Around 1,300 listed companies in China produced satisfactory results for their investors in 2003.
By the end of April, most of the listed companies in
Shanghai and
Shenzhen had released annual reports for the year.
Altogether 1,289 companies realized a net profit of 125.8 billion yuan last year (US$15.2 billion), a 37.5 percent growth year-on-year.
Average earnings per share also rose by 37 percent to 0.196 yuan (2.4 US cents).
It was the first time Chinese listed companies' annual net profits had exceeded 100 billion yuan (US$12 billion) since the stock market was established 13 years ago.
Even the outbreak of severe acute respiratory syndrome (SARS), which had a short-term impact on travel, tourism and catering businesses, did not affect the overall growth of the listed firms.
The major engines behind the growth are a rosy Chinese economy, fast investment expansion and surging energy and raw material prices, analysts said.
A better control of expenditure during management and operation and lower costs for financing also contributed to the faster profit growth, said Zhou Dao, an analyst with Southwestern Securities Co.
In general, the large-caps, or blue-chips, contributed more revenue and profit, but some of the small-caps recorded faster growth, said Zhou.
A big proportion of the best performers were resource companies, such as those involved in power, energy, iron and steel and petroleum.
Real estate, textile, electronics, automobile and machinery sectors, which benefited from rallying commodity prices and fast investment growth, also handed in satisfactory reports.
The 44 listed power companies, for example, achieved a 10 percent growth of average earnings per share in 2003.
As electricity supply is expected to remain tight and demand continues to grow with the economic boom, power companies will maintain momentum this year, analysts said.
Similar growth potential also exists in companies involved in the coal, iron and steel businesses, as construction projects flourish across the country and increase demand for resources.
One of the factors affecting growth, however, is the policy adjustment of financial authorities, who have felt great pressure from an overheating economy and over-investment in sectors that could create dangerous bubbles, said Chen Huiqin, an analyst with Huatai Securities Co.
The nation's central bank has taken measures to tighten credit supply this year and recently raised the reserve requirements for commercial banks.
The tightening will cut off financial resources for some projects, particularly those in the real estate and iron and steel industries, and reduce market demand for related raw materials and products, Chen said.
If market demand declines and prices slide, it would erode the profit margin for such companies, especially small and medium-sized ones who have built up their stocks on price rallies.
That would weigh down investors' expectations of relevant listed companies, she said.
However, analysts also noted that the impact of the policy adjustment would not hurt all enterprises.
While reducing financial support to low-level construction projects, authorities would concentrate funding on stronger, better-managed companies with more competitiveness, said Zhao Xuegui, an analyst with Everbright Securities Co.
The auto sector, for example, would see more of the profit gathered by a few bigger enterprise groups, while many of the small and medium-sized companies would be driven out of the market.
On the other hand, as investment growth slows down, the government would take more measures to stimulate consumption, another driver of the economy. And some listed companies, including manufacturers of consumer goods such as electronics and their sales agents will have more opportunities, said Chen Huiqin of Huatai Securities.
By the end of April, most listed companies had also announced their first quarter results for 2004, which were also quite positive, with almost 50 percent net profit growth year-on-year.
Rising raw material prices, on the back of strong domestic demand, remained the major contributor to growth.
In the first quarter, commodity retail prices rose by 1.4 percent on a year-on-year basis. Ex-factory prices of industrial products also surged by 3.7 percent and fixed asset investment rose by 7.5 percent.
Whether such pace can be maintained in the second quarter will be a major element in deciding the interim results of the listed firms, said Wang Jiping, an analyst with Hongyuan Securities.
But to realize a sustained growth, it is not enough to focus on only short-term movements of prices and macro policies.
Apart from existing financial figures, another major indicator of corporate performance is the strategic planning of the company, which decides long-term development, said Liu Shuwei, a professor with the Central University of Finance & Economics.
In telecom stocks, for example, a fast pace of innovation in technology and steady investment in research and development are crucial for the future growth of the companies.
