As of August 31, 2023, all 557 companies on the SSE STAR Market have disclosed the main information on their business performance for the first half of 2023 through semi-annual reports, listed company statements or other means. In the first half of the year, STAR Market companies successfully navigated multiple challenges, achieving steady growth in operating revenue. In the second quarter, the overall operating conditions stabilized and recovered, witnessing a significant performance improvement quarter on quarter. Simultaneously, STAR Market companies have continued their commitment to R&D innovation, leading the way in high-quality development and showcasing the potential and resilience of key and core technology enterprises.
I. Overall operations demonstrated stabilization and recovery, with strong quarter-on-quarter growth in the second quarter
In the first half of 2023, STAR Market companies reported a total operating revenue of RMB 627.173 billion yuan, a year-on-year increase of 5%. Of these companies, 60% achieved growth in operating revenue, with 72 companies experiencing growth of over 50%, and 20% of companies achieving operating revenue exceeding RMB 1 billion yuan. Looking at a longer time frame, 159 companies have sustained positive growth in operating revenue since 2019, representing nearly 30% of the total number of companies on the STAR Market, indicating abundant growth momentum. The total net profit attributable to the parent company of STAR Market companies reached RMB 40.593 billion yuan, reflecting a 39% year-on-year decrease. However, almost 50% of these companies recorded an increase in net profit attributable to the parent company, with 115 companies experiencing growth rates exceeding 50%. The overall decline in net profit mainly resulted from industry concentration and the significant impact of industry periodicity and changes in downstream market demand.
Since the second quarter, the performance of STAR Market companies has witnessed a remarkable improvement. Collectively, they reported a total operating revenue of RMB 345.491 billion yuan, a 23% quarter-on-quarter increase. The net profit attributable to the parent company reached RMB 23.785 billion yuan, marking a 42% quarter-on-quarter increase. Over 80% of companies reported quarter-on-quarter growth in their operating revenue, nearly 70% experiencing quarter-on-quarter growth in net profit attributable to the parent company. Moreover, and more than 40% experienced a quarter-on-quarter growth in net profit attributable to the parent company exceeding 50%, indicating a stabilization and recovery trend in overall performance.
II. New energy and high-end equipment companies led in performance, with further differentiation in certain industries
The STAR Market focuses on serving strategic emerging industries and high-tech industries, emphasizing innovation-driven development. In the first half of the year, the new energy and high-end equipment manufacturing industries demonstrated leading growth rates, with net profit attributable to the parent company increasing by 19% and 8% respectively compared to the previous year. Looking at specific segments, advanced manufacturing companies in such fields as CNC machine tools and industrial laser continued to improve their profitability, with net profit attributable to the parent company increasing by 13% and 64% respectively compared to the previous year, laying a solid foundation for building a manufacturing powerhouse. Notable examples include KEDE Numerical Control Co., Ltd., which improved its CNC machine tool product layout on its existing technology platform, achieving year-on-year growth rates of 43% and 73% in operating revenue and net profit attributable to the parent company respectively in the first half of the year. Leading precision laser welding equipment manufacturer, Shenzhen United Winners Laser Co., Ltd., continued its R&D and innovation and met customers’ cutting-edge demands, achieving an impressive 184% growth in the first half of 2023, following a significant increase of 190% in net profit attributable to the parent company in 2022. The photovoltaic industry continued to deliver outstanding performance, actively driving green and low-carbon development. Among the industry leaders in photovoltaic components, Jinko Solar Co., Ltd., CSI Solar Co., Ltd., and Trina Solar Co., Ltd. reported a doubling of net profit attributable to the parent company, reaching 325%, 322%, and 179%, respectively. Additionally, inverter companies such as GoodWe Technologies Co., Ltd., Yuneng Technology Co., Ltd., and Hoymiles Power Electronics Inc. achieved high growth rates due to increased shipments and evident scale effect, with a combined net profit attributable to the parent company year-on-year growth rate of 218%.
