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Industrial Profit Growth Hit A Second Low In The Year. The Growth Rate At The End Of The Year May Continue To Slow Down To 13%.
- Nov 05, 2018 -

Affected by factors such as the decline in PPI growth, the profit growth rate of industrial enterprises in the first three quarters continued to slow down to 14.7%, the second lowest in the year. There is worry and joy behind the data. Worryingly, the profit growth rate of industrial enterprises in the future may continue to slow down; the good news is that the cost reduction and de-leveraging effect of enterprises will continue to emerge, and the future support policies will help private enterprises to increase profit margins.


According to data released by the National Bureau of Statistics on the 27th, in the first three quarters, the total profit of industrial enterprises above designated size increased by 14.7%, and the growth rate slowed by 1.5 percentage points from January to August, and the profit in September increased by 4.1%.


He Ping, the industrial division of the National Bureau of Statistics, said in the interpretation of the data that the slowdown in profit growth of industrial enterprises was mainly affected by factors such as slower growth in industrial production and sales, lower price increases, and higher profit base in the previous year.


Li Chao, chief macro analyst of Huatai Securities, believes that PPI will turn downside under the combined influence of the hikes and the flexible policies of environmental protection and production restrictions. It is expected that the profit growth rate of industrial enterprises will continue to slow down in the future, and the growth rate will slow down to 13 at the end of the year. %about.


Zhu Jianfang, chief economist of CITIC Securities, also analyzed that the profit growth rate of industrial enterprises began to decline, but the profit growth rate of industrial enterprises will remain at 8% to 10% in the next six months to one year. The outlook is not pessimistic.


Although the profit growth rate has slowed down, it is worth noting that the cost reduction and de-leveraging effect of enterprises continue to show, and the quality of industrial economic operations has further improved.


A series of data can prove that from January to September, the cost per 100 yuan of main business income of industrial enterprises above designated size was 84.31 yuan, down 0.29 yuan year-on-year; the profit rate was 6.44%, up 0.29 percentage points year-on-year. At the end of September, the asset-liability ratio of industrial enterprises was 56.7%, a decrease of 0.4 percentage points year-on-year.


On the one hand, the cost of enterprises is reduced, on the other hand, the asset-liability ratio is declining. In Li Chao's view, these all indicate that the operating efficiency of industrial enterprises continues to improve.


The effectiveness of state-owned enterprises in reducing leverage is even more pronounced. According to the statistics of the Bureau of Statistics, at the end of September, the asset-liability ratio of state-owned holding companies was 59%, down 1.6 percentage points year-on-year. In the same period, the private enterprise's asset-liability ratio was 56.1%.


Li Chao expects that the policy support for the private economy will help the continued improvement of its financing situation, and will also help improve the business environment and increase profit margins.


From the perspective of industry performance, the new profits are mainly from the steel, building materials, petroleum, chemical and other industries. The data shows that in the first three quarters, the profit of the steel industry increased by 71.1%, the building materials industry increased by 44.9%, the oil extraction industry increased by 4 times, the petroleum processing industry increased by 30.8%, and the chemical industry increased by 24.5%. The total contribution of the five industries to the profit growth of industrial enterprises above designated size was 72.4%.


Li Chao said that with the effect of the policy, the infrastructure subsidy board is expected to drive downstream demand in the relevant industrial sectors. At the same time, the growth rate of high-end manufacturing investment this year is still significantly higher than the overall manufacturing industry. It is expected that the country may continue to increase policy support for high-end manufacturing.