In 2022, the STAR Market prioritized stability, pursued progress while ensuring stability, actively implemented the innovation-driven development strategy, and leveraged its institutional advantages to stimulate market vitality. Despite various unfavorable factors, the STAR Market companies achieved steady growth in business performance throughout the year, contributing to the stabilization and recovery of the economy. At the same time, they seized momentum in advantageous fields, continuously expanding and strengthening their presence, promoting the complementation of key industrial chains, consolidating their foundation to become sci-tech self-reliant and self-strengthening, and forming a strong driving force for high-quality development. In 2022, there were over 500 companies on the STAR Market, with the overall operating revenue exceeding RMB 1 trillion yuan for the first time, net profit exceeding RMB 100 billion yuan for the first time, and R&D spending exceeding RMB 100 billion yuan for the first time, offering a glimpse of the vitality and resilience of enterprises with "key and core technologies".
I. Achieving steady growth in overall performance to show the "power of growth" of companies with key and core technologies
In 2022, STAR Market companies achieved operating revenue and net profit of over RMB 1 trillion yuan and RMB 100 billion yuan respectively, with a total operating revenue of RMB 1,212.049 billion yuan, up 29% year on year, a net profit attributable to the parent company of RMB 113.589 billion yuan, up 6% year on year, and a net profit attributable to the parent company after deducting non-recurring gains and losses of RMB 90.781 billion yuan, up 9% year on year. Nearly 70% of companies saw growth in operating revenue, with 23 companies doubling their growth, while 40% of companies saw operating revenue exceeding RMB 1 billion yuan. Over 80% of companies achieved profitability, with 50% of companies' net profit attributable to the parent company increasing, and 49 companies doubling their growth. The average operating revenue of the STAR Market increased from RMB 1.815 billion yuan to RMB 2.344 billion yuan, and the average net profit attributable to the parent company increased from RMB 208 million yuan to RMB 220 million yuan, showing a stable and positive trend. Based on 2019, the compound annual growth rates of operating revenue and net profit attributable to the parent company of STAR Market companies over the past three years reached 29% and 56% respectively. More than 30% of companies achieved positive net profit growth for three consecutive years, with 94 companies having a compound annual growth rate of net profit attributable to the parent company exceeding 50%, injecting strong impetus into China's economic development.
The STAR Market is based on the innovation-driven development strategy and serves the strategic emerging and high-tech industries, with significant agglomeration effects in integrated circuits, biopharmaceutical, new energy and other leading industries, showing strong growth momentum. There were over 90 listed companies in integrated circuits, covering the three major production links of chip design, manufacturing, and packaging & testing. Supporting fields such as semiconductor equipment and materials also had impressive performance, forming an industrial pattern featuring coordinated development. Leading wafer foundry company, Semiconductor Manufacturing International Corporation, achieved a historic high performance, with operating revenue and net profit reaching RMB 49.516 billion yuan and RMB 12.133 billion yuan respectively. Five semiconductor equipment companies, including Piotech Inc. and ACM Research (Shanghai) Inc., achieved a doubling in performance and steady growth in their order backlog. New energy companies covered the photovoltaic, wind power, energy storage, and power battery and other industrial chains. By relying on their technological and scale advantages in the context of a high industry prosperity, their performance growth was impressive. The total operating revenue and net profit attributable to the parent company reached RMB 464.694 billion yuan and RMB 42.379 billion yuan respectively, representing a year-on-year growth of 72% and 112%, fully demonstrating the growth vitality of green economy on the STAR Market.
In 2022, the overall operating performance of special-type enterprises on the STAR Market saw improvement, with 9 unprofitable companies at the time of listing achieving positive net profits before and after deducting non-recurring gains and losses for the first time after being listed, and letter "U" was removed from their stock abbreviation after the annual report was disclosed. Eighteen of the 48 unprofitable companies listed on the STAR Market achieved profitability, and letter "U" was removed from their stock abbreviations. It is worth noting that among the 19 biopharmaceutical companies that adopted the fifth set of listing standards (no operating revenue indicator), 14 had products approved for listing and 11 had operating revenues exceeding RMB 100 million yuan.