In addition, further structural differentiation is apparent in some industries. In the field of new energy, the release of new capacity in the silicon material market led to a significant decline in polysilicon prices, resulting in noticeable drops in the operating revenue and net profit of silicon material companies in the first half of 2023. More than 100 listed companies are in the integrated circuit field. Among them, companies engaged in semiconductor equipment segment continually benefited from domestic substitution and had abundant orders, collectively achieving a year-on-year net profit attributable to the parent company increase of 72%. However, companies engaged in chip design, manufacturing, packaging and testing experienced temporary declines in overall performance due to weak downstream consumer markets and significant destocking pressures. In the biopharmaceutical industry, various segments including chemical drugs, biologics, medical devices, and CRO, all reported year-on-year growth in operating revenue. Many innovative pharmaceutical companies, including BeiGene Ltd., saw a significant reduction in losses. However, the overall net profit attributable to the parent company in the field of in vitro diagnostics saw a year-on-year decrease of 92% with the effective control of the COVID-19 pandemic.
III. Leading companies maintained steady operations, and SRDI little giants saw accelerated growth
As the pillar of the STAR Market, the companies included in the STAR 50 Index have continued to play the leading role, achieving a total operating revenue of RMB 166.819 billion yuan in the second quarter, up by 23% quarter on quarter. They also achieved a net profit attributable to the parent company of RMB 16.342 billion yuan, up by 27% quarter on quarter. The operating revenue and net profit attributable to the parent company accounted for 48% and 72% of the STAR Market as a whole in the first half of 2023, making them the locomotive of stable growth in the board. Benefiting from the rapid growth in global photovoltaic market demand, Jinko Solar Co., Ltd. achieved an operating revenue of RMB 53.624 billion yuan in the first half of the year, a year-on-year increase of 61%, and a net profit attributable to the parent company of RMB 3.843 billion yuan, a year-on-year increase of 325%. Shenzhen Transsion Holdings Co., Ltd. continued its deep commitment to smartphone R&D, ranking third among global smartphone brand manufacturers. In the first half of the year, the company achieved an operating revenue of RMB 25.029 billion yuan and a net profit attributable to the parent company of RMB 2.102 billion yuan. In the second quarter alone, the company achieved operating revenue of RMB 15.756 billion yuan, a 70% increase quarter on quarter. Additionally, the companies included in the STAR 100 Index also experienced strong growth in the second quarter, with a 27% quarter-on-quarter increase in net profit attributable to the parent company.
As a gathering place for sci-tech innovation enterprises, up to now, there are 301 listed companies on the STAR Market being selected in the list of national SRDI (specialized, refinement, differential, innovation) little giant enterprises. Among them, 35 companies have been awarded the title of manufacturing industry single item champion demonstration enterprises, and 40 companies' main products have been awarded as manufacturing industry single item champion products, totaling 59% of the total number of companies on the STAR Market after de-duplication. In the second quarter of 2023, the aforementioned companies reported a total operating revenue of RMB 223.402 billion yuan, up by 23% quarter on quarter, and a net profit attributable to the parent company of RMB 19.150 billion yuan, up by 36% quarter on quarter. Hwatsing Technology Co., Ltd. seized market opportunities to improve the competitiveness of its chemical mechanical polishing equipment products, achieving operating revenue of RMB 1.234 billion yuan in the first half of the year, a year-on-year increase of 72%, and a net profit attributable to the parent company of RMB 374 million yuan, a year-on-year increase of 101%. Qingdao Yunlu Advanced Materials Technology Co., Ltd., the leader in amorphous alloy materials, maintained its leading position in domestic market share, achieving operating revenue of RMB 848 million yuan in the first half of the year, a year-on-year increase of 33%, and a net profit attributable to the parent company of RMB 164 million yuan, a year-on-year increase of 82%.
IV. Innovation continued to lead development, with greater characteristics of key and core technology
The STAR Market features a high R&D investment intensity and prominent characteristics of key and core technology. In the first half of 2023, the total amount of R&D investment of STAR Market companies reached RMB 70.6 billion yuan, a year-on-year increase of 19%. The median proportion of R&D investment to operating revenue was 12%, with 102 companies having an R&D investment intensity of 30% or more. In total, over 7,600 new invention patents were added, with an average of 168 invention patents per company. The R&D achievements of many STAR Market companies have been recognized, with a total of 119 companies leading or participating in projects that have received major awards such as national science and technology awards as of the first half of the year. The invention patents of Frontier Biotechnologies Inc., Rigol Technologies Co., Ltd., and MGI Tech Co., Ltd. have been awarded the highest prize in the field of national patents, the China Patent Gold Award.
