2009 Annual Report Analysis Report Of Listed Companies In The Multi Level Capital Market Of Shenzhen Stock Exchange

preface

As of April 30, 2010, 938 listed companies in Shenzhen Stock Exchange have disclosed their 2009 annual reports as scheduled, including 485 main board companies, 395 small and medium-sized enterprise board companies and 58 GEM companies. This is the first collective appearance of listed companies on the main board, SME board and GEM in the form of annual reports since Shenzhen Stock Exchange promoted the construction of multi-level capital market.

Promoting the construction of a multi-level capital market aims to provide financing platforms for enterprises at different growth stages and with different risk characteristics, and deepen support for SMEs and independent innovation enterprises. This report attempts to preliminarily reflect the construction of the multi-level capital market through the empirical analysis of the operating performance of listed companies on the Main Board, SME Board and GEM, based on the annual reports of listed companies in 2009, combined with the annual reports and prospectus data of the past three years. Since the launch of the SME board, especially the GEM, is not long and the number of samples is limited, the statistical analysis results of the annual report need to be tracked and tested in the future.

According to the full sample statistical analysis of 938 annual reports, our preliminary conclusions are: (1) In 2009, the performance of listed companies as a whole achieved significant growth, achieving an average earnings per share of 0.3539 yuan, a year-on-year increase of 27.76%, and the return on equity of 10.35%, a year-on-year increase of 1.45 percent. The sustainability of the performance growth of the SME board and the high growth of the GEM are relatively prominent, and the multi-level market supports high-quality enterprises in the real economy to achieve results; (2) From 2007 to 2009, listed companies on the main board, SME board and GEM had significant plate characteristics in terms of performance and influencing factors of performance changes, which reflected the functional positioning characteristics of each plate of the multi-level market system from one side; (3) There are performance differentiation, high growth sustainability and high transmission problems in the three sectors to varying degrees, which need attention.

　　 1、 Overall performance of listed companies in 2009

In 2009, the impact of the global financial crisis continued. In order to cope with the impact of the financial crisis, the central government adopted a series of positive macro policy measures, and actively promoted the transformation of the economic development mode with improving the ability of independent innovation as the main line. Under this background, listed companies actively took countermeasures to improve their business level. A number of listed companies seized the opportunities brought by industry integration, industry recovery, and the rise of emerging industries, and achieved rapid growth. In 2009, the performance of companies on the main board, SME board and GEM achieved overall growth (see Table 1).

1. The performance of main board listed companies shows a strong recovery trend

In 2008, the financial crisis led to a sharp decline in the performance of main board companies: the average operating profit of 485 companies fell from 277.461 million yuan to 156.3199 million yuan, the average total profit fell from 304.7543 million yuan to 192.51.08 million yuan, and the average net profit fell from 214.9673 million yuan to 132.119 million yuan. The three profit indicators all declined by about 40%.

In 2009, the performance of the main board companies resumed growth, with the average operating revenue increasing by 6.39% year on year. The profit level rebounded strongly, and the average net profit increased by 54.46% year on year; 63.51% of the companies achieved profit growth, and the overall profitability rebounded significantly compared with 2008. The average operating profit was 258071400 yuan, the average total profit was 293232800 yuan, and the average net profit was 205326800 yuan, basically returning to the level of 2007.

The majority of 485 companies on the main board of Shenzhen Stock Exchange have been listed for more than 10 years, and the differentiation is very obvious. A number of companies have become blue chip companies with prominent main businesses and leading industries. A number of companies have actively optimized and integrated the industrial chain through mergers and acquisitions, reorganization, overall listing, etc., laying the foundation for sustainable growth. According to the analysis of the 2009 annual report, it is the rapid recovery of the performance of these companies that has led to a substantial increase in the average performance of the main board companies as a whole.

In addition, 485 companies on the main board are mainly distributed in traditional industries. The cyclical characteristics of the industry boom are obvious, and performance fluctuations are sensitive to the macroeconomic environment. The sharp fluctuations in the profitability of the main board companies in 2008 and 2009 reflected the overall changes in the operation of the national economy in the past two years, and also reflected the first recovery of China's economy in the global financial crisis.

