As of August 31, 2019, all of 2,178 companies (except *ST Changsheng) listed on Shenzhen Stock Exchange (“SZSE”) had disclosed their interim reports. Overall, the companies listed on SZSE saw a continuous growth in operating income and stable operation in the first half of 2019 (H1). In addition, blue chip and strategic emerging industry companies maintained a sound development momentum, and the quality of listed companies continued to rise steadily. SZSE spokesperson answered the questions from reporters.
1. Q: The market is concerned about the performance of companies listed on SZSE. Would you brief us on their overall operation in H1?
A: In H1, the companies actively responded to the profound changes in internal and external environment in accordance with high-quality development requirements, showing a steady growth and improvement on the whole. Data show that, in H1, the companies registered total operating income of CNY5,953,059 million, a YOY increase of 9.36%, and total net profit of CNY407,961 million, a YOY decrease of 0.87%, basically on par against substantial growth in the same period last year. Among them, 1,892 companies (87%) made profits; 1,240 companies (57%) realized a YOY increase in net profit; and the net profit of 519 companies (more than 40%) grew faster than 20%.
2. Q: What's the performance of companies listed on SZSE in main industries?
A: In H1, with further release of policy and market dividends, the real economy exhibited the characteristics of great resilience, potential and momentum. In particular, midstream and downstream industries continued to maintain a significant growth in net profit despite economic downturn. Average net profit recorded a more than 20% of growth in the industries of communications, agriculture, forestry, animal husbandry and fishery, non-banking finance, transportation, national defense & military, food & beverage, building materials and mechanical equipment in the market of Shenzhen.
It is worth noting that, communications, electronics, artificial intelligence and other emerging industries witnessed a more prominent development trend. Average net profit of the communications industry was CNY83,475,600, a YOY rise of 278.69%. Twenty-three companies (such as ZTE and Sinnet) realized at least double-digit growth. More than 100 electronic companies enjoyed growth in both operating income and net profit. Luxshare, Goertek and iFLYTEK performed well in H1.
At the same time, affected by industry life cycle, trade frictions and other factors, there was a slight drop in the return on assets of traditional processing trade, medium and low-end manufacturing and other industries. In addition, media, iron & steel, commercial trade, auto and light manufacturing were under pressure in terms of profit. Business performance of some companies slumped, some private companies still faced stock pledge risks, and some companies were trapped in operation difficulties due to fund shortage.
3. Q: What's the performance of blue-chip companies?
A: As an excellent representative of various industries, blue-chip companies listed on SZSE focused on main business, ran business in a down-to-earth manner, and conduct standardized operation, maintaining a good growth momentum on the basis of great operating income and net profit on the whole. Statistical data show that, in H1, the operating income of "SZSE 100 Index companies" totaled CNY1,968.8 billion, a YOY increase of 15.3% and accounting for 32.86% of total operating income in the market of Shenzhen. Net profit increased by 9.84% YOY to CNY185.1 billion, accounting for 45.38% of total net profit in the market of Shenzhen. Both average performance and growth were better than the overall market level and are a real "ballast" of capital market. Midea Group realized net profit of CNY15,187 million, a YOY increase of 17.39%. Weichai Power realized net profit of CNY5,287 million, a YOY increase of 20.37%. SF Holding realized net profit of CNY3,101 million, a YOY increase of 38.83%.
4. Q: The market has always been concerned about strategic emerging industries in the market of Shenzhen. How about their development?
A: There are 989 strategic emerging companies listed on SZSE in total engaged in new materials, new energy, biological medicine, information technology and other areas. They have strong core technologies and research & development capacities and have played an important role in independent innovation and import substitution. Among them, 863 strategic emerging enterprises made a profit, accounting for 87%. Their operating income totaled CNY2,323,786 million, accounting for 40% of total operating income of Shenzhen market.
It is worth noting that SZSE-listed companies in strategic emerging industries concentrated efforts on R&D and talent cultivation and boosted high-quality development through technical innovation. In H1, they invested CNY130,132 million in R&D, a YOY increase of 30.21%. Average R&D intensity of 5.59% was far higher than market average, continuously providing forces to drive development. Sixty-five companies implemented equity incentive on core technicians, accounting for 60% of all SZSE-listed companies implementing equity incentive.
5. Q: Tax and fee cut is one of keywords of this year's national economic policies. Could you introduce the effect of the cut on SZSE-listed companies?
A: Large-scale tax and fee cut is a major decision made by the CPC Central Committee and State Council. In H1, taxes on SZSE-listed companies accounted for 5.39% of their operating income, a YOY fall of 0.53 percentage point. Total cut reached CNY31,551 million. Taxes on chemical, automobile manufacturing, communication equipment, pharmaceutical manufacturing and other industries declined sharply by 14.54% from the same period last year.
With the accelerated effect of tax and fee cut, the confidence of listed companies was stabilized and boosted, and market vitality was further stimulated and unleashed. Many companies gathered pace in production technology transformation, new product R&D and tackling key core technical problems. For example, benefiting from tax (such as value-added tax and income tax) reform, BYD realized an operating income of CNY62.2 billion in H1, a YOY increase of 14.84%, while comprehensive taxes dropped 34.45% over the same period last year. R&D input increased by 7.28% YOY. The market share of the new energy automobile raised to 24%.
6. Q: What's performance forecast of SZSE-listed companies in the first three quarters?
A: Up to now, a total of 280 companies have released their performance forecast for the first three quarters. Based on the statistics on lower limit of expected net profit, the net profit of 153 companies was expected to increase YOY in the first three quarters. One hundred and eighteen companies expected doubling of net profit. Twenty-six expected net profit to increase by 50%-100%. Twenty-eight turned losses into profits. By industries, the companies with substantial profit increase in the first three quarters are mainly engaged in communications, transportation, chemical, computer, light manufacturing and medical biotechnology.
7. Q: In subsequent regulatory work, what measures will be taken by SZSE to promote high-quality development of listed companies?
A: SZSE-listed companies have disclosed their 2019 interim reports. Towards the basic objective of better quality of listed companies and on the basis of maintaining the continuity of regulatory arrangement and review methods, SZSE will give full play to the advantages and experience of industry and category-specific supervision, mutually verify financial and non-financial information, pay high attention to performance authenticity, production operation, corporate governance, goodwill impairment, fund transaction, high-proportion pledge and due diligence of intermediaries, and conduct post-review of interim reports.
SZSE will conscientiously implement the Opinions of the CPC Central Committee and the State Council on Supporting the Building of Shenzhen into the Pilot Demonstration Area of Socialism with Chinese Characteristics, continuously push forward market reform, refine the rule system and raise regulatory efficiency according to the requirements of CSRC on improving the quality of listed companies, and focus on the development of technical innovation enterprises, mitigation of difficulties with private enterprises, SOE reform, market-based reform of M&A reorganization and other subjects. Meanwhile, it will attach equal importance to supervision and service, take multiple measures to make listed companies better, stronger and healthier and endeavor to create a multi-tiered capital market of SZSE that is law-based, transparent, open, vibrant and resilient.
