On November 1, SSE STAR 50 Index closed at 1024.52 points, up 1.40%. It is worth noting that this is the second consecutive day that SSE STAR 50 Index rose by more than 1%. Yesterday, the Q3 reports of SSE STAR 50 companies were released and those companies showed strong performance. Operating income and net profit attributable to the parent company rose by 46% and 44% respectively on year-on-year basis, fully demonstrating the growth vitality of "hard tech" enterprises.
Since mid-October, SSE STAR 50 Index has shown strong momentum and continued to outperform most broad-based indexes. On October 31, the market-making trading business of the STAR Market was officially launched, and the trading volume and liquidity of the STAR Market were further improved. At the same time, the ability of the STAR Market to attract investment has continued to strengthen. Institutional investors have raised the proportion of STAR Market products in their portfolio, with that of SSE STAR 50 products up by 95% since the start of the year.
Q3 reports of SSE STAR 50 companies show good performance, among which 17 companies have a net profit increase of over 50%
Except for Semiconductor Manufacturing International Corporation (SMIC), which has not yet disclosed its Q3 report, the component companies of SSE STAR 50 Index achieved a total operating income of RMB 378.597 billion in the first three quarters of this year, up 46% year on year. They played a leading role in stable growth, with the growth rate higher than the overall growth rate of the STAR Market, also significantly higher than the constituents of other major indexes. The operating income and net profit of SSE STAR 50 companies account for 48% and 45% of the overall STAR Market, as the cornerstone of the overall market. In terms of operating income, the revenue of more than 80% companies has increased, with 18 of them up by more than 50% and 5 of them doubled. In terms of net profit attributable to the parent company, the net profit of more than 60% companies has increased, with 17 of them up by more than 50% and 8 of them doubled.
The data shows that among SSE STAR 50 companies, Daquan Energy, Pylontech, JinkoSolar and Changyuan Lithium show increasing revenue and net profit by more than 100% in the first three quarters. The above four companies belong to industries favored by investors such as photovoltaics, energy storage and power batteries, and they are all leaders in their sub industries.
In the first three quarters, Daquan Energy, a company that leads the polysilicon industry, achieved an operating income of RMB 24.677 billion, a year-on-year increase of 197%, and a net profit attributable to the parent company of RMB 15.085 billion, a year-on-year increase of 237%. The company stated that the shortage of polysilicon material has driven its price to rise. Also, the second phase of the three-phase expansion project finished and went into operation at the start of 2022, which bring a large increase of the sales volume. In the middle and late October, the company successively issued three announcements on the signing of special major contracts, and the total sales amount of polysilicon is expected to exceed RMB 190 billion.
In the first three quarters, Pylontech, the world's leading company in household energy storage, achieved an operating income of RMB 3.568 billion, a year-on-year increase of 176%, and a net profit attributable to the parent company of RMB 645 million, a year-on-year increase of 157%. The company stated that the substantial increase in performance was mainly due to the fact that some production lines of the company's funded projects were completed and put into operation, and the substantial release of production capacity resulted in a sharp increase in the company's production and sales. In the first three quarters of this year, the company's sales volume was 2,203MWh, a year-on-year increase of 128%.
JinkoSolar, the leading photovoltaic module, leveraging its global layout and strategic advantages of localized operation, increased its PV module shipments significantly. In the first three quarters, its operating income was 52.772 billion yuan, a year-on-year increase of 117%, and its net profit attributable to the parent was 1.676 billion yuan, a year-on-year increase of 132%. According to public information, JinkoSolar ranked first in global shipments in the first half of the year, with shipments reaching 18.21GW, and the conversion efficiency of the company's 182N high-efficiency monocrystalline silicon cells reached 26.1%, setting an industry record.
Hunan Changyuan Lico, the cathode material leader sees strong demand in downstream new energy vehicle market. The company's 40,000 tons/year automotive lithium battery cathode material expansion project reached full capacity, and part of its phase-2 production line completed construction and trial operation. With both strong production and sales, its operating income of the first three quarters hit 12.696 billion yuan, a year-on-year increase of 180%, attributable to the parent net profit of 1.114 billion yuan, a year-on-year increase of 129%.
In addition, SMIC - the A+H dual-listed red-chip company, which has not yet disclosed its Q3 report, will do so on November 11 according to the red-chip corporate rules. According to its mid-year financial report, SMIC achieved operating income of 24.592 billion yuan in the first half of the year, a year-on-year increase of 53%, and a net profit attributable to the parent of 6.252 billion yuan, a year-on-year increase of 19%. The company expects sales revenue to increase 2% sequentially in the third quarter, with gross margins in the range of 38% and 40%.
