Important note: The Administrative Measures for the Suitability of Securities and Futures Investors came into effect on July 1, 2017, and the views and information published through this WeChat subscription account are only for the reference of professional investors of Haitong Securities, and the complete investment views should be subject to the full report issued by Haitong Securities Research Institute. If you are not a professional investor among Haitong Securities clients, in order to control investment risks, please unsubscribe, receive or use any information in this subscription account. We apologize for the difficulty in setting access permissions for this subscription account, and for any inconvenience caused. Our company will not regard relevant personnel as customers because of the following, receipt or reading of the content of this subscription account, the market is risky, and investment needs to be cautious.
Haitong Macro Liang Zhonghua team
Authors of this report:
李林芷 S0850121060038
梁中华 S0850520120001
· Overview ·
Profits of industrial enterprises are relatively under pressure. The profits of industrial enterprises have increased year-on-year for seven consecutive months, which may reflect the current squeeze on the profit margins of industrial enterprises to a certain extent. In terms of drivers, the marginal decline in profit margins has the greatest impact on earnings, followed by the marginal decline in volume. Among the various industries, the midstream industry has performed relatively well, with coal in the upstream industry benefiting from higher prices and higher profit margins, and pharmaceuticals in the downstream industry benefiting from increased demand, and also performing better. At present, the profitability of enterprises has weakened compared with the previous period, which is mainly due to the fact that domestic demand is still at a low level, and the profits of industrial enterprises should be improved in the next stage, or stronger policies may be needed to support the demand side.
Risk warning: demand improvement is less than expected.
The profit growth rate of industrial enterprises has turned from positive to negative. From January to March 2024, the cumulative year-on-year growth rate of profits of industrial enterprises above designated size was 4.3%, down from 10.2% in January and February. Judging from the growth rate of the month, profits in March decreased by 3.5% year-on-year, which was the first negative year-on-year increase in profit growth since August last year.
From the perspective of influencing factors, both volume and price fell, and the profit margin turned negative year-on-year. The drag on profits from prices increased, with PPI growing at -2.8% y/y in March, a further widening decline from the previous month. The contribution of volume to profits has decreased, and the industrial added value above the designated size increased by 4.5% year-on-year in March, down from 7.0% in the previous month. The cumulative revenue margin in March was 4.9% and 5.1% in the month, both higher than the cumulative value from January to February, but this was mainly due to seasonality. Compared with previous years, the profit margin improved by a small margin in March this year, and the year-on-year growth rate of profit margin in the month turned from positive to negative again since November last year, and the contribution to overall profit turned from positive to negative. From the perspective of factors affecting profit margins, although unit expenses have decreased, the increase in unit costs has dragged down profit margins to a certain extent, which may be mainly due to the increase in the prices of raw materials such as crude oil and non-ferrous metals.
The midstream industry accounts for nearly half of the profits. We grouped the monthly profits of 15 key industries into upstream, middle and downstream groups, and the proportion of midstream profits further rose to 47.3%, accounting for nearly half of the total profits, while the proportion of profits of upstream and downstream industries declined, of which the proportion of profits of downstream industries fell from 32.5% to 27.3%, a large decline. It is worth noting that although the profits of industrial enterprises in March were affected by the rise in raw material prices, the proportion of profits in the upstream industry did not increase but decreased, mainly because the prices in March were mainly import-based commodities such as crude oil, copper, and aluminum, and the profits of domestic upstream enterprises did not benefit from the rise in raw material prices.
From the perspective of specific industries, it was found that in the upstream industry, the year-on-year decline in profits from coal mining narrowed slightly, but the profits of nonferrous metals, chemicals, and building materials fell at the margin, and the steel industry could not calculate the year-on-year growth rate due to the profit loss from January to March last year. In the midstream industry, the profit growth rate of special equipment has turned from negative to positive, and the growth rate of other industries has declined, but the growth rate of electronic equipment and power and heating industries still maintains a high level. In the downstream industry, the profit growth rate of the food and pharmaceutical industries has rebounded, but the profits of other industries are also declining at the margin.
