research conclusion
Event: on November 27, the National Bureau of statistics released the latest profit data of industrial enterprises. From January to October, industrial enterprises above Designated Size achieved a profit of 7164.99 billion yuan, a year-on-year increase of 42.2% (previous value 44.7%), and an average increase of 19.7% (previous value 18.8%) in two years.
Under the background of the marginal slowdown of economic recovery, the two-year average growth rate of profits of industrial enterprises rebounded. The cumulative two-year average growth rate of total profits in October was 0.9 percentage points higher than that of the previous month, and the two-year average growth rate of single month was 13.2 percentage points higher than that of the previous month. We understand that the driving force for the rebound of corporate profits mainly comes from the simultaneous rise of upstream volume and price caused by price protection and stable supply, and the relief policy has alleviated the cost pressure of some enterprises – 1) from the two-year average growth rate of accumulated profits, the production and supply industries of mining, manufacturing, electricity, heat, gas and water increased by 7.3, 1.6 and – 1.2 percentage points respectively over the previous month, The sharp rise in mining profits is the main reason for the profit rebound. The biggest change in October was from “power and production restriction” to “price guarantee and stable supply”, which made the upstream volume and price rise together, the PPI rose to a historical high of 13.5% year-on-year, the profit margin of the mining industry further increased to 19.32%, and the two-year average growth rate of operating revenue increased by 2.6% to 9% over the previous month; 2) The implementation of the policy of helping enterprises to rescue has improved the profit margin. The expenses and costs per 100 yuan of operating revenue have decreased by 0.02 and 0.03 yuan respectively compared with the previous month. Another confirmation is that the profit growth rate of private enterprises has stabilized, with an average growth rate of 0.09 percentage points over the previous month in the two years. It is expected that the further implementation of the policies of tax reduction and fee reduction and enterprise relief during the year will contribute to the improvement of profit margin. On November 10, the State Council issued the notice on Further Strengthening the relief and assistance to small and medium-sized enterprises, proposing measures such as further promoting tax reduction and fee reduction, making good use of the new small refinancing line of 300 billion yuan, and alleviating the pressure of rising costs.
The phenomenon of increasing income without increasing profits in some consumer goods industries reflects that the terminal demand is relatively weak against the background of rising prices, and the profits of the textile industry chain have improved significantly. The internal profits of the consumer goods manufacturing industry are divided, and the profits of some industries have not improved with the growth of revenue, indicating that the cost pressure is difficult to be fully transmitted. For example, the cumulative two-year average growth rates of revenue and total profits of the agricultural and sideline food processing industry have increased by 1 and – 0.7 percentage points respectively compared with the previous month. The revenue and profit of the textile industry chain improved. From January to October, the two-year average growth rate of the operating revenue of the textile industry, textile clothing and clothing industry increased by 2 and 2.1 percentage points respectively over the previous month; The total profit increased by 4.9 and 2.9 percentage points respectively.
The cumulative inventory of finished products has risen to a high level in recent years, but the stage of inventory recovery may be coming to an end. The cumulative inventory of finished products in October was 16.3% year-on-year, an increase of 2.6 percentage points over the previous month. We believe that the reasons are as follows: 1) the supply guarantee policy in October effectively alleviated the supply situation of enterprises, thus pushing up the inventory; 2) The high upstream price makes the nominal value of inventory rise. From historical experience, the trend of PPI and finished product inventory is relatively consistent. Subsequently, with the PPI inflection point approaching and the recovery of downstream demand, we believe that the recovery of finished product inventory should be close to the end.
Risk tips:
The rapid rise of overseas epidemic situation affects the stability of supply chain and import and export;
Commodity prices changed more than expected.
