By Wen Jicong
The reports of the first three quarters of listed companies have been fully released. Data show that the net profits of more than 65 percent of listed companies achieved growth. Insiders said that the main economic indicators of the first three quarters of this year have given positive signal. The improvement of main business of listed companies has driven their performance up significantly.
Improvement of external environment being favorable to the performance of companies
According to iFinD statistics of Loyalflush, in the first three quarters of this year, 1922 of 2946 listed companies in Shanghai Stock Exchange and Shenzhen Stock Exchange have achieved net profit growth, accounting for 65.24 percent.
According to the statistics of choice.eastmoney.com, in the first three quarters of this year, all A-share listed companies have obtained a total business income of RMB 22.44 trillion yuan, an increase of 4.87 percent year-on-year and total net profit of RMB 2.08 trillion yuan, down 2.97 percent year-on-year. The total business income of SME board listed companies in the first three quarters of this year was RMB 1.97 trillion yuan, an increase of 20.48 percent year-on-year and the total net profit was RMB 149.404 billion yuan, an increase of 25.60 percent year-on-year. Listed companies in GEM have achieved a business income of RMB 511.072 billion yuan in the first three quarters of this year, an increase of 36.94 percent year-on-year and net profit of RMB 61.839 billion yuan, an increase of 50.33 percent year-on-year.
"The main economic indicators of the first three quarters of this year have given positive signal. The improvement of main business of listed companies has driven their performance up significantly." Liu Jingde, deputy general manager of Cinda Securities Research and Development Center, expressed when interviewed by an "Economic Daily" reporter that the national economic operation data of the first three quarters of 2016 released by National Bureau of Statistics on October 19 show that the GDP of the first three quarters grew 6.7 percent compared with the same period of last year. The growth rates of the first, second and third quarter were all 6.7 percent, which indicated that the national economy is continuing to maintain a stable trend. In addition, the performance improvement of listed companies is related to the improvement of industry's environment and the enhancement of the level of corporate governance. At the same time, the greater profit growth of the companies is related directly with the factors like high rate growth of main business and more M&As.
"Counter attack" of steel and other traditional industries
Benefited by the effective implementation of capacity reduction and the warming of real estate and infrastructure construction in the first half of this year, 29 of 34 major listed companies in iron and steel industry get profits, accounting for about 85.29 percent; only 5 made losses, accounting for less than 15 percent.
Specifically, the listed steel enterprises with the growth rate of net profit attributable to the parent company and shareholders ranked in top five are Luyin Investment, Shagang Corporation, Bengang Steel Plates, Hangzhou Steel and Xinyu Iron & Steel that the growth rates are 996.50 percent, 280.36, 252.28 percent, 215.40 percent and 212.69 percent respectively. While the growth rates of net profit of 20 listed companies including Ansteel Corporation, Taigang Stainless Steel, Baosteel Corporation, Shougang Corporation are higher than 100 percent, achieving double growth.
From the point of view of the net profit amount, Baosteel Corporation, Ansteel Corporation and Hebei Iron & Steel are ranked in the top three with their net profits of RMB 5.598 billion yuan, RMB 977 million yuan and RMB 933 million yuan respectively. Baosteel's net profit has increased substantially, being a typical example of "counter attack" of iron and steel enterprises. The company reported that as of September this year, it has achieved revenue of RMB 133.435 billion yuan, an increase of 9.20 percent year-on-year and net profit of RMB 5.598 billion yuan, an increase of 148.33 percent. Baosteel also expects that its net profit in the whole year of 2016 will increase 6 times to 8 times. It is known the company's net profit in 2015 was RMB 1.013 billion yuan, so according to this estimate, Baosteel's net profit in 2016 will be between RMB 7 billion yuan to 9.0 billion yuan. The data of Ansteel is gratifying as well. From January to September this year, the company has achieved revenue of RMB 41.039 billion yuan, down 1.26 percent year-on-year, but its net profit was RMB 977 million yuan, while in the same period last year, it was a loss of nearly RMB 900 million yuan. The company said in the earnings report, the main reason of turning from deficits to profit is that the company has reduced the cost and improved the efficiency.
Behind the overall performance improvement of the steel industry, there is the initial result of capacity reduction in the whole industry. CISA said the promotion and implementation of the capacity reduction policy in steel industry has provided a good external environment for the entire industry to transforming and off-the-hook. According to statistics, in the first three quarters of this year, the total revenue of CISA member enterprises has reached over RMB 1.99 trillion yuan, down 8.05 percent year-on-year, but the profit was RMB 25.206 billion yuan, getting profits in contrast with the losses in the same period of last year.
In view of Du Zhengzheng, deputy general manager of China Development Bank Securities' research department, in addition to the effect of capacity reduction, the good performance of steel companies is related to the appearance of soaring market of the black bulk commodities since September as well. Taking the day of October 31st as an example, the coke price rose more than 6 percent on that day with a closing price of about RMB 1816 yuan; coking coal price rose 3 percent with a closing price of about 1307 yuan. The rise of black bulk commodity prices has further consolidated the performance of steel enterprises.
At the same time of steel enterprises making "counter attack", the non-ferrous metal sector performs uncommon as well. In 104 companies of the sector, 67 of them achieved net profit growth compared with the same of last year, accounting for 64.42 percent. The "counter attack" of iron and steel and nonferrous metal sectors is one of the highlights in this year's first three quarters reports.
Performance of equity incentive companies being showy
In addition to the "counter attack" of iron and steel and other traditional industries, the performance growth of the companies having launched ESOP is more obvious and is another highlight in this year's first three quarters reports as well.
Combined data of Royalflush iFinD and Eastmoney Choice show that this year, there are totally 245 listed companies who have announced the completion of or to plan to launch the ESOP, in which 178 companies report realizing net profit growth in the first three quarters compared with the same period of last year, accounting for up to 72.65 percent.
In the above 245 companies who have announced the completion of or to plan to launch the ESOP, 58 of them have seen significant increase in net profit.
Taking Yihua Health Care as an example, from January to September this year, its main business revenue grew 31.59 percent year-on-year, the net profit rose 105335.42 percent year-on-year and the ROE was 36.84 percent. Compared with the same period of last year, the performance of this company has substantially increased. As of September 27 this year, GF Asset Management (Guangdong) Co., Ltd., the manager of the company's ESOP, has purchased 10,616,700 shares of the company's stock totally through the secondary market with the amount of transaction totally being RMB 341 million yuan and the average transaction price being 32.08 yuan/share, which accounts for 2.3708 percent of the general capital.
"Generally speaking, the companies who launch ESOP are better in operating performance and more complete in information disclosure. At the same time, the launch of ESOP also shows that the major shareholders, the board of directors, the senior executives and the board of supervisors of the company are confident of the company's current situation and its future development and have more energy for long." A person in charge of a medium-sized brokerage research institute in Beijing said that the ESOP will help to maximize the interests of shareholders and make the interests of employees and shareholders tend to be consistent. It enhances the sense of belonging and identity of the employees and improves the work enthusiasm and work efficiency; hence there is a certain positive effect on the performance growth of listed companies.