Summary

Profit: The profit growth rate dropped significantly in 2118, and the net profit improved in the first quarter of 2119. In 2118, the overall growth rate of operating income, operating profit and net profit of A-share non-financial listed companies dropped sharply year-on-year, and the growth rate of net profit turned negative. However, the growth rate of net profit returned to positive in the first quarter of 2119, and it remains to be seen whether the future profit can continue to improve. In 2118, although the profit growth rate of building materials and steel industry was relatively high, the effect of price increase was gradually fading. The profit situation of petroleum and petrochemical, food and beverage, national defense and military industry and basic chemical industry was excellent. Due to the influence of trade, the industries such as communication and electronic components were impacted to some extent, and the profit growth rate of real estate industry was in the upper-middle position in all industries. However, considering the lag of real estate industry's profit and the unsustainable high turnover strategy, the sustainability of future profit and cash flow was not optimistic.

cash flow: corporate financing improved in the first quarter of 2119. The free cash flow of A-share non-financial listed companies turned positive, which was mainly caused by the sharp increase in cash received by the real estate industry in selling goods and providing services, which led to the increase in operating net cash flow. At the same time, in 2118, the financing environment of enterprises was tight, and the ability of financing cash flow to cover the capital gap weakened. In the first quarter of 2119, the effect of wide credit policy gradually appeared, and social financing recovered. The ratio of financing cash flow to free cash flow gap was about 61%, an increase of 7 percentage points year-on-year. In terms of industries, free cash flow generally rebounded year-on-year in 2118, and financing cash flow generally declined, while the industries with a year-on-year decrease in financing cash flow at the end of the first quarter of 2119 decreased. In 2118, the free cash flow of the real estate industry increased significantly year-on-year, and the cash flow of financing dropped sharply year-on-year. The free cash flow gap of the construction industry was basically the same as that in 2117, and it still relied on external financing, but the situation of other industries was different.

capital structure: the debt burden increased slightly, and the leverage ratio of private enterprises increased. By the end of 2118, the debt ratio of A-share non-financial listed companies increased slightly, and the overall asset-liability ratio increased slightly by 1.1 percentage point at the end of the first quarter of 2119 compared with the beginning of the year. From the microscopic data, the proportion of enterprises whose debt ratio decreased year-on-year at the end of 2118 decreased, and the proportion at the end of the first quarter of 2119 continued to decrease compared with the beginning of 2119, indicating that the leverage ratio of enterprises in 2118 and the first quarter of 2119 has not been significantly improved, and the leverage ratio of local state-owned enterprises and central enterprises is relatively stable, while the leverage ratio of private enterprises is higher. In addition, the debt structure is short-term. In terms of industries, the asset-liability ratio of listed companies in the real estate and construction industries is still the highest, exceeding 71%. By the end of 2118 and the end of the first quarter of 2119, the overall debt ratio of the real estate industry has not improved, and it is still a highly leveraged model. The asset-liability ratio of the construction industry has declined at the end of 2118 and the end of the first quarter of 2119. The asset-liability ratio of supply-side reform-related industries such as coal, steel, building materials and non-ferrous industries decreased in different degrees at the end of 2118 compared with the end of 2117, among which the leverage of building materials and steel industries was significantly reduced, and other industries with significantly reduced debt ratios included basic chemical industry, national defense and military industry, textile and clothing, food and beverage, etc.

solvency: in the first quarter of 2119, the short-term solvency was enhanced. At the end of 2118, the overall quick ratio of A-share non-financial listed companies was about 1.78, which was 1.11 lower than that in 2117, and the monetary fund/short-term debt index dropped significantly, but it improved in the first quarter of 2119. In terms of industries, in absolute terms, the short-term debt repayment pressure of iron and steel, electric power and public utilities, comprehensive industries and non-ferrous industries is heavier. At the end of 2118, the coverage rate of short-term debt by industrial monetary funds was all below 51%, and the light industry manufacturing, basic chemical industry, agriculture, forestry, animal husbandry and fishery, transportation and machinery industries were all at a low level below 71%. The downstream consumer industries such as food and beverage, media, catering and tourism, computers and home appliances are relatively abundant in funds and have strong short-term solvency; In terms of changes, the short-term solvency of most industries fell last year, while in the first quarter of 2119, only three industries continued to decline compared with the beginning of the year, and their solvency improved.

