As of April 28, 2018, 2105 public companies in Shenzhen market, including 472 companies from the Main Board, 911 from the SME Board, and 722 from the ChiNext board, have submitted their 2017 performance ‘report’. The annual reports showed that these listed company, the vanguard of the Chinese economy, fully implemented the spirit of the 19th CPC National Congress and the Central Economic Work Conference, conscientiously implemented all deployment for the 13th Five-Year Plan, deepened supply-side structural reform, pushed forward industrial transformation and upgrading, and fostered new impetus for development, took the lead in practicing social responsibility. These six highlights marked the vigorous development of the multi-layer capital market in Shenzhen, and have made positive progress in facilitating the high-quality development of economics.
First, Better Business Performance
In 2017, listed companies in Shenzhen continued to increase in the overall performance, achieving total operating income (hereinafter referred to as revenue) of 10.4 trillion yuan, an increase of 23.46% year-on-year, and achieving net profit attributable to shareholders of listed companies (hereinafter referred to as net profit) of 729.5 billion yuan, an increase of 20.58% year-on-year. Net cash flow from operating activities increased by 19.71% year-on-year, with quality of earnings improving significantly. the return on average equity (ROAE) was 9.72%, steadily increased for three consecutive years. Companies from three different boards have their own salient features in terms of industry distribution, growth stage and business model. Public companies from three boards all achieved rapid growth in revenue, and witness continued expansion in the scale of production and operations. The average net profit of the companies listed on the Main Board increased by 36%, manifesting outstanding performance and increasing profitability of the blue chip groups. The companies listed on the SME board achieved steady growth year-on-year in average revenue and net profit, which grow by 27% and 19% respectively, showing good development prospects. The companies listed on the ChiNext Board increased by 28% year-on-year in average revenue, with an average gross margin of 29%, which is the highest of the three boards, reflecting strong competitive advantages and development potential of the ChiNext Board listed companies, which are representatively high-tech companies.
Second, New Breakthrough of Good Performing Companies
In 2017, good performing companies in Shenzhen market continued to maintain a steady developing momentum, and further consolidated dominant position. 213 companies had revenues of over 10 billion, an increase of 56 over the previous year’. 11 companies had revenues of hundreds of billions, an increase of 3 over the previous year. 1,274 companies achieved growth both in revenue and profits, and 556 companies' net profits increased by more than 50%. The top 50 companies in the net profit accounted for more than 40% of Shenzhen market's net profit. These companies played a leading role in supporting economic growth, and paid a total of 220 billion yuan in taxes and fees, and provided 1.47 million jobs cumulatively, making outstanding contributions in taxes and job market. The net profit of five blue-chip companies on the Main Board including Vanke, Ping An Bank, Gree, Midea Group, and China Merchants Shekou exceeded 10 billion yuan. The net profit of Hikvision, leading company on the SME board, nearly doubled. Yanghe Brewery, SF Holding, Focus Media and other companies continued to grow steadily. Although the companies listed on the ChiNext Board is relatively small in size, they are extremely dynamic, with companies as influential as SJEP and Originwater growing significantly.
Third, New Growth Momentum for Economic Transition and Upgrading
Emerging industries assumes a more prominent role as the economy enters a “new normal” stage. At the end of April 2018, high-tech firms account for over 70 percent of listed companies in Shenzhen market, and new emerging companies over 40 percent. There emerge a number of leading firms and role models that would help optimize industrial development and facilitate the economic transition. The prosperous growth of listed companies in information technology, mobile payment, big data, cloud computing, Internet-of-Things, biomedical, AI and other emerging industries is making SZSE a place of innovative companies in China and a main front in the new economy. The clustering effect of the new economy is more apparent in the ChiNext board, with strategic emerging companies accounting for about 70 percent of the companies listed on the board. Companies of indigenous innovation such BGI Genomics, Yealink Network, Sonoscape Medical were listed on ChiNext board, and Oriental National Communication and Zhifei Biological continue to prosper. A number of companies in traditional industries are embracing new modes and new technologies to release new energy and vitality. Rainbow continues to grow by actively pushing through on-line and off-line integration with Internet and big data. Hailiang and Sansteel Minguang have successfully switched from precision finishing from traditional processing, with an increase in revenue by 59% and 66%, and in profit by 28% and 331% respectively. Berry Genomics enters the industry of gene test via restructuring, and has achieved sustainable development. Benefiting from the deepening of the supply-side reform, traditional industries such as iron and steel, coal, nonferrous metal and mining have seen great improvement in their business results and profitability, with revenue up by 27% and profit by 240%. JZEG, guided by the national strategy of cutting overcapacity, has accelerated the exit of obsolete production facilities and increased quality output, with an increase of 49% in revenue and 336% in profit.