Moreover, STAR Market companies continued to play a leading role in serving national strategic needs and promoting domestic production in key areas. In the field of integrated circuits, ACM Research (Shanghai), Inc., relying on multiple core technologies, successfully developed advanced packaging electroplating equipment, three-dimensional TSV electroplating equipment, and high-speed electroplating equipment, which filled the domestic gap and realized mass sales. In the field of high-end manufacturing, Baimtec Material Co., Ltd.'s manufacturing technologies for high-load, high-reliability elastic components and long-life high-damping rubber vibration reduction components are widely used in such fields as helicopter ball flexible rotor systems, breaking the foreign technical monopoly. In the field of biomedical technology, Dizal (Jiangsu) Pharmaceutical Co., Ltd.'s independently developed Sunvozertinib tablets, which are the first and only domestically produced innovative drug for treating lung cancer, received dual Breakthrough Therapy Designation from China and the United States, which was approved for listing in August 2023. A number of R&D projects have successfully transformed into new products, becoming new drivers for the development of enterprises. For example, Changchun Bcht Biotechnology Co. Ltd.'s Herpes Zoster Live Vaccine was approved for listing in early 2023, driving a significant increase in company's performance.
V. SOEs and central SOEs saw improvements in both quantity and quality, and private enterprises became dynamic force of sci-tech innovation
The STAR Market effectively supports the reform and innovation of SOEs and boosts their high-quality development. As of now, there are 54 SOEs and central SOEs listed on the STAR Market. In the second quarter, these companies saw stable and sound overall operations, with a total operating revenue of RMB 60.881 billion yuan, a quarter-on-quarter increase of 27%, and a net profit attributable to the parent company of RMB 5.466 billion yuan, a quarter-on-quarter increase of 32%. Through capital operations, state-owned capital actively lays out strategic emerging industries on the STAR Market. In the first half of the year, China Merchants Group planned to participate in the synthetic biology leader Cathay Biotech Inc.'s directional placement with no more than RMB 6.6 billion yuan, which is conducive to reducing carbon emissions in multiple industrial sectors controlled by the group and supporting listed companies in expanding their business. Through directional placement, agreement transfer and other means, Guangzhou State-owned Assets Management Group Co., Ltd. invested over RMB 5 billion yuan to obtain control right over Farasis Energy (Gan Zhou) Co., Ltd., a leading enterprise in the three-element soft-pack power battery industry, thereby accelerating its own layout in the new energy vehicle industry and enhancing its comprehensive strength and market competitiveness as a listed company.
The private economy has played an irreplaceable role in stabilizing growth, promoting innovation, and increasing employment. Private sector companies account for over 90% of total number of listed companies on the STAR Market and have become a dynamic force behind the board's high-quality development. In the first half of the year, private sector companies on the STAR Market provided nearly 740,000 job positions and invested RMB 62.1 billion yuan in R&D, an increase of 18% compared to the previous year. Through innovative institutional tools such as equity incentives, the STAR Market stimulates the vitality of enterprise sci-tech innovation, supports the development of the private economy, and has seen 339 private sector companies release equity incentive plans, covering nearly 90,000 individuals.
VI. An institutional market preliminarily formed on the STAR Market, boosting investor confidence through repurchases, increase in holdings, dividends and other means
In the first half of the year, the number of institutional shareholders and the proportion of shareholding in STAR Market companies continued to rise, and the investor structure was further optimized. As of the end of June 2023, the number of active accounts held by professional institutional investors in the STAR Market companies exceeded 60,000, a year-on-year increase of 10%. The proportion of professional institutional investors' holdings was about 40%, and the proportion of trading volume in the first half of the year was nearly half. The majority of STAR Market companies include fund shareholders as holders of tradable shares, and nearly 20% of STAR Market companies have social security fund as shareholder. The index system and products of the STAR Market continue to be enriched, and its market influence and recognition are constantly improving. The scale of the STAR 50 Index ETF has exceeded RMB 130 billion in just over three years, making it the second largest broad-based index ETF in the A-share market.
