Electronics and other listed companies outperformed, and the performance of leading Internet companies exceeded expectations
2024-08-26
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Editor's Note: The performance of listed companies in my country is slowly recovering. As of August 22, 2024, a total of 1,717 A-share companies have announced performance forecasts, of which 804 companies have strong performance forecasts, accounting for 47%; 908 companies have weak performance forecasts, accounting for 53%. This issue of the capital market mainly analyzes the composition of companies with strong and weak performance forecasts, as well as the characteristics of the semi-annual reports of Internet companies, listed banks, and communications companies, and looks forward to the market in the second half of the year. With the pressure of the internal economic slowdown and the release of external liquidity pressure, the valuation of A-shares may be significantly repaired and usher in a rebound, but we must be vigilant against the challenges brought about by continued global economic uncertainty and sluggish investment activities.
Our reporter Liu Hui
The performance of listed companies in my country is slowly recovering. According to Wind data, as of August 22, 2024, a total of 1,717 A-share companies announced performance forecasts, of which 804 companies had favorable forecasts (including expected increase, slight increase, turnaround, and continued profit), accounting for 47%; 908 companies had weak performance forecasts (including expected decrease, slight decrease, first loss, and continued loss), accounting for 53%.
Currently, the industries with a large number of companies with favorable performance forecasts include electronics, basic chemicals, mechanical equipment, and automobiles. Recently, "Black Myth: Wukong" has been very popular around the world, bringing heat to related sectors. The financial reports of leading Internet companies such as Tencent show that the overall revenue growth rate is in line with expectations and the net profit growth rate exceeds expectations. People interviewed by China Economic Times reporters said that looking forward to the second half of the year, as the pressure of internal economic slowdown and external liquidity pressure are released, the valuation of A-shares may be significantly repaired and usher in a rebound.
Electronics and basic chemical companies performed well
Xu Chi, chief strategy analyst at Zhongtai Securities, said in an interview with a reporter from China Economic Times that the industries with a large number of companies with favorable performance forecasts include electronics, basic chemicals, machinery and equipment, and automobiles. Among them, 113 companies in the electronics industry have favorable forecasts, accounting for as high as 72%; 69 companies in the automobile industry have favorable forecasts, accounting for 64%; and 78 companies in the machinery and equipment industry have favorable forecasts, accounting for 57%. The industries with poor performance forecasts include coal, real estate, and building materials. Among them, 23 companies in the coal industry announced performance forecasts, and 21 companies had losses or expected reductions in performance, accounting for more than 90%; the number of companies with poor performance forecasts in the real estate and building materials sectors accounted for a relatively large proportion, 60 (85%) and 27 (75%) respectively.
From the perspective of individual stocks, the company with the highest net profit forecast is China Shenhua, which is expected to have a net profit of about 28.6 billion yuan to 30.6 billion yuan in the first half of the year; Zijin Mining ranks second, with a net profit forecast of about 14.55 billion yuan to 15.45 billion yuan, an increase of 41% to 50%. The company with the largest loss forecast is Vanke, with a net profit of about -9 billion yuan to -7 billion yuan, a year-on-year decrease of 171% to 191%.
Xu Chi believes that the overall development of my country's manufacturing sectors related to new productivity, such as electronics, machinery, and nonferrous metals, is good, with both revenue and profits improving. Real estate is still the main reason for the downward trend in my country's investment demand, and the performance of the real estate and construction sectors remains under pressure. In the second half of the year, as the pressure of the internal economic slowdown and the external liquidity pressure are released, the valuation of A shares may be significantly repaired and rebound. As my country's economy further accelerates, the performance of some listed companies may continue to improve. At the same time, as US inflation slows, the Federal Reserve may gradually cut interest rates, and the narrowing of the interest rate gap between China and the United States may effectively reduce the pressure of foreign exchange and foreign capital outflows, and northbound funds may accelerate inflows in the second half of the year.
"At present, the overall valuation of my country's stock market is low, and there is a basis for rebound." Xu Chi said that under the background of the "Nine National Regulations", market supervision has gradually become stricter. In the second half of the year, high-quality large-scale central state-owned enterprises with stable performance and high dividends may continue to dominate, and some small-cap stocks with performance risks and regulatory risks may be under pressure overall. With the continuous advancement of various industrial policies, some technological innovation sectors may usher in a significant recovery in performance and valuation. At present, geopolitical risks are gradually increasing. Against the background of future supply chain development paying more attention to security, the demand for independent technology and domestic substitution sectors at some key technology nodes in my country may increase, and sectors such as semiconductors will develop.
