Many of the companies mentioned in Wu Jun's "Top of the Wave" have grasped the pulse of the times when the tide of the times is coming, and if they follow the trend of the times, they can achieve a career, and the same is true for investment. In the past more than ten years of consumption upgrading, the birth of Haitian, Moutai, Wuliangye and many other ten years of ten times larger, at the same time, with the acceleration of the urbanization process, real estate and related ** rose hugely, Oriental Yuhong's share price rose from more than 1 to a maximum of more than 60, but with the slowdown of urbanization, per capita housing area reached a high level in the world, real estate and related industry chain ** fell into a mess, and even some companies went bankrupt or on the verge of bankruptcy (I will write a special article about real estate).
At present, China is in a stage of economic development, in the context of this era, not only the real estate chain is sluggish, but even the valuation of traditional value investors preferred by consumption has dropped sharply, and the stock price has fallen from 390 to 80 China Duty-free, 13 times PE Yili, 10 times PE Yanghe.
Just when the Shanghai Composite Index fell to a new low in recent years, and the CSI 300 fell for more than 3 consecutive years, the stock prices of China Mobile, CNOOC and other companies were unusually strong, and even hit new highs.
1. The assessment and reform process, interpretation and investment opportunities of central state-owned enterprises
In the past, central and state-owned enterprises have always attached importance to revenue and asset scale, coupled with the long process of major decision-making, and the efficiency of operation and management is not high, giving people the first impression of "big". Because of the desire to become bigger and stronger,The profits of the operation often continue to be invested in expanding the scale, and even in order to do large-scale, they invest in many unrelated industries, and the enthusiasm for dividends is not high, which is very unfriendly to small and medium-sized shareholders。Even through a series of reform measures such as supply-side reform, asset restructuring, and mixed reform, good results have been achieved, but the overall idea of central and state-owned enterprises is still stuck in "becoming bigger".
Since 2020, the State-owned Assets Supervision and Administration Commission (SASAC) has begun to assess the operating indicators of state-owned enterprises, proposing "two profits and three rates", "two profits" refers to the total profit and net profit of enterprises, and "three rates" refers to the asset-liability ratio, operating income profit margin, and R&D investment intensity. In 2021, the "two profits and four rates" were proposed, which increased the labor productivity of all employees. Overall, it is still in the idea of becoming bigger and stronger, and there is no assessment of the quality of earnings and shareholder returns that are more related to the interests of investors.
The assessment in 2023 will be further upgraded to "one profit and five rates", replacing the profit indicator with ROE, replacing the operating income margin indicator with the operating cash ratio, and continuing to retain the asset-liability ratio, R&D investment intensity, and labor productivity indicators of all employees. At the same time, it is proposed to achieve the annual business goal of "one increase, one stability and four improvements", and "one increase" means that the growth rate of total profit should be higher than the national GDP growth rate; "Stable" means that the asset-liability ratio remains stable overall; The "four improvements" are to improve the return on net assets, the labor productivity of all employees, the intensity of R&D investment and the operating cash ratio.
Such a reform is more interesting:
1) Replace the profit indicator with ROE, and keep the asset-liability ratio stable overall, the original assessment of total profit and net profit, to make a big profit can be achieved by increasing leverage; Now it is necessary to keep the debt ratio stableUsing ROE as a measure allows the company to either continue to grow at a high quality or maintain the lowest possible net worth, which may be achieved by increasing dividends.
2) Replace the operating income margin index with the operating cash ratio, which is originally an assessment of the profit margin, that is, it can be achieved by increasing credit sales as much as possible; NowAssess the cash content of revenue and profit, and get cash income and profit, rather than a bunch of accounts receivable.
3) To achieve "one stability, one increase and four improvements", the enterprise will have toIncrease R&D investment, improve operating efficiency, and make profits grow qualitatively, which lays a solid foundation for the ability to pay cash dividends.
Combined with the SASAC in May 2022 to "encourage eligible listed companies to optimize shareholder returns through cash dividends and other ways", in March 2023, China Mobile and China Telecom issued an announcement that "the profits distributed in cash will be increased to more than 70% of the profits attributable to the company's shareholders in the current year", on January 24, the person in charge of the SASAC said that it would further study the inclusion of market value management in the performance appraisal of the heads of central enterprises, and on the 29th, it said that on the basis of the early pilot exploration and accumulation of experienceComprehensively promote the market value management assessment of listed companies. These measures will make central SOEs pay more attention to the stock price performance, investment returns and cash flow of listed companies, dividend yields are expected to be further improved, and the valuation system of central SOEs will be reshaped.
Take China Shenhua and China Mobile, which I have bought, as an example, China Shenhua was listed on the A-share market in October 2007 and had an average dividend rate of 37 in 20167%；From 2017 to 2022, the average dividend rate is 8505%, the dividend rate is significantly higher than the previous one.
China Mobile was listed on the Hong Kong stock market in October 1997, and began to pay dividends in 2002 to 38 in the first ten years of 201199%, with an average dividend rate of 53 in the second decade from 2012 to 202102%, with a dividend rate of 66 in 202299%, and in 2023, it promises to "increase the profit distributed in cash to more than 70% of the profit attributable to shareholders of the company in that year".
Second, the advantages of the listed companies of central state-owned enterprises
1. Seek certainty in uncertaintyIn the economic downturn, many industries are now facing difficulties and uncertainties, and their performance has declined sharply, but the profits of central state-owned enterprises represented by public institutions are relatively stable. In the face of such a macroeconomic background, more funds are more inclined to allocate assets to companies with stable profits and certain dividends. Most of the public utilities, resources and minerals assets operated by central enterprises and state-owned enterprises have strong anti-risk ability and are less affected by economic fluctuations.
2. Some central state-owned enterprises have low valuations in the pastFrom the perspective of investment, the indicators such as profit margin, cash flow, and operating efficiency are relatively general, coupled with the neglect of market value, inactive dividends, and many factors such as large shareholders' operations, the capital market votes with its feet, and the valuation is not high all year round, and the price-earnings ratio of many large state-owned enterprises and central enterprises is within 10 times.
Overall,At present, the sharp increase in the stock price of central state-owned enterprises is not just speculation, if the assessment mechanism can be put in place, the valuation system will be reshaped, with great investment opportunities.
In addition to China Shenhua and China Mobile, there are many satisfactionsCentral enterprises with high cash flow, more quasi-cash on the books, and no financial expenses in the current period, such as CNOOC, which is a resource-based company with cost advantages, Yangtze River Power with a good business model, Sinopec Guande, a port serving Sinopec oil products, and Guodian Power, a thermal power representative after the introduction of the capacity electricity price mechanismUnder the wave of all-round reform of central state-owned enterprises, there will be a good return on investment.
China Shenhua (SH601088) $; PetroChina (SH601857) $; China Mobile (SH600941) $