II. Continuously increasing R&D investment to promote sci-tech self-reliance and self-strengthening at higher levels
In 2022, STAR Market companies continued to increase their R&D investment to keep improving their independent innovation capabilities. The total R&D investment for the year amounted to RMB 128.468 billion yuan, a year-on-year growth of 28%. The average R&D investment-to-revenue ratio was 16%, a year-on-year increase of 3 percentage points. Among them, the biopharmaceutical and integrated circuit industries had the largest R&D investment intensity, with 69 companies, including Hygon Information Technology Co., Ltd., having an R&D investment-to-revenue ratio exceeding 30%, and 51 companies, including Trina Solar Co., Ltd., having an R&D investment exceeding RMB 500 million yuan. High-level sci-tech researchers have become the most important resource for STAR Market companies. The STAR Market currently has over 170,000 R&D personnel, and over 60% of the founding teams of STAR Market companies are scientists, engineers and other scientific research talents or industry experts. On average, R&D personnel account for nearly 30% of total employees in each company, and over 30% of companies have a human resource investment return rate of over 100%.
In multiple technology frontier fields, STAR Market companies have set their sights on international advanced levels, pushed forward key and core technology research, accelerated the transformation of innovative achievements, and volunteered to be "front-runner" in sci-tech self-reliance and self-strengthening. In 2022, there were 43,007 newly added intellectual property rights, including 13,758 invention patents. On average, each company owned 152 invention patents, with 90 companies leading or participating in projects that won major national science and technology awards. High-end equipment enterprises were building the foundation of a "manufacturing powerhouse". China Railway Construction Heavy Industry Corporation Limited independently developed a large-diameter vertical well drilling rig, creating a "steel frame" for high-difficulty and precision underground projects. Zhejiang Supcon Technology Co., Ltd. empowered high-end smart manufacturing with the release of heavy-duty technology i-OMC, gradually transforming the "autonomous operation" of industrial processes into a reality. Innovative pharmaceutical companies adhered to original innovation. Shanghai Allist Pharmaceuticals Co., Ltd.'s lung cancer targeted drug Furmonertinib entered clinical phase III. Mabwell (Shanghai) Bioscience's Adalimumab's biosimilar QUMAKANXY was approved for market launch for the treatment of rheumatoid arthritis. Suzhou Zelgen Biopharmaceuticals Co., Ltd.'s recombinant human coagulation factor product has become China's first biological hemostatic material product to complete Phase III clinical research and submit a market approval application, fully demonstrating the mission and responsibility of Chinese pharmaceutical enterprises.
III. Leading companies highlighting demonstration effects, and SRDI (specialized, refinement, differential, innovation) enterprises showing vitality
The STAR 50 Index brings together leading sci-tech companies, highlighting their strength as the "backbone". In total, these companies achieved operating revenue of RMB 610.582 billion yuan and a net profit attributable to the parent company of RMB 71.35 billion yuan, accounting for 50% and 63% of the STAR Market's total operating revenue and net profit respectively. The operating revenue and net profit attributable to the parent company both increased by 44% year on year, serving as a "ballast" for the market's growth. SOEs and central SOEs on the STAR Market have played a demonstrative and leading role in driving high-end development of industries. Ten manufacturing SOEs on the board, including Zhuzhou CRRC Times Electric Co., Ltd. and China Railway Construction Heavy Industry Corporation Limited, have been included on the "Dual Demonstration" enterprise list for building world-class demonstration enterprises and SRDI expertise, covering leaders in various manufacturing sub-sectors such as advanced rail transportation, new energy power equipment, and critical strategic materials. Fully leveraging their leading role, the "Dual Demonstration" enterprises achieved a total operating revenue of RMB 49 billion yuan and a net profit attributable to the parent company of RMB 5.495 billion yuan in 2022, up 17% and 46% year on year respectively.
In the meantime, the STAR Market is continuously building a matrix of "little giants" and accelerating the cultivation of hidden champions in niche segments. To date, 256 STAR Market companies have been selected for the national SRDI "little giant" enterprise list, 35 companies have been awarded the title of manufacturing industry "single item champion demonstration enterprise", and 35 companies' products have been awarded the title of "single item champion product", totaling 55% of the total number of STAR Market companies. These companies achieved rapid revenue growth in 2022, with a total operating revenue of RMB 713.754 billion yuan, a year-on-year increase of 35%, and a total net profit attributable to the parent company of RMB 68.187 billion yuan, with 48 companies achieving a net profit growth of over 50%. "Little giant" enterprises implemented the innovation-driven strategy and focused on strengthening, supplementing and extending the industrial chains. A number of companies, such as Anji Microelectronics Technology (Shanghai) Co., Ltd. and Leader Harmonious Drive Systems Co., Ltd., achieved significant breakthroughs in the autonomy of key links, accelerating the filling of gaps in domestic industries, and effectively promoting the optimization and upgrading of China's industrial and supply chains.