2. High quality and steady growth of performance of small and medium-sized board listed companies

In the financial crisis, small and medium-sized board companies showed a strong ability to resist risks. In 2008, the year hit hardest by the financial crisis, the performance growth slowed down, but the absolute level did not decline. In 2008, the average operating profit was 99.2892 million yuan, the average total profit was 106.5317 million yuan, and the average net profit was 84.8648 million yuan, which was basically the same as the 97.3 million yuan, 103.8375 million yuan, and 80.575 million yuan in 2007 before the financial crisis.

In 2009, small and medium-sized board companies stepped back into the track of steady growth: 395 companies' average operating revenue increased by 7.59% year on year, and average net profit increased by 27.08% year on year; 77.22% of the company's net profit increased year on year, of which 233 achieved double growth in operating income and net profit, accounting for 58.99%; Net profit of 30 companies decreased by more than 50% over the same period last year, accounting for 7.59%; The number of loss making companies decreased from 19 to 13, accounting for 3.29%.

In particular, 2009 is the sixth consecutive year that the overall performance level of SMEs has achieved positive growth. Especially for the 38 companies listed in the first batch of SME board in 2004, the vast majority of the performance not only did not appear the phenomenon of "one year flat, two years sliding, three years losing", but also maintained a sustained high growth momentum. From 2004 to 2009, the average compound growth rate of operating income was 31.21%, and the average compound growth rate of net profit was 39.44%. Even in 2008, the year most affected by the financial crisis, the average net profit still maintained a growth rate of 37.67%. In 2009, only two companies suffered losses due to the industry downturn.

The performance growth quality of small and medium-sized board companies is relatively high, which is reflected in: (1) the growth rate of net profit far exceeds the growth rate of operating income. In 2009, the growth rate of operating revenue of small and medium-sized board companies was 7.59%, while the growth rate of net profit was 27.08%. The increase of net profit was significantly higher than that of operating revenue, indicating that the company's profitability was improved; (2) Performance growth comes from the main business, and the proportion of non recurring gains and losses is low. In 2009, 88.91% of the profits came from main business, 6.47% from non operating income and expenditure such as government subsidies, and 4.62% from investment income. In addition, the total profit and loss from changes in fair value is only 15 million yuan, accounting for only 0.03% of the total profit, which has little impact on the overall performance; (3) Half of the companies achieved double growth in net profit and operating cash flow. The average net cash flow from operating activities was 168 million yuan, up 62.26% year on year, 1.55 times the average net profit of the year. The operating cash flow of 234 companies was higher than the net profit realized, accounting for 59.24%, and 207 companies achieved double growth of net profit and operating cash flow, accounting for 52.41%.

3. The outstanding characteristics of high growth performance of GEM listed companies have initially emerged

In the three markets, the performance of GEM companies showed the strongest growth trend. The total operating revenue of 58 companies in 2009 was 17.522 billion yuan, an increase of 33.3% over the same period last year, of which 8 companies exceeded 50% and 3 companies exceeded 100%; The operating profit was 3.643 billion yuan, up 48.02% year on year; The total net profit attributable to the owners of the parent company was 3.354 billion yuan, up 45.3% year on year, of which 20 companies exceeded 50% and 5 companies exceeded 100%. In 2009, the weighted average earnings per share was 0.71 yuan.

The high growth of GEM listed companies is prominent, but two factors may reduce the reliability of cross sector comparison: (1) In 2009, the vast majority of GEM listed companies experienced the baptism of the 2008 financial crisis and still achieved high growth, to some extent, it is the result of selecting the best among the best. For comparative analysis, the sample is biased; (2) The number of samples is relatively small, and the time span after the company goes public is relatively short, so the analysis results are not enough to support the trend judgment.

