Stabilized Growth, Balanced Structure and Better Returns-SSE Main Board Companies Completed the Annual Report of 2021
As of April 30, 2022, except for 4 companies including Shanghai Topcare Medical Services Co., Ltd., all 1,667 listed companies on SSE main board have completed the disclosure of their 2021 annual reports. Data shows that in the first year of the "14th Five-Year Plan", with strong support of national policies, the Shanghai-listed companies have overcome the influence of multiple unfavorable factors and maintained stable growth in overall business performance, which played an important role in stabilizing the economy, promoting employment, and protecting people's livelihood. These companies have become the backbone for the sustained and stable recovery of China's economy.
The overall performance maintained steady growth, and 70% of the companies exceeded the pre-epidemic level
In 2021, the main board companies on SSE registered a total operating income of 47.07 trillion yuan, an increase of 18% year-on-year, accounting for more than 40% of China's total GDP. Their net profit attributable to the parent company hit 4.04 trillion yuan and net profit after deducting non-recurring gains and losses reached 3.81 trillion yuan, an increase of 23% and 28% respectively. The two-year compound growth rate of the three main indicators reached 10%, 10% and 9% respectively, maintaining a continuous recovery trend.
In terms of profitability, 1,451 companies achieved profits, accounting for 87%, and among them 1,371 companies achieved profits from main businesses, accounting for 82%. Over 80% of companies expanded their operating income, and over 60% of companies achieved net profit growth. Compared with the year of 2019 which was before the epidemic, more than 70% of companies’ operating income and 60% of companies’ net profit achieved growth.
By quarter, the year-on-year growth rates of revenues from Q1 to Q4 were 26%, 22%, 14%, and 9%, respectively, and the year-on-year growth rates of net profits were 45%, 42%, 2%, and 10%, respectively. The trend shows that the growth rate of performance in the third quarter slowed down, but it improved in the fourth quarter, and revenue increased by 9.1 percentage points month-on-month. Among them, the effect of tax and fee reduction has gradually taken effect. In 2021, the main board companies on SSE paid a total of 2.14 trillion yuan in taxes and fees, accounting for 5.7% of operating income, a year-on-year decrease of 0.3 percentage points.
The structure has been continuously optimized and upgraded, and the state-owned and private enterprises have developed in a balanced manner
Driven by both propellers of supply-side structural reform and innovative development strategies, the industrial structure of companies listed on SSE main board has been continuously optimized. In 2021, the performance of companies have grown strongly, with a total operating income of 37.61 trillion yuan, net profit attributable to the parent company of 1.81 trillion yuan, and net profit after deducting non-recurring gains and losses of 1.59 trillion yuan, up by 21%, 44%, and 62% year-on-year, respectively, much higher than the overall level of SSE main board companies. Among them, the proportion of manufacturing industry in the overall performance continued to increase, and its contribution to the net profit of SSE market increased by 2.2 percentage points year-on-year. The two-year average growth rate of net profit of high-tech industries represented by electrical equipment, pharmaceutical manufacturing, and aerospace reached 15%, 5.5 percentage points higher than the overall growth rate. In addition, the tertiary industry has gradually recovered with steadily improved operation quality, and its contribution to the profits of real enterprises has increased by 2.6 percentage points.
For SOEs and private companies, the SOEs listed on SSE main board have contributed a total of 38.90 trillion yuan in operating income and 3.56 trillion yuan in net profit attributable to the parent company in 2021, an increase of 18% and 21% year-on-year respectively. Among them, the state-owned listed companies under the State-owned Assets Supervision and Administration Commission of the State Council achieved a total operating income of 19.69 trillion yuan and a net profit of 0.97 trillion yuan, a year-on-year increase of 22% and 41% respectively. The momentum of high-quality development has become more obvious. Comparatively, private enterprises show a faster growth rate. In 2021, private companies on SSE main board have achieved an operating income of 8.17 trillion yuan and a net profit of 0.47 trillion yuan, with a year-on-year growth rate of 15% and 49% respectively.
More than 70% of the industry's performance has grown, and 20% of the industry has yet to be repaired
In 2021, all major industries on SSE main board have achieved profits. Over 70% of the industries registered growth in both operating income and net profit. 40% of the industries’ profits grew by over 30% year-on-year, and nearly 80% of the industries exceeded the level of the same period in 2019. However, 20% of the industries were still recovering.
