As of October 31, 2024, 2,265 listed companies on Shanghai Stock Exchange (SSE) have disclosed reports for the first three quarters of 2024. Data showed that due to existing and new policy implementation and proactive efforts by listed companies to improve quality and efficiency, the overall business performance recorded marginal improvement and bounced back to a growth track, which proves that the national economy is stabilizing.
I. Performance Growth Again
In the first three quarters of 2024, listed companies on the SSE achieved a total operating revenue of RMB 37.48 trillion, marking a slight year-on-year decrease of 1.2%. Net profit was RMB 3.61 trillion, and net profit after deducting non-recurring profits or losses stood at RMB 3.45 trillion, up 1.8% and 2.2% year-on-year. The growth rate turned from negative to positive compared with that in the first half of the year and resumed growth. On a quarterly basis, the marginal recovery trend in the third quarter was obvious. The net profit and net profit after deducting non-recurring profits or losses increased by 8.3% and 7.8% respectively on a year-on-year basis, which were 7.3 percentage points and 5.4 percentage points higher than those in the second quarter on a year-on-year basis, and increased by 5.6% and 4.6% respectively compared with that in the second quarter.
The net profit of social service, non-bank finance, agriculture, forestry, animal husbandry and fishery, nonferrous metals, electronics, automobile and other industries increased rapidly year-on-year in the first three quarters. The year-on-year decline rate of construction materials, real estate, computer, commerce, trade and retail and other industries narrowed down in the first three quarters. The quarter-on-quarter growth rate of transportation, agriculture, forestry, animal husbandry and fishery, power equipment and other industries was strong in the third quarter. Various information shows that the operating data of many industries in September was impressive. Revenue of more than half of the companies in September hit the highest among the first 9 months of the year, and net profit of nearly 40% of the companies hit the highest in the first 9 months of the year.
Revenue of private enterprises stopped falling and recovered. The revenue in the first three quarters increased by 2.5% year-on-year, of which the revenue in the third quarter increased by 2.5% year-on-year and 2.4% quarter-on-quarter. The net profit decline was reduced by by 1.2 percentage points year-on-year compared with the first half of the year, and the figure in the third quarter was reduced by 5.7 percentage points year-on-year, with the net profit in the third quarter increasing by 2.8% quarter-on-quarter. Central and state-owned enterprises made steady progress. Net profit and net profit after deducting non-recurring profits or losses increased by 4.1% and 4.4% respectively on a year-on-year basis.
Listed companies on the SSE actively fulfilled their main responsibilities, which is the main driver for their performance growth. Since the beginning of this year, more than 1,100 companies have disclosed the special action plan of "corporate value and return enhancement", covering 80% of companies on SSE 50, SSE 180 and STAR Market. The overall profit improvement and share price performance are better than the average level of the SSE. Good performance has driven the medium-term cash dividend to a new high. A total of 88 companies have made dividend plans for the first three quarters, marking a nearly 4 times year-on-year increase. The total amount of cash dividends exceeded RMB 9 billion, up 80% year-on-year. More investors are expected to get real money before the Spring Festival.
II. Gradually Effective Policies
A package of policies has continued to yield remarkable results. The "trade-in" policy stimulated consumption vitality, and the sales of key consumer goods such as automobiles and household appliances increased significantly. The net profit of the automobile industry in the first three quarters increased by 17% year-on-year, and that of 5 passenger vehicle enterprises increased by 11% year-on-year. Among them, new energy vehicles have a prominent driving effect. Guangzhou Automobile Group Co., Ltd., SAIC Motor Corporation Limited and Great Wall Motor Company Limited all achieved double-digit month-on-month growth in sales of new energy vehicles in September. Seres Group Co., Ltd. turned its losses into profits significantly, with cumulative sales of new energy vehicles increasing by 364% year-on-year in the first three quarters. In terms of home appliances, the end-user retail sales of Haier Smart Home Co., Ltd. improved month by month in the first three quarters, and the net profit increased by 15% year-on-year in the first three quarters. Beijing Roborock Technology Co., Ltd. launched a number of new products, driving revenue growth by 23% year-on-year. Hisense Visual Technology Co., Ltd. continued to upgrade its product structure aiming at large screen high-end market, and its revenue and profits in the third quarter achieved substantial quarter-on-quarter growth.
