Companies on SSE Main Board Complete Disclosure of Semi-annual Reports
As of August 31, 2021, all 1,644 companies listed on the main board of the Shanghai Stock Exchange (SSE) had disclosed their 2021 semi-annual reports. Various data show that with the targeted regulation and strong support of national policies, the companies on the SSE main board are gradually getting rid of the impact of the pandemic, and have become an important force for and epitome of the sustained and stable recovery of the national economy, as they have announced encouraging results highlighted by solid production and operation with improvements, stable performance growth with increases and steady advancement of green development.
1. The performance rebound was fairly stabilized, and 90% of the companies reported a profit.
In the first half of 2021, the companies on the SSE main board recorded a total operating income of RMB21.96 trillion, a year-on-year increase of 23.94%; and the net profit attributable to the owners of the parent company amounted to RMB2.08 trillion and the net profit after deducting non-recurring gains and losses stood at RMB1.98 trillion, up by 43.15% and 44.40% year-on-year respectively. It is particularly worth mentioning that compared with the same period in 2019, the operating income increased by 20.22%, and the net profit attributable to the owners of the parent company and net profit after deducting non-recurring gains and losses grew by 11.58% and 13.17%, respectively, showing that the performance was back to the growth track before the pandemic. From the perspective of a single quarter, in the second quarter of 2021, the operating income was RMB11.55 trillion, with the net profit attributable to the owners of the parent company at RMB1.07 trillion and the net profit after deducting non-recurring gains and losses at RMB997.02 billion, up by 21.99%, 41.65% and 43.84% year-on-year respectively, and up by 10.94%, 5.21% and 1.30% quarter-on-quarter respectively, maintaining the momentum of steady growth.
From the perspective of profit and loss, much more companies on the SSE’s main board posted profits, with both the number of companies and the amount of losses decreased. In the first half of the year, a total of 1,467 companies were profitable, accounting for 89.23% of the total, an increase of 5.05 percentage points from the same period last year. Among them, 80% of the companies recorded a year-on-year increase in the net profit, and more than half of the companies registered an increase of more than 30%. In the first half of the year, there were 177 loss-making companies, a decrease of 83 compared with the same period last year, and 74 companies that were unprofitable in the first quarter turned losses into profits in the first half of the year and achieved restoration in performance; the total loss amounted to RMB64.03 billion, a year-on-year drop of 59.58%, and there were 18 companies posting a loss of more than RMB500 million, a decline of 7 from the same period last year.
2. The contribution rate of the companies in the real economy steadily increased, and the structure and proportions of profits were improved.
In the first half of 2021, the companies of the real economy on the SSE’s main board recorded a total operating income of RMB17.01 trillion, a year-on-year increase of 30.27%, which was 6.33 percentage points more than the growth for the entire SSE market; the companies’ net profit attributable to the owners of the parent company amounted to RMB910.12 billion, and the net profit after deducting non-recurring gains and losses was RMB817.90 billion, up by 103.72% and 120.66% year-on-year respectively, which were 60.57 and 76.26 percentage points more than the growths of the entire SSE market respectively; the companies’ net cash flow of operating activities stood at RMB701.76 billion, an increase of 112.19% year-on-year, showing that their operational sustainability was significantly enhanced. By comparison, for the companies of the real economy, the net profit attributable to the owners of the parent company accounted for 43.74% of the total in the first half of the year, an increase of 13 percentage points over the same period of the previous year, indicating that both the quality and the profitability of the industries in the real economy were improved and the structure and proportions of profits of the companies in the real economy and the financial companies on the main board of the SSE were more reasonable. In the same period, the financial companies on the SSE’s main board registered a total operating income of RMB4.95 trillion, a net profit of RMB1.17 trillion attributable to the owners of the parent company, and a net profit of RMB1.16 trillion after deducting non-recurring gains and losses, a year-on-year increase of 6.21%, 16.28% and 16.18%, respectively.