it remains to be seen whether the profitability can be continuously improved, and the improvement of the financing side is more critical. On the whole, the data of the annual report in 2118 highlighted some problems, such as the serious decline in the growth rate of corporate profits, the weakening of the ability of financing cash flow to cover the free cash flow gap, the increase in the leverage of private enterprises, and the decrease in the coverage of monetary funds to short-term debts, etc., while the first quarterly report in 2119 showed that the net profit, financing and short-term solvency had been improved to some extent. Last year, affected by the economic downturn, and frequent risk events, risk appetite declined, and the tightening of financing environment had a negative impact on corporate financing and operation to some extent. In the first quarter of 2119, the effect of the wide credit policy gradually appeared, and after the social financing gradually stabilized, it remains to be seen that the sustained recovery of corporate profits, and whether the financing side can continue to improve in the future is the key factor to determine the credit risk of enterprises.

　 1。 Profit: the profit growth rate dropped significantly in 2118, and the net profit improved in the first quarter of 2119

The overall operating income, operating profit and net profit growth rate of A-share non-financial enterprises in 2118 dropped sharply compared with 2117, and the net profit growth rate turned negative. Specifically, in 2118, the overall growth rate of operating income of A-share non-financial enterprises decreased from 19.5% in 2117 to 12.7%, the growth rate of operating profit decreased from 39.4% in 2117 to 4.1%, and the growth rate of net profit decreased from 31.3% in 2117 to -5.4%, all of which decreased, and corporate profitability indicators deteriorated.

at the micro level, the proportion of loss-making enterprises increased in 2118, from 8.7% in 2117 to 11.1%; Compared with 2117, the proportion of enterprises whose net profit decreased year-on-year increased from 24.1% to 31.3%, an increase of about 6 percentage points. On the whole, the macro and micro data of listed companies reflect the deterioration of corporate profits.

in the first quarter of 2119, the profit index diverged, the growth rate of operating income and operating profit continued to decline, and the growth rate of net profit turned positive, so the sustainability remains to be seen. From the year-on-year profit indicators, the year-on-year growth rates of operating income and operating profit of A-share non-financial enterprises in the first quarter of 2119 were 9.4% and 2.2% respectively, which continued to decline compared with 2118, while the growth rate of net profit rebounded to 1.3%. From the perspective of the growth rate of net profit, the profit situation in the first quarter of 2119 improved compared with 2118, but the sustainability remains to be seen.

Micro-level data shows that the profitability continued to decline in the first quarter of 2119. The proportion of A-share non-financial enterprises with negative net profit was 11.2% in the 1 th quarter of 2119, which was slightly higher than that in the whole year of 2118. Considering the seasonal regularity of corporate profits and the comparability in the same period, the proportion of loss-making enterprises in the 1 th quarter of 2118 was 6.5%, which was more obvious than that in the 1 th quarter of 2119. In the first quarter of 2119, the proportion of enterprises whose net profit decreased year-on-year was 31.8%, which increased from 25.3% in the same period of 2118.

in terms of industries, in 2118, the profit growth rate of building materials and steel industries, which benefited from the supply-side reform, was higher, while the profit growth rate of petroleum and petrochemical, food and beverage, national defense and military industry and basic chemical industry ranked higher among all industries, while the profit growth rate of coal, construction, electric power and public utilities industries was positive but low. The net profit of textile and garment, computer, machinery, non-ferrous metals, agriculture, forestry, animal husbandry and fishery industries has fallen sharply, and industries such as communications and electronic components have been hit by trade to some extent. In the first quarter of 2119, the net profit of the communication industry increased significantly year-on-year, and the impact of trade was eased. The profit growth rate of defense, military industry, comprehensive, catering, tourism and computer industries was relatively high. Profits in agriculture, forestry, animal husbandry and fishery, steel, non-ferrous metals, automobiles, basic chemicals and media industries declined significantly year-on-year.