Driven by economic recovery, higher demand and rising raw material prices, the upstream cyclical industries generally have seen profits improved: the net profits of the oil mining industry has more than doubled; non-ferrous metal mining and dressing industry has doubled profits; and the coal industry’s profits have increased by 87% year-on-year. In Q4, under the background of stable supply and price, the net profit of related industries declined to a certain extent, down by 32%, 23%, and 15% from the previous quarter.
Companies in the midstream manufacturing industry have seen performance varied due to their different positions in the industrial chain. The chemical and steel industries at the upper end of the spectrum have logged net profit growth rates of 135% and 92% respectively. In contrast, industries at the middle and lower end of the chain were affected by different downstream demand drivers, taking varied degree of material price transmission. Hence some companies faced higher costs pressure. The operating income of general equipment and special equipment industry maintained steady growth (an increase of 11% and 14% year-on-year), but their net profits decreased. The computer manufacturing industry has fully benefited from the increase in demand for downstream electronic components, and its net profit has increased by 20% year-on-year and by 50% compared with 2019. Electrical machinery benefited from the accelerated development of the new energy power generation industry, with a year-on-year increase of 27% in net profit and an 80% increase from 2019.
The downstream terminal consumer industry has recovered as a whole, but under the disturbance of multiple factors, some industries were still facing difficulties. While people-mobility-intensive industries have done a good job in epidemic prevention and control, they have actively improved operation. The accommodation and catering industry has turned losses into profits. The net profit of wholesale and retail, and cultural, sports and entertainment industries has increased by 55% and 1.19 times year-on-year respectively.
The pharmaceutical manufacturing industry was driven by factors such as the large demand for vaccines and testing reagents at home and abroad, and the overall net profit increased by nearly five times. In the home appliance industry, both emerging categories of home appliances and traditional home appliances have grown significantly, and net profit has increased by 34% year-on-year. Under the influence of factors such as rising material prices and lack of chips, the automobile manufacturing industry's net profit fell by 3%. The air transport industry has not yet achieved a turnaround, and there is still uncertainty about performance recovery.
The investment in innovation continues to increase, and the transformation and upgrading are accelerated
In 2021, with higher R&D investment, the SSE main board companies have further strengthened their efforts to lead innovation-driven development. Data shows that the R&D intensity of companies has maintained positive growth for three consecutive years, with a total R&D investment of 700.6 billion yuan in the whole year, a year-on-year increase of 26%. Among them, 107 companies invested more than 1 billion yuan in R&D, and 13 companies including China State Construction, SAIC, and China Mobile invested more than 10 billion yuan in R&D. The R&D intensity of 86 companies exceeds 10%, promoting the continuous acceleration of domestic substitution, and the digital and intelligent level of traditional industrial process innovation was steadily advancing. In scientific and technological innovation, the use of equity incentives became more common. SSE-listed main board companies launched 323 draft equity incentive and employee stock ownership plans throughout the year, a significant increase of 81% year-on-year, covering 108,000 incentive objects, a year-on-year increase of 44%. Among them, the participation of SOEs equity incentives increased by 14%. Nearly 40% are technological innovation-leading companies in pharmaceutical biology, chemical industry, automobile manufacturing, and electronic equipment.
In the same time, the pace of transformation and upgrading of listed companies through mergers and acquisitions was also accelerating. In 2021, more than 60 companies on SSE main board have disclosed major asset restructuring plans, involving a transaction amount of nearly 130 billion yuan, and emerging industries such as new energy power generation, environmental protection and water conservation, computer communications, and semiconductor materials account for more than 40%. Typical cases include the acquisition of two hydropower stations in Wudongde and Baihetan by Yangtze Power by issuing shares and directional convertible bonds, focusing on low-carbon and clean energy, further increasing the installed hydropower capacity of listed companies, and consolidating the status of a giant in the world's hydropower industry. SinoADL completed the transformation from the traditional department store retail industry to the battery industry through M&A, and quickly entered a high-growth track. China Energy Construction Co., Ltd. absorbed and merged with Gezhouba, which not only solved the problem of horizontal competition, but also streamlined management and improved operating efficiency. Power Xinke invested in heavy-duty trucks and diesel engine assets to form an integrated development pattern of "heavy-duty trucks + powertrain".
