The second quarter is the staged bottom of profitability
Editor’s note: This article is from WeChat public account ” Guotai Junan Securities Research (ID: gtjaresearch), author of the Monarch Research Product Center.
The 2019 mid-year season has come to an end.
From the data of the mid-year reports released by more than 3,000 companies, the degree of performance differentiation is unprecedented.
According to the statistics of Guotai Junan Strategy Team, some industries such as mining and white electricity, the top three in the industry accounted for more than 70% of revenue, and the top three revenues of liquor, cement and telecommunications also exceeded 60%.
Industry leader, strong and strong.
The seven teams of Guotai Junan Research Institute clearly pointed out in the series of “Interpretation of the Interim Report” and the conference call:
Under the economic slowdown, the dominant enterprises will squeeze out the market share of the weak enterprises to a certain extent, thus gaining contrarian growth. In the future, the market for first-line advantage enterprises will continue, and those with lack of competitive advantages in the second and third lines will continue to shrink.
So, which industry performances in the mid-term report are worthy of attention?
01 Several company performanceTo drag down overall performance
In the first half of 2019, 3,650 listed companies achieved a total operating income of 23.47 trillion yuan, a year-on-year increase of 9.47%, and a net profit of 2.14 trillion yuan, a year-on-year increase of 7%.
After removing financial stocks and two barrels of oil, the remaining A-share listed companies’ revenue scale was 16.37 trillion yuan, an increase of 8.05% year-on-year, and the net profit of the returning mothers reached 932.476 billion yuan, down 1.35% year-on-year.
It seems that the performance is not good, but if we exclude LeTV (a large number of arbitration losses lead to losses, the first half of 2019 loss of 10 billion yuan), * ST Xinwei (multiple guarantees, stock price 35 limit, 2019 After half-year losses of 15 billion yuan, *ST Huaye (10 billion accounts receivable, loss of 2.7 billion in the first half of 2019), you can get the second half of the 2019 half-year non-financial non-financial The net profit growth rate of the returning mother under the caliber is 2.4%.
On the other hand, although the growth rate has declined, the ROE has improved. Under the full A caliber, compared with the first half of 2018, the ROE increased from 10% to 10.2%, and the total non-ROE of the two A rose from 7.8% to 8.2%.
The group of listed companies in China still shows strong resilience.
▼ profit growth rebounds, ROE stabilizes
Data source: wind, Guotai Junan Securities Research
Note: Excluding LeTV, *ST Xinwei, *ST Huaye
02 Which star industry is worthy of attention?
So, in the first half of this year, which star industries have outstanding performance?
Retail and Consumption
Since 2019, with a series of tax reduction and consumption promotion policies, consumer confidence has recovered and consumption has grown steadily. In the first half of the year, the total retail sales of consumer goods increased by 8.4% year-on-year. Although the growth rate dropped by 1.0 pct compared with the same period of last year, it was basically the same as the second half of 2018.
After deducting the price factor, the total retail sales of consumer goods in the first half increased by 6.7%.
▼2019Q2 Supermarket, gold jewellery, department store revenue growth rate increased, cosmetics maintained steady growth
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Source: Wind, Guotai Junan Securities Research
Note: Due to the abnormal changes in the performance of Oriental Jinluo and ST Qiulin, the main business of Yuyuan has changed and has been removed from the analysis of the gold and jewelry industry since 2018. Same as
From the perspective of the revenues of various fine-molecular industries, the demand for consumption and safe-haven value in the downward pressure of the economy is strong, and the performance of supermarkets and gold jewelry is bright: 2019Q2 supermarket industry revenue growth rate increased by 1.8pct to 11.2 %; Gold jewelry industry revenue growth rate increased by 3.8pct to 9.1%.
In the optional consumption, the retail sales of cosmetics above the zero limit will increase from January to July by +12.7%, leading to consumer goods. The growth rate of cosmetics was outstanding in July, and the property of crossing the cycle became more and more recognized by the market.
Follow-up, CPI continuesMaintaining a high position in the supermarket sector, the industry’s internal integration has also made the leading edge more prominent.
Pharmaceutical
In the first half of 2019, the overall revenue and profit growth of the pharmaceutical sector were in line with expectations, with high-yield areas and excellent performance of key companies.
