Better times for listed firms
▶ Nearly half say earnings expanded in 2020
Nearly half of the 750-plus A-share companies that have announced preliminary results for the past year said their earnings improved, with petrochemical, pharmaceutical, high-tech, food and beverage sectors among the best performers, a sign China’s economy has displayed extraordinary resilience amid the COVID-19 pandemic.
With the economy continuing its rebound from the virus this year and providing a sustained boost to consumer confidence, the consumer discretionary sector will deliver stellar returns, analyst said, envisioning 2021 to be a much better year for company earnings.
As of Sunday night, 753 companies listed on Chinese mainland bourses had disclosed their preliminary results for 2020, with 369 (49 percent), posting earning gains, the China Securities Journal reported on Monday, citing financial information provider Wind.
Eight companies including distillers Wuliangye Yibin and Shanxi Xinghuacun
Fen Wine Factory, as well as Wanhua Chemical Group, Shenzhen Mindray Bio-Medical Electronics, and Apple supplier Luxshare Precision said the upper end of their net profits’ target range will exceed 3 billion yuan ($463.3 million).
Additionally, 287 companies (38.1 percent) estimated a 10 percent-plus increase in 2020 net profits, while 156 estimated earnings growth of more than 100 percent.
Six companies including Guangzhou Tinci Materials Technology, which specializes in chemical materials and lithium-ion battery materials, coronavirus testing kit manufacturer Da An Gene Co and HaiXin Foods projected more than 10-fold surge in earnings.
Enviable profitability is underpinning share prices despite overall market weakness.
Shenzhen-listed Jiangsu NanFang Bearing, a major domestic supplier of needle bearings, clutches and auto parts, saw its shares soar by the 10-percent daily limit on Monday after a filing on Sunday revealed a surge of eight to 10.37 times in 2020 net profits.
The benchmark Shanghai Composite Index fell 1.08 percent on Monday while the Shenzhen Component Index shed 1.33 percent. Out of the 4,000-plus stocks traded on the Chinese mainland market, fewer than 800 closed up.
An uptick in earnings in the pharmaceutical and petrochemical sectors is essentially linked to rising factory prices of industrial products and international commodity price spikes and post-COVID-19 inventory replenishment, said Wu Jinduo, head of fixed income at the research institute of Great Wall Securities. Wu cited an upward spiral in the CRB Commodity index since April 2020 and an uptrend in Brent Crude oil futures and industrial metals traded on the London Metal Exchange since May 2020.
As a major consumer of commodities, China’s demand for industrial products has been spurred by an economic recovery since the second quarter of last year, Wu told the Global Times on Monday, adding that an increase in property and infrastructure investment to offset the virus’ impact pushed up global commodity prices.