Companies on SSE Main Board Disclose Third Quarter Reports

01 Nov 2021

Recently, 1,651 companies listed on the main board of the Shanghai Stock Exchange (SSE) have completed the disclosure of their reports for the first three quarters of 2021. The data show that in the face of the complex situations at home and abroad, the companies on the SSE main board demonstrated strong resilience in development. With “stability” as the keynote, the companies maintained the momentum of high-quality development in production and operation, bolstering the sustained recovery and development of the national economy.

1. The performance continued to grow steadily, and the number of profitable companies increased year-on-year.

In the first three quarters of 2021, the companies on the SSE main board recorded a total operating income of RMB33.44 trillion, a year-on-year increase of 21.43%, with the net profit attributable to the owners of parent company at RMB3.08 trillion and the net profit after deducting non-recurring gains and losses at RMB2.95 trillion, up by 27.14% and 33.45% year-on-year respectively, showing that their overall performance maintained the momentum of steady growth in the year. In the third quarter of 2021, their operating income was RMB11.37 trillion and the net profit attributable to the owners of parent company amounted to RMB1 trillion, up by 15.75% and 2.23% year-on-year respectively.

In terms of profit and loss, nearly 90% of the companies on the SSE main board made profits, with a dwindling number of loss-making companies and shrinking amount of losses. There were 1,467 profitable companies, accounting for 89% of the total, an increase of 2 percentage points from the same period last year. Specifically, more than 60% of the companies expanded their net profits year-on-year, with 30% of the companies posting an increase of more than 50%. There were 184 loss-making companies, a decrease of 25 compared with the same period last year, and 19 companies that reported losses in the first half of the year turned profitable in the third quarter; the total loss amounted to RMB94 billion, a year-on-year decrease of 3.5%.

2. The real-economy companies grew more rapidly, and the quality of profits continued to improve.

In the first three quarters, the companies of the real economy on the SSE main board recorded a total operating income of RMB26.21 trillion, a year-on-year increase of 26.49%; the net profit amounted to RMB1.35 trillion, with the net profit after deducting non-recurring gains and losses at RMB1.23 trillion, up by 52.69% and 81.27% year-on-year respectively, both of which were much higher than the overall levels of the SSE market. The net profit of the companies of the real economy accounted for 43.85% of the SSE main board, a significant increase of 7.21 percentage points from the same period last year.

The high growth in the performance of the companies of the real economy benefited from the operating efficiency improvement and the debt declines. The data shows that the return on net assets of the companies of the real economy stood at 7.89%, an increase of 2.16 percentage points over the same period last year; the receivables turnover ratio reached 7.25 times, an increase of 1.03 times year-on-year, showing that the ability to collect credit sales was significantly enhanced; the net operating cash flow went up by 50.26% year-on-year, with its proportion to the net profit at 1.18, demonstrating strong liquidity. At the end of the third quarter, the interest-bearing liabilities of the companies of the real economy accounted for 38.87% of the total liabilities, a decrease of 1.51 percentage points from the beginning of the year. Specifically, the debt ratio of the manufacturing industry was 52.3%, lower than the overall level of the companies of the real economy in the SSE market.

3. The performance of the emerging industries was impressive, with steady advancement in green and low-carbon development.

Generally, the strategic emerging industries far outperformed the traditional industries. Specifically, in the first three quarters, both the aerospace equipment and the electrical machinery manufacturing industries recorded a year-on-year growth rate of more than 40% in net profit; in the same period, the semiconductor companies saw their net profit doubled, with a year-on-year increase of 83.07% in the third quarter. The computer communications manufacturing industry registered an increase of 38.58% in net profit in the first three quarters, with a quarter-on-quarter jump of 75.87% in profit. The sustained and rapid growth of business performance formed a positive cycle with the R&D spending and industrial investment. The R&D investment of six industries, namely computer communications manufacturing, software information services, equipment manufacturing, automobile manufacturing, electrical machinery manufacturing, and pharmaceutical manufacturing, accounted for nearly 40% of the total of the industries of the real economy, with the ratio of the R&D expenditure to operating revenues exceeding 10% in 60 companies, and 17 companies reporting a ratio of more than 20%. Expenditures of relevant industries in the acquisition and construction of long-term assets for expansion of production totaled RMB198.6 billion, a year-on-year increase of 30%, which surpassed the overall level of the companies of the real economy by 18.96 percentage points.