The ability of the STAR Market to attract capital continues to enhance with share of SSE STAR 50 ETF products increased significantly
Supported by strong performance fundamentals, the attractiveness of the STAR Market to institutional funds continues to increase. According to CICC statistics, as of the end of Q3 2022, the allocation ratio of active equity funds to the new board rose from 5.7% to a record high of 7.9% at the end of the second quarter. STAR is also the only market that sees the allocation ratio of public funds increased in that period. From 2019 to the end of 2021, the allocation ratio of active equity funds to the STAR Market was 0.5%, 2.8% and 4.5% respectively, and the attention and allocation ratio of public offerings continued to rise. Long-term funds such as social security funds, insurance companies, and QFII also continued to increase their allocation to the board, accounting for more than 5% of the total free-flow market value as of the end of Q3 2022.
The SSE STAR 50 ETF products remain popular, with a total share of 58.323 billion invested in eight SSE STAR 50 ETF products, an increase of 28.375 billion (or 95%) over the beginning of the year. Among them, the latest share of the largest Huaxia SSE STAR 50 ETF fund hit 33.15 billion, an increase of nearly 19 billion over the beginning of the year.
According to the Q3 reports, a number of SSE STAR 50 Index component companies are heavily invested by institutional investors. The institutional shareholding ratio of the constituent companies of the SSE STAR 50 Index is 40% on average. For 15 companies including Western Superconducting Technologies the ratio is over 50%. Trina Solar ranked first in the number of institutional shareholders (288 in total), and the market value held by institutional shareholders reached 50.2 billion yuan, accounting for 59% of the free-flow shares. JinkoSolar and other 8 companies are heavily invested by 11 QFII institutional investors, including Goldman Sachs Group, JPMorgan Chase Bank, Abu Dhabi Investment Authority and other well-known investment institutions. Among them, Goldman Sachs Group holds 19.7 million shares of JinkoSolar and 860,000 shares of Huaxi Biologics, with a market value of 329 million yuan and 112 million yuan respectively. Nine companies including Transsion Holdings are heavily invested by the National Social Security Fund, of which Portfolio 113 increased its holdings in Transsion by 2.1 million shares in Q3, making it among the top ten shareholders of the company with 8.91 million shares.
Market maker system stimulates market vitality and fund managers are optimistic about "hard & core technology" in the long-run
On October 31, the market-making trading business of STAR Market stocks was launched. From the first two trading days, the trading volume and activity of stocks with market making services provided by market makers significantly increased. Market makers inject effective liquidity into the market. The market responded enthusiastically to the introduction of the market maker mechanism on STAR Market. Among the 42 stocks included in the first batch of market-making pool, 22 are constituent stocks of the STAR 50 Index, accounting for 67% of the weight. Among them, Trina Solar and SUPCON Technology have 3 securities firms as market makers, and China General Number, Western Superconductor, Times Electric and Catchon Microna have 2 securities firms as market makers.
Industrial Securities and many other securities firms said that the market maker system is conducive to enhancing the price discovery function of the market, effectively regulating market supply and demand, and reducing speculation and price fluctuations. It can improve price stability and will be conducive to the long-term development of the STAR Market.
Recently, with mutual funds successively disclosing their third quarterly report, many fund managers are firmly optimistic about the long-term value and growth potential of the "hard & core technology" of the STAR Market. Xiao Ruijin, fund manager of Bosera STAR Three-year Hybrid Fund, which can be subscribed and redeemed at pre-set dates, pointed out in Q3 report that the current valuation of the STAR board is one standard deviation below the historical average, its dynamic P/E ratio premium compared with the main board is at a historically low level, and the static P/E ratio of the STAR 50 Index is lower than that of comparable sectors, indicating overall investment opportunities. As of the end of the Q3 2022, the Star Market has reached its third anniversary, and as listed companies' earnings continue to grow, the board will also be revaluated.
Hu Yibin, fund manager of Huaan Fund, believes that currently China is still in a period of economic structural transformation, and scientific and technological innovation and consumption upgrading will remain the core driving force for China's total economic growth in the future. A large number of investment opportunities will emerge from the fields of industrial innovation, cutting-edge technological breakthroughs, new materials, new energy, and new consumption. He is confident in the emergence of a number of enterprises with global competitiveness, scientific and technological edge and brand influence in the future.