From the perspective of the company sizes, the small and medium-sized enterprises gained a strong momentum of development, and the performance of large blue-chip companies continued to recover. In the first half of the year, the companies with a market capitalization of less than RMB10 billion on the SSE main board posted an operating income of RMB1.86 trillion and a net profit of RMB73.97 billion attributable to the owners of the parent company, up by 25.08% and 175.94% year-on-year, respectively, 1.14 percentage points and 132.79 percentage points more than the growths of the entire SSE market respectively. The companies with a market value of more than RMB10 billion contributed more than 90% of the profits of the companies on the SSE’s main board, and their operating income and net profit attributable to the owners of the parent company increased by 23.84% and 40.66% year-on-year respectively, and 10.82% and 5.74% quarter-on-quarter respectively in the second quarter, maintaining stable growth rates.
3. The performance of the companies in the industries ensuring people's livelihood was stable with improvements, and significant growths were reported by the companies in the resources sector.
In the first half of 2021, all major industries on the SSE main board were profitable, as nearly 90% of the industries reported growths in both operating income and net profit, nearly 50% of the industries recorded a year-on-year increase of more than 30% in net profit, and more than 80% of the industries made more profits than before the pandemic, showing that all the industries were running in a recovery curve. Among them, the industries of transportation and accommodation and catering found their net profits increased quarter by quarter, turning losses into profits by a large margin over the same period last year; the net profit of the culture, sports and entertainment industry grew by 1.2 times year-on-year, and by 67.26% in the second quarter from the previous one. Thanks to the continuous rebound in demand and the rising prices of industrial products, the operation of the means of production sector picked up in all aspects, as the net profits of the chemical and ferrous metal smelting and processing industries expanded by 2.17 times and 3.26 times respectively year-on-year, the net profits of the coal and non-ferrous metal industries grew by 60.80% and 95.83% in the first half of the year, and the oil extraction industry reversed the loss substantially, with its net profit increased by 54.17% compared with 2019.
The companies in the sector ensuring people’s livelihood represented by the electricity, heating, gas and water production industry and the food and beverage manufacturing industry were active in supporting national policies, stabilizing prices and guaranteeing production, and provided firm protection for economic recovery and people’s lives; at the same time, they vigorously tapped into their internal potential and reduced the expenses, as in the first half of the year, the expense ratios of the two abovementioned industries decreased by 2.03 and 1.49 percentage points year-on-year respectively, with their growth rates of net profit still at 20.92% and 22.86% respectively. In addition, the special equipment industry brought its comparative advantages into full play and continued to benefit from the increase in export demand and the acceleration of domestic product substitution, with the net profit up by 30.91% year-on-year, which was a significant growth rate.
4. Investment in innovation continued to increase, and emerging industries performed well.
In the first half of 2021, the emerging industries on the SSE’s main board achieved rapid development. Benefitting from the increase in demand for consumer electronics and the unexpected growth in demand for electrical components in emerging industries, the companies in the computer communication manufacturing industry and the software information service industry recorded a year-on-year growth rate of 42.85% and 23.07% respectively in net profit, with their total net profit amounting to RMB51.53 billion, which was much higher than the level in the same period of 2019. Specifically, 14 companies in the integrated circuit industry grew particularly strongly, with their total net profit increasing by 1.24 times year-on-year. Under the guidance of the policy of “carbon emission peaking and carbon neutrality”, the companies on the SSE’s main board continued to expand their presence in the new energy industry. Taking the photovoltaics as an example, the SSE-listed companies have formed a relatively complete upstream and downstream industrial chain so far, gathering a number of leading companies. As the companies jointly brought their advantages into full play through strategic partnership, the 11 photovoltaic equipment companies on the SSE’s main board saw their total net profit grow by 57.39% in the first half of the year. In the field of new energy vehicles, traditional auto companies have accelerated their industrial preparations toward electricity powering, intelligent driving, internet connection and shared mobility, as in the first half of the year, the sales of new energy passenger vehicles continued to rise, with an increase of approximately 330,000 vehicles year-on-year, which was an important driver pushing the overall profit of the automobile manufacturing industry up by nearly 1.4 times.