Fourth, New Pillar of Made in China
About 70% of the SZSE-listed companies are in the manufacturing industry. A hard core of the real economy, manufacturing is the base for building a country, tool for rejuvenating a country and foundation for powering a country. In 2017, the entirety of 29 divisions of manufacturing turns out profitable, with the increases in revenues and net profits being 26% and 34% respectively. Among them, high-end equipment manufacturing outshines in growth, with 133 companies delivering 40% and 101% increase in revenues and net profits respectively. According to the deployment requirements stated in “Made in China 2025” Program of Action, the listed units of manufacturing have earnestly implemented the national strategy of innovation-driven development. They improved their performance by relying on independent technical innovation and extensional M&A and constantly sped up transformation in development approaches to achieve industrial structure upgrade, give full force to the shift from “Made in China” to “Design in China”, and endeavor to meet the strategic goal of becoming a manufacturing power. For years, AVIC Aircraft has been plowing in the field of complement machine of large and medium-sized military and civilian aircraft and aerospace parts. It assumed nearly half of the tasks concerning the full body structural parts of C919 aircraft, helping the successful maiden flight of a home-made large airplane in 2017. BOE has made successive breakthroughs in its core technologies, ascending into the lineup of world-class top-level suppliers of semiconductor display. Also, it achieved explosive growth after years of dedicated input, with its net profit tripled in 2017.
Fifth, New Progress in SOE Development
In 2017, the SZSE-listed SOEs employed the capital market to further excel and expand and actively promoted the comprehensive deepening of reform, with remarkable achievements delivered. Their revenues and net profits averaged CNY9.3 billion and CNY600 million respectively, with the respective year-on-year growth of 20% and 43%. Throughout 2017, a total of 39 SOEs completed the implementation of their restricting plans, facilitating the substantial progress in SOE reform. China Merchants Expressway finished its M&A of Huabei Expressway through A-share offering and share swap, successfully integrating industrial resources and optimizing the layout of state-owned capital. And it becomes another example of SOEs who implement strategic restructuring. Yunnan Baiyao introduced in private capital through capital increase at the controlling shareholder level to increase flexibility in systems and mechanisms and improve the market-oriented nature of its governance structure, further enhancing its market competitiveness. Sanonda purchased 100% equity in Adama through share offering to vigorously deploy a globalized layout of agrochemical business assets, successfully ascending the queue of global leading pesticide production dealerships. All these are influential SOE reform examples. They have attracted broad market attention and got positive market comments while providing other state-owned listed companies with referential experience in utilizing the capital market to achieve reform and development.
Six, New Undertakers of Social Responsibility
While pursing and achieving self-development, the SZSE-listed companies have improved their return to shareholders year by year, constantly increased environmental investment and enhanced the awareness of active participation in precision poverty alleviation. In 2017, 1,611 SZSE-listed units made cash dividend distribution plans, with the cash dividend totaling CNY320 billion, a 62% year-on-year increase, the dividend payment rate of 44%. There are 1,162 companies, 50% of the base, who introduced dividend distribution plans for three years in a roll from 2015 to 2017. The 118 environmental corporates on SZSE accumulatively made CNY19.1-billion investment into the R&D of environmental technology and product services, powering the construction of a Beautiful China. Among the SZSE-listed companies, 313 units disclosed annual CSR reports, 394 units announced precision poverty alleviation situation and 409 units released environmental information, representing significant increases compared with those in the same period of previous year. Listed companies have set an example in endeavoring for success in the tough battles of precision poverty alleviation and pollution prevention and control.
Furthermore, the SZSE-listed companies have vigorously participated in the “Belt and Road” construction to offer China wisdom to the economic development of the countries along the line. A batch of companies owning leading technology, such as COHC, BOE, CAMCE and E-Hualu, have widely involved in the “Belt and Road” project construction. They, while achieving their own growth in performance scale and profitability, have introduced China Standards, China Technology and China Innovation to the countries along the “Belt and Road”, creating a brand image of Chinese enterprises.