IV. Relying on diverse innovation system to create a favorable market ecology to serve sci-tech innovation
STAR Market companies have accumulated key resources, such as talent and funding, to achieve innovative development through innovative systems including refinancing, equity incentive, inquiry transfer, and market-making. As of the end of 2023 Q1, 137 STAR Market companies had issued 154 refinancing plans, with a total of approximately RMB 230.456 billion yuan proposed to be raised. Photovoltaic industry leader, Jinko Solar Co., Ltd., raised RMB 10 billion yuan for the production of an annual output of 11GW of high-efficiency battery production line and an annual output of 8GW of high-automation photovoltaic component production line to expand the corresponding production capacity of high-quality silicon rods, battery wafers, and components, thereby consolidating the company's leading position in the industry.
Moreover, an increasing number of STAR Market companies have used normalized equity incentive mechanisms to retain, attract, and motivate talent, which has played a positive role in encouraging research staff to engage in technological innovation. By the end of 2023 Q1, 307 STAR Market companies had launched 414 equity incentive plans, covering over 60% of the Market and involving nearly 80,000 employees. Espressif Systems (Shanghai) Co., Ltd. and Appotronics Corporation Limited had implemented six and four phases of equity incentives respectively. Eleven companies, including Montage Technology Co., Ltd., had incentivized over 90% of their employees, basically realizing stock ownership for the entire staff.
The inquiry transfer mechanism continued to strengthen, promoting the orderly "relay" between early investors and long-term investors. As of the end of 2023 Q1, 58 groups of shareholders of 34 STAR Market companies had completed inquiry transfers, with a total turnover of RMB 27.141 billion yuan, effectively alleviating the impact of risk capital exit on the secondary market. At the same time, the STAR Market introduced the market-making mechanism to orderly expand the market-making stocks and significantly improve the liquidity of STAR Market stocks. There are currently a total of 14 market makers on the STAR Market who have completed filings for 227 stocks, covering 139 STAR Market stocks, or about 27% of the total number. Among them, Western Superconducting Technologies Co., Ltd., National Silicon Industry Group Co., Ltd., and Zhejiang Supcon Technology Co., Ltd. are covered for market-making by five securities companies, significantly improving market activity and pricing efficiency.
V. Actively practicing ESG concept to promote green transformation of industrial structure
STAR Market companies have actively implemented the ESG concept, striving for dual emphasis on environmental protection and development, and technology and green development, and promoting the green transformation of industrial structure. In 2022, in addition to the disclosure of ESG-related information in the annual reports of all STAR Market companies, over 130 companies separately prepared and published social responsibility reports or ESG reports, with vivid diagrams and good readability. Thirteen photovoltaic industry chain companies, including Xinjiang Daqo New Energy Co., Ltd. and Trina Solar Co., Ltd., constantly empowered the green and digital transformation and upgrading of the photovoltaic industry, establishing a digital procurement, manufacturing and sales system, and creating a platform that is replicable, reusable and collaborative. These companies achieved a year-on-year increase of 102% and 176% in operating revenue and net profit attributable to the parent company. Seventeen power battery companies, including Tianneng Battery Group Co., Ltd. and Ningbo Ronbay New Energy Technology Co., Ltd., jointly created an innovative, green, and ecological recycling industry chain. Focusing on fields such as battery disassembly, recycling, and utilization, they maximized the use of clean energy to replace traditional energy, and achieved a year-on-year increase of 75% and 51% in operating revenue and net profit attributable to the parent company.