▼The current pharmaceutical sector is valued relative to all A-shares, with a premium rate of 136.25%
Data source: wind, Guotai Junan Securities Research
Because of the large number of pharmaceutical sub-sectors and the increasing degree of differentiation, the overall analysis of the sector and even the analysis of the first-level sub-industry have gradually lost statistical significance. We pay more attention to the analysis of the segmentation areas and the trends and changes of key companies:
1, consumer medical services, CRO/CDMO, therapeutic specialty drugs, high-end medical devices, IVD (chemiluminescence, POCT) and other fields continue to be highly prosperous;
2. In the pharmaceutical field, the trend of continued shrinking of adjuvant drugs and the rise of therapeutic varieties has been further strengthened; some of Biotech’s new drugs have begun to generate income and cash flow, and have officially become new local pharmaceutical companies;
3. The circulation of pharmaceuticals in 2019 has improved, and the retail pharmacy industry has a stable economy. However, the leading companies have shown a trend of better than the average growth of the industry, which is better than the previous market expectations.
4. Due to the impact of the speed of the issuance of the inspection, the vaccine and blood products companies are still in good shape, but some companies’ performance is lower than the previous market optimistic expectations.
Insurance
In the first half of 2019, benefiting from the adjustment of the A-share market and the adjustment of the income tax policy, The net profit of listed insurance companies achieved rapid growth.
The net profit of China Life Insurance, China Pacific Insurance, Xinhua Insurance and China Ping An Insurance Company’s four home insurance companies increased by more than 60% year-on-year: China Life Insurance (128.9%)> China Pacific Insurance (96.1%)> Xinhua Insurance (81.8) %)> China Ping An (68.1%)> China Property Insurance (39.1%)> China Taiping (29.5%).
▼In the first half of 2019, The net profit of each company’s return to the mother increased overall
Data source: semi-annual report of listed company, Guotai Junan Securities Research
Social Services
The consumption upgrade trend does not change, performance continues to improve.
1 Tourism: China International Travel Company’s revenue in the first half of 2019 was 24.444 billion / +15.46%, and the net profit of the mother was 3.279 billion / + 70.87%. Haitang Bay tax-free camp +28.72%, Shanghai’s revenue +97.29%, and China’s revenue of +13.78%.
2 Catering: Haidilao 2019H1 income was 11.69 billion yuan, an increase of 59.3% year-on-year, and the net profit of returning to mother was 911 million yuan, a year-on-year increase of 40.9%. Bohai International 2019H1 revenue was 1.656 billion yuan, a year-on-year increase of 64.9%; net profit attributable to mothers was 270 million yuan, a year-on-year increase of 46.5%.
3 Takeaway: The US Mission’s 2019H1 revenue was 41.88 billion yuan, a year-on-year increase of 58.94% (outsourcing part revenue of 23.551 billion yuan, +47.52%), benefiting from the improvement of weather and company efficiency for the first time in a single quarter.
Bank
The profit before the provision of the listed bank in the first half of 19 years was +12.9% year-on-year, and the net profit attributable to the mother was +7.0%. Overall performance was in line with expectations, profit growth was steady and upward, and asset quality improved overall.
03 Size and DifferentiationTo be continued
While the core assets maintain a steady growth trend, we see that the funds still show a strong trend of holding groups. The profit growth rate of large-cap companies is better, and the gap between the growth rate of small-cap companies and the company continues to expand.
From the index point of view, the growth rate of the three major indices is: growth rate change, SSE 50> Shanghai and Shenzhen 300> CSI 500.
From the perspective of SSE 50, the growth rate of net profit growth of the mothers rose from 11.1% to 11.3%, and the ROE rose from 12.5% to 12.6%. The overall trend is positive.
▼SSE 50 net profit growth rate rose steadily
Data source: wind, Guotai Junan Securities Research
From the perspective of the Shanghai and Shenzhen 300, the net profit growth rate of the mother-in-law was maintained at 10.8%, and the ROE rose from 11.5% to 11.8%.
▼CSI 300 net profit growth rate remains stable
Data source: wind, Guotai Junan Securities Research
In the CSI 500 perspective, the net profit growth rate of the mother-in-law decreased from -0.1% to -6.5%, but the ROE rebounded from 7.2% to 7.7%.
▼CSI 500 return to home net profit growth rate
Data source: wind, Guotai Junan Securities Research
In addition, we selected four dimensions of market concern (cycle, consumption, growth, finance) and placed them in three representative sub-sectors to observe the concentration of the industry.
▼ See the size differentiation from the revenue share: cycle> consumption> growth> finance
Source: wind, Guotai Junan Securities Research
We found that the cycle industry has the strongest Matthew effect, with steel CR10 approaching 70% and mining and cement CR10 around 90%.
