Text | Caijing reporter Chen Xi Liu Jianzhong
Edit | Liu Jianzhong
In the first quarter of 2023, industries such as tourism, catering, and film have shown signs of recovery, but many industries have maintained their status in 2022, such as education and real estate. There are even some industries that are less profitable than in 2022. We want to know which sectors have seen their earnings deteriorate.
"Return on equity" (ROE) is often used to measure a company's profitability. "Return on equity" is the percentage of a company's net profit divided by its net assets, which reflects the level of return on net assets.
If the "return on equity" of most companies in an industry decreases significantly, we can say that it becomes harder to make a profit in that industry. The research sample of this paper was selected as an A-share listed company. Because listed companies are leaders in all walks of life, if the profitability of most listed companies in an industry deteriorates, then the profitability of the entire industry is likely to deteriorate.
This article measures the percentage of companies in various industries that experienced a year-on-year decline in their ROE in the first quarter of 2023. And according to a criterion to sort the industry, the top ten were selected.
In order to reflect the actual operating situation, "return on equity net excluding non-recurring gains and losses" is used in the text. Net assets are selected as net assets at the end of the period, that is, the "non-net return on assets deducted at the end of the period" is used in this article, also known as "non-diluted ROE" (hereinafter referred to as ROE).
The specific calculation method is as follows:
The first step is to calculate the ROE of all sample companies in an industry in the first quarter of 2022. At the same time, calculate the ROE of these companies for the first quarter of 2023.
The second step is to count the number of companies in the sample industry whose ROE in the first quarter of 2023 is more than 0.2% larger than the data in the first quarter of 2022, which is counted as A. A represents the number of companies with a year-on-year increase in ROE. In this article, ROE increases and decreases in the range of 0.2% and is considered unchanged.
The third step is to count the number of companies in the sample industry whose ROE in the first quarter of 2023 is more than 0.2% smaller than the data in the first quarter of 2022, which is counted as B. B represents the number of companies with a year-over-year decline in ROE.
The fourth step is to define a concept: "earnings deterioration".
Earnings deterioration = (B-A) / total number of sample companies
B-A represents the number of companies whose ROE has decreased, minus the number of companies whose ROE has increased. If the number of companies with declining ROE and the number of rising ROE are equal, then the deterioration of earnings is 0; If the ROE of all sample companies decreases in the first quarter of 2023, then the deterioration in earnings is 100%.
In the fifth step, the top ten are selected according to the "earnings deterioration" of each industry.
Selection method of industry sample companies: refer to the CITIC Securities industry classification of A-share listed companies, but deduction
1. Companies with incomplete data.
2. Companies whose ROE declined due to additional issuance, listing, etc., whose net assets increased by more than 40% year-on-year in the first quarter of 2023.
At the same time, this paper ignores the industries with less than 12 sample companies, and the following are the results and analysis of the calculations.
10th: Semiconductor Materials and Equipment Profit deterioration 36.8%
The semiconductor materials and equipment industry is the upstream of the semiconductor industry. In the long run, under the trend of digitalization and intelligence, the demand for semiconductors will continue to rise. However, since the second half of 2022, the semiconductor industry has entered a period of inventory adjustment. Demand in the semiconductor industry is less than expected, and inventories are high, which affects the upstream semiconductor materials and equipment industry.
In the first quarter of 2022, 5.3% of the industry sample companies lost a total loss of 50 million yuan, and in the first quarter of 2023, 31.6% of the sample companies lost a total loss of 160 million yuan. The number of loss-making companies has increased fivefold.
In the first quarter of 2023, compared with the same period last year, the ROE of 57.8% of the sample companies decreased and increased by 21%, and the ROE of other companies changed within 0.2%, which is regarded as unchanged. Profit deterioration was 36.8% (57.8%-21%=36.8%).
