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· Overview ·
The profit margin of industrial enterprises rebounded, and the Spring Festival effect had a greater impact. Excluding the impact of the base, the profit growth rate in January and February rebounded compared with the end of last year, and the main driving factor was the increase in volume. The distribution of corporate profits among industries is more balanced, and some upstream industries are affected by the decline in prices, and the profit growth rate of electronic equipment, electricity and heat, food and textile and clothing industries, which have increased more in the middle and downstream industries, has improved, which is mainly due to the strong consumer demand during the Spring Festival. We believe that whether the profit margins of industrial enterprises can be further opened up in the next stage need to observe a sustained and definite improvement in downstream demand. This requires greater counter-cyclical and cross-cyclical adjustment policy support.
Risk warning: demand improvement is less than expected.
Excluding the base impact of last year's data, the profit growth rate of industrial enterprises rebounded marginally. From January to February 2024, the cumulative year-on-year growth rate of profits of industrial enterprises above designated size was 10.2%, which was lower than the year-on-year growth rate of 16.8% in December last year, but this was partly due to the fact that last year's data was greatly affected by the base. After removing the impact of the base on last year's data, the four-year annualized growth rate was 7.6%, and the growth rate from January to February was higher, ending the decline for two consecutive months. This reflects the rapid growth of corporate profits at the beginning of the year, and the speed of repair has increased compared with the previous period.
From the perspective of influencing factors, the increase in volume contributed greatly. The cumulative year-on-year decline in PPI from January to February narrowed to 2.6% from 2.7% in December last year, but if the annualized growth rate is taken into account the impact of the base, the drag on prices has expanded compared with last year. The contribution of volume to profits continued to increase, and the added value of industrial enterprises above designated size increased by 7.0% year-on-year from January to February, an improvement from 6.8% in December last year, and the improvement was even greater if the base impact is considered. The cumulative revenue margin for January-February was 4.7%, down from 5.8% for the full year and down from 5.3% in December, partly due to seasonality. However, compared to the same period of the previous year, the revenue margin in January-February this year is only higher than in 2023 and lower than in other years since 2018. This was mainly due to higher unit costs and expenses, which led to lower corporate margins. The year-on-year growth rate of profit margins fell to 2.3% from 6.8% in December last year, which weighed on profits.
Upstream, midstream and downstream industries have a more balanced distribution of profits. We aggregate the monthly profits of 15 key industries by upstream, midstream and downstream, and the proportion of profits of upstream industries fell to 27.3% from 32.8% in December last year. The profit proportion of the midstream industry was flat at 40%, and the profit proportion of the downstream industry rebounded, from 27.5% in December last year to 32.5%, which was mainly due to the relatively strong consumer demand during the Spring Festival holiday, which led to the relative improvement of the profits of the downstream industry.
From the perspective of specific industries, after taking the four-year annualized average growth rate, we find that in the upstream industry, except for the non-ferrous industry, the profits of other industries have fallen at the margin, and the growth rate of the coal industry has turned from positive to negative. In the midstream industry, the profit margin of general equipment, electronic equipment and power and heating industry has improved, among which the profit improvement of electronic equipment industry is the most obvious. In the downstream industries, the profit growth rate of the food, textile and clothing, and automobile industries is rebounding.
From the perspective of profit drivers in various industries, the increase in volume has led to the improvement of profits in the middle and downstream industries. In the upstream industry, the profit margin of the steel industry is lower, mainly due to the decline in prices, while the coal mining and chemical industries are mainly affected by the reduction of the volume margin. Although the volume and price of the non-ferrous industry have fallen slightly, the obvious marginal improvement in profit margins has made the profit growth rate of the industry still pick up. In the middle and lower reaches of the industry, the profit improvement of the electronic equipment, electricity and heat, food and textile and clothing industries is mainly due to the contribution of volume, which is partly due to the recovery of consumption during the Spring Festival, and the continuous growth of industry production driven by demand. The production growth rate of the automobile industry has declined, but if we consider the impact of the base last year, the actual production growth rate from January to February has rebounded, and the sharp marginal improvement in profit margins has driven the growth rate of the automobile industry to pick up.
Post-holiday replenishment. From January to February, the growth rate of finished industrial goods inventory was 2.4%, which continued to rise from 2.1% last year, and replenished the warehouse for the second consecutive month. The cumulative year-on-year growth rate of corporate revenue was 4.5%, higher than the 1.1% growth rate for the whole of last year, but lower than the four-year annualized growth rate of 5.0% in December last year, which shows that it remains to be seen whether the current repair of the demand side of enterprises can be sustained.
The profit margin of industrial enterprises rebounded, and the Spring Festival effect had a greater impact. Excluding the impact of the base, the profit growth rate in January and February rebounded compared with the end of last year, and the main driving factor was the increase in volume. The distribution of corporate profits among industries is more balanced, and some upstream industries are affected by the decline in prices, and the profit growth rate of electronic equipment, electricity and heat, food and textile and clothing industries, which have increased more in the middle and downstream industries, has improved, which is mainly due to the strong consumer demand during the Spring Festival. We believe that whether the profit margins of industrial enterprises can be further opened up in the next stage need to observe a sustained and definite improvement in downstream demand. This requires greater counter-cyclical and cross-cyclical adjustment policy support.
Risk warning: demand improvement is less than expected.
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Rising to the Challenge: Haitong's Macroeconomic and Policy Outlook in 2024 (Haitong Macro Research Team)
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