In the consumer industry, although the concentration of CR3 is higher than that of liquor, the CR10 of liquor is close to 95%, which is the highest in all industries.
In the growth section, both communication and electronic CR10 exceed 75%;In the financial sector, the banking industry has the highest concentration and the securities industry has the lowest concentration.
In terms of operating costs, the proportion of industry leading operating costs is basically the same as the corresponding revenue ratio. The only difference is liquor.
In terms of CR3, liquor revenue accounted for 62%, but its operating cost accounted for only 50%. The strength explained, what is the star business model of “income is higher than you, cost is lower than you”.
▼The operating cost pattern is close to revenue. The only difference between is white liquor
Data source: wind, Guotai Junan Securities Research
04 The performance of private enterprises is warming up,The proportion of profit is obviously improved
Compared with 2018, the proportion of private enterprises’ profits has increased significantly.
Combined with the 2018 annual report and the 2019 mid-year report, the ratio of profitability of central enterprises, state-owned enterprises and private enterprises is maintained at 90%, but the structure has undergone major changes: the policy to promote the development of small and medium-sized enterprises begins. Effective, the proportion of private enterprises’ profits has begun to rise.
Among them, the proportion of profit of central enterprises fell from 30% to 26%; the proportion of profit of local state-owned enterprises fell from 34% to 32%; and the proportion of profit of private enterprises rose from 27% to 32%.
▼Compared with 2018, the proportion of private enterprises’ profitability began to increase
Data source: wind, Guotai Junan Securities Research
Note: Indicators come from a consistent wind. Unclassified companies are companies that appear blank according to company attributes. The data comes from the 2019 mid-year report and the 2018 annual report.
Analysis of the nature of the increase in the proportion of private enterprises’ earnings. We believe that the downside of the financing expense ratio has brought the foundation of the profitability of private enterprises.
With “financial expenses/current financing” as the calculation index of financing expense rate, we found the first half of 2019In the year, the financing rate of private enterprises began to decline, while the financing expense ratio of central enterprises and state-owned enterprises rebounded.
▼The private enterprise financing expense rate appears to be down
Data source: wind, Guotai Junan Securities Research
Note: Financing Expense Rate = Financial Expenses / Total Financing
At present, there are preventive/passive rate cuts in more than 20 economies around the world, while China has chosen to advance the interest rate marketization reform process at this critical time.
The interest rate marketization reform has accurately hit the current credit stratification phenomenon, and the downside of the entity financing interest rate will also bring the credit-ERP-profit mid-term turning point.
05 Cherish strategic allocation period, Optimize two main lines
Reviewing the monarch strategic profit forecasting model of May 2019, we forecast a net profit growth rate of nearly 10% for the mid-reported A-two.
The error mainly comes from several aspects: First, the GDP forecast for the second quarter is 6.4, which is actually 6.2; secondly, the forecast of the social welfare volume is too optimistic, the original forecast is close to 22 trillion, and the current revision is to 21.4 trillion; Third, the PPI downlink speed exceeded our expectations. It was originally predicted to hit 0 in the fourth quarter, and the actual PPI in June was 0.
▼Old calculation: 2019Q2 is close to 10%, error stems from overestimation of GDP and social welfare
Data source: wind, Guotai Junan Securities Research
In order to avoid the profit forecasting error caused by the old measurement, we made a profit forecast for different GDP situations based on the unadjusted all-A.
▼New calculation: 2019Q2 is the profitable stage bottom
Data source: wind, Guotai Junan Securities Research
We believe that the profit of 2019Q2 is a phased bottom, and the profit growth rate will gradually increase after 2019Q3.
We have always stressed that there is a limit to fear, and we must pay attention to the profit repair caused by credit repair.
On the one hand, the guidance of financial institutions’ financing, the promotion of interest rate marketization, and on the other hand, the follow-up of demand-side policies, credit channeling will be more smooth in the environment of demand, which makes us confidence in profit recovery. More determined.
Looking back (6-12 months), with the opening of the credit cycle and the promotion of the demand side policy, we will see the double “Nike type” of ERP and profitability. Nowadays, it is an excellent strategic allocation period, based on 4X4 configuration system, we recommend two main lines:
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Preferred style. Optimistic about the new infrastructure development, communication, computer and other growth styles, optimistic about the undervaluation of automobiles, media and other varieties.
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Cheap is always profitable, with a solid price/performance ratio. Looking at banks with low valuations and stable profits, non-banking.
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