the profit growth rate of the real estate industry is in the upper-middle position in all industries, among which the total profit growth rate of the real estate industry in 2118 was 21.4%, and the net profit growth rate was 9.8%. Because the real estate adopts the pre-sale system, the sales income is reflected in the statements with a certain lag, and the profit in 2118 more reflects the previous market sales. In the first quarter of 2119, the growth rate of net profit of the real estate industry was about 16.1%, which to some extent reflected the carry-over of sales revenue in 2118 this year. In 2118, the improvement of cash flow in real estate industry was mainly due to the high turnover strategy adopted by many real estate enterprises. However, according to the data of land acquisition by real estate enterprises, the year-on-year growth rate of land acquisition and area has been negative since the third quarter of 2118, and the growth rate of land acquisition fees has dropped significantly, with high turnover or unsustainable. In the future, the profitability and cash flow sustainability of real estate industry are not optimistic.

　2。 Cash flow: the financing situation of enterprises eased in the first quarter of 2119

In 2118, the free cash flow of enterprises turned positive. The 2118 annual report shows that the operating net cash flow of A-share non-financial enterprises increased by about 31% year-on-year, while the investment net cash flow has been negative, and the absolute value increased by nearly 2% year-on-year, which led to the positive change of corporate free cash flow. The total free cash flow of all A-share non-financial enterprises in 2118 was about 179.5 billion, a substantial increase of 695.6 billion compared with 2117, mainly due to the sharp increase in cash received from the real estate industry in selling goods and providing services, and the accelerated cash flow turnover in the real estate industry In the first quarter of 2119, the total net operating cash flow of non-financial listed companies was negative, which was due to seasonal reasons. However, compared with the first quarter of 2118, the cash flow gap increased.

in 2118, the financing environment of enterprises was tight, and the ability of financing cash flow to cover the capital gap weakened, which eased in the first quarter of 2119. From 2114 to 2116, the financing cash flow of non-financial listed companies has been increasing year by year. Especially in 2115 and 2116, the low interest rate stimulated the rapid growth of the financing scale of enterprises. In the first half of 2118, under the influence of financial deleveraging and new asset management regulations, the financing cash flow of non-financial listed companies decreased significantly. Since then, the financing environment of enterprises has continued to tighten due to the downward pressure of the economy and the reduction of risk appetite. In 2118, the total net cash flow of A-share non-financial enterprises was only about 31 billion yuan. In the first quarter of 2119, the effect of the wide credit policy gradually appeared, social financing picked up, and the scale of corporate financing increased significantly from the previous quarter. In the first quarter of 2119, the total cash flow of financing was about 551.5 billion yuan, and the ratio of financing cash flow/free cash flow gap was about 61%, an increase of 7 percentage points compared with the first quarter of last year.

From the microscopic data, regarding the free cash flow gap, in 2118, more than 43% of A-share non-financial listed companies had a wider free cash flow gap, which was lower than 57% in 2117. The first quarter of 2119 was basically the same as that in 2118, and the free cash flow situation of enterprises improved.

in terms of financing cash flow, in 2118, the financing cash flow of non-financial listed companies increased by about 41% year-on-year, which was significantly lower than that of 54% in 2117. The financing environment became tighter and improved in the first quarter of 2119, and the financing cash flow of non-financial listed companies increased by about 48% year-on-year. When we examine the financing cash flow and the free cash flow gap of enterprises together, we find that the compensation of financing cash flow to the free cash flow gap of enterprises has also weakened. The proportion of enterprises with reduced difference between them increased significantly at the end of 2118, from 47% in 2117 to 51% in 2118, and decreased to the same level in the first quarter of 2119.