Behind the spotlight performance was the continuous increase in R&D investment. In the first half of 2021, the companies of the real economy on the SSE’s main board invested a total of RMB242.47 billion in research and development, a year-on-year increase of 39.17%, as 77 companies reported an R&D intensity (the proportion of R&D investment to operating income) of more than 10%, and the figure was higher than 20% in 24 companies. Specifically, the average R&D intensity of the six industries of computer communication manufacturing, software information service industry, equipment manufacturing, automobile manufacturing, electrical machinery manufacturing, and pharmaceutical manufacturing reached 5.67%, which was higher than the market average, and provided new impetus for the high-quality and sustained development of those industries.
5. Investment in manufacturing remained stable, and industrial upgrading was accelerating.
In the context of the steady recovery of the overall economy, the size of the investment in long-term assets of the SSE-listed companies in the real economy has steadily rebounded. In the first half of 2021, the expenditures of the companies of the real economy on acquisition and construction of long-term assets totaled RMB959.55 billion, a year-on-year increase of 9.76%. The manufacturing industry that serves as the foundation for the industrial chains of the real economy reported a year-on-year growth of 23.29%, which was higher than the overall level. Specifically, more than 80% of the manufacturing sub-industries maintained growths, and 30% of the sub-industries expanded investment by more than 50%. While the size of investment continued to swell, the efficiency of fixed asset investment also improved significantly. In the first half of the year, the fixed asset turnover rate of the manufacturing companies on the SSE’s main board stood at 179%, up by 34 percentage points year-on-year.
From the perspective of industry categories, a number of strategic emerging industries showed particularly high growths in investment, providing new support for the domestic economic circulation. The combined investment growth rate of the computer communications manufacturing, the equipment manufacturing, the pharmaceutical manufacturing and the electrical machinery manufacturing industries reached 44%, which was higher than the overall level of the manufacturing industry. Specifically, the medical equipment manufacturing and the photovoltaic equipment manufacturing became the industries propelling and leading the innovation-driven development with growth rates of 58.6% and 34.8% respectively. In traditional industries, the transition from old to new drivers of growth accelerated in all aspects, resulting in higher ranking in the growth rates of long-term asset investment. In addition, the construction materials and the iron and steel industries expanded their investment expenditures by 44% and 29% respectively in the first half of the year to promote industrial upgrading and complete technological transformation.
6. Financing costs decreased, and tax and fee cuts have taken effect.
In the past two years, driven by the macro-monetary policy, the companies of the real economy on the SSE’s main board have maintained steady growths in the financing size. In the first half of 2021, the cash inflows in financing totaled RMB5.84 trillion, with an average increase of 7.16% in the two years; after deducting the cash for debt repayment, the net inflow in financing for the real economy amounted to RMB1.18 trillion, with an average increase of 14.88% in the two years. Specifically, the direct financing was RMB630.26 billion, including RMB332.28 billion in equity financing and RMB297.97 billion in bond financing; the indirect financing represented by bank loans was RMB5.21 trillion. From the perspective of maturity, as of the end of the first half of the year, the long-term debt of the companies of the real economy accounted for 30.72% of the total, an increase of 0.56 percentage point from the second half of last year, with the financing maturity structure further optimized. The asset-liability ratio of the companies of the real economy stood at 61.96%, remaining stable compared with the beginning of the year.
While the scale of financing grew, the financing cost for the companies of the real economy was stable with decreases. In the first half of the year, the total financial expenses of the companies of the real economy on the SSE’s main board amounted to RMB186.41 billion, a year-on-year decrease of 5.60%, with the proportion of financial expenses to interest-bearing liabilities down by 0.14 percentage point year-on-year, showing that the overall financing cost was further reduced and the financial sector continued to surrender benefits to the real economy. At the same time, the benefits of the country’s tax and fee reduction policy continued to be fully reflected in the performance of the listed companies. In the first half of the year, the companies of the real economy on the main board paid a total of RMB1.15 trillion in taxes and fees, accounting for 6.76% of their operating income, a drop of 0.55 percentage point from the same period last year. Specifically, the listed manufacturing companies paid a total of RMB284.54 billion in taxes and fees, accounting for 5.26% of their operating income, down by 0.11 percentage point year-on-year. In the first half of the year, while the policy of granting an extra tax deduction of 75 percent on enterprises’ R&D costs was further implemented in the structural tax and fee reduction, the percentage was increased to 100% for manufacturing companies. The state encouraged enterprises to expand R&D investment through mechanisms of preferential tax treatment, which also cut the cost for the manufacturing and related parties, and further improved the profitability of the listed companies.
