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Chinese companies listed in the A-share market achieved higher revenue and profit in the first quarter, led by enterprises in the consumer sector such as services, home appliances and food, as well as producers of machinery, vehicle and construction, according to Chinese financial data provider Wind Information.

Analysts said the results showed signs of a continuing recovery from the fourth quarter which augurs well for 2023. 

Corporate profitability will likely keep improving, driven by an accelerating momentum, ongoing industrial upgrade and the low base effect. Analysts expect rapid expansion in emerging sectors such as new-energy vehicle and bio-medicine.

So far, 5,155 Chinese listed companies have released first-quarter results, and their total revenues increased 3.8 percent year-on-year to reach 17 trillion yuan ($2.46 trillion), Wind data showed. Total profit rose 1.42 percent to nearly1.5 trillion yuan.

In breakdown, companies in catering and tourism, agriculture, finance, as well as computer industries led the profit gains. Among them, catering and tourism recorded an impressive growth of 164.23 percent. 

Among the 5,155 companies, 2,834 saw their first-quarter revenue spike, while 2,751 recorded profit jumps. In the latter group, 1,241 reported profit growth of more than 50 percent. 

Industry observers said that one of the key takeaways is that the profitability of listed Chinese companies likely bottomed out in the first quarter.

A note from Merchants Securities said that the first quarter was probably "the end of the profitability downward cycle". In the second quarter, Chinese companies are poised to embark on "a new upward cycle." 

"It is likely that first-quarter profit gains are the slowest, with a significant jump expected in the second quarter," said a research note from China Securities, which suggested that investors keep a close eye on companies in sectors such as IT, EVs, telecom, gaming, semiconductor and infrastructure. 

Companies involved in the EV sector made strong first-quarter gains. For example, CATL, which makes one-third of the world's EV batteries, said its profit rose 558 percent to 9.82 billion yuan. BYD reported first-quarter net profit of 4.13 billion, up 410.9 percent year-on-year.

"Consumption sectors have rebounded swiftly, followed by manufacturers, underscoring the vibrancy of both supply and demand. It is also in line with China's overall industrial upgrading," Cong Yi, a professor at the Tianjin University of Finance and Economics, told the Global Times on Thursday. He said growth in those areas will speed up in the remainder of the year.

According to Cong, the robust recovery of China's real economy, buoyed by spending on infrastructure construction and other support policies, will support corporate profitability this year.  

In 2022, the revenue of A-share companies reached 71 trillion yuan, up 6.69 percent year-on-year, while total profits rose by 0.96 percent to reach 5.2 trillion yuan.

Global Times