(Yicai Global) Feb. 14 -- Some 62 Chinese A-share companies issued their annual reports in the runup to the Spring Festival yesterday, 53 of which achieved net profit growth. Fangda Carbon New Material Co. [SHA:600516], a leader in graphite electrodes, ranked top with a growth rate over 52-fold.
Among the 53 companies with performance growth, 19 companies increased their revenue by more than 50 percent, while 21 more than doubled their net profit, per Shanghai Securities News statistics. Profit growths higher than revenue showed a great increase in profitability, one important reason for which is the help of supply-side reform in extricating traditional cyclical industries from their predicament.
Fangda Carbon as an apt example. The company reported revenue of CNY8.35 billion (USD1.32 billion) last year, up 249 percent on the year before, and a net profit of CNY3.62 billion, surging 5,267.65 percent, the only one to report a net profit increase over 10 times among firms publishing annual reports up to date. The company's performance growth came mainly from the large rise in the price of its core graphite electrodes, a necessary steelmaking material.
The supply-side reform China implemented to resolve excess capacity in the steel industry last year significantly improved the supply-demand relationship in the steel market and the steel industry business environment and boosted the performance of leading companies in related sub-sectors like Fangda Carbon. Such leading enterprises have many years of experience and accumulate ample capacity and technical reserves. When the demand for their products rises, they can quickly capture the market and gain greater profits than the industry average.