Summary:
Why did profit growth decline sharply? In November, the profits of Industrial Enterprises above designated size increased by 9.0% year-on-year, down 15.6 percentage points from the previous month; The two-year average growth was 12.2%, and the growth rate decreased by 14.2 percentage points compared with the previous month, indicating that the decline of profit growth this month has little to do with the rise of the base.
In terms of total volume, the main reason for the decline in profit growth is price. In November, PPI fell by 0.6 percentage points compared with the previous month, weakening the support for profits. In terms of profit margin, the profit margin from January to November was 6.98%, down 0.03 percentage points from January to October, which also dragged down the profit growth. However, observing the change of profit margin from the cost expense rate, we can find that the cumulative operating cost of industrial enterprises decreased year-on-year, and the price of main raw materials of PMI also decreased significantly in November, It means that the reason for the increase of cost margin (decrease of profit margin) is more the decline of price than the increase of cost. It can be inferred that the decrease of profit margin amplifies the impact of price on profit.
In terms of structure, first, the effect of ensuring supply and stabilizing price continues to appear, the profit growth slope of the upstream mining industry slows down, and the growth rate of the middle reaches raw material processing industry slows down. Second, the price of power coal remains high, while the floating space of electricity price is limited, and the profitability of power generation enterprises is still difficult, resulting in the deep negative growth of utility profits.
The profit structure improved and the outlook of downstream consumer goods rebounded for the first time in the year. Since the beginning of this year, due to the rising commodity prices and weak superimposed consumption, the profit margin and proportion of the downstream consumer goods industry have continued to decline. The profit margin of the downstream consumer goods industry this month was 6.20%, up 0.03 percentage points from the previous month. The proportion of profits in the downstream consumer goods industry also rebounded by 0.02 percentage points. The recovery of profit margin and profit proportion of downstream consumer goods is the first time in the year, which is consistent with the narrowing of the scissors difference between PPI and CPI. In the future, the downward trend of PPI is established, the cost pressure of the downstream consumer goods industry will be gradually reduced, and the profits of the downstream industry are expected to accelerate the improvement. On the other hand, the downstream manufacturing industry has recovered its profits with the support of the export boom and the alleviation of the core shortage problem.
The enterprise is in the "passive replenishment" stage. The enterprise inventory in the current period presents a combination of "increased finished product inventory and flat finished product turnover days". Considering that the inventory of finished products has shown an upward trend for two consecutive months year-on-year, and the revenue and profit growth of industrial enterprises are stepping into the downward channel, we believe that enterprises are in the stage of "passive inventory replenishment".
Risk factors: China's policy changes exceed expectations; Inflation exceeded expectations, etc.