Cash dividends hit a record high, and performance briefings became the norm
While achieving performance growth, SSE main board companies paid more attention to benefiting investors. A total of 1,221 companies launched dividend distribution plans throughout the year, accounting for 84% of all profitable companies. The total cash dividend distribution was close to 1.48 trillion yuan, a significant increase of 26% over 2020. In terms of proportions, the proportion of cash dividends of 903 companies exceeds 30%, accounting for 74%. 696 companies have paid dividends of more than 30% for three consecutive years, and about 203 companies have paid dividends of more than 50% for three consecutive years. In terms of amount, 157 companies distributed more than 1 billion yuan, and 26 distributed more than 10 billion yuan. From the perspective of dividend yield, the average dividend yield of main board companies has increased year by year. Based on the closing price at the end of the year, the average dividend yield in 2021 was 1.44, an increase of 8% year-on-year. There were 94 companies with a dividend yield of more than 5%, involving banking, transportation and mining, etc. 20 companies registered a dividend yield of more than 5% for three consecutive years. At the same time, the share repurchase efforts were further intensified. A total of more than 150 share repurchase were implemented throughout the year, with a total repurchase amount of about 44 billion yuan. Among them, about 90% of the company's repurchase purpose was to implement equity incentives or employee stock ownership plans, demonstrating the company's firm confidence in long-term intrinsic value.
On the other hand, more and more companies communicated with investors directly and took a variety of innovative ways to actively update their company performance. Since entering the annual reporting period, over 1,600 companies on SSE main board are expected to hold performance briefings, achieving full coverage for main board companies. In order to enhance the interaction effect and the sense of gain for investors, SSE main board companies make full use of digital technology to visually display the company's operations and performance. Among them, more than 60% of the companies produced short videos or long pictures and texts of visual annual reports, and companies such as China Unicom and Kweichow Moutai adopted the form of "cloud visit" to lead investors into the company's production and operation sites. Around the 6 "theme weeks" of the performance briefing, professional analysts carried out 12 industry interpretation series programs, and investors have a deeper understanding of the industry and the company. The events were attended by chairman, general manager and other management of listed companies, elaborated by professional analysts, and widely participated by retail investors. Among the 600 performance briefings already held by listed companies, over ten millions investors participated.
Investment unabated and exports continued to grow
In 2021, SSE main board companies raised about 11.27 trillion yuan, and among them, the scale of direct financing was 1.5 trillion yuan, a year-on-year increase of 3%. There were 87 new listed companies in the year, with initial financing of 162.5 billion yuan, a year-on-year increase of 35%. The non-public issuance market continued to increase activity, with the number of issuers increasing by 64% year-on-year to 138, and the total fundraised reaching 251.9 billion yuan. Funds raised through convertible bonds was 163.1 billion yuan, a year-on-year increase of 19%. In terms of bond financing, the SSE bond market has played an active role. In 2021, about 260 billion yuan was raised through bond issuance for entities listed on the SSE.
Stable financing channels further enhance the investment confidence of enterprises. In 2021, the long-term asset investment of SSE-listed companies hit 2.55 trillion yuan, a year-on-year increase of 5%. Among them, the scale of investment in manufacturing was 0.68 trillion yuan, a year-on-year increase of 26%, which was 21 percentage points higher than the growth rate of investment in real enterprises. The growth of investment in high-tech industries was encouraging. The investment scale of 266 high-tech industry companies is 0.2 trillion yuan, a year-on-year increase of 35%, which was 30 percentage points higher than the growth rate of investment in real enterprises. Building materials, electronic equipment, and electrical equipment increased by 50%, 47%, and 38% year-on-year, respectively, maintaining a relatively high level. In addition, investment in machinery and equipment and automobile manufacturing increased by 28% and 26% respectively, maintaining rapid growth.
Thanks to the stable domestic supply system, the net profit of over 120 export-related companies on SSE main board totaled 60.2 billion yuan, a year-on-year increase of 38%. Among them, the net profit of the textile and garment industry, which was highly dependent on exports, achieved a year-on-year growth rate of 15%. Port companies directly related to exports also increased. The three major port companies of Shanghai Port Group, Ningbo Port and Qingdao Port completed cargo throughput of about 2.1 billion tons and container throughput of about 105.05 million TEUs, a year-on-year increase of 4% and 8% respectively.
The effect of stabilizing employment and benefiting people's livelihood was obvious
The SSE main board companies continue to play their role in stabilizing employment. In 2021, the number of new employees hit around 240,000, and the overall number of employees reached 16.7 million, accounting for 2.22% of the total number of employees in China, up from 2.19% in 2020. Measured by the proportion of GDP, these companies provided jobs indirectly to more than 200 million people, accounting for nearly 30% of the national employment population. Among them, manufacturing employment accounted for 34%, an increase of 4% year-on-year, and the growth rate was leading all industries. The number of employees in industries such as automotive equipment, medicine, computer communications, electrical machinery and equipment exceeded 400,000 persons. Stable economic growth has boosted employment and vice versa.