7. The listed companies actively promoted sustainable development, and made efforts to realize the goal of carbon emission peaking and carbon neutrality.
Promoting green development and advancing ecological improvement, the SSE-listed companies have stepped up the green transformation, and unswervingly followed the path of prioritizing ecological conservation and pursuing green development. In terms of energy conservation and emission reduction, the companies in the pollution-heavy industries represented by the iron and steel, petrochemical, and coal industries continued to improve production technology, increase investment in environmental protection, strengthen the construction of environmental protection projects, and carry out environmental protection improvement projects, having achieved a continuous decline in pollutant emissions on the whole.
In addition, the SSE-listed companies have actively responded to the call of the central government and adopted effective measures to fully facilitate the realization of the goals of carbon emission peaking and carbon neutrality. A total of 719 SSE-listed companies disclosed the measures taken and the results achieved to realize the goals. Specifically, China Petroleum & Chemical Corporation reduced the greenhouse gas emissions by 2.30 million tons of carbon dioxide equivalent, recycled 716,000 tons of carbon dioxide, injected 155,000 tons of carbon dioxide with the carbon dioxide flooding technology, and recycled 320 million cubic meters of methane, reducing greenhouse gas emissions by 4.8 million tons of carbon dioxide equivalent. Baoshan Iron & Steel Co., Ltd. focused on low iron-to-steel ratio, low-carbon metallurgy, green energy, and energy efficiency improvement to reduce carbon emissions, and in the first half of the year, its carbon emission intensity was estimated to decline by 3% compared with that in last year. In addition, the financial industry never weakened its support for the industries’ green upgrading. China Merchants Bank Co., Ltd. recorded an increase of 14.46% in the green loan balance in the first half of the year, which was 11.21 percentage points higher than the growth rate of corporate loans, and the green loans were mainly given to infrastructure upgrading, clean energy, energy conservation and environmental protection and other fields; the proportion of the company’s loan balance for the industries with high pollution, high energy consumption and over capacity declined continuously; the company assisted 15 companies’ issuance of 17 green bonds, with the raised funds invested in multiple energy-saving and emission-reduction projects in industries such as new energy vehicles, rail transit, and photovoltaic power generation, which strongly supported the direct financing for the companies characterized by environmental protection and low carbon emission.
8. Some companies were under pressure in development, with business risks still existing.
In the first half of 2021, although the overall situation was optimistic, there were still concerns with some companies’ operations. Affected repeatedly by the pandemic, the risks of imbalance and uncertainty in the improvement of the companies’ profitability still existed. In the first half of the year, there were 177 loss-making companies, and 66 companies’ performance fell sharply.
Specifically, on one hand, the scattered epidemic outbreaks affected the pace of recovery in some industries. Particularly, although the performance of the accommodation and catering industry was substantially restored in the first half of the year, the revenue and the net profit still declined compared to those in 2019, and there are uncertainties in the prospect of performance in the second half of 2021. On the other hand, the prices of commodities rose remarkably in the first half of the year, but the prices of end products did not rise sufficiently, and the profit of some midstream and downstream enterprises was squeezed. For example, the downstream industries such as the leather and wood processing saw a rapid increase in profits in the first half of the year due to low base figures in the same period of last year, but compared with those in 2019, the profits of the two abovementioned industries still fell by 43.55% and 63.31% respectively. Affected by factors such as rising raw material prices and insufficient supply of chips, the automobile manufacturing industry posted a quarter-on-quarter drop of 3.28% in profit in the second quarter. All these situations show that the foundation for the stabilization and recovery of some listed companies' performance is still not strong enough, and the twists and turns of the pandemic may have adverse effects on some industries that are still in the process of recovery, especially the transportation, accommodation and catering, culture, sports and entertainment industries, which calls for continuous careful observation.