Medium and special estimates", that is, the valuation system with Chinese characteristics, began to attract the attention of the A** market in November 2022. This concept first appeared after Yi Huiman, chairman of the China Securities Regulatory Commission, proposed to "explore the establishment of a valuation system with Chinese characteristics" in November of the same year, and on December 2, the Shanghai Stock Exchange issued the "Three-year Action Plan for Comprehensive Services for Enterprises", which clearly mentioned that it was necessary to "serve and promote the valuation of central enterprises to return to a reasonable level", saying that "the revaluation of central state-owned enterprises is an important part of the valuation system with Chinese characteristics".
At the meeting of the State-owned Assets Supervision and Administration Commission (SASAC) on March 3, 2023, the mobilization and deployment of state-owned enterprises to carry out world-class enterprise value creation actions was carried out, although the term "valuation system with Chinese characteristics" was not directly mentioned, but the intention of the valuation of state-owned enterprises to benchmark against world-class enterprises was more obvious. Two days later, on March 5, the ** work report proposed to deepen the reform of state-owned assets and state-owned enterprises, improve the core competitiveness of state-owned enterprises, and further emphasized the implementation of the "valuation system with Chinese characteristics".
What is the valuation of central state-owned enterprises?
According to the analysis of Cinda**, the valuation of A-shares in the fields of consumption, utilities and information is more prominent, but the valuation is relatively low in basic industries such as communications, finance and energy that are resource-intensive and low value-added. From the perspective of the nature of enterprises, the valuation of state-owned enterprises has been lower than the overall market level for a long time, and the low valuation characteristics of central enterprises are particularly significant, accounting for only 40% of the overall market value.
As a stabilizer of the economy, central state-owned enterprises account for only 20% of China's state-owned enterprises (** local) among A-share listed companies, but their profits account for nearly 70% (calculated based on 22Q3 cumulative net profit). This makes the low valuation of central state-owned enterprises significant. When investors make investment decisions, valuation has become an important reference, so it is very necessary to correct the valuation of central state-owned enterprises.