STAR Market companies actively carried out ESG practices from multiple perspectives, including environment, society, governance, and information disclosure, showcasing their responsibility as enterprises with key and core technologies. In terms of environmental protection, many STAR Market companies strengthened their practices in green technology innovation. Over 70% of companies voluntarily disclosed information on resource consumption and emissions, and over 60% of companies disclosed their measures and results in carbon emission reduction. National Silicon Industry Group Co., Ltd. applied waste heat recovery systems to reduce energy consumption, recovering about 24 million kWh of heat from the heat recovery chiller units, equivalent to saving about 8 million kWh of electricity through air-cooled heat pumps. Zhuzhou CRRC Times Electric Co., Ltd.'s solid waste consists mainly of calcium fluoride sludge, which is provided to qualified brick factories as auxiliary material for brick production. In 2022, the processing volume was 1,453.57 tons, effectively reducing the environmental impact of sludge. In terms of social responsibility, STAR Market companies focused on a series of key areas, including strategic security, industrial leadership, rural revitalization, and charitable donations, with a total donation of over RMB 129 million yuan, promoting the comprehensive value enhancement of economic, social, and environmental aspects. Beijing Kingsoft Office Software, Inc. empowered small and medium enterprises (SMEs) by establishing "Kingsoft Office National Headquarters for SMEs" to meet their practical needs for remote collaboration, and creating a "Digital Transformation and Application Platform for SMEs". In terms of corporate governance, many companies attached great importance to ESG-related institutional building, incorporating ESG elements into corporate governance and strategic planning, establishing ESG governance structures, setting up ESG committees, and formulating ESG policies to explore ESG as a path for high-quality corporate development.
VI. Continuously optimizing investor structure and further improving internationalization level
Overall, the number and shareholding ratio of institutional shareholders in STAR Market companies have steadily increased, and the investor structure has continued to optimize. As of the end of 2023 Q1, the number of active accounts held by professional institutional investors in STAR Market companies exceeded 57,000, a year-on-year increase of 5.8%. Professional institutional investors held about 40% of the shares, with their trading volume throughout the year accounting for over half of the total. Most STAR Market companies' circulating shareholders include fund shareholders, with "key and core technology" industry chain companies represented by integrated circuits, new energy, and aerospace being most favored among funds. The share and scale of STAR 50 ETF continue to grow. In just over two years, it has become the fourth-largest broad-based index ETF in the A-share market.
Apart from this, the international appeal and influence of the STAR Market have been on the rise. As of now, 214 STAR Market stocks have been included in the Shanghai Stock Connect, and 67 STAR Market stocks have been included in the core index system of MSCI, FTSE Russell, and S&P. With the further expansion of foreign investment channels, foreign holdings and coverage on the STAR Market continue to increase. Thirteen STAR 50 ETF products have been listed overseas, with a total scale of about RMB 2.5 billion yuan, opening up new channels for overseas investors to invest in the STAR Market. STAR Market companies have taken the initiative to enter the international investors' view by issuing GDRs abroad, opening up dual financing channels both domestically and internationally. Zhejiang HangKe Technology Incorporated Company and Zhejiang Supcon Technology Co., Ltd. have completed GDR issuances, raising USD 173 million and USD 565 million respectively. Another five STAR Market companies are actively preparing for GDR issuances to raise funds.
VII. Conveying confidence in development through shareholding increases and share repurchases, and sharing fruits of development with high-level dividends
While effectively developing their main businesses, STAR Market companies have actively signaled their confidence in development to investors through shareholding increases and share repurchases. In 2022, 46 companies released shareholding increase plans, with a planned maximum increase of RMB 1.27 billion yuan; and 85 companies released share repurchase plans, involving an amount of RMB 8.384 billion yuan. At the same time, the cash dividend level of STAR Market companies has reached a new level. In 2022, 334 companies launched cash dividend plans, totaling RMB 31.771 billion yuan. Cash dividends exceeding 30% were offered by 228 companies, an increase in both quantity and scale compared to the previous year. Among them, 77 companies' cash dividends exceeded RMB 100 million yuan. The dividend amounts of China Railway Signal & Communication Corporation Limited, Shenzhen Transsion Holdings Co., Ltd., and Trina Solar Co., Ltd. were RMB 1.8 billion yuan, RMB 1.447 billion yuan, and RMB 1.039 billion yuan respectively.
In addition, STAR Market companies continue to strengthen information channel construction with investors, focusing on improving investor relationship management concepts and levels. During the disclosure period of the 2022 annual report, the STAR Market continued to promote the full coverage of performance meetings. The chairmen, general managers, and other major persons in charge of STAR Market companies communicated face-to-face with investors through live web casting and other means. The presentation method of annual reports also became increasingly diversified. Over 50% of companies used long graphic texts, short videos, and other forms to display information from annual reports, which enhanced readability.
