The Zhitong Finance App learned that GF Securities released a research report saying that central enterprises are still drastically undervalued, and poor assessments are one of the main reasons. The essence of market value management of central enterprises is healthy interaction between physical operation and capital operation. In the short term, the main path is to stabilize market expectations by means of increasing holdings and repurchases; in the medium to long term, methods such as dividends, equity incentives, and employee stock ownership plans can form long-term incentives for market value. The driving force behind the medium- to long-term revaluation of central enterprises mainly comes from improving the quality and investment guidance of listed central enterprises. It is recommended to focus on state-owned enterprises with undervalued values, stable and high dividend ratios, stable cash flow, and low leverage.
Incidents:
On January 29, the State Assets Administration Commission stated that it will fully implement the market value management assessment, fully implement the “one enterprise, one policy” assessment for central enterprises, coordinate common quantitative indicators and differences between individual enterprises, establish a “double plus points” mechanism, strengthen the “dual line” assessment of R&D investment and output, strengthen the assessment of the revenue and value added share of strategic emerging industries, and explore the inclusion of brand value in the assessment. (Xinhuanet)
▍ The main views of GF Securities are as follows:
Currently, central enterprises are still greatly underestimated, and poor assessments are one of the main reasons.
According to Wind data, as of January 29, '24, 15.7% of listed central enterprises were still PB<1, mainly in traditional industries such as construction, steel, finance, and real estate. The main reason why central enterprises were underestimated in the past was that central enterprises were mainly distributed in traditional industries such as finance, petroleum and petrochemicals, and communications; second, the social value of central enterprises was ignored in the traditional financial valuation system; third, the incremental capital of central enterprises was insufficient; currently, state-owned enterprise reform theme funds were small in number, small in size, and low in proportion;
Fourth, corporate governance is insufficient, and central enterprises have problems such as inadequate assessment systems, insufficient equity incentives, concentrated equity structures, and inadequate investor relations management; fifth, innovation issues have been ignored. Some listed platforms of central enterprises have problems such as peer competition and business redundancy. The inefficient state-owned enterprise shell has yet to be revitalized, and innovative reforms such as spin-offs have not yet been fully recognized.
The essence of market value management of central enterprises is healthy interaction between physical operations and capital operations.
In the short term, the main path is to stabilize market expectations by using methods such as increasing holdings and repurchases. According to Wind data, 17.7% of listed central enterprises carried out share repurchases in '23, with a total amount of 6.5 billion yuan, an increase of 5.1% over the previous year. In the medium to long term, measures such as dividends, equity incentives, and employee stock ownership plans can form long-term incentives for market value. According to Wind data, 13.5% of listed central enterprises in both '22 and '23 had dividends of over 3%.
The driving force behind the medium- to long-term revaluation of central enterprises mainly comes from improving the quality and investment guidance of listed central enterprises.
The first is to continuously deepen the reform of central enterprise listing platforms, including specialized integration, revitalization of stock assets, and continuous optimization of management assessment goals; the second is to strengthen central enterprise industry support and transformation, that is, the endogenous growth and innovative development of central enterprises, and strategic emerging industries and future industries in the direction of digitalization and greening, including forming new central enterprise groups in strategic emerging industries, expanding the main chain industry circle, and building “world-class” state-owned enterprises; the third is to increase investment guidance and strengthen investor relationship management, including guiding institutions to expand their ESG investment scale and optimize ESG rating standards; Number of central enterprise surveys conducted by leading agencies Increase exploration of the establishment of an open communication platform for central enterprises to the outside world, etc.
Investment Strategy:
The policy strengthens the comprehensive market value management assessment of central enterprises. The essence is to improve the modern corporate governance of central state-owned enterprises → guide investors' value recognition → help central state-owned enterprises revalue them. It is recommended to focus on central enterprises with low valuations, stable and high dividend rates, stable cash flow, and low leverage. The overall market relied on large-cap stocks, and sentiment was initially stabilized. With the disclosure of the annual report forecast, small-capital/growth assets, which had fallen above the previous period, are also expected to usher in a rebound opportunity.
Risk warning
The downward pressure on the macroeconomy exceeded expectations; the recovery of the global economy may fall short of expectations; the relationship between China and the US in the trade/financial sector remains uncertain.