The median ROE of the sample companies in the first quarter of 2022 was 2.44%, and the average value was 1.6%; The median ROE of the sample companies in the first quarter of 2023 was 1.44%, and the average value was 1.5%. The median and mean decreases were 41% and 6.3%, respectively. The median decline was greater than the mean, indicating that large companies in the industry fared better than small companies. From Table 1, in the case of the overall decline of the industry, the ROE of the three companies with the highest market capitalization has increased.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 1: Top 3 semiconductor materials and equipment sample companies by market capitalization
9th place: Consumer electronics profit deterioration 39%
The consumer electronics industry has a cyclical character, which is related to the macroeconomic cycle, but more related to the innovation cycle of the industry. The consumer electronics industry is transitioning from the mobile Internet era to the post-mobile era, and a new innovation engine is needed in the future. When the product does not have essential progress, superimposed on the economic downturn, the profitability of the industry will deteriorate.
In the first quarter of 2022, 22% of the sample companies lost a total loss of RMB1.51 billion, and in the first quarter of 2023, 40.2% of the sample companies lost a total loss of RMB2.39 billion. The number of loss-making companies has nearly doubled.
In the first quarter of 2023, compared with the same period last year, the ROE of 63.4% of the sample companies decreased, 24.4% increased, and the ROE of other companies changed within 0.2%, which is regarded as unchanged. Earnings deterioration 39% (63.4%-24.4%=39%).
The median ROE of the sample companies in the first quarter of 2022 was 1% and the average was 1.5%; The median ROE of the sample companies in the first quarter of 2023 was 0.31%, and the average value was 0.82%. The median and mean decreases were 69% and 45%, respectively.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 2: Top 3 consumer electronics sample companies by market capitalization
8th place: Textile Profit deterioration 41.3%
In 2022, the total export of textiles and garments in mainland China reached US$341 billion, a year-on-year increase of 2.5%. However, the long-term prospects of the textile and garment industry are not optimistic: from an international point of view, trade protectionism is on the rise; Domestically, the growth of household income has slowed down and consumer confidence is insufficient.
In the first quarter of 2023, the situation in the branded apparel industry has recovered, but the textile industry is still sluggish. In the first quarter of 2022, 15.2% of the sample companies lost a total loss of RMB80 million, and in the first quarter of 2023, 23.9% of the sample companies lost a total loss of RMB150 million. The number of loss-making companies rose sharply, and the total loss nearly doubled.
In the first quarter of 2023, compared with the same period last year, the ROE of 60.9% of the sample companies decreased and increased by 19.6%. The deterioration of earnings was 41.3% (60.9% -19.6% = 41.3%).
The median ROE of the sample companies in the first quarter of 2022 was 1.2% and the average was 1.8%; The median ROE of the sample companies in the first quarter of 2023 was 0.74%, and the average value was 1.1%. The median and mean decreases were 39.3% and 38.9%, respectively.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 3: Top 3 companies by market capitalization of a sample of textile products
7th place: General computer equipment Profit deterioration 42.1%
General computer equipment includes computer hosts, servers, storage, cabinets, power supplies, etc. The computer equipment industry provides infrastructure for informatization and digitalization.
The 14th Five-Year Plan for the Development of the Digital Economy points out that by 2025, the digital economy will enter a period of comprehensive expansion, and the added value of the core industries of the digital economy will account for 10% of GDP. In this context, the general computer equipment industry will maintain long-term growth. However, the industry has obvious cyclical characteristics, and when the macro economy weakens, the profitability of the industry will deteriorate.
Since the fourth quarter of 2022, some projects under construction have been postponed and the industry has weakened. In the first quarter of 2022, 57.9% of the sample companies lost a total loss of RMB1.25 billion, and in the first quarter of 2023, 52.6% of the sample companies lost a total loss of RMB1.59 billion. The ROE of the general computer equipment industry has obvious seasonality, so the true state of the industry needs to be observed.
