Event: from January to February 2022, the profits of Industrial Enterprises above designated size increased by 5% year-on-year, with the previous value of 4.2%; Operating revenue increased by 13.9% year-on-year.
I. from January to February 2022, industrial enterprises showed a pattern of "volume increase, price increase and profit increase", driven by price factors. The conflict between Russia and Ukraine has pushed up global commodity inflation, especially in energy, chemical industry and metals. Further efforts need to be made to ensure supply and stabilize prices.
1) volume increase: high growth on a high base. From January to February 2022, the cumulative revenue of industrial enterprises was 13.9% year-on-year, an increase of 4.2 percentage points compared with 9.7% year-on-year in December 2021; From January to February 2021, the cumulative year-on-year growth rate was 9.43%. After excluding the influence of base effect, the growth performance of industrial production in "volume" was not weak, belonging to further high growth on the basis of high base.
2) profit rise: low growth on high base. From January to February 2022, the total profits of industrial enterprises accumulated 5.0% year-on-year, down 6.9 percentage points from 11.9% year-on-year in December 2021, and the profit growth slowed down significantly. At the same time, it was far lower than 31.2% year-on-year in January to February 2021. The sales gross profit margin remained stable and the operating profit margin tended to decline. From January to February, the sales gross profit margin was 16.1%, down 0.2 percentage points from the previous value, and continued to decline slightly in the past year; From January to February, the operating profit margin was 6.0%, down 0.8 percentage points from the previous value, indicating that the overall profit growth of industrial enterprises was weak.
2. Commodity inflation blocks the profit transmission process, and the profits of industrial enterprises show a trend of "rising at both ends and falling in the middle".
In November 2021, the scissors gap between CPI and PPI bottomed out and the upstream profits gradually transmitted to the middle and lower reaches. However, the conflict between Russia and Ukraine has promoted a new round of commodity inflation and blocked the profit transmission chain that has lasted for two months. Industrial enterprises may return to the cost dilemma in the third quarter of 2021.
1) from the perspective of profit proportion, the upstream, middle and downstream show a profit distribution pattern of "rising at both ends and falling in the middle". From January to February, the profit of the upstream mining and processing industry accounted for 47.8%, ending the downward channel for two consecutive months; Both ends of the midstream equipment manufacturing industry were constrained, and the proportion of profits fell to 20.0%, down 7.6 percentage points from December; Downstream consumption and manufacturing profits accounted for 32.2%, an increase of 3.1 percentage points over December.
2) from the perspective of profit growth, the profit growth rate of the upstream mining and processing industry is still in the upward channel, but the growth rate has narrowed. From January to February, the cumulative profit of the upstream mining and processing industry was 30.1% year-on-year, 4.0 percentage points lower than the two-year compound growth rate in December 2021. Among them, the total profit of the oil and gas mining and coal mining industry was 156.7% and 155.3% year-on-year, 115.3 and 101.6 percentage points higher than the previous period. In addition, there were marginal improvements in non-ferrous metal mining and processing, and the profit growth rate increased by 20.0 and 9.6 percentage points compared with the previous period; Midstream equipment manufacturing profit was eroded and the growth rate turned negative. The profit growth rate from January to February was - 5.9% (17.4% year-on-year in 12 years in 2021), including delivery equipment, general equipment, instruments and computer electronics manufacturing - 34.7%, - 15.7%, - 14.9% and - 7.3%, down 26.9%, 26.1, 27.0 and 34.1 percentage points respectively compared with December 2021; The damage degree of downstream consumption and manufacturing profit is lower than that in the middle reaches. The profit growth rate of wine, tea and beverage, textile, food, culture, education, sports and entertainment products from January to February was 32.5%, 13.1%, 12.3% and 10.5% respectively, 18.0%, 7.3%, 9.4 and 8.7 percentage points higher than that in December 2021, but the profits of automobile, furniture, agricultural and sideline products processing and papermaking were damaged in different ranges.