Foreign trade policies continued to take effect, bringing in more positive factors for exports. Great Wall Motor Company Limited's overseas sales in the first three quarters have exceeded that of 2023, and the proportion of high-value vehicle sales has steadily increased. In the first three quarters, the export of new energy buses of Yutong Bus Co., Ltd. increased by 50% year-on-year, with an accumulated export exceeding 6,000 units. A number of electronics enterprises have deepened their cooperation in the international industrial chain. Overseas revenue of Will Semiconductor Co., Ltd. Shanghai, JCET Group Co., Ltd. and other enterprises accounts for more than 70% of the total. Starpower Semiconductor Ltd. has achieved large-scale delivery of automotive grade IGBT modules to European first-tier brands. STAR Market companies are developing presence in overseas markets with product and technology export. According to incomplete statistics, more than 10 innovative drug companies have reached about 30 license-out cooperation agreements with overseas pharmaceutical enterprises, and 15 products of in vitro diagnostics (IVD) companies were approved for registration in overseas markets in the first three quarters.
The new round of large-scale equipment renewal policy has driven the net profit of engineering machinery and rail transit equipment industries to increase by 10% and 3% respectively in the first three quarters. Old operating ships have been scrapped and renewed, green transformation has accelerated, production orders of shipping companies are at full capacity, and the net profit of navigation equipment has increased by 35%. The electrification replacement of urban buses and the renovation of old operating diesel trucks have been carried out. The investment in commercial vehicles and logistics facilities increased by 82% and 26% respectively on a quarter-on-quarter basis. The upgrading of tourist attractions and recreational facilities has accelerated, with the investment increasing by 11% and 28% year-on-year respectively. The issuance and use of ultra-long-term special treasury bonds and special bonds provided financial support for infrastructure construction. The investment growth rates in railway transport, public utilities and coal in the first three quarters were 14%, 13% and 19% respectively.
Capital markets have also benefited from a package of incremental policies. After the implementation of a series of new policies such as the central bank lending facility for share repurchase and shareholding increase and the swap facility instruments, 39 companies have disclosed special loans for share repurchase and shareholding increase, with the scale of such special loans reaching nearly RMB 10 billion. A total 13 securities companies, including CITIC Securities Company Limited, China International Capital Corporation Limited and Guotai Junan Securities Co., Ltd., received a reply from China Securities Regulatory Commission (CSRC) on participating in the swap facility business. Yongan Futures Co., Ltd.'s shareholder Caitong Securities Co., Ltd. completed the swap operation in exchange for the first batch of treasury bonds. Caitong Securities Co., Ltd. said that it would use the funds obtained by the swap facility to further increase its holdings of stocks and stock ETFs, so as to play the role of financial institutions in stabilizing the market.
III. Strong Innovation Momentum
In the first three quarters of 2024, listed companies on the SSE continued to increase investment in scientific and technological innovation, developed new quality productive forces according to local conditions, and gradually formed a "Four New" economy. The total R&D investment of real-economy companies was RMB 607.9 billion, marking a year-on-year increase of 2%. The R&D investment of 102 companies exceeded RMB 1 billion, the R&D growth rate of 164 companies exceeded 50%, and the R&D intensity of 435 companies exceeded 10%. Among them, the STAR Market continued to serve as a main hub for cultivating new quality productive forces, with R&D investment hitting record highs. The cumulative R&D investment reached RMB 104 billion, up 7% year-on-year, with the median proportion of R&D investment in operating revenue reaching 12.6%.
A number of STAR Market companies have ushered in a harvest period for key technology breakthroughs, and scientific and technological innovation achievements are constantly emerging. As of October, all innovative drug companies listed according to the fifth set of listing standards of STAR Market have completed the listing or submission of listing applications for their core products. Dizal (Jiangsu) Pharmaceutical Co., Ltd.'s core product Sunvozertinib has filled the 20-year global clinical gap in the field of the EGFR exon 20 insertion mutations in non-small cell lung cancer. Listing applications for more than 10 new drugs from BeiGene, Ltd., Shouyao Holdings Co., Ltd. and other companies have been successively submitted. In addition, the 28nm logic chip of Nexchip Semiconductor Corporation passed the functional verification and successfully lit up the TV panel through integrated operation with the panel driver chip. Kede Numerical Control Co., Ltd. independently completed the R&D and production of high-end five-axis CNC machine tool products and key functional components through core technologies, with a localization rate of more than 90%. There are also a number of scientific and technological enterprises on the Main Board that have made great achievements in innovation. The efficiency of HPBC2.0 module independently developed by Longi Green Energy Technology Co., Ltd. has reached 25.4%, breaking the world record in the efficiency of crystalline silicon modules. CRRC Corporation Limited's offshore floating 20MW wind turbine "Sailing" has successfully rolled off the production line, expanding the scope of wind power generation to deep blue seas. Offshore Oil Engineering Co., Ltd. has overcome 25 key technological bottlenecks and successfully created a new model of economical and efficient development of deep-water oilfields.
