By He Chuan
Disclosure of semi-annual reports of enterprises listed in NEEQ has concluded and 8,852 companies released their interim performance. According to data from Straight Flush, companies listed in NEEQ achieved RMB 687.897 billion yuan of operating revenues in total in the first half this year, a year-on-year increase of 17.15 percent and the total net profits attributable to owners of parent companies were RMB 40.267 billion yuan, increased by 3.46 percent year one year. As a whole, NEEQ-listed companies have achieved outstanding growth and efforts made at the innovation layer are rather prominent.
Revenue YOY increasing in nearly 70 percent companies
According to data, 66.03 percent NEEQ-listed companies achieved increase in revenue, while 61.66 percent listed in Shanghai and Shenzhen Stock Exchanges achieved increase. Among these companies, 5808 achieved revenue of less than RMB 50 million yuan, accounting for 66.26 percent of the total, while 57 fulfilled revenue of more than RMB 1 billion yuan, accounting for only 0.65 percent. Shanghai Gangyin E-commerce Co., Ltd. and Jintian Group grabbed the first two positions respectively with the revenue of RMB 16.636 billion yuan and 14.04 billion yuan separately. From the perspective of industry, the top 5 industries with the largest revenue are manufacturing industry, information transmission, software and IT service industry, wholesale and retail industry, construction industry and finance industry according to primary industry classification by China Securities Regulatory Commission.
In terms of profitability, 6,478 NEEQ-listed companies achieved profitability in the first half of year, accounting for 73.18 percent of the total and basically remaining unchanged. Among these companies, 2,503 received attributable net profits of over RMB 5 million yuan, accounting for 28.55 percent. 49 enterprises fulfilled attributable net profits of more than RMB 100 million yuan and Qilu Bank, Kenfeng Seed and Jiuding Group ranked the top three with attributable net profits of RMB 811 million yuan, 535 million yuan and 415 million yuan. However, in the first half of the year, 10 companies suffered losses of more than RMB 100 million yuan. For example, Shenzhou Youche suffered RMB 2.371 billion yuan of loss in total. It indicates that the earning performance of NEEQ-listed companies has large differentiation.
In terms of growth, 4,958 NEEQ-listed companies achieved positive year-on-year growth rate in attributable net profits, accounting for 56.56 percent, while 2,482 fulfilled 100 percent growth, taking up 28.31 percent. However, according to the annual report last year, 65.83 percent enterprise saw a positive year-on-year growth rate in attributable net profit and 34.03 percent enterprises realized above 100 percent in growth rate, showing that the proportion of NEEQ-listed enterprises achieving increased market profits declined.
Wang Mengmeng, a researcher from licai.com believed that it is owing to the absence of financial threshold for NEEQ-listed companies and that the market scale in the first half of the year expanded nearly by 50 percent compared with that by the end of 2015 and thus the cardinal number has changed completely. In addition, under the influence of downturn macro economy, the NEEQ market of manufacturing-oriented enterprises listed was under great pressure.
Booming innovation layer
On June 27 this year, the NEEQ market carried out internal stratification. By August 31, there were 953 and 7,942 enterprises at the innovation layer and foundation layer respectively. In the first half of the year, total revenues of enterprises at the NEEQ innovation layer were RMB 178.22 billion yuan, while enterprises at the foundation layer achieved 509.13 billion. Enterprises at the innovation layer accounted for 10.7 percent of the whole market and their revenues accounted for 26 percent.
"Compared with the NASDAQ market, though the proportion of 26 percent at the NEEQ innovation layer in total revenues is not very high and can be further improved, the capacity of the market is still at the explosive stage and there are still many newly listed companies. Thus, it is appreciable for such a low proportion", expressed Huang Shichuan, an analyst from Southwest Securities R&D center.
From the perspective of average revenue, the innovation layer and the foundation layer showed a great difference. Data show that the average revenues of enterprises at the innovation layer were RMB 188 million yuan, a year-on-year increase of 18.67 percent, while that at the foundation layer was RMB 65 million yuan at the foundation layer, increased by 4.03 percent year on year. The average revenue at the innovation layer is three times of that at the foundation layer and its increase rate is also higher than enterprises at the foundation layer.
In terms of growth, 601 enterprises at the innovation layer realized positive year-on-year growth rate in attributable net profits, taking up 63.06 percent of the total, while 4,398 at the foundation layer achieved positive increase, accounting for 55.38 percent.
In addition, compared with the GEM at Shenzhen Stock Exchange, there is also something noticeable at the entrepreneurship layer. Though RMB 187 million yuan and 17.43 million yuan of average revenue and net profits respectively of enterprises at the innovation layer is both lower than RMB 600 million yuan and 72.5514 million yuan of enterprises at GEM, enterprises at the NEEQ innovation layer showed prominent growth. In the first half of year, the median of increase rate of revenues and net profits of enterprises at the NEEQ innovation layer is 22.94 percent and 19.92 percent respectively, both higher than 16.34 percent and 18.56 percent of enterprises at GEM.
Notable worsening cash flow
As the market develops rapidly, the semi-annual report of the NEEQ showed many problems. According to an announcement recently released by National Equities Exchange and Quotations, 43 listed companies failed to disclose their semi-annual reports as provided by August 31 and therefore were suspended from equity exchange from September 1. What is noteworthy is that if these enterprises failed to release their reports by the end of October, they would suffer the risk of termination of listing.
Among these 43 enterprises, most enterprises said that "the preparation has not completed yet" and 7, such as Jiahe Petty Loan and Hongxiang Equities, are applying for termination of listing. Most of the companies failing to make announcements and semi-annual reports are newly listed ones, including China Smart Mice Group and Mao-day Technology. Moreover, by the end of August, nearly 40 listed enterprises received risk warning announcements from master securities traders due to issues related to semi-annual report. This shows that certain listed companies are weak in information disclosure and many master securities traders fail to make continuous supervision, etc.
Besides, some NEEQ-listed companies achieved profits by relying on government subsidies rather than completely by their main business. According to data, 6,097 NEEQ-listed companies received government subsidies of RMB 6.937 billion yuan in total in the first half of the year, accounting for nearly 70 percent of the total. Majority of such government subsidies are for listing, taking up nearly 20 percent of net profits of the NEEQ market in the first half of the year. Wherein, listed companies of Fantawild and Wanfeng Power received RMB 153 million yuan and 110 million yuan of government subsidies separately, topping the list.
It is noteworthy that the operational cash flow of NEEQ-listed companies deteriorates. Data show that the net operational cash flow of NEEQ-listed companies in the first half of the year decreased to RMB -21.53 billion yuan from RMB 68.297 billion yuan in the same term last year and the net inflow of the operational cash flow at the innovation layer and foundation layer in the same term last year both turned to new outflow. According to Zhu Haibin, NEEQ chief analyst from Essence Securities, with the decreasing economic growth and rising enterprise expenses, it is alarming for the worsening cash flow of NEEQ-listed enterprises.