3) the profit differentiation between upstream, middle and downstream is related to the conflict between Russia and Ukraine. Oil, coal, chemical industry and non-ferrous metals with rapid profit improvement, agricultural and sideline products processing and automobile with rapid profit decline, and Shenzhen Agricultural Products Group Co.Ltd(000061) , neon and non-ferrous metals at the cost end are important export commodities of Russia and Ukraine. At present, the situation in Russia and Ukraine has not eased, and the negotiations have not made substantive progress. It will still be the leading factor in commodity prices for some time in the future, which still needs continuous attention. Global inflation remains high in the short term. It is expected that the proportion of upstream profits in the first half of this year is still large, and the differentiation of upstream and midstream profits may exceed that in the third quarter of 2021. The follow-up policy of ensuring supply and price stability is expected to make further efforts to reduce the costs of middle and lower reaches enterprises and promote the stable operation of the industrial economy.
III. The inventory growth rate of industrial enterprises fell slightly.
From January to February 2022, the cumulative inventory of finished products of industrial enterprises was 16.8% year-on-year, a slight decrease of 0.3 percentage points compared with the previous value of 17.1%, which has fallen for two consecutive months. The high price of industrial products contributed to some of the growth rate. After excluding the year-on-year PPI, the cumulative actual inventory from January to February was 8.0% year-on-year. We use the scissors difference between the growth rate of operating revenue and the growth rate of finished goods inventory to measure the behavior of enterprises in replenishment and destocking. The scissors difference bottomed out in November 2021 and has narrowed for three consecutive months. The scissors difference from January to February is - 2.9%, which is expected to be corrected in the first quarter. The improvement of revenue growth rate exceeds that of inventory growth, indicating that industrial enterprises may take the initiative to replenish inventory.
IV. what do you think of the follow-up industrial production?
1) from January to February, the operation data of industrial enterprises showed "volume increased, price increased and profit increased". The good side is that the revenue exceeded expectations, and the enterprises took the initiative to replenish the inventory. However, the rise in the price of raw materials has seriously eroded the profits of the middle and lower reaches, and the cost side pressure has become more explicit, which has blocked the profit transmission process that has lasted for two months. It is necessary to be vigilant against the recurrence of the dilemma in the third quarter of last year. Looking back, the conflict between Russia and Ukraine abroad has not been alleviated, the European and American sanctions continue to escalate, the multi-point outbreak of the epidemic in China in March and the tightening of prevention and control measures will further drag down the pattern of industrial production and profit distribution.
2) the previous cpi-ppi bottomed out and rebounded. How to allocate assets In the report, we have suggested the upward logic of consumption boom under profit transmission in 2022. The data show that in the five cycles of CPI and PPI scissors difference recovery in history, the proportion of upstream profits changed by - 20.0%, - 0.5%, - 10.9%, - 1.1% and - 10.1% respectively, with an average decline of 7.9%; The proportion of midstream profits was relatively stable, with an average increase of 1.3%; The downstream benefited greatly from profit transmission, with changes of + 19.0%, 0.0%, + 6.4%, + 7.6% and + 1.4% respectively, with an average increase of 6.8%. In November 2021, the scissors gap between CPI and PPI bottomed out and rebounded, and the proportion of profits in the middle and lower reaches rose for two consecutive months. In November and December, the proportion of profits in the middle reaches increased by 0.5% and 1.2%, and the proportion of profits in the lower reaches increased by 0.0% and 0.7%. The profit transmission logic was preliminarily verified; Although Russia and Ukraine promoted the rise of commodity prices, resulting in the slowdown of the downward rate of PPI, the profit transmission represented by the gradual recovery of cpi-ppi scissors difference is still the main line of the year. The difference is that the interpretation time point of consumer market may be delayed. We still suggest that we pay attention to the structural price rise opportunities of consumption and the "dilemma reversal" opportunities of some industries in the second half of the year.
Risk tips
The conflict between Russia and Ukraine intensified beyond expectations, the epidemic situation accelerated and deteriorated, and the implementation of the policy of ensuring supply and stabilizing prices was less than expected.