in 2118, the free cash flow of the industry generally rebounded year-on-year, and the cash flow of financing generally declined. Generally speaking, among the 27 industries we are concerned about, 22 industries saw a year-on-year rebound in free cash flow in 2118, especially in real estate, household appliances, electric power and public utilities, basic chemical industry and other industries. Industries with deteriorating free cash flow include petroleum and petrochemical, coal, machinery, national defense and military industry, and trade and retail. From the perspective of financing cash flow, the financing cash flow of most industries decreased year-on-year, and the only industries that did not decrease were construction and commercial retail. The tightening of financing environment had a common impact on all industries, while the number of industries that decreased financing cash flow in the first quarter of 2119 decreased to 12, and the financing environment also improved from the perspective of industries.

the debt ratio of non-financial enterprises has rebounded. Although China has made positive progress in deleveraging, the total leverage is still on the high side, and it gradually changed from deleveraging to stable leverage after the second half of 2118. Specifically, as of the end of 2118, the overall asset-liability ratio of A-share non-financial enterprises was 61.69%, which was 1.75 percentage points higher than the debt ratio of 59.94% at the end of 2117, indicating that the leverage ratio of non-financial enterprises was initially controlled to some extent. At the end of the first quarter of 2119, the overall asset-liability ratio of A-share non-financial enterprises was 61.79%, a slight increase of 1.1 percentage point from the beginning of the year.

According to the microscopic data, the proportion of enterprises with year-on-year reduction in debt ratio decreased. In 2117, less than half of listed non-financial enterprises achieved leverage reduction, and the proportion of enterprises with year-on-year reduction in asset-liability ratio was only 41% at the end of 2118, indicating that the leverage ratio of enterprises has not been significantly improved in 2118. At the end of the first quarter of 2119, the proportion of enterprises whose asset-liability ratio decreased year-on-year decreased by about 1.28 percentage points from the beginning of the year.

the leverage ratio of local state-owned enterprises and central enterprises is relatively stable, and the leverage ratio of private enterprises is higher. By the end of 2118, the asset-liability ratio (overall method) of A-share non-financial central enterprises was 61.73%, which was about 1 percentage point higher than the average level. The average of local state-owned enterprises was 61.19%, while that of listed private enterprises was only 56.33%. Judging from the change of leverage ratio, the asset-liability ratio calculated by the overall method of central enterprises and local state-owned enterprises decreased slightly at the end of 2118 compared with the end of 2117, in which the asset-liability ratio calculated by the overall method of local state-owned enterprises decreased by about 1.16 percentage points and the asset-liability ratio calculated by the overall method of central enterprises decreased by about 1.23 percentage points compared with the end of 2117. At the end of the first quarter of 2119, the leverage ratio of non-financial central enterprises increased slightly by 1.84 percentage points compared with the beginning of the year, and the leverage ratio of non-financial local state-owned enterprises decreased. The leverage ratio of private enterprises has risen, and the asset-liability ratio calculated by the holistic method has increased from 53.62% at the end of 2117 to 56.33% at the end of 2118, an increase of about 2.72 percentage points. By the end of the first quarter of 2119, the leverage ratio of private enterprises was basically the same as that at the beginning of the year.

short-term debt structure. In 2118, the proportion of current liabilities of A-share non-financial enterprises increased significantly. At the end of 2118, the proportion of current liabilities was 72.45%, an increase of 1.78 percentage points compared with 71.67% at the end of 2117. This is because in 2118, the market risk appetite declined, the bond market and non-standard defaults frequently occurred, and the financing costs of some enterprises rose. It is common for enterprises to roll over long-term debts with short-term financing and control financing costs.

in terms of industries, the asset-liability ratio of listed companies in real estate and construction industries is still the highest, exceeding 71%, and the real estate industry has not improved compared with the end of 2117. On the contrary, the overall debt ratio has increased by 1.1 percentage point, which is still a highly leveraged model. The leverage ratio of the real estate industry at the end of the first quarter of 2119 is basically the same as that at the beginning of the year. The asset-liability ratio of the construction industry decreased by 1.6 percentage point year-on-year at the end of 2118, and decreased by 1.1 percentage point at the end of the first quarter of 2119 compared with the beginning of the year. The asset-liability ratio of supply-side reform-related industries such as coal, steel, building materials and non-ferrous industries decreased in different degrees at the end of 2118 compared with the end of 2117.