Investment tips for the current period:
It is timely to explore the establishment of a valuation system with Chinese characteristics and lay out central state-owned enterprises. On November 21, 2022, Yi Huiman, the then chairman of the CSRC, delivered a speech at the annual meeting of the Financial Street Forum, proposing to "grasp the valuation logic of different types of listed companies and explore the establishment of valuation systems with Chinese characteristics". At the beginning of 2023, SASAC will update the assessment system of central enterprises to "one benefit and five rates", focusing on "improving quality and efficiency"; On January 24, 2024, the State owned Assets Supervision and Administration Commission (SASAC) said at the press conference that "efforts should be made to improve the quality of listed companies controlled by central enterprises and strengthen investor returns", and "research should be made to incorporate market value management into the performance assessment of central enterprise heads". A-share central state-owned enterprises have entered the long-term historical process of valuation recovery.
The valuation of A-share central state-owned enterprises is still low, and the revaluation potential is huge. As of May 17, 2024, the overall PE and PB of A-share state-owned enterprises listed companies are 11.2 and 1.1 respectively, while the overall PE and PB of state-owned enterprises listed companies are 18.5 and 1.5 respectively, significantly lower than 37.9 and 2.4 of private enterprises and 32.3 and 3.1 of foreign enterprises. After the "valuation system with Chinese characteristics" was proposed, although the valuation gap between central state-owned enterprises and other enterprises of ownership has narrowed, there is still great potential in valuation repair.
A solid fundamental is the basis of value revaluation. As of 2024Q1, the ROE-TTM of entity central enterprises and entity local state-owned enterprises is 8.7% and 7.8% respectively, which are significantly stronger than 6.6% of entity private enterprises, showing resilience against the background of weak economic recovery momentum. Behind ROE resilience is the resilience of net interest rate. Since central and local state-owned enterprises are mainly concentrated in the upstream cycle industries, after the supply side reform clears the excess capacity, the business of central state-owned enterprises has a strong irreplaceable and cost shifting ability.
The central state-owned enterprises still have spare power after a large dividend. By the end of 2023, the dividend rate of central enterprises, local state-owned enterprises and private enterprises is 38.4%, 46.6% and 52.7% respectively. The total dividend of central enterprises increased from 578.55 billion yuan in 2022 to 583.38 billion yuan in 2023, and local state-owned enterprises increased from 170.06 billion yuan to 174.77 billion yuan. On the basis of large dividends, the cash flow of A-share central state-owned enterprises shows the characteristics of operating net cash flow>investment net cash flow+financing net cash flow, that is, after the endogenous hematopoietic capacity covers the capital expenditure demand, it has spare power to repay interest bearing liabilities and cash dividends, and on this basis, cash is still accumulating, providing an economic basis for further dividend ratio.
The constituent stocks of the Shanghai Stock Exchange SOE Bonus Index (000151. SH) are weighted by dividend yield, which is stable higher than comparable indexes of the same kind. The index selects 30 securities with high cash dividend rate, stable dividend distribution, and certain scale and liquidity among the constituent stocks of the Shanghai 180 Index as samples to reflect the overall performance of high dividend securities in the group of state-owned enterprises. The value of component stock market is evenly distributed, focusing on high dividend industries such as coal, banking and transportation. The dividend yield of this index has been stable in recent years. The three-year average dividend yield (TTM) in 2021-23 is as high as 6.14%, which is higher than the comparable index of the same kind. The allocation value under the low interest rate environment is prominent. At present, the valuation of the index is deeply broken (PB is 0.68), which is more likely to benefit from the revaluation of state-owned enterprises.
Cathay Pacific Shanghai Stock Exchange SOE Bonus Trading Open Index Securities Investment Fund (510720. OF) is the only product linked to the Shanghai Stock Exchange SOE Bonus Index, which can achieve maximum monthly dividends. According to the fund contract, the product can receive monthly dividends at most. Cathay Pacific Fund is one of the first standardized fund management companies in China, with a variety of businesses and rich product lines.
Cathay Pacific Fund quantitative index business A-share industry/theme ETF scale first, the first industry ETF Taurus fund was born. Mr. Ma Yiwen is the fund manager of Cathay Pacific Shanghai SOE dividend ETF and has rich experience in ETF product management.
Risk tip: The research and analysis of fund products and indexes in this report are based on historical public information, which may cause certain analysis deviation due to changes in sample stocks of the index; In addition, the historical performance and performance of fund managers do not represent the future. The future performance of the index is affected by multiple factors such as the macro environment, market volatility, style conversion, etc., and there is a risk of volatility. This report does not involve the evaluation of securities investment funds, the recommendation of fund products, or the recommendation of any index sample stocks.
