Event:
On April 27, 2022, the National Bureau of statistics released the profit data of industrial enterprises in March 2022. From January to March 2022, the profits of industrial enterprises increased by 8.5% year-on-year.
Core view:
Driven by the tax reduction and fee reduction and the low base in the same period last year, the growth rate of corporate profits increased significantly in March. Specifically, in March, the price of industrial products remained high and volatile, the operating profit margin increased significantly, and the unit cost decreased significantly, supporting the increase of enterprise profit growth. In terms of structure, the profit differentiation gradually eased in March, the profit proportion of the upstream mining industry fell, the profit proportion of the midstream equipment manufacturing industry rebounded sharply, the profit proportion of the consumer manufacturing industry disturbed by the epidemic fell slightly, and the benefit imbalance between enterprises tended to ease.
Looking ahead, under the impact of multiple factors such as the conflict between Russia and Ukraine and the spread of the epidemic, the profit recovery of industrial enterprises is still facing challenges, the inventory of enterprises is still running at a high level, and the cost pressure of small and medium-sized enterprises is still large. It is urgent for a new round of stable growth policies to be implemented. We expect that the upcoming Politburo meeting this week will make policy arrangements for stabilizing the economy and expanding domestic demand. A new round of counter cyclical hedging policies in the second quarter is worth looking forward to.
Drive: the profit margin has recovered significantly, driving the profit growth to stabilize and rebound
In March, corporate profits increased by 14.0% year-on-year, up 9.0 percentage points from January to February. By item:
Price: the price continues to fluctuate at a high level and remains resilient to profit support. In March, PPI fell to 8.3% year-on-year from 8.8% in February, while the month on month ratio rose to 1.1% from 0.5% in February. The downward speed slowed down significantly, but overall, the supporting role of price factors on the profits of industrial enterprises will continue to weaken.
Volume: affected by the epidemic, the growth rate decreased significantly, weakening the support for profits. The added value of industries above designated size increased by 5.0% in March, down 2.5 percentage points from January to February. It is mainly due to the disturbance of the epidemic, and the significant decline in the growth rate of added value of manufacturing industry due to the shutdown of enterprises in some areas and the obstruction of supply chain.
Profit margin: the sharp recovery of operating profit margin is the main support for the profit in March. In March 2022, the monthly profit margin of industrial enterprises was 6.72%, an increase of 0.75 percentage points compared with January February 2022 and 0.19 percentage points compared with the same period of the previous year, reflecting the continuous effectiveness of tax reduction and fee reduction and enterprise assistance policies.
Structure: the proportion of upstream fell, and the structural differentiation eased
From the perspective of major industries, the total profits of mining, manufacturing and electricity, fuel and water supply industries increased by 177.2%, 1.1% and - 5.5% respectively year-on-year in March. Upstream mining continued to maintain rapid growth, and the profits of manufacturing industry gradually stabilized.
In terms of the proportion of profits in various industries, the proportion of mining industry has fallen, the proportion of manufacturing industry and electricity, fuel and water supply industry has rebounded, and the structural differentiation has eased; Internally, the manufacturing industry is mainly driven by the increase in the profit proportion of the midstream equipment manufacturing industry. In March, the total profit of the equipment manufacturing industry increased by 1.75% year-on-year, up 7.0 percentage points from January to February 2022, and the profit proportion was 29.6%, up 4.0 percentage points from the previous month.
Inventory: under the impact of the epidemic, the inventory growth rate is passively upward, and the active destocking trend remains unchanged
The inventory of finished products in March increased by 18.1% year-on-year, up 1.3 percentage points from January to February, mainly due to the obstruction of the supply chain and the passive rise of enterprise inventory under the impact of the epidemic; In terms of revenue growth, revenue growth in March increased by 12.7% year-on-year, down 1.2 percentage points from January to February 2022. Under the slowdown of enterprise revenue growth, the passive inventory replenishment of enterprises has peaked, and the short-term disturbance does not change the long-term active inventory removal trend.
Risk tip: the implementation of the policy is less than expected, and the repeated epidemic situation is more than expected.