From the perspective of profit drivers in various industries, the drag on volume has a greater impact. In the upstream industry, the price of the coal industry rebounded marginally compared with the previous month, and the marginal improvement of profit margin made a positive contribution to profits; although the price of the non-ferrous industry rebounded marginally, the profit was still marginally declining due to the drag of volume and profit margin. The price of the midstream industry is relatively stable, the main factor affecting the profit is the volume and profit margin, most of the midstream industry volume and profit margin are compared with the previous month marginal decline, so that the industry profit is compressed, only the profit margin of special equipment improves, which is also the main reason for the profit margin rebound. Although the growth rate of electronic equipment and electrical machinery industries benefiting from exports declined, it still maintained a high level, which provided some support for the industry's profits. Among the downstream industries, only the pharmaceutical industry has increased its volume, which is mainly due to the frequent occurrence of diseases in the spring and the rebound in demand for pharmaceutical products, which also makes the profit margin of the pharmaceutical industry improve.
Demand weakened and continued to accumulate inventory. From January to March, the growth rate of industrial finished goods inventory was 2.5%, a slight rebound from January to February, and the inventory was replenished for the third consecutive month. The cumulative year-on-year growth rate of enterprise revenue from January to March was 2.3%, and the year-on-year growth rate of the month was -1.2%, both of which fell from January to February.
Profits of industrial enterprises are relatively under pressure. The profits of industrial enterprises have increased year-on-year for seven consecutive months, which may reflect the current squeeze on the profit margins of industrial enterprises to a certain extent. In terms of drivers, the marginal decline in profit margins has the greatest impact on earnings, followed by the marginal decline in volume. Among the various industries, the midstream industry has performed relatively well, with coal in the upstream industry benefiting from higher prices and higher profit margins, and pharmaceuticals in the downstream industry benefiting from increased demand, and also performing better. At present, the profitability of enterprises has weakened compared with the previous period, which is mainly due to the fact that domestic demand is still at a low level, and the profits of industrial enterprises should be improved in the next stage, or stronger policies may be needed to support the demand side.
Risk warning: demand improvement is less than expected.
---------------
Rising to the Challenge: Haitong's Macroeconomic and Policy Outlook in 2024 (Haitong Macro Research Team)
Legal Notices
This public subscription account (WeChat ID: Liang Zhonghua Macro Research) is the only official subscription account operated by the macro industry of Haitong Securities Research Institute, the content contained in this subscription account is only for the reference of professional investors of Haitong Securities, and only for the exchange of research views in the context of new media; ordinary individual investors due to lack of ability to interpret research views or reports, use the relevant information of the subscription account or cause investment losses, please be sure to cancel the subscription account, Haitong Securities will not be regarded as a customer because any recipient receives the content of this subscription account. This subscription account is not a publishing platform for Haitong research reports, and customers still need to refer to the complete report officially released by Haitong Research Institute through the research report publishing platform. The market is risky, and investors need to be cautious. In any case, the information or opinions contained in this subscription account do not constitute investment advice to any person, and Haitong Securities shall not be liable for any consequences or losses arising from any direct or indirect use of the information and content published in this subscription account or investment based on it. The information, opinions and projections contained in this subscription account may no longer be accurate or invalid due to various factors after the date of publication, and Haitong Securities undertakes no obligation to update inaccurate or outdated information, opinions and projections without prior notice. The copyright of this subscription account belongs to Haitong Securities Research Institute, and any subscriber who pre-quotes or reprints the content contained in this subscription account must contact Haitong Securities Research Institute for permission, and must indicate the source as Haitong Securities Research Institute, and shall not quote or delete the content contrary to the original intention. Haitong Securities Research Institute Macro Industry reserves all legal rights to this subscription account (WeChat ID: Liang Zhonghua Macro Research). Other subscription accounts registered by other institutions or individuals on the WeChat platform in the name of the macro industry of Haitong Securities Research Institute, or containing "macro team or group of Haitong Securities Research Institute" and related information are not official subscription accounts of Haitong Securities Research Institute macro industry.