4. The capital market has made remarkable achievements in supporting the development of high-tech enterprises

As the backbone of independent innovation in China, high-tech enterprise groups have become the key support objects of the capital market. With the promotion of multi-level capital market construction, SME board and GEM have become the main channels for high-tech enterprises to enter the capital market. The cooperative research between the Comprehensive Research Institute of Shenzhen Stock Exchange and the Torch Center of the Ministry of Science and Technology shows that among the "high-tech enterprises" re certified in 2008, a total of 347 were listed from 2005 to the end of April 2010, of which 281 were listed on the SME board and 60 were listed on the GEM. By the end of April 2010, about 70% of the listed companies on the SME board and about 80% of the listed companies on the GEM were "new high enterprises".

Listing creates favorable conditions for high-tech enterprises to improve their R&D investment intensity, and listed companies are gradually increasing their R&D investment intensity in order to enhance their competitiveness. The 2009 annual report shows that in the small and medium-sized board, the 261 "new high tech enterprises" that released detailed data invested an average of 32.9 million yuan in R&D, an increase of 66.16% compared with 19.8 million yuan the year before listing; R&D investment accounted for the proportion of main business income, with an average of 5.48%, an increase of 25.97% compared with 4.35% the year before listing. In GEM, the R&D expenditure of 58 companies in 2009 totaled 823 million yuan, and the average R&D expenditure of each company accounted for 6.6% of operating revenue (taking the arithmetic mean), an increase of 14.58% over 5.76% in 2008. Among them, the R&D expenditure of computer application service industry is relatively large.

　　 2、 Analysis of the Board Characteristics of the Performance of Main Board, SME Board and GEM Companies in Recent Three Years

Due to the different positioning of the main board, the small and medium-sized board and the GEM, listed companies differ in size, growth stage and industry attributes. In theory, the performance, performance change rules and performance influencing factors of listed companies in the three tiered markets should show the observable characteristics of the sector. In order to analyze the characteristics of the three markets more deeply and systematically, we selected the performance data of the three years from 2007 to 2009 to further analyze the profitability of the company reflected by the average gross profit rate, the growth reflected by the growth rate of the main profit indicators, and the performance influencing factors reflected by the profit composition.

1. Profitability difference of the company

From 2007 to 2009, the average gross profit margin of listed companies on the main board, the small and medium-sized board and the GEM showed a steady rise, and the amount of gross profit increased year by year.

At the same time, the average gross profit margin level shows a ladder like distribution from the main board to the SME board and the GEM. Among them, the average gross profit margin of GEM companies in the past three years has averaged between 36% - 41%, almost twice that of SMEs (21% - 23%) and mainboards (16% - 18%).

Note: Take the data submitted by 485 listed companies on the main board in 2009 as the sample to take the average statistics. Because the report structure is not comparable, 6 financial securities companies are excluded. The main business income and cost amount are obtained by adjusting the data of the items in the profit statement disclosed by the company (the same below).

Similar to the distribution of the average gross profit rate, the average annual compound growth rate of the average profit index of listed companies also shows a stepped distribution from the main board to the SME board and the GEM. Among them, the compound growth rate of average operating profit, average total profit and average net profit of the main board is - 3.56%, - 1.91% and - 2.27% respectively; Small and medium-sized boards were 14.12%, 14.30% and 15.69% respectively; The growth enterprise market is 42.30%, 42.10% and 40.20% respectively.

In addition to the growth difference shown by the difference in the average annual compound rate of earnings indicators, the average annual compound growth rate of the company's average operating revenue from 2007 to 2009 also showed a significant ladder distribution in three levels of markets, including 9.2% in the main board, 15.7% in the small and medium-sized board, and 36.7% in the GEM.

3. Difference in influencing factors of company performance change

Analyze the overall situation and change trend of the profit composition of the main board, small and medium-sized board, and GEM companies in the past three years. There are obvious systematic differences in the influencing factors of performance changes in the three levels of markets.

