The FINANCIAL -- As of August 31, 2018, all 2116 SZSE-listed companies, excluding ST Changsheng Bio-technology, have disclosed their 2018 semi-annual reports.
Statistics show the following achievements: the SZSE-listed companies continue to deliver rapid performance growth in the first half of 2018; the multi-tiered market has greater capacities to serve the real economy; most industries achieve growth, while the manufacturing sector shows a sign of slowdown; new economy and new momentum have accelerated their formation and state-owned enterprises (SOEs) continue to become better and stronger; cutting overcapacity and strengthening areas of weakness have made good progress, and the supply-side structural reform continues to deepen; the cash flow of enterprises in the real economy sector has improved significantly, and M&A and restructuring have improvements in quality and efficiency. In sum, these listed companies have earnestly fulfilled their social responsibilities to jointly build a Beautiful China.
Three Sectors Develop in a Coordinated Way and Continue to Maintain Steady Growth
In the first half of 2018, SZSE-listed companies achieve a total operating income of CNY5.41 trillion, a year-on-year increase of 17.24%. The net profit attributable to shareholders of the parent company (hereinafter referred to as "net profit") reaches CNY396.35 billion, scoring a year-on-year increase of 16.86%.
The profitability of companies on the Main Board, where many traditional industry leaders and SOEs are listed, has enhanced significantly. 474 companies have achieved an average operating income of CNY5.848 billion, a year-on-year increase of 11.90%, and an average net profit of CNY409 million, a year-on-year increase of 19.16%.
On the SME Board, main platform for the champions of subdivided SME businesses, companies continue to grow under the circumstances of industrial transformation and upgrade. The average operating income of 912 companies taps CNY2.3 billion, growing 21.29% year-on-year; and the average net profit reaches CNY163 million, increasing 13.57% year on year.
On the ChiNext Board dominated by high-tech companies, the performance further improves. 730 companies achieve an average operating income of CNY810 million, 19.92% increase year-on-year, and an average net profit of CNY75 million, 8.13% increase year-on-year.
Most Industries Have Achieved Growth, with Slowdown in the Manufacturing Sector
Among the 19 industries to which SZSE-listed companies belong, 17 industries achieve a year-on-year increase in operating income and 13 industries in net profits. Those manufacturing companies, accounting for nearly 70% of the SZSE-listed companies, achieve the growth of 17.46% and 14.83% in their operating income and net profit respectively.
Due to unfavorable factors such as rising cost of raw materials, demand decline from downstream customers and fluctuation in exchange rates, the performance of some sub-sectors declines slightly. In particular, the net profit of electrical machinery and equipment manufacturing sector increases only 7.33%, and that of the computer, communications and other electronic equipment manufacturing sector decreases by 23.82%.
Strategic Emerging Industries Gain Great Momentum, and SOEs Show Rapid Growth
Among the SZSE-listed companies, 957 companies from strategic emerging industries have effectively transformed scientific and technological achievements into actual productivity through the innovation in technology, products and services. The average operating income and net profit of these companies grow by 23.32% and 20.77% respectively, showing strong profitability and development potential.
It is worth noting that the SOEs listed on the SZSE have comprehensively promoted SOE reform. With the help of capital market platforms, they integrate resources and improve quality and efficiency through various methods such as debt-to-equity swap pilots, asset securitization, and specialized restructuring. In the first half year, the total operating income of these companies reaches CNY1.94 trillion, an increase of 17.53% year on year. Their total net profit taps CNY147.823 billion, a year-on-year increase of 32.03% year. These showcase the solid scale base and strong profitability of SOEs.
Cutting Overcapacity and Strengthening Weakness Areas Deliver Fruitful Results, and Supply-side Structural Reform Continues to Deepen
In the first half of 2018, the fixed assets plus construction in progress (CIP) assets of SZSE-listed companies reach CNY4.12 trillion, accounting for 18.49% of the total assets, a year-on-year decrease of 2.36%. In addition, the growth rate of fixed asset investment is on the track of decline in industries featuring excessive consumption and emissions (such as the coal, steel, and chemical fiber industries).
