Core view
From January to November, the cumulative year-on-year growth rate of industrial enterprise profits accelerated and slowed down, mainly due to the month on month decline in revenue profit margin in November and the high base in the same period last year. In November, the cumulative year-on-year growth rate of inventory rose again, the highest since March 2012, mainly due to the repeated epidemic, which made the inventory rise passively. We believe that under the background of the continuous slowdown of enterprise profit growth, limited consumption repair and insufficient investment, it is difficult for enterprises to have the willingness to take the initiative to replenish stocks beyond the season. In December, under the influence of the repeated epidemic that has not been alleviated, it is still possible to passively rush up inventories again.
The year-on-year growth rate of profits returned to normal, and the upstream and downstream structures were differentiated and repaired
From January to November, the total profits of Industrial Enterprises above designated size increased by 38.0% year-on-year, the previous value was 42.2%, the average growth in two years was 18.9%, and the previous value was 19.7%. Among them, the year-on-year growth rate in November was 9.0%, down 15.6 percentage points from the previous month. As we suggested in the early stage, the growth rate of total profit fell greatly, but the differentiation peak of profit structure has been shown in the previous month. It is expected that the profit growth rate of industrial enterprises will decline to – 3.5% in 2022, and the differentiation of upstream and downstream profit structure will gradually improve.
The year-on-year growth rate of the total profit in November fell significantly, mainly due to the month on month decline in revenue profit margin, and the reading of the decline was amplified under the action of the high base in the same period last year. First, the revenue profit margin fell in the current month and the structural differentiation improved. According to our calculation, the revenue profit margin of the mining industry in November was about 7.2 percentage points lower than that of the previous month, and the manufacturing industry was flat at 6.5% month on month, but it was significantly lower than that of the same period last year, and the supply of electricity, heat, gas and water turned negative. Second, the industrial output was marginally repaired compared with that of the previous month, but the support was weak. The energy supply guarantee promoted the large-scale coal supply. Third, PPI was flat month on month in November, PPI began to enter the downward channel, and the new profit structure of industrial enterprises was greatly improved. The contribution of the equipment and consumer goods manufacturing industry in the middle and lower reaches to the profits of industrial enterprises has increased. According to our calculation, the profits of the upstream raw material industry in November fell by about 10 percentage points compared with the previous month. With the repair of the ppi-cpi scissors difference, the downstream profits will gradually improve.
Consumer goods manufacturing picked up and equipment manufacturing improved
In November, under the main effect of the recovery of consumer goods prices, the profit of consumer goods manufacturing industry increased by 10 percentage points year-on-year from the previous month, with a growth rate of 13.6%. In November, affected by the epidemic, the consumption of residential economic attributes such as communication equipment, beverages and cultural office supplies remained booming. By industry, the profit growth of textile and garment, textile industry, wine and beverage, agricultural and sideline food processing, culture, education, industry and beauty, and food manufacturing industries was fast or accelerated.
In November, the profit growth of equipment manufacturing industry changed from negative to positive. The reasons for marginal improvement are as follows: first, the problem of car core shortage is alleviated and the output is repaired, resulting in the improvement of sales volume; Second, benefiting from the increased output of high value-added products, the rapid growth of container demand and other factors, the profit growth of railway, ship and metal products industry accelerated year-on-year.
Passive inventory rise under the repeated influence of epidemic situation
At the end of November, the finished product inventory of Industrial Enterprises above designated size increased by 17.9% year-on-year, with the previous value of 16.3%, a new high since March 2012. The repeated impact of the epidemic in many provinces made the inventory rise passively again. We believe that under the background of the continuous slowdown of enterprise profit growth, limited consumption repair and insufficient investment, although there is a certain demand for goods at the end of the year, it is difficult for enterprises to have the willingness to take the initiative to replenish stocks beyond the season. Considering the repeated impact of the epidemic in December, the inventory may be pushed up passively again.
Looking forward to next year, we believe that under the background of limited demand repair intensity in China and the gradual decline of profits of industrial enterprises, it is expected that the overall trend of active destocking will continue. However, as pointed out in the previous report, due to the uncertainty of virus variation and the increase of infection intensity, there are still repeated risks in many provinces in China. Under the zeroing policy, it may still promote the passive base and rush up in some months and disrupt the rhythm of the inventory cycle.
Risk warning: the epidemic situation rebounded beyond expectations; The economy went down faster than expected
