As of October 31, 2021, except Semiconductor Manufacturing International Corporation, an A + H red chip company listed in both Shanghai and Hong Kong, 351 companies listed on the STAR Market of the Shanghai Stock Exchange (SSE) disclosed their operating performance information for the first three quarters of 2021 through the third quarter reports, listing announcements and in other forms. In general, focusing on the main business based on the sci-tech innovation, the STAR-listed companies maintained the momentum of high growth in the overall performance in the first three quarters of the year, recording substantial year-on-year increase in operating income and net profits. With their R&D investment remaining at a high level, the STAR-listed companies have turned out to be important practitioners for innovation-driven development, and a high-quality development cluster is emerging in the capital market.
First, the overall performance maintained rapid growth. In the face of the complex and volatile situations at home and abroad, the STAR-listed companies focused on their main innovative business, demonstrating great development potential and vitality. In the first three quarters of 2021, the STAR-listed companies recorded a total operating income of RMB483.95 billion, a year-on-year increase of 45.08%, with the net profit attributable to the owners of the parent company amounting to RMB63.02 billion, a year-on-year increase of 64.01%. With the non-recurring gains and losses deducted, the net profit attributable to the owners of the parent company stood at RMB50.79 billion, a year-on-year increase of 39.25%. In terms of operating income, 90% of the companies achieved growths in operating income, with 38 companies doubling their revenues. In terms of net profit, 70% of the companies registered increases in net profit attributable to the owners of the parent company, and 80 companies posted an increase of more than 100%, with the highest at 290 times.
Second, the “green engine” drove new development. With China implementing the “carbon peaking and carbon neutrality” strategy, the STAR-listed companies took advantage of technological innovation to drive the “green engine”, actively promoting the realization of the carbon peaking and carbon neutrality goals and sustainable economic development. In the first three quarters, the six strategic emerging industries on the STAR Market maintained rapid growth. The new energy industry ranked first with growths of 72% in operating income and 163% in net profit attributable to the owners of the parent company. For example, the photovoltaic companies such as Trina Solar Co., Ltd. and Xinjiang Daqo New Energy Co., Ltd. made great efforts in the research and development of innovative technologies and mass production to drive up the performance remarkably, with the total operating income and net profit attributable to the owners of the parent company swelling by 71% and 220% respectively; and the companies on the power battery industry chain such as XTC New Energy Materials (Xiamen) Co., Ltd. and Hunan Changyuan Lico Co., Ltd. unleashed their production capacity rapidly in the first three quarters, with the total operating income and net profit attributable to the owners of the parent company up by 58% and 72% respectively year-on-year. In addition, a number of STAR-listed companies in the new-generation information technology and high-end equipment manufacturing industries actively promoted technological innovation, providing strong support for China’s green industrial development and the enterprises’ energy conservation and emission reduction.
Third, the companies continued to step up R&D investment. With renewed effort to spearhead the high-quality development through high-quality innovation, the STAR-listed companies maintained a high-level investment in research and development, thus constantly enhancing the quality of sci-tech innovation and making a series of technological breakthroughs and scientific advances on the main battlefield of supporting China’s self-reliance and self-improvement in science and technology. In the first three quarters of 2021, the STAR-listed companies invested a total of RMB37.66 billion in research and development, a year-on-year increase of 40%, with the spending close to the level of the whole year of 2020. After excluding the companies listed in accordance with the fifth set of standards, the ratio of the R&D expenditure to operating revenues stood at 13% on average, ranking the first among all A-share sectors. Among the industries, the ratios of R&D spending in integrated circuit, pharmaceutical manufacturing, and software industries ranked high, with 15 companies, including China Resources Microelectronics Limited and Shanghai Junshi Biosciences Co., Ltd., investing more than RMB500 million in R&D, and 52 companies, including Beijing Kingsoft Office Software, Inc. and Shenzhen Chipscreen Biosciences Co., Ltd., reporting a ratio of more than 20% in R&D expenditure.
Fourth, the overall profit quality was stable and improving. As a new force for the high-quality development of the real economy, the STAR-listed companies maintained high profit quality on the whole, with rapid increase in its performance and continued improvement in its main financial indicators. In the first three quarters of 2021, the median gross profit margin of the STAR-listed companies reached 43%, and nearly 40% of the companies posted a gross margin of more than 50%, with 39 companies expanding their gross margins by 5 percentage points over the same period of the previous year; the median net profit margin stood at 15%, and more than 30% of the companies registered a net profit margin of more than 20%, with 70 companies increasing the rate by 5 percentage points year-on-year. Particularly, the biopharmaceutical industry ranked first among all industries with the most outstanding overall profitability, recording a median gross profit margin of 73% and a median net profit margin of 24%.
Fifth, the special type of companies witnessed gratifying development. Thanks to the results of earlier R&D, the 19 companies listed on the STAR Market which were unprofitable at listing have been accelerating the product commercialization with continued improvement in their performance. In the first three quarters of 2021, such STAR-listed companies recorded a total operating income of RMB21.61 billion, a year-on-year increase of 126%, which was significantly higher than the overall level of the STAR Market; their total net profit attributable to the owners of the parent company amounted to RMB3.05 billion, a significant reduction of RMB2.64 billion in loss year-on-year. Specifically, four innovative drug companies that adopted the fifth set of standards for listing on the STAR Market, including Cansino Biologics Inc., Shanghai Allist Pharmaceuticals Co., Ltd., Suzhou Zelgen Biopharmaceuticals Co., Ltd. and Sinocelltech Group Limited, launched their domestically-produced new drugs in the market for the first time during the reporting period, beginning to make sizable revenues from drug sales, marking a new milestone on the company’s journey of growth as well as demonstrating the empowering effect of the STAR Market, which provides an inclusive system.
Sixth, a small number of companies diverged in terms of performance. STAR-listed companies are generally relatively small in scale and mostly in the growth stage, so their business performance is vulnerable to the impact of the peripheral environment and market competition, resulting in fluctuations. In the first three quarters of 2021, 36 STAR-listed companies saw their net profit attributable to the owners of the parent company fall by more than 50%; after excluding the companies that were unprofitable when being listed, 18 companies recorded losses in the first three quarters. While a small number of the companies are characterized by seasonal differences in revenues, the main reasons for the decline in performance and the losses include changes in the COVID-19 pandemic situation overseas, increase in raw material prices, growing expenses during the period, and intensified industry competition. Due to small base figures, some companies were more sensitive to the impact of increased R&D investments or marketing expenses, and amortization of large equity incentive expenses.