Especially worth mentioning was that the SSE-listed companies actively responded to national policies, and the industries related to green and low-carbon development provided strong support for the continuous advancement of carbon peaking and carbon neutrality with their excellent performance. Companies in environmental protection, new energy power generation and other industries achieved rapid growth in performance, as they benefited from the implementation of the philosophy of green development. In the first three quarters of the year, the photovoltaic equipment industry, an upstream industry for new energy power generation, posted a year-on-year increase of 36.11% in net profit, and a quarter-on-quarter growth rate of 21% in the third quarter; the companies in the downstream of the new energy power generation industry saw both the operating income and the net profit increase by more than 20.56% year-on-year; the environmental protection industry expanded their operating income and net profit by 27.09% and 33.78% year-on-year respectively in the first three quarters of the year.

4. Export remained resilient, and the consumption for everyday life drove the growth.

In the first three quarters, more than 120 export-oriented companies on the SSE main board registered a total operating income of RMB872.32 billion, a year-on-year increase of 15.45% and a compound annual increase of 10.23% over 2019. Those companies demonstrated strong export competitiveness with sufficient orders and performance growths. It should be noted that due to multiple factors such as the weak demand in the overseas market, and shortage and rising prices of raw materials, the operating income of the aforementioned companies fell by 7.37% year-on-year and 17.75% quarter-on-quarter in the third quarter.

The third quarter of the year saw the resurgence of the coronavirus epidemic and some flood-affected areas. However, with the timely implementation of various prevention and control measures, household consumption showed a strong momentum of recovery. In the first three quarters, the operating income of the food processing, beverage manufacturing, clothing and home textiles, and culture and media industries grew by 13.28%, 20.60%, 14.53% and 17.59% respectively, with their net profits increased by 13.18%, 20.65%, 201.99% and 106.16% respectively. Consumption was further invigorated and the potential of demand was adequate.

5. The tax cuts in the manufacturing industry took effect, with a stronger sense of gain among small and medium-sized enterprises.

In terms of financing costs, the ratio of cash interest payments to the average interest-bearing liabilities of the manufacturing companies on the SSE main board was 4.07% in the first three quarters, a decrease of 0.34 percentage point from the same period last year. Turning to taxes and fees, in the first three quarters, the manufacturing companies paid a total of RMB416.09 billion in cash for taxes and fees, accounting for 4.99% of the operating income, a decrease of 0.04 percentage point from the same period last year, showing that the tax and fee reduction policies were taking effect.

Since the beginning of this year, the rising prices of raw materials and labor costs have put small and medium-sized manufacturing enterprises under operating pressure. At the state level, the supportive policies such as inclusive finance and direct transfer of fiscal funds were introduced in a timely manner to provide targeted assistance for small and medium-sized enterprises to reduce their burden of taxes and fees. In the first three quarters, the financing costs of the SSE-listed small and medium-sized manufacturing companies with a market value of less than RMB10 billion decreased by 0.73 percentage point year-on-year, which was 0.39 percentage point more than the overall decline for the manufacturing industry; their tax and fee costs shrank by 0.16 percentage point year-on-year, 0.12 percentage point more than the overall level for the manufacturing industry, giving the small and medium-sized enterprises a stronger sense of gain.

6. The pace of growth slowed down to some extent, with some industries under operating pressure.

Although the overall performance of the SSE’s main board was improving in the first three quarters, the market-wide operating income and net profit attributable to the owners of parent company declined by 1.92% and 6.38% respectively in the third quarter from the previous one. At the industry level, overshadowed by macro-control policies and the tight supply of raw materials, some industries found themselves under more operating pressure. For example, the thermal power companies suffered large losses in the third quarter due to short supply and sharp price increases of coal, with four of the companies posting a loss of more than RMB1 billion; the real estate industry saw their net profit tumble by 45.55% year-on-year in the first three quarters. Despite the year-on-year performance growths in the first three quarters, the building materials industry, which is closely related to the real estate industry, suffered decline in both operating income and net profit in the third quarter from the previous one, putting their performance under significant pressure. In addition, a small number of companies are obviously hollowing out and lack the ability to self-rescue, and may thus face delisting.