More than 70 percent of listed companies reporting earnings posted profit growth in 2006, underlining the stock market boom that sent the index up 130 percent in the past 12 months.
By January 19 a total of 462 listed companies on the Shanghai and Shenzhen Stock Exchange announced estimated annual profits. Of those 340 recorded higher profits or recovery from losses the year previous.
Combined net profit of all listed companies is expected to surpass 400 billion yuan, up 40 percent from 2005, according to Shanghai Securities News, an official publication of the Shanghai Stock Exchange.
Company reports indicate an improvement of the investment climate and stronger company management skills are two major contributors to profit growth.
On the Shanghai bourse, Fosun Pharmaceutical, a leading listed pharmaceutical company, posted a more than 50 percent increase in 2006 net profit.
Harbin High-tech Group, a provider of high-tech products and technical consultation, said its estimated net profit will rise over 80 percent due mainly to efficient management.
Earlier, Jiangnan High Polymer Fiber Co Ltd, the first listed company to release its annual report, announced a 53 percent jump in 2006 net profit to 52 million yuan. Pre-tax profit amounted to 81 million yuan, up 68 percent from 2005. The company said new production technology was the main contributor to company's core revenue increase, which rose 19 percent to 602 million yuan in 2006.
On the Shenzhen bourse, Taigang Stainless Steel reported a surge of more than 200 percent in 2006 net profit. Higher selling prices and the well-performing stainless steel sector are key factors for the profit growth, the company said.
Another metals company, Yunnan Aluminum, said that its estimated increase in net profit of more than 100 percent was due to dropping costs of raw materials and management efficiency.
Investment income from the stock market was also a new major contributor to some listed companies. There was a total of 344 listed companies holding listed stocks from other companies, amounting to 156 billion shares in early 2007, according to China Securities News, another stock exchange official publication.
Analysts said the new listing of super large-cap companies such as the Industrial and Commercial Bank of China (ICBC), Bank of China, Air China and Daqin Railways have greatly contributed to the total market profit growth.
ICBC said earlier it had estimated a net profit rise of over 26 percent, while Bank of China projects an increase of 17 percent. Listed large-cap companies were estimated to generate a total of 120 billion net profit in 2006, according to China Securities News.
"The net profit of listed large-cap companies in the banking, steel and transportation sectors largely contributed to 2006 total market profit growth," said Zhang Yidong, an analyst at Industrial Securities, "and we still have lots of large-cap blue-chip companies that have yet to go public."
Large-cap companies such as China Mobile, Bank of Communications, PetroChina and Ping An Insurance, are expected to be listed on the stock exchange in 2007.
According to statistics on listed companies in the third quarter of 2006, the total net profit of the top 20 highest-earning companies accounted for 56 percent of profits reported.
For example, net profit of China Petroleum & Chemical Corp represents 16 percent of the total market net profit. Top 20 companies were mainly in the steel, banking, electric power and oil sectors.
Remaining listed companies will release their annual reports by May this year. Analysts said companies that announced big gain in profit would probably increase in share prices in the short term by strengthening investors' confidence in the stock. Fosun Pharmaceutical rose 8 percent to close at 7.48 yuan after announcing its estimated annual report that day.
For 2007, Zhang said he expects more steady growth in the stock market.
(China Daily January 23, 2007)