In addition, faced with rising material prices and epidemic, a batch of SSE main board companies which are related to China’s national economy and people's livelihood actively cooperated to stabilize supply and prices, and made every effort to ensure people's well-being through cost reduction and efficiency improvement. With thinner gross profit margin, food manufacturing and beverage manufacturing industry has reduced expense ratio by 2.9 percentage points and 0.7 percentage points respectively. Wholesale and retail, delivery and storage, accommodation and catering and other industries that meet the basic needs of people's travel and consumption managed to overcome the impact of the epidemic and achieve a year-on-year reduction of 0.8, 1.0, and 3.8 percentage points in expense ratios, maintaining service prices within a reasonable range. To deal with greater upward pressure on costs, the electric heating and water production industry strives to reduce various expenses. The expense ratio is reduced by 0.2 percentage points year-on-year to ensure the stable operation of basic energy. The five largest thermal power companies, namely Datang Power Generation, Huaneng Power International, Huadian Power International, Guodian Power and Shanghai Electric Power Co., Ltd. have completed a cumulative power generation of 1.48 trillion kWh, a year-on-year increase of 9%. The infrastructure industry represented by China Railway Construction Corporation and China Railway Group leverages its own advantages and continues efforts in construction projects related to people’s livelihood including railways, highways, housing construction and water conservancy in Yunnan, Guizhou and other places. With these projects completed and put into operation, local people can enjoy better life and the convenience of travel.
Substantial growth in ESG information disclosure, and continuous consolidation of support for poverty alleviation
In 2021, SSE main board companies have implemented the dual-carbon goals and made positive progress in green development. More than 770 companies disclosed ESG reports, sustainability reports or social responsibility reports in 2021, and the number of ESG disclosures reached a record high. About 970 companies voluntarily released in their annual reports the measures they have taken to reduce carbon emissions and their effects. Data shows that nearly 1,300 companies have established environmental protection related mechanisms and invested a total of 169.2 billion yuan in environmental protection funds, and about 1,200 companies have taken carbon reduction measures, reducing carbon dioxide equivalent emissions by a total of about 100.8 million tons. Efforts in environmental protection and emission reduction have grown substantially. Companies in key industries such as iron and steel, chemicals, coal, and electric power have practiced the concept of green development by adjusting product structures, innovating process technologies, and improving monitoring mechanisms. For example, Huaneng International vigorously promoted the development and construction of new energy projects such as photovoltaics and wind power, and the proportion of installed capacity of low-carbon and clean energy increased to 22% during the reporting period. China Shenhua established a sound climate risk identification system, formulated carbon emission management goals and reviewed them on an annual basis Emission progress. Baosteel has improved its carbon reduction process technology, and is preparing to build a million-ton hydrogen-based shaft furnace with full hydrogen process test conditions. In the future, carbon emission of long production line will be reduced by more than 90%.
For social responsibilities, SSE main board companies responded to the call of the state and actively supported the continuous consolidation of the achievements of poverty alleviation by participating in targeted projects, accumulating momentum for rural revitalization and construction. In 2021, Shanghai-listed main board companies invested nearly 52.1 billion yuan in poverty alleviation funds and materials, of which more than 550 companies responded to the call of rural revitalization, actively carried out industrial poverty alleviation projects, and supported poverty-stricken counties to develop featured industries. Nearly a thousand companies have contributed through target assistance projects, offering employment, attracting consumers to purchase the products and services of poor areas and providing much-needed education to people in poor districts.
The proportion of institutional investors increased year by year, leading to a more balanced market structure
In 2021, the stock trading of SSE main board companies remained active. The annual trading volume is 8.36 trillion shares, a year-on-year increase of 27%, and the turnover is about 103.07 trillion yuan, a year-on-year increase of 34%. The average annual turnover rate is about 3.72, which is basically the same as that in 2020. Among them, the transaction scale of blue-chip companies continued to grow, and the transaction activity of leading companies increased significantly. The annual transaction volume of companies with a market value of more than 50 billion yuan at the end of the year exceeded 50 trillion yuan, accounting for nearly half of the transaction value, an increase of 55% year-on-year. LONGi Co., Ltd., COSCO Shipping Holdings Co. Ltd and other 7 companies register an annual turnover of more than one trillion yuan.