R&D efforts continued to intensify, as R&D expenses totaled CNY121.906 billion (up 17.92% year-on-year), accounting for 2.27% of the operating revenue (up 0.12% year-on-year). The R&D investments of ZTE, BYD and BOE etc. reached CNY5.061 billion, CNY3.719 billion and CNY3.645 billion respectively.
ZSE-listed companies increases by 2.48% compared to that at the beginning of the period. The average asset-liability ratio is 66.32%, up 0.27% compared to that at the the beginning of the period. Therefore, SZSE-listed companies are still facing great pressure in “de-stocking”, “de-leveraging” and “cost reduction”. Deepening supply-side structural reform, improving business environment, solving corporate financing problems and reducing production and operation costs are still the actual needs of enterprises.
Cash Flow of Entity Enterprises Improves and Financing Environment Needs Optimizing
In the first half of the year, the net cash flow generated by the operating activities of entity enterprises totals CNY121.3 billion, a significant increase from the CNY49.6 billion of the same period last year. However, in the macro environment of tight liquidity, the cost of capital has risen. After the financial industry and real estate are excluded, the average financial cost was CNY37,674,100 (up 18.69% year-on-year), accounting for 1.67% of the operating revenue (up 0.1% year-on-year).
Due to the impact of the overall valuation drop of the market, the difficulty of financing increases. The number of SZSE-listed companies that implemented refinancing through non-public offering and rights issue is 243, an increase of 3.4% year-on-year; but the amount raised, CNY203.737 billion, is a sharp drop of 48.65% year-on-year.
M&A and Restructuring Improve in Quality and Efficiency and Industrial Factors Lead Rational M&A.
M&A and restructuring continues a good trend. The quality and efficiency improvement gets more obvious and the quality ratio more reasonable. In the first half of the year, 206 SZSE-listed companies have planned major asset restructuring; 82 companies have disclosed major asset restructuring plans; and the transaction amount involved reaches CNY248.3 billion, basically flat with the same period of last year. However, the average single transaction amount is about CNY3 billion, up 22% over the same period of last year. In addition, some companies have gradually accepted the market-based pricing mechanism and no longer relied excessively on trading suspension to lock down the issued share price. They have smoothly and orderly promoted restructuring based on the principle of disclosure by stage and have not applied for share major asset reorganization and suspension.
Although the number of restructuring does not increase significantly, the quality and structure have improved greatly. There have been a number of cases featuring typical industrial logic, value orientation and reform demonstration. They focus on the main industry to carry out M&A of the upstream and downstream of the industrial chain and actively deploy new economic fields such as the Internet, cloud computing, AI, biomedicine, and high-end equipment manufacturing. One instance is that Jiangsu Hagong Intelligent Robot Co., Ltd. acquired an auto welding equipment manufacturer to enrich its technology and talent reserves in the field of high-end intelligent equipment and improve its flexible multi-model production capacity.
Social Responsibilities Earnestly Fulfilled to Jointly Build a Beautiful China
SZSE-listed companies have earnestly practiced their social responsibilities and become an important force in improving people's livelihood and building a beautiful China. In the first half of 2018, the amount of taxes paid totals CNY413.786 billion and the 8,095,300 jobs have been created. The staff salary paid amounts to CNY554.918 billion. Besides, the total investment in environmental protection reaches CNY15.246 billion, up 17.46% year-on-year. 46 companies have disclosed the interim cash dividend plans, with a total of CNY12.979-billion dividend involved (up 113.50% year-on-year).
349 SZSE-listed companies have disclosed information about targeted poverty alleviation. The accumulated total of CNY21.625 billion has been directly invested in poverty alleviation to facilitate the winning of poverty alleviation battle through industrial development and education.