The main business of the main board company grew steadily, but the non recurring items fluctuated greatly. In recent years, the main business profit of the main board company has increased steadily, with a compound growth rate of 17% from 2007 to 2009. However, from the perspective of overall profit composition, non main business, non recurring items and other items account for a high proportion of the total profit, and are highly volatile. This is mainly reflected in: (1) The total of investment income, net non operating income and expenditure and gains and losses from changes in fair value in each year accounts for about 30% of the total profits; (2) The three expenses account for a high proportion and fluctuate greatly, affecting the profit changes of each year; (3) The asset impairment losses of the main board companies accounted for more than 10% of the total profits in each year, of which the asset impairment losses accounted for 33.79% in 2008, and decreased to 12.94% in 2009, which was the primary factor causing the performance of the main board companies to decline significantly in 2008; (4) In addition, some main board companies rely on non recurring projects to make profits, and the unsustainability of these projects also aggravates the overall earnings volatility of main board companies (see Table 6).

The impact of non recurring projects of small and medium-sized board companies is small, and the main business contribution is stable. The overall change trend of the profit composition of small and medium-sized board companies in the past three years basically reflects the characteristics of the trough in 2008, but the fluctuation range is far lower than that of the main board. The main characteristics of the composition are: (1) The total annual investment income, net non operating income and expenditure, and gains and losses from changes in fair value of small and medium-sized board companies only account for about 10% of the total profit, and the proportion of non recurring and non operating income is lower than that of the main board; (2) Asset impairment losses accounted for a relatively low proportion in the past three years. Even in 2008, they did not exceed 10% of the total profits, and further decreased in 2009; (3) The proportion of three fees in small and medium-sized board companies is smaller than that in the main board, and the proportion of three fees in 2009 decreased by 17.56% year on year (see Table 7).

The main business of GEM is prominent, and the proportion of non recurring projects is the smallest. The total profit of GEM listed companies in each year mainly comes from the main business, which is mainly shown as follows: (1) From 2007 to 2009, the total proportion of GEM investment income, net non operating income and expenditure, and gains and losses from changes in fair value in the total profit of the current period was 5.7%, 6.7% and 7.6%, respectively, the lowest among the three sectors; (2) The overall asset impairment provision accounted for less than 4% of the total profit even at the peak in 2008, with little change between years; (3) In 2009, the growth rate of the total three expenses of GEM companies was slightly lower than the growth rate of the main business income, and accordingly, its proportion in the total profit decreased by 11.14%.

　　 3、 Main issues needing attention

Based on the analysis of the 2009 annual report and the performance of the company after listing, the following issues need attention.

1. The performance differentiation of listed companies has intensified

Over time, the performance of listed companies will gradually appear differentiation, which has been reflected to varying degrees in the main board, small and medium-sized board, and GEM.

The differentiation of main board companies is most significant. The specific performance is as follows: (1) High profit concentration. In 2009, the net profits of the top 50 companies in the main board accounted for 73% of the total net profits of 485 companies. Among them, the top 10 companies achieved a total net profit of 30.874 billion yuan in 2009, accounting for 31% of the total net profit. In addition, the total profit of the top 10 companies in 2009 increased by 65.95% compared with 2008, and the total net operating cash flow increased by 76.73% year on year, significantly ahead of the overall growth of the main board companies; (2) The performance of some companies with poor performance worsened. As of April 30, 2009, the main board had implemented delisting risk warnings and suspended 64 listed companies, of which 32 were loss making companies in 2009, with a total loss of 7.68 billion yuan, accounting for 52% of the total loss of loss making companies on the main board. Most of the main businesses of these companies are at a standstill, and they usually need to rely on non recurring projects to make profits.

The differentiation trend of small and medium-sized board companies continued. In 2009, the top 10 companies in the small and medium-sized board achieved an average net profit of 1.216 billion yuan, an average increase of 35%, higher than the overall growth rate of the small and medium-sized board. The total net profit of the 10 companies is nearly one-third of the total net profit of the SME board. The net cash flow from operating activities of 10 companies was further optimized. The average net inflow in 2009 was 2.846 billion yuan, 2.34 times the average net profit. While the overall performance of small and medium-sized board companies improved significantly in 2009, 13 companies suffered losses, with a total loss of 1.222 billion yuan and an average loss of about 94 million yuan. In addition, after the disclosure of the 2009 annual report, there were one special treatment company, two delisting risk warning companies and one suspended listing on the SME board.

