of raw materials, increased costs of equity incentives, and more investment in research and development.
Thanks to the more inclusive listing conditions for the STAR Market, 19 companies that were not profitable at the time of listing, 4 red-chip companies, 2 companies with weighted voting rights (WVR) and 1 company that issued depositary receipts successfully went public. In the first half of 2021, those companies showed a good momentum of development with the overall growth of operating income reaching 56.82%. Specifically, 16 companies that used to be unprofitable recorded a total operating income of RMB11.174 billion, a year-on-year increase of 129.46%, with the net profit attributable to the owners of the parent company at RMB-1.839 billion, a further reduction of RMB1.636 billion in loss from the same period last year. Boosted by the capital, the companies that used to be unprofitable made encouraging achievements with innovation results emerging one after another. For example, the recombinant novel coronavirus vaccine jointly developed by Cansino Biologics Inc. and the Academy of Military Sciences was approved for marketing registration in China. As a result, the company posted an operating income of RMB2.061 billion and RMB937 million in the net profit attributable to the owners of the parent company in the first half of the year, making a profit for the first time. Furmonertinib, a new national class-1 drug for the treatment of the non-small cell lung cancer developed by Shanghai Allist Pharmaceuticals Co., Ltd., was officially approved for marketing, and in the first half of the year, the company reported an operating income of RMB121 million for the first time, with its net loss shrunk by 40%.
2. The companies in the six major industries were developing in balance, with green economy as the new driver for development.
In the first half of 2021, the six strategic emerging industries on the STAR Market all showed strong momentum of growth. The biomedicine industry continued to advance innovation and R & D. In particular, the leading companies involved in the coronavirus testing and vaccines rapidly responded to market demand, speeding up the performance improvement with growths in product sales. The companies in the industry achieved growth rates of 90% in the overall operating income and 176% in the net profit attributable to the owners of the parent company, ranking first among all the industries. Thanks to the rapid expansion in production capacity, coupled with the strong downstream demand, the companies in the new energy industry saw the operating income and the net profit attributable to the owners of the parent company grow by 76% and 157% respectively. The companies in the industries of the new generation information technology, energy conservation and environmental protection, new materials and advanced equipment manufacturing also achieved high growth rates in performance, with the net profit attributable to the owners of the parent company increasing by 107%, 53%, 48% and 44%, respectively.
In China’s great efforts to advance the “carbon emission peaking and carbon neutrality” strategy, the 46 STAR companies in the industries of new energy and energy conservation and environmental protection focused on their main businesses and developed rapidly, drove the “green engine” with sci-tech innovation, and actively contributed to the realization of the goals of the strategy and sustainable economic development. Among the companies, 9 segment leaders in the photovoltaic industry such as Trina Solar Co., Ltd., guided by the industrial policies and driven by market demand, continuously stimulated their innovative and growth vitality, with their operating income and net profit attributable to the owners of the parent company increased by 67% and 181% year-on-year respectively; 12 companies on the industry chain of the power battery, which is the core component of new energy vehicles, rapidly unleashed their production capacity in the first half of the year, with their operating income and net profit attributable to the owners of the parent company swollen by 59% and 84% year-on-year respectively. In addition, the 35 STAR companies in the integrated circuit industry continued to tap into the innovation chain and improve the supply chain, strived to maintain and expand production capacity, and provided strong support for the development of the green industries such as new energy vehicles and photovoltaics in the context of the global “chip shortage”, recording an operating income of RMB43.769 billion and RMB10.419 billion in the net profit attributable to the owners of the parent company, up by 42% and 179% year-on-year respectively.
3. The top-ranking companies played a leading role in growth, and the potential of the “little giant” companies can be expected.
Playing the leading role, the companies included in the STAR 50 Index as constituents registered a total operating income of RMB148.152 billion, a year-on-year increase of 46%, in the first half of the year, with the net profit attributable to the owners of the parent company at RMB19.547 billion, up by 104% year-on-year. In terms of proportions, the operating income and the net profit attributable to the owners of the parent company accounted for 49% and 45% of the totals of the market, respectively, serving as the “backbone” of the board.
