Author of this article: Cheng Qiang; Source: CS Macro Research
1-August, the profits of industrial enterprises above designated size fell by 2.1% year-on-year, down 1.0 percentage points from the previous value. The profit pattern between upstream, midstream and downstream industries continues to improve, and the proportion of downstream industries continues to rebound. It is expected that the promotion factor for subsequent industrial enterprises' profits will be the year-on-year growth rate of PPI-CPI scissors gap continues to be negative and equipment update and transformation policy support, but problems such as the decline in exports, the decline in bulk prices and their high base may drag down the growth of industrial enterprises' profits in September.
▌ Matters: National Bureau of Statistics released the profit data of industrial enterprises on September 27. From January to August, the total profit of industrial enterprises above designated size nationwide reached 5.5 trillion yuan, a year-on-year decrease of 2.1%, and operating income of 87.89 trillion yuan, a year-on-year increase of 8.4%.
▌ Profit growth rate of industrial enterprises continues to decline due to multiple factors. is based on the cumulative scale of January-August, and the profits of industrial enterprises above the designated size fell by 2.1% year-on-year, down 1.0 percentage points from the previous value, and the average growth rate in three years was 11.8% (the geometric average based on January-August 2019, the same below), down 0.9 percentage points from the previous value. Judging from the three major categories, the mining industry's profit growth rate still performed the best. From January to August, the mining industry's profit increased by 88.1% year-on-year (the previous value of 105.3%). The manufacturing industry fell by 13.4% year-on-year (previous value -12.6%), a slight decline. The electric-thermal water production and supply industry fell by 4.9% year-on-year (the previous value is -12.5%), and the decline narrowed. Multiple factors have led to a decrease in profits of industrial and enterprise: (1) Foreign demand has declined and export growth has dropped sharply. The year-on-year growth rate of total cargo exports in August fell by 12.1 percentage points from the previous value. (2) The downward fundamentals of the industrial economy have driven down corporate profits. The tight power supply in August caused some provinces to limit production measures on industry. In addition, the scattered epidemic in key cities, although the manufacturing PMI rose by 0.4 percentage points month-on-month to 49.4%, it was still in the contraction range. (3) High base price factor. The base of PPI in August last year was relatively high (9.5%), and the price of bulk commodities weakened month-on-month in August. The above factors led to a decline in the profit growth rate of industrial enterprises above the designated size from January to August compared with January to July. We believe that the drag on exports and price factors will continue in the short term. (4) Certain expenses are incurred during the renovation of enterprise equipment.
▌ upstream, midstream and downstream profit pattern is constantly being optimized, and the proportion of downstream profits continues to rise. htmlFrom 51 to August, the growth rate of upstream, midstream and downstream profits all fell compared with January to July, and the proportion of downstream profits continued to rise. Specifically, from January to August: (1) The profits of upstream industries increased by 43.5% in three years, down 0.2 percentage points from the previous value, and upstream profits accounted for 20.4%, the same as the previous value. (2) The total profit of the Midstream Petroleum Coal Fuel Processing Industry and the ferrous non-ferrous metal in the three-year average growth rate was -2.8%, a decrease of 5.9 percentage points from the previous value, which was a significant drag. (3) The profits of other industries in the midstream industry increased by 9.9% in three years, down 0.2 percentage points from the previous value. From January to August, the total profit of the midstream industry accounted for 37.1%, down 0.9 percentage points from the previous value. (4) The profits of downstream industries increased by 5.7% in three years, down 0.3 percentage points from the previous value, and the proportion of downstream profits from January to August was 42.5%, up 0.9 percentage points from the previous value. In August, PPI rose 2.3% year-on-year, down 1.9 percentage points from the previous value, CPI rose 2.5% year-on-year, and the scissors difference turned negative for the first time in nearly 20 months. The cost-end pressure on the downstream industry has been further alleviated, and the profits of upstream and midstream are transmitted to the downstream.
