The performance forecast for 2021 is generally good
Entering the financial reporting season, some listed companies disclosed performance forecasts. As of January 15, 2022, 410 A-share companies have disclosed the performance forecast for 2021, of which 85.4% of the companies have improved their performance (including pre increase, slight increase, continued profit and loss reversal), the proportion of good performance is at an all-time high, and more than half of the companies expect the growth rate of performance to be more than 60%.
The performance forecast of most industries is better. By industry, there are a large number of companies that disclose performance forecasts in basic chemical, pharmaceutical, biological, electronic and other industries. The results of performance disclosure in most industries are good, and the proportion of companies with good performance in the number of companies disclosing performance forecast is more than 80%, of which nonferrous metals, light industry and other industries account for 100%, while the proportion of companies with good performance in building decoration, public utilities, building materials and social services is relatively low, only about 50%.
The positive proportion of current performance forecast is high, or it is related to a low base. According to the disclosure rules, listed companies need to disclose performance forecasts when they have losses, turn losses into profits, and the growth rate of net profit is more than 50% or less than – 50%. However, the base in 2020 is low, and many companies will have performance growth of more than 50% in 2021.
It is estimated that the annual growth rate of A-share performance in 2021 will be about 31.9%. Overall, under the benchmark assumption, the annual growth rate of A-share net profit in 2021 will be about 31.9%, and the compound growth rate will also be in the double-digit level compared with 2019. It is expected that the growth rate of A-share net profit will decline significantly in 2022.
Which industries may outperform expectations?
Historically, the market often overestimates the performance growth of a shares. Since 2010, the actual profit growth of A-Shares over the years has been lower than the market expectation at the end of the year. The expected error in most years is about 5pct. Although the market always overestimates the performance growth rate, most of the judgments about the direction of the rise or decline of the growth rate are accurate. From the perspective of individual stocks, about a quarter of companies exceed market expectations every year.
Which industries may exceed expectations? When the net profit growth rate of the industry is higher, there are relatively more individual stocks whose performance exceeds expectations in the industry. There is a significant correlation between the net profit growth rate of most industries and the proportion of individual stocks exceeding expectations. In terms of 2021, cyclical industries with good performance in 2021, such as nonferrous metals, iron and steel and chemical industry, have a relatively greater probability of exceeding expectations. In addition, electronics, power equipment, medicine, biology, mechanical equipment and other industries are also more likely to outperform expectations.
Focus on industries and individual stocks whose performance may exceed expectations. Stocks with significantly better performance than expected tend to have better stock price performance. In the context of the current downward overall earnings of a shares, industries with better performance than expected and expected to maintain high prosperity in the future may have better performance. It is suggested to pay attention to pharmaceutical, mechanical equipment, power equipment, automobile and other industries.
The restless market will still come as promised
The restless market will still come as promised. The recent overall market performance is weak, but the restless market is still worth looking forward to. On the one hand, the “spring agitation” market in history will appear almost every year, rarely absent; On the other hand, in the future, with the emergence of policy effectiveness and the release of liquidity, the logic of restless market is still established. Since December, there has been a trend of style switching in the market, which is also a reflection of the restless market to a certain extent.
It is suggested to focus on consumption and steady growth. 1, the main line of consumption suggests that we should pay attention to Baijiu, medicine, household electrical appliances, automobiles and mass consumer goods. 2. For the main line of steady growth, it is recommended to pay attention to traditional infrastructure (machinery, building materials and construction) and new infrastructure (wind power and photovoltaic).
Risk analysis: 1. The level of economic growth is significantly lower than expected; 2. The underrepresentation of companies that disclose performance forecasts affects the overall conclusion.