As the STAR Market is where the companies characterized by sci-tech innovation cluster together, up to now, a total of 95 STAR-listed companies have been selected into the list of the state-level “little giant” enterprises characterized by specialization, expertise, uniqueness and novelty, accounting for 29% of the total number of the STAR companies, 30% of the total number of listed “little giant” companies and 77% of the total number of listed “little giant” companies under the registration-based IPO system, respectively. The companies are mainly distributed in the new generation information technology, advanced equipment manufacturing and other industries, including a number of “hidden champions” in sub-industries such as Suzhou Nanomicro Technology CO., Ltd., a leading company in nano-microsphere materials, and Pylon Technologies Co., Ltd., a leading company in household energy storage. In the first half of 2021, the “little giant” enterprises listed on the STAR Market showed the distinctive characteristics of high growth and heavy investment in research and development, with the total operating income at RMB44.789 billion and the net profit attributable to the owners of the parent company at RMB7.514 billion, up by 51% and 38% year-on-year respectively; and their total R & D investment amounted to RMB3.288 billion, a year-on-year increase of 49%, with the R & D investment accounting for 14% of the operating income on average, which provided strong support for China’s industrial chains to accelerate the efforts in improving weak links, forging advantages and filling in gaps.
4. R & D investment remained at a high level, and a virtuous circle of technology, capital and the real economy was gradually emerging.
R & D is the core internal driving force for the development of the enterprises characterized by sci-tech innovation. In the first half of 2021, the STAR companies continued to step up R & D investment, which amounted to RMB25.403 billion in total; and after excluding the companies listed on the basis of the fifth set of standards, the R & D investment accounted for an average of 14% of the operating income. Specifically, the companies in the integrated circuit and biomedicine industries invested more heavily in research and development, as the R & D investments of 26 companies such as Shenzhen Chipscreen Biosciences Co., Ltd. accounted for more than 30% of their operating income. In line with the high R & D investment, the STAR-listed companies already had a team of nearly 100,000 researchers in total, and the R & D personnel accounted for an average of nearly 30% of a company’s total employees, with the number of the R & D team members at more than 1,000 in 16 companies such as Semiconductor Manufacturing International Corporation and China Railway Signal & Communication Corporation Limited. The high-intensity R & D investments and high-level teams of researchers have laid a solid foundation for the STAR companies to advance the breakthroughs in core technologies and the transformation of scientific research results.
In addition, as the link between the capital market and the factor market, the STAR Market continued to facilitate the formation of an effective cycle where technology leads industrial development and the industries guide the investment of capital, so as to create a sound ecosystem in which industries, schools, research institutions and capital jointly serve the national innovation-driven development strategy. In terms of promoting the two-way interconnection between technology and industry, many of the top ten shareholders of the STAR companies were from well-known scientific research institutions, and 87 companies were founded by scientific research institutes or experts from well-known universities; and the companies continued to step up cooperation with the research institutes after going public, as 28 companies established academician or postdoctoral workstations to provide application scenarios and financial support for technology research and development. With regard to propelling the in-depth coupling between national strategies and development of enterprises, nearly 50% of the STAR companies participated in important national special projects of sci-tech research as coordinators or contractors. For example, Western Superconducting Technologies Co., Ltd. undertook more than 200 major national special scientific and technological projects and realized the technological research and development and transformation of achievements in the field of advanced materials. With respect to guiding the orderly flow of industrial capital, in the first half of the year, the industrial capital represented by the National Integrated Circuit Industry Investment Fund and the Advanced Industry Investment Fund held the individual stocks on the STAR Market through purchases in the secondary market, subscription in targeted additional issuance, inquiry-based transfers and other channels, with the average shareholding ratio at 13.12%, showing that the capital entry and exit were smooth and orderly.
5. R & D achievements continued to emerge, with high-quality innovation leading high-quality development.
In the first half of 2021, the STAR-listed companies reported their innovation results one after another, with the quality of sci-tech innovation constantly improved, and a total of 11,571 new intellectual property rights were added, including 3,217 new invention patents. As of the end of the first half of the year, the STAR companies had a total of 35,106 invention patents, with an average of 106 invention patents per company. On the main battlefield to boost China’s self-reliance and self-improvement in science and technology, the STAR companies stayed in the correct direction while encouraging innovation, and made major breakthroughs in various fields.