VIII. Seeing business stabilization and recovery in 2023 Q1, and taking multiple initiatives to build up growth potential
The policy measures for stabilizing growth and the economy have taken the lead. The supply and demand sides continue to improve, and the economic development is showing a trend of rebound and improvement. The economic operation has taken a good start, driving STAR Market companies to achieve stable operating results in 2023 Q1. Other than three multi-listed red-chip companies, i.e. Semiconductor Manufacturing International Corporation, BeiGene, Ltd., and Innocare Pharma Limited, nearly 60% of STAR Market companies had a year-on-year increase in operating revenue in Q1, and 42 companies had a revenue growth rate of over 100%. Over 40% of companies had a year-on-year increase in net profit in Q1, with 72 companies' net profit attributable to the parent company having a growth rate of over 100%, fully demonstrating the growth potential of sci-tech innovation enterprises. It is worth noting that the energy storage, laser, and other sub-industries showed outstanding performance, with their revenue growth rates in Q1 reaching 81% and 56% respectively. In the photovoltaic sector, leading companies achieved strong profit growth. The net profits of Trina Solar Co., Ltd. and Jinko Solar Co., Ltd. in Q1 both exceeded RMB 1.5 billion yuan, with year-on-year growth rates of 225% and 313% respectively.
While starting smoothly, STAR Market companies continue to focus on their main businesses and build up momentum for annual performance growth through order acquisition, heavy investment in R&D, and investment promotion. In terms of orders, the total amount of new major orders disclosed by STAR Market companies in Q1 exceeded RMB 16 billion yuan. Among them, the total amount of newly signed orders in the rail transit sector amounted to RMB 6.2 billion yuan, and the total amount of newly signed orders in the photovoltaic field amounted to RMB 4.9 billion yuan. On the R&D front, the total R&D investment of STAR Market companies in Q1 reached RMB 24.435 billion, a year-on-year increase of 6%. Among them, 26 companies have made positive progress in innovative product development, and are expected to form new revenue growth points. For example, Suzhou Nanomicro Technology Co., Ltd.'s STS0100 nucleic acid synthesizer is the company's first product in nucleic acid synthesis. Innovative pharmaceutical companies such as Shanghai Junshi Biosciences Co., Ltd., Dizal (Jiang Su) Pharmaceutical Co., Ltd., and Hinova Pharmaceutical Inc. have submitted applications for new drugs or new indications. On the investment front, STAR Market companies have increased their efforts to expand production and enhance efficiency. In Q1, their total expenditure on fixed assets and intangible assets reached RMB 44.557 billion yuan, a year-on-year increase of 27%. Seven STAR Market companies signed significant investment agreements with local governments at various levels, with a total planned investment amount of RMB 12.6 billion yuan, providing support for boosting domestic demand and stabilizing economic growth.
Currently, the overall improvement of the national economy has created favorable conditions for the high-quality development of STAR Market companies. However, due to factors such as industry development cycles and market competition, there is differentiation in the Market's performance. Some STAR Market companies are under pressure because of fluctuations in market demand, increased R&D investment, and the provision of stock payment expenses. Excluding unprofitable listed companies, 53 STAR Market companies reported losses in 2022 and 48 companies saw a net profit decline of over 50%. Given the diversified listing criteria and greater inclusiveness, and the characteristics of sci-tech innovation companies having new business models and small operating scales, the performance of some STAR Market companies is prone to volatility. For example, some R&D-oriented companies such as innovative drugs are still in the stage of product development or promotion and have not formed a stable source of profit. Because of their small operating scale, the performance of sci-tech innovation companies is sensitive to stock payments and raw material price fluctuations.
Going forward, the Shanghai Stock Exchange (SSE) will adhere to the positioning of the STAR Market and closely follow the mainline of high-quality development. The SSE will dynamically monitor changes in the business performance of STAR Market companies, further advance the "open-door review, open-door supervision, and open-door services" initiative, and support STAR Market companies in increasing R&D investment, accelerating technological iteration, and promoting industrial upgrading. The SSE will facilitate the benign cycle of technology, industry, and capital, seize the opportunity to promote the effective quality improvement and reasonable growth of the economy, better serve the national innovation-driven development strategy, and achieve sci-tech self-reliance and self-strengthening at higher levels.