China: Rebound in industrial profit growth - Nomura

Analysts at Nomura note that China’s industrial profit growth rose in April, consistent with the rebound in industrial production growth and PPI inflation during the month.

Key Quotes

“It rose 3.4 percentage points (pp) to 15.0% y-o-y ytd, closer to the 16.1% in January-February 2018, but lower than the 21.0% for full-year 2017. In year-on-year terms, it jumped to 21.9% from 3.1% in March.”

“The improvement in profit growth was seen almost across the board, mainly driven by foreign enterprises, for which profit growth rose by 5.3pp to 4.4% y-o-y ytd.”

“By industry, the rise in April profit growth was mainly in manufacturing, where profit growth rose 3.8pp to 12.0% y-o-y ytd.”

“Despite the April rebound in profit growth, we remain cautious on the outlook for industrial profit outlook as operational revenue growth remained sluggish in April. With domestic demand weakening and PPI inflation moderating this year, and given a high base last year, we believe that the downtrend in profit growth has not changed and the rebound in April should prove to be a brief one.”