The differentiation of GEM companies is beginning to take shape. There were 39 companies on the GEM whose growth rate of operating revenue in 2009 was lower than that in 2008, of which 3 companies saw a sharp decline in the growth rate of operating revenue. The compound growth rate of operating revenue of the two companies from 2007 to 2009 was negative. The growth rate of net profit of 27 companies slowed down, and the growth rate of net profit of 9 GEM companies was less than 20%. A few companies experienced significant performance decline in the second half of the year due to the impact of industrial policies. At present, the number of GEM companies is small, and the listing time is short. The trend of performance differentiation may be further reflected in the future.

2. There is pressure on the sustainability of high performance growth

In 2009, the performance of companies on the main board, the SME board and the GEM all achieved significant growth on the whole. However, from the perspective of the growth law of listed companies, the sustainability of high growth is a problem that needs objective evaluation.

The average net profit of main board companies in 2009 increased by 54.46% year on year. It should be noted that this growth rate was achieved on the basis of the sharp drop in net profit in 2008, and this problem also exists in the small and medium-sized board. At present, it remains to be seen whether the net profit of main board companies in 2010 can continue to maintain the high growth rate of 2009 when the foundation for economic stabilization and recovery is not yet stable.

In 2009, the operating income and net profit of GEM companies achieved a high growth, with a year-on-year growth of 33.3% and 45.3% respectively. This has a lot to do with the fact that most GEM companies are in the stage of fast growing enterprise life cycle. With the change of enterprise life cycle and expansion of scale, the difficulty of rapid profit growth will also increase. In addition, GEM companies have a large amount of over raised funds, leading to a substantial increase in net assets. It is difficult to find suitable investment projects in the short term, and a large number of over raised funds are idle. There is a risk that the return on equity of some companies will decline significantly.

3. High speed transmission has hidden troubles

In 2009, a large number of listed companies on the SME Board and the GEM introduced a high proportion of bonus shares and the plan of converting capital reserve into capital stock. Among the 58 companies on the GEM, there are 18 companies that transfer more than 10 shares per 10 shares, and 30 companies that transfer between 5 and 10 shares. There are 23 companies that transfer 10 shares for every 10 shares on the SME board, and 59 companies that transfer 5 shares to 10 shares. In comparison, there are fewer companies that transfer high shares from the main board, and there are only 26 companies that transfer more than 5 shares from 10 shares.

As the dividend policy or business strategy of an enterprise, "high dividend" itself is justifiable. However, a large number of listed companies are keen on "high transfer", which may cause market speculation and insider trading, but there are also some hidden concerns. If a listed company does not expand its share capital on a large scale and is not supported by sustained high growth, earnings per share may decrease in the next few years due to the unsynchronized growth of net profit and capital expansion. In fact, after the large-scale expansion of capital stock, some companies' performance growth is not enough to support the expansion of capital stock, and some companies even experienced a decline in performance.

Disclaimer: The data used in this report are all from the annual reports and prospectuses of listed companies. The conclusions of this report are the objective statements and independent analysis opinions made by the annual report analysis task force of Shenzhen Stock Exchange Comprehensive Research Institute on the annual report data of listed companies, and do not constitute the confirmation, commitment or guarantee of the authenticity, accuracy, integrity and timeliness of the annual report data of listed companies, It does not represent the position or opinion of Shenzhen Stock Exchange.

Any content of this report does not constitute investment advice. The annual report analysis team of Shenzhen Stock Exchange Comprehensive Research Institute will not bear any responsibility for any investment losses or other losses caused by the direct or indirect use of the content of this report.

Any organization or individual who uses the contents of this report shall be deemed to have fully known, understood and accepted all the contents of this statement.