In the first quarter of 2023, compared with the same period last year, the ROE of 57.9% of the sample companies decreased, the ROE increased by 15.8%, and the profit deterioration was 42.1% (57.9%-15.8%=42.1%).
The median ROE of the sample companies in the first quarter of 2022 was -0.76%, and the average value was -0.3%; The median ROE of the sample companies in the first quarter of 2023 was -0.81%, and the average was -0.6%.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 4: Top 3 companies by market capitalization of the General Computer Equipment Sample
Note: FII (601138. SH), because general-purpose computer equipment accounts for less than 50% of its revenue.
Sixth place: Furniture Profit deterioration 45.5%
In the long run, the furniture industry has gradually entered a mature period, and the overall growth rate of the industry has slowed down. In the short term, home sales and completions will affect the furniture industry. Since 2022, especially since the second half of the year, the furniture industry has performed poorly.
In the first quarter of 2022, 18.2% of the sample companies lost a total loss of RMB240 million, and in the first quarter of 2023, 31.8% of the sample companies lost a total loss of RMB300 million.
In the first quarter of 2023, compared with the same period last year, the ROE of 59.1% of the sample companies decreased and increased by 13.6%. The deterioration of earnings was 45.5% (59.1% -13.6% = 45.5%).
The median ROE of the sample companies in the first quarter of 2022 was 1.26%, and the average value was 1.4%; The median ROE of the sample companies in the first quarter of 2023 was 0.3% and the average was 0.7%. The median and mean values decreased by 74.6% and 50% respectively.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 5: Top 3 furniture sample companies by market capitalization
5th place: Cement Profit deterioration 52.3%
Infrastructure investment and real estate investment are the two most important factors affecting cement demand and prices. Since the end of 2021, the cement price index has continued to decline (Figure 1).
Figure 1: Cement price index
In the first quarter of 2022, 33.3% of the sample companies lost a total loss of RMB460 million, and in the first quarter of 2023, 47.6% of the sample companies lost a total loss of RMB3.67 billion. The total losses of loss-making enterprises rose sharply.
In the first quarter of 2023, compared with the same period last year, the ROE of 66.6% of the sample companies decreased and increased by 14.3%. The deterioration of earnings was 52.3% (66.6% -14.3% = 52.3%).
The median ROE of the sample companies in the first quarter of 2022 was 0.26%, and the average value was 1.3%; The median ROE of the sample companies in the first quarter of 2023 was 0.06%, and the average value was -0.07%. The mean fell by more than 100%.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 6: Top 3 cement sample companies by market capitalization
Fourth place: industrial non-ferrous metals profit deterioration 55.2%
Industrial non-ferrous metals include copper, aluminum, lead, zinc and other metals, and their prices are globally interoperable. Industrial metal prices are a barometer of the global economy. Since 2022, the US dollar has continued to raise interest rates, the global economy has slowed down, and the non-ferrous metals industry has declined.
In the first quarter of 2022, 6.9% of the sample companies lost money, with a total loss of 99 million yuan, and in the first quarter of 2023, 17.2% of the sample companies lost money, with a total loss of 265 million yuan.
In the first quarter of 2023, compared with the same period last year, the ROE of 70.7% of the sample companies decreased and increased by 15.2%. The deterioration of earnings was 55.2% (70.7%-15.2%=55.2%).
The median ROE of the sample companies in the first quarter of 2022 was 2.1%, and the average value was 2.9%; The median ROE of the sample companies in the first quarter of 2023 was 1% and the average was 2.2%. The decline in mean is less than the median, indicating that the earnings of large companies in the industry have fallen less. From Table 7, the ROE of China's aluminum industry and Jiangxi copper industry did not decline.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 7: Top 3 Industrial Nonferrous Metals Sample Companies by Market Capitalization
3rd place: Pugang Profit deterioration 70.9%
Pugang refers to steel products other than special steel. Since 2022, the steel industry has seen weak supply and demand, shrinking profits, and corporate development facing difficulties. Steel prices fluctuated downward, and the steel composite price index in the first quarter of 2023 fell by 13.5% year-on-year.