The operating performance of new quality industries in the first three quarters showed many highlights. The STAR Market integrated circuit industry chain has gathered momentum, showing vigorous development potential. Among them, chip design companies such as Hygon Information Technology Co., Ltd. and Montage Technology Co., Ltd. have achieved rapid development driven by the AI industry and the recovery of consumer electronics market, with net profits increasing by 205% year-on-year in the first three quarters. Semiconductor equipment companies such as Advanced Micro-Fabrication Equipment Inc. China continued to grow in shipments in the first three quarters, with revenue up 33% year-on-year. Nexchip Semiconductor Corporation and other leading wafer foundry companies have high capacity utilisation rates, and their quarterly revenue has increased year-on-year and quarter-on-quarter. With the development of "R&D and going global", the biomedical industry chain has further released its vitality. In the first three quarters, innovative drug companies achieved a total revenue of RMB 26.1 billion, up 53% year-on-year. Five innovative drug companies including Shanghai Allist Pharmaceuticals Co., Ltd. have blockbuster products with annual sales exceeding RMB 1 billion.
IV. Improved Cash Flow
In the first three quarters, the cash flow of operating activities has improved significantly under relevant policies of the State Council to solve the problem of arrears in accounts payable to enterprises. Data show that the drop in operating cash flow of real-economy enterprises on the SSE in the first three quarters narrowed by 20.7 percentage points compared with the first half of the year, and the net inflow reached RMB 1.22 trillion in the third quarter, up 8.6% year-on-year and 23.1% quarter-on-quarter. The real value of performance has improved significantly. The sales cash flow to revenue ratio of real-economy enterprises in the third quarter stood at 1.05, showing an improvement on a year-on-year basis and a quarter-on-quarter basis. The cash flow to net income ratio was 2.07, up 0.33 and 0.52 respectively on a year-on-year basis and a quarter-on-quarter basis. The capital structure was further optimized. At the end of the third quarter, the asset-liability ratio was 58.66%, which decreased by 0.24 percentage point compared with that at the end of the half year.
The cash flow of many industries increased greatly in the first three quarters. On the one hand, payment collections have improved. The construction and decoration sector has seen a recovery in receiving actual payments of accounts receivable, achieving a sales cash flow to operating revenue ratio of 1.11, reflecting an increase of 0.36 quarter-on-quarter. This sector recorded a net cash flow from operating of RMB 22.5 billion, marking a transition from negative to positive growth both year-on-year and quarter-on-quarter. More than 50% of firms in this sector reported net inflows. Additionally, sectors such as oil and petrochemicals, machinery equipment, and telecommunications have strengthened cash management, with net cash inflows growing quarter-on-quarter by 16%, 575%, and 27%, respectively. On the other hand, performance improvements have driven cash flow growth. Supported by the continuous recovery of downstream industrial production and consumption, net operating cash inflows increased quarter-on-quarter by 31%, 47%, and 55% in the electricity equipment, utilities, and social services sectors, while the non-ferrous metals sector experienced remarkable year-on-year and quarter-on-quarter growth of 48% and 23% respectively.