In the new generation information technology industry, Advanced Micro-Fabrication Equipment Inc. China made breakthroughs in the advanced manufacturing process, as in the first half of the year, it completed the design, manufacturing, testing and preliminary process development and evaluation of the 3nm etching machine prototype; and the new generation high-performance low-voltage power MOSFET products independently developed by China Resources Microelectronics Limited achieved breakthroughs in key core technologies, with the device performance reaching the advanced level worldwide. In the biomedicine industry, the class-1 new drug Donafenib independently developed by Suzhou Zelgen Biopharmaceuticals Co., Ltd. was approved for marketing, and it was the first innovative small molecule targeted drug for the first-line treatment of liver cancer developed and marketed by a Chinese pharmaceutical company; and the Toripalimab solely developed by Shanghai Junshi Biosciences Co., Ltd. received the FDA’s breakthrough therapy designation. In the advanced equipment industry, the offshore wind turbine blade S90 independently developed by Shanghai Electric Wind Power Group Co., Ltd. passed the full-scale static test at one time and became the longest wind power glass fiber blade in the world; China Railway Construction Heavy Industry Corporation Limited successively put into production high-quality products such as the first super-powerful unblocking TBM in China and the earth pressure balance shield machine with the largest diameter in China, continuously providing the country’s advanced equipment for major projects at home and abroad.
6. The investor structure improved continuously, with a higher level of internationalization.
The semi-annual reports show that the number and the shareholding ratio of the institutional shareholders of the STAR companies increased significantly, and the investor structure improved continuously. The number of investment funds holding shares reached 50,085, an increase of 20 times over the end of the first quarter. Specifically, in nearly 80% of the STAR companies, those holding tradable shares include fund shareholders, an increase of 2 percentage points from the end of the first quarter. In addition, according to the disclosed regular reports, the shareholding proportion of investment funds rose from 7.47% at the end of the first quarter to 11.36%. In terms of industry distribution, the companies in the “key and core technology” industries represented by integrated circuits and advanced medical devices were the most favored by investment funds, with 41 companies reporting a more than 30% shareholding by investment funds. Among them, 3peak Incorporated, Zwsoft Co., Ltd. (Guangzhou) and Micro-tech (Nanjing) Co., Ltd. were the top three companies with the largest percentages of shareholding by investment funds, which were 70%, 67% and 55%, respectively.
In addition, the internationalization level of the STAR Market was further improved. Up to now, 24 stocks on the STAR Market are eligible for trading under the Shanghai Stock Connect and 16 stocks on the STAR Market have been included in the core index systems of FTSE Russell and MSCI. Overseas investors continued to increase their holdings of the shares on the STAR Market, as by the end of July, the market value of the tradable shares on the STAR Market held by overseas investors amounted to RMB66.6 billion, an increase of 115% from the end of last year.
7. The performance briefing was becoming a common practice and standard arrangement for STAR companies.
Performance briefings are an important platform for listed companies to communicate with investors, enabling investors to understand the regular reports more accurately and learn about a company’s operations more comprehensively. Earlier, all 215 companies listed on the STAR Market before the end of 2020 held their briefings on annual performance, and 22 companies that were newly listed in 2021 also actively held their performance briefings, which were well received in the market.
During the disclosure of the 2021 semi-annual reports, the STAR companies took various measures to continuously strengthen communication and interaction with investors. At the semi-annual performance briefings held by Advanced Micro-Fabrication Equipment Inc. China and Qingdao Gaoce Technology Co., Ltd., the attendance of chairmen, presidents and other senior officials of the companies made the companies’ direct interactions with investors more substantive, extensive and effective; Beijing Kingsoft Office Software, inc., Ninebot Limited and other companies interpreted the their operating performance and technological innovations in the first half of the year through multimedia such as texts with graphics and short videos, making the regular reports more readable and comprehensible. Going forward, the performance briefings of STAR companies will become regular, and all STAR companies will hold briefings on semi-annual performance to strengthen communication with investors through webcast or text interaction, so as to establish a sound and long-term communication and interaction mechanism.