Internet companies are gradually shifting from a high-growth era to a mature stage
Tencent, JD.com, Alibaba, and Baidu have successively released performance reports. Tencent Holdings' revenue in the first half of 2024 was 320.618 billion yuan, and its net profit attributable to the parent company was 89.519 billion yuan, a year-on-year increase of 72%. Alibaba's revenue in the first quarter of 2025 (quarter ending at the end of June) was 243.236 billion yuan, and its adjusted net profit was 40.69 billion yuan. JD.com's revenue in the first half of the year was 551.4 billion yuan, with a net profit of 8.9 billion yuan in the first quarter and 14.5 billion yuan in the second quarter, with a net profit margin of 5.0% for the first time; JD Health's revenue in the first half of the year was 28.3 billion yuan, and its net profit under non-IFRS indicators was 2.64 billion yuan; JD Logistics' revenue in the first half of the year was 86.3 billion yuan, and its adjusted net profit was 3.12 billion yuan. Baidu achieved revenue of 65.431 billion yuan in the first half of the year and a net profit attributable to the parent company of 14.407 billion yuan.
Xu Chi said that the financial reports of leading Internet companies showed that the revenue growth rate was generally in line with expectations and the net profit growth rate exceeded expectations. Tencent Holdings' revenue in the second quarter increased by 8% year-on-year, which was basically in line with expectations; net profit attributable to the parent company increased by 53% year-on-year, significantly exceeding market expectations; among them, advertising business revenue increased by 19% year-on-year, mainly driven by the growth of video account and long video advertising revenue. Tencent's domestic game and overseas game business revenues both increased by 9% year-on-year. JD Group's revenue in the second quarter increased by only 1.2% year-on-year, but its net profit attributable to the parent company increased by 69% year-on-year, far exceeding expectations, mainly due to better-than-expected gross profit margin performance and reduced losses in JD Logistics and new businesses. JD's quarterly active user numbers and user shopping frequency continued to maintain double-digit growth, also exceeding market expectations. Alibaba Group's 24Q2 revenue increased by 4% year-on-year, slightly lower than market expectations, and gross profit increased by 6% year-on-year, higher than market expectations. Taotian Group's revenue in the second quarter decreased by 1% year-on-year, but quarterly GMV achieved high single-digit year-on-year growth, and order volume achieved double-digit year-on-year growth. The emergence of such trends in my country's Internet companies shows that Internet companies are gradually turning from a high-growth era to a mature stage, and the decline in capital expenditure and expense growth has led to significant profit improvement.
According to the list of "Top 500 Chinese Listed Companies by Market Capitalization" in the first half of 2024, Tencent Holdings ranked first in the market capitalization list (3.18 trillion yuan). As of August 24, the total market capitalization of Tencent Holdings reached 3.51 trillion yuan. Recently, "Black Myth: Wukong" has become more popular around the world, and Tencent Holdings, NetEase-S, Perfect World, Bilibili, X.D. Company, and Kaiying Network have all received attention.
According to Tencent Holdings' financial report, the revenue of its financial technology and enterprise services business increased by 4% year-on-year to 50.4 billion yuan in the second quarter. According to a research report by Soochow Securities, Tencent Holdings' financial technology business continued to grow, and its financial management and cloud services steadily improved. The further slowdown in the growth of commercial payment revenue reflects the slow growth of consumer spending. The revenue of the enterprise service business achieved a growth rate of more than ten percentage points. Benefiting from the growth of cloud service business revenue (including the commercialization of enterprise WeChat), the company's gross profit margin increased beyond expectations. According to a research report by Western Securities, "Black Myth: Wukong" indicates that Chinese game companies have the production capabilities to compete in the global market. Tencent Holdings' profitability continues to improve, but we must be vigilant about the game's turnover not meeting expectations and policy supervision risks.
JD.com Group's net profit in the second quarter increased by 69% year-on-year, significantly higher than Bloomberg's consensus forecast (up 13.2% year-on-year). According to Kaiyuan Securities' research report, merchandise sales revenue was basically flat year-on-year, core electronics and home appliance product revenue fell 4.6% year-on-year, and daily necessities product revenue increased 8.7% year-on-year. Service revenue increased by 6.3% year-on-year in 2024Q2, of which platform and advertising services increased by 4.1% year-on-year, mainly driven by 3P merchants.
Alibaba's revenue growth slightly exceeded expectations, and overall profitability declined. Live streaming e-commerce platforms such as Douyin have seized market share from JD.com and Alibaba. According to a research report by Soochow Securities, such companies should be wary of intensified competition in the e-commerce industry, insignificant economies of scale in infrastructure, and lower-than-expected user retention rates.
Baidu's second-quarter revenue was 33.9 billion yuan, down 0.4% year-on-year; net profit was 7.4 billion yuan, 9% higher than the market consensus. According to a research report by CMB International, this was due to better-than-expected sales and marketing cost control. Baidu is promoting improvements in user experience and plans to further increase the contribution of content generated by generative artificial intelligence in search results pages, and will prioritize improving user experience rather than monetization in the short term. Although this transformation may bring additional headwinds to advertising revenue growth in the short term, Baidu's monetization prospects may be strengthened in the long run. CICC believes that Baidu's core advertising may continue to be under pressure, but AI-supported cloud revenue profits are stable.