In the first quarter of 2022, 12.5% of the sample companies lost a total loss of RMB2.03 billion, and in the first quarter of 2023, 41.7% of the sample companies lost a total loss of RMB3.08 billion. The number of loss-making companies has more than tripled.
In the first quarter of 2023, compared with the same period last year, 79.2% of the sample companies decreased their ROE and 8.3% increased. The deterioration of earnings was 70.9% (79.2%-8.3%=70.9%).
The median ROE of the sample companies in the first quarter of 2022 was 1.92% and the average value was 1.78%; The median ROE of the sample companies in the first quarter of 2023 was 1.57%, and the average value was 0.17%. The average ROE value in the first quarter of 2023 was less than 10% of the same period in 2022. The mean decline was greater than the median, indicating that large companies were worse off.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 8: Top 3 companies by market capitalization
2nd place: Chemical raw materials Profit deterioration 80.6%
As a primary product, the demand for chemical raw materials is related to the development of the entire national economy. When the overall economy weakens, the chemical raw materials industry will also fall into a downturn.
In the first quarter of 2022, 7.5% of the sample companies lost a total loss of RMB110 million, and in the first quarter of 2023, 35.8% of the sample companies lost a total loss of RMB1.62 billion. The number of loss-making companies increased fourfold.
In the first quarter of 2023, compared with the same period last year, 86.6% of the sample companies decreased their ROE and increased by 6%. The deterioration of earnings was 80.6% (86.6%-6%=80.6%).
The median ROE of the sample companies in the first quarter of 2022 was 2.8%, and the average value was 3.7%; The median ROE of the sample companies in the first quarter of 2023 was 0.56%, and the average value was 1.1%. Both the median and mean values have fallen sharply.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 9: Top 3 companies by market capitalization of sample chemical raw materials
First place: chip profit deterioration 81.6%
Since 2022, chip supply and demand have reversed, from "grabbing chips" to "destocking". Entering 2023, the chip industry continues to decline. In addition to automobiles, the downstream demand for chips is relatively weak. Of course, chips are the foundation of the digital economy, and after adjustment, the future of the industry is still bright.
In the first quarter of 2022, 15% of the sample companies lost a total loss of RMB510 million, and in the first quarter of 2023, 43.3% of the sample companies lost a total loss of RMB2.16 billion. The number of loss-making companies and the amount of losses have increased significantly.
In the first quarter of 2023, compared with the same period last year, the ROE of 88.3% of the sample companies decreased and increased by 6.7%. The deterioration of earnings was 81.6% (88.3%-6.7%=81.6%).
The median ROE of the sample companies in the first quarter of 2022 was 1.93%, and the average value was 2.4%; The median ROE of the sample companies in the first quarter of 2023 was 0.11%, and the average was 0.3%. Both the median and mean fell dramatically.
Among the sample companies, the three companies with the highest market capitalization as of March 31, 2023 are as follows:
Table 10: Top 3 chip sample companies by market capitalization
epilogue
Figure 2: Top 10 sectors with the highest earnings deterioration in 2023
The economy can be divided into the old economy represented by traditional industries and the new economy represented by digitalization. Among the top ten industries with deteriorating profits, steel, cement, non-ferrous metals, and chemical raw materials are the barometers of the old economy, while semiconductor materials and equipment, general-purpose computer equipment, and chips are the thermometers of the new economy.
The prosperity of these seven industries is declining, indicating that the old economy and the new economy lack vitality at the same time. At present, economic momentum is still insufficient and confidence is still lacking. At this time, it is necessary to reform the supply side and the demand side at the same time, to make simultaneous efforts of old infrastructure and new infrastructure, to reduce taxes and interest rates, to reduce the obstacles to the free flow of capital, and to give full play to the vitality of the private economy.