▌ As a downstream consumer goods manufacturing industry, the profit situation has improved. As policies to stabilize growth and promote consumption continue to take effect, the pressure on market demand has eased, and the profits of most consumer goods industries have improved. In August, the year-on-year decline in consumer goods manufacturing industry narrowed significantly compared with the previous month, and its profitability improved. Among the 13 consumer goods manufacturing industries, 8 industries have improved profits compared with the previous month, and 4 industries have achieved double-digit growth in profits. Among them, the profits of the wine, beverage, tea, culture, education, and aesthetic industries increased by 59.8% and 29.1% respectively, both of which accelerated significantly compared with the previous month; the profits of the tobacco and food manufacturing industries increased by 33.8% and 19.0% respectively, both of which maintained rapid growth.
▌ Profits in the equipment manufacturing industry continue to improve, and profits in the automotive industry rebounded rapidly. benefited from the recovery of the industrial chain and supply chain. From January to August, the profits of the equipment manufacturing industry fell by 2.0% year-on-year, a decrease of 3.7 percentage points from January to July, and the proportion of profits in large-scale industries increased by about 5.0 percentage points from the beginning of the year. In August, the profits of the automobile manufacturing industry increased by 1.02 times year-on-year, a significant increase from the previous value (77.8%), the highest growth rate in a year. It is expected that the growth rate of automobile manufacturing and equipment manufacturing will continue to be at a high level, leading the overall profits of industrial enterprises to rise. The support policies for the above industries in September include: Premier Li Keqiang presided over the State Council Executive Meeting on September 13, deciding to update and transform equipment for manufacturing, service industry, social services, small and medium-sized enterprises, individual industrial and commercial households in the fourth quarter, and support national commercial banks to actively issue medium- and long-term loans at an interest rate of no more than 3.2%; People's Bank of China provides special re-lending support to commercial banks at 100% of the loan principal; on September 26, the Ministry of Finance, the State Administration of Taxation, and the Ministry of Industry and Information Technology issued an announcement on the extension of the policy of exempting vehicle purchase tax from new energy vehicles, and exempting vehicle purchase tax for new energy vehicles from purchase dates from January 1 to December 31, 2023.
▌ Enterprise operating costs continue to increase, and inventory and capital turnover continue to slow down. As of the end of August, the assets of industrial enterprises increased by 9.6% year-on-year, and the debt-to-asset ratio was 56.8%, an increase of 0.2 percentage points year-on-year. From January to August, the year-on-year revenue increased by 8.4% (the previous value was 8.8%), and the operating income of 100 yuan assets was 89.9 yuan, a year-on-year decrease of 1.4 yuan. In comparison, the operating cost of 74.56 trillion yuan, a year-on-year increase of 9.7%. The cost of 100 yuan operating income increased by 1.04 yuan year-on-year, which reduced the revenue profit margin by 0.67 percentage points year-on-year to 6.29%. In August, the number of days of inventory turnover of finished products and the average accounts receivable recovery period increased by 0.8 days and 2.9 days year-on-year, reaching 18.3 days and 54.4 days respectively.
▌ The margin of profits of state-owned enterprises has improved, while the profits of foreign and private enterprises have continued to be sluggish. From January to August, the profit growth rates of state-owned, joint-stock, foreign-owned Hong Kong, Macao and Taiwan and private enterprises were 5.4%, 0.8%, -12.0%, and -8.3%, respectively, with the average growth rates of three years of 17.8%, 14.0%, 6.4%, and 6.0%, respectively. Only state-owned enterprises and joint-stock enterprises maintained a high profit growth rate, while the profit growth rates of foreign enterprises and private enterprises continued to be sluggish. On September 13, Premier Li Keqiang presided over the State Council Executive Meeting. The meeting decided to delay the payment of income tax and other five taxes and two fees for small and medium-sized enterprises and individual industrial and commercial households in manufacturing, starting from September 1, involving a tax delay of 440 billion yuan. It is expected that the subsequent profitability of private enterprises will improve and the profitability of state-owned enterprises will be further optimized.
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Appendix Chart
This article is excerpted from the report released by CITIC Securities Research Department on September 27, 2022 "Comment on Industrial Enterprise Profit Data from January to August 2022 - Industrial and Enterprise Profits Continue to Decline, and the proportion of downstream profits has steadily increased". Please refer to the relevant report for details of the analysis content (including related risk warnings, etc.). If there is ambiguity due to excerpts of the report, the complete content on the day the report is released shall prevail.
This article is from the securities company research report selected
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