V. High-Quality Mergers and Acquisitions
The rollout of policies such as the Opinions on Deepening Market Reform in Mergers and Acquisitions of Listed Companies and the Eight STAR Market Measures has invigorated the mergers and acquisitions (M&A) activity in the capital market. Since the beginning of the third quarter, 25 companies listed on SSE have disclosed plans for M&A or suspended trading for restructuring, with a total transaction value exceeding RMB 240 billion. Notably, China CSSC Holdings Limited plans to conduct a stock acquisition of China Shipbuilding Industry Company Limited, aiming to integrate its ship assembly operations and create a more competitive shipbuilding company. Similarly, Huadian Power International Corporation Limited intends to purchase multiple power generation assets from Huadian Group, which will enhance its controlling installation capacity and market competitiveness, thereby improving its overall performance. Multiple securities firms are strengthening business synergies and enhancing market competitiveness through M&A, including Guotai Junan Securities' plan to merge with Haitong Securities through a share exchange and Guolian Securities’ intention to acquire a controlling stake in Minsheng Securities. Furthermore, since the introduction of these policies, numerous leading companies have consolidated industrial assets through non-restructuring transactions, further boosting their competitive advantages, with a total of 75 "small but quick" acquisitions on the SSE, amounting to approximately RMB 24 billion. Huaqin Technology Co., Ltd. has acquired assets to refine its industrial capability, aiming to increase its market share and competitiveness in key segments. Meanwhile, COSCO SHIPPING Energy Transportation Co., Ltd. has expanded its portfolio by acquiring various equity stakes and assets to enhance the integration of its logistics supply chain for energy and chemical products.
Companies on the STAR Market are actively implementing innovative policy measures to accelerate technological breakthroughs, industry integration, and international expansion through high-quality industrial M&As. Notably, since the release of the "Eight STAR Market Measures," the STAR Market has disclosed over 40 new equity acquisition transactions, more than double the number from the same time last year, with a total value surpassing RMB 11 billion. Landmark cases have emerged. In terms of an accommodative approach to valuation, ten transactions have involved acquiring high-quality but unprofitable "hard technology" companies, seeking synergies in technology, products, and markets. Regarding payment optimization, 3peak Incorporated's acquisition of 100% equity in Shenzhen ICM-Semi Microelectronics Co., Ltd. through a “targeted convertible bonds + cash” approach demonstrates differentiated pricing for various shareholders of the target company, effectively increasing negotiation flexibility and enhancing transaction convenience. The review process and efficiency are also improving. It took only 52 days for RIGOL Technologies Co., Ltd.'s restructuring project to be accepted and approved by the exchange, and just two months for it to be registered with the CSRC.
VI. ETFs as a Key Indicator of the "Three Investments" Concept
ETFs, as representatives of index-based funds, have emerged as a significant driving force to growth and elevated market activity to new heights. By the end of October, the total size of ETFs listed on the SSE reached approximately RMB 2.6 trillion, with a trading volume of about RMB 22 trillion, while non-monetary ETFs experienced a net inflow of nearly RMB 790 billion, these figures representing all-time highs. The daily trading volume of ETFs ranks first in Asia, with total assets ranking second. Meanwhile, flagship broad-based products continue to emerge. As of the end of October, the scale of equity ETFs on the SSE was around RMB 2.1 trillion, reflecting a remarkable 91% increase since the start of the year, while the total scale of broad-based ETFs reached RMB 1.6 trillion, accounting for 77% of equity ETFs. The CSI 300 ETF has become the largest ETF products in the domestic market, surpassing a total size of RMB 1 trillion, with over 80% of that attributed to products listed on the SSE.
The investment ecosystem around STAR Market indices and related products is gradually taking shape. This year, the STAR Market has introduced nine new indices, including the STAR 200 and STAR Semiconductor Materials and Equipment indices, bringing the total number of indices to 25. This expanding index system encompasses various categories, including scale, themes, and strategies, providing mid- to long-term capital with diverse investment options and guiding it to support the development of "hard technology." By the end of October, the combined size of domestic and foreign products based on STAR indices approached RMB 290 billion, reflecting a growth of over 70% since the beginning of the year. Notably, the scale of the STAR 50-based products reached nearly RMB 220 billion, marking an increase of over 40% compared to the start of the year.
The scale and proportion of mid- to long-term investment have further increased. As of the end of the third quarter, institutional investors held a market value of RMB 38 trillion in circulating shares of SSE-listed companies, a year-on-year increase of 15% and a 13% rise compared to mid-year. This figure accounted for nearly 80% of the total market value, with fund investors holding a market value of RMB 5 trillion — an increase of 12% year-on-year and a 20% rise from mid-year, representing 10% of the total market value. Additionally, state-owned enterprises are experiencing an opportunity for valuation. Since the beginning of the year, the overall price-to-earnings (P/E) ratio of central government-owned enterprises listed on the SSE has risen from 8.89 to 10.83, while the price-to-book (P/B) ratio increased from 0.82 to 1.03. The overall P/E ratio for state-owned enterprises has seen an uplift from 10.21 to 12.16, with the P/B ratio climbing from 0.92 to 1.11.