With more active trading, the proportion of institutional investors has also increased. Data shows that by the end of 2021, market value of professional institutional investors' holding in the tradable shares of SSE main board companies totaled at about 10 trillion yuan, an increase of nearly 25% year-on-year. Transactions accounted for about 35%, an increase of about 7 percentage points year-on-year. The annual average daily turnover was 330.1 billion yuan, a year-on-year increase of 147.5 billion yuan, an increase of 81%. Among them, fund investors (public and private funds) held a market value of 4.6 trillion yuan, a year-on-year increase of 77%. Their shareholding accounted for about 10%, an increase of 3 percentage points year-on-year. The annual average daily turnover was 199.3 billion yuan, a year-on-year increase of 95%.
Significant results in risk mitigation and strong implementation of the delisting system
With the guidance of the CSRC, the overall risk of SSE main board companies has been further reduced, laying a solid foundation for high-quality development. In terms of "clearing debts and releasing guarantees", more than 60 companies on SSE main board solved the problem of capital occupation throughout the year, with a cumulative amount of more than 78 billion yuan. Over 20 companies solved the problem of illegal guarantees, with a cumulative amount of more than 62 billion yuan. During the 2021 annual report period, the number of new companies found to have occupation guarantees on SSE main board decreased by about 60% compared with 2020. In terms of equity pledge, at the end of 2021, the number of companies with stock pledges on SSE main board decreased by more than 50 compared with the beginning of the year, and the number of high-proportion pledged companies decreased by more than 30% compared with the beginning of the year, a drop by 2/3 compared with the peak level. At the end of the year, the pledged balance to be repaid was 780.6 billion yuan, a decrease of 51.5 billion yuan compared with the beginning of the year. The overall performance of guarantee increased by more than 16 percentage points compared with the beginning of the year, and the default risk was significantly alleviated.
In 2022, the new delisting regulations take effect. Up to now, 21 delistings of various types are expected. Among them, it is expected that 17 companies will be terminated from listing once relevant financial delisting indicator is triggered, and among them 9 will be delisted since the financial portfolio indicator of "deducting non-net profit + operating income" is triggered. In addition, the delisting of Xinyi involved major illegal delisting, and three companies including SinoADL and *ST Guangzhu exited through diversified channels such as restructuring and active delisting. Up to now, the number of delistings has increased by 50% compared with 2021, of which the number of forced delistings has increased by 125%, and the delisting rate of companies with delisting risk warnings has reached about 45%. Another 13 companies have been marked with*ST and 28 companies marked with ST. A benign mechanism for screening out quality listed companies is taking shape.
The performance in 2022 Q1 is under pressure, while the resumption of work and production is advanced in an orderly manner
In 2021, affected by factors including changes in internal and external environment and repeated local epidemics, the recovery of various industries and enterprises was uneven, and some enterprises faced greater operating pressure. On SSE main board, 216 companies lost money, with a total loss of 250.5 billion yuan, basically the same as in 2020. Real estate, air transport, and thermal power companies experienced significant operating pressures, with a total loss of 143.9 billion yuan. In addition, although the manufacturing industry has recovered, due to the increase in raw material prices, the net profit of 20% of the sub-sectors such as automobile manufacturing, rubber products industry, and wood processing industry has not been restored to the pre-epidemic level.
In the first quarter of 2022, SSE main board companies achieved an operating income of 12.03 trillion yuan, a net profit of 1.13 trillion yuan, and a net profit after deducting non-recurring gains and losses of 1.08 trillion yuan, with year-on-year growth rates of 12%, 8%, and 10% respectively. Affected by multiple factors such as the epidemic, 308 companies suffered losses, and 625 companies saw a year-on-year decline in profits. The total number of companies that saw loss or decline in profits accounted for 56%, and the proportion climbed compared with the same period last year. Among them, a small number of companies temporarily suspended production due to the impact of the epidemic. Affected by the limited supply of the industrial chain, industries such as automobiles and computer communications have experienced a phased decline in capacity utilization. Profits in the first quarter fell by 17% and 14% year-on-year.
It is reported that as of the end of April, thanks to various policies to promote production resumption, more than 70% of the companies that were trapped in the early stage of the epidemic and suspended operation have resumed production and work, and the overall recovery is relatively clear.