STAR Market companies' awareness of social responsibility continues to increase, conveying positive signals through repurchases, increases in holdings, dividends, and other means to boost investor confidence and stabilize market expectations. Since 2023, a total of 93 companies on the STAR Market have announced their repurchase plans, with a maximum repurchase amount of RMB 11.915 billion yuan. In particular, in August 2023, 67 STAR Market companies released their repurchase plans, with a maximum repurchase amount of RMB 7.189 billion yuan. Among them, the planned repurchase amount of the STAR 50 constituent stocks companies accounted for more than 50%, leading the market to quickly start a wave of repurchases, attracting wide attention and applause. The critical few of STAR Market companies use real money to endorse the company's development prospects. A total of 51 shareholders of 16 companies have announced their plans to increase holdings since the beginning of this year. Since its establishment, the STAR Market has accumulated cash dividends of RMB 94.5 billion yuan. The cash dividend ratios of the board as a whole for 2019-2022 were 38%, 34%, 30%, and 33%, all higher than 30%. The STAR Market actively shares the development dividends with investors. Recently, shareholders of 12 companies on the STAR Market voluntarily extended their lock-up period or pledged not to reduce their holdings, demonstrating their confidence in the long-term development of the company.
Furthermore, STAR Market companies actively practice the ESG concept, enrich ESG information disclosure, and demonstrate the social responsibility of listed companies. More than 80% of companies have established environmental protection mechanisms, and 70% of companies have taken carbon reduction measures. Since 2015, Trina Solar Co., Ltd. has cumulatively generated power exceeding 7.2 billion kilowatt-hours through clean energy in its solar power stations in China, while its cumulative clean energy generation in the first half of the year exceeded 150 million kilowatt-hours, equivalent to a reduction of approximately 87,700 tons of carbon dioxide emissions.
VII. Positive trend remains unchanged in the mid to long term despite short-term challenges
Impacted by the complex and ever-changing domestic and international situation, the operating performance of some companies listed on the STAR Market in the first half of the year showed divergence, resulting in overall pressure on the board's performance. Excluding companies that were not profitable at the time of listing, 110 companies on the STAR Market reported losses and 139 companies saw a decline in net profit attributable to the parent company by more than 50%. The main reasons are as follows. First, with the continued slowdown in global economic growth, anti-globalization trends have emerged in such fields as economics, science and technology, significantly affecting the operations of certain industries and companies on the STAR Market. Second, the STAR Market companies are relatively concentrated in specific industries, and overall, they are relatively small in size, making them more susceptible to industry factors and the performance fluctuations of industry leaders. For example, due to effective control measures against the COVID-19 pandemic, 21 companies in the in vitro diagnostic industry saw a year-on-year decline of approximately RMB 13 billion yuan in net profits in the first half of the year. Furthermore, due to a significant drop in silicon material prices, from a peak of RMB 330,000 yuan per ton last year to around RMB 90,000 yuan per ton currently, related silicon material companies experienced an RMB 5.1 billion yuan decline in net profits in the first half of the year, indicating a trend of profit transfer from the industry chain to components and battery segments. Additionally, due to weak demand in downstream industries like consumer electronics and the pressure of reducing chip inventory, two wafer foundry enterprises saw a net profit decline of nearly RMB 6 billion yuan. Third, sci-tech innovation enterprises are generally featured by new business models, small-scale operations, and high R&D investment. Their performance is more sensitive to fluctuations in raw material prices and increased share payment expenses, making them more vulnerable to fluctuations.
Currently, China's economy continues to recover and the overall performance is trending positively, providing favorable conditions for the high-quality development of the STAR Market. The main growth drivers for STAR Market companies remain unchanged, including promoting sci-tech self-reliance and self-strengthening at higher levels, replacing imports in the industrial chain, and enhancing independent control. Sixty percent of STAR Market companies are actively driving the realization of import substitutes with their core products or technologies, while 30% are continuously launching pioneering technologies or products at the industry forefront. STAR Market companies are actively implementing investment projects financed by raised funds. As of the end of June 2023, a total of RMB 434.955 billion yuan has been invested from IPO funds, with an overall investment progress rate of nearly sixty percent. Among companies listed for more than two years, the investment progress rate is nearly eighty percent. In terms of investment, STAR Market companies spent a total of RMB 129.429 billion yuan on the acquisition of fixed assets and intangible assets in the first half of the year, representing a 28% year-on-year growth. Regarding orders, since July 2023, more than 30 companies have disclosed signings of major contracts or winning bid announcements, with a cumulative amount exceeding RMB 13 billion yuan. Looking ahead to the second half of the year, positive signals are expected from various industries, such as gradual recovery from the bottom of the semiconductor industry cycle, innovative drugs entering the transformation stage, and consecutive production increases and efficiency improvements in new energy projects. As a result, the operating performance of the STAR Market is expected to recover and make progress, while new growth drivers continue to accumulate and strengthen. The long-term development potential of the STAR Market is promising.