Securities Times｜SEE Main Board's Investment Prospects Brighten with 69 Companies Anticipating Positive Mid-Year Performances

Translated from Securities Times

As of July 8 at 19:00, upward momentum surrounds the SSE Main Board as 69 companies unveil optimistic mid-year expectations. Among these companies, Zijin Mining Group Company Limited projects a net profit range of RMB 14.55 billion to 15.45 billion for the first half of 2024, marking a substantial 41% to 50% increase year-on-year.

While focusing on high-quality development in core sectors, SSE Main Board companies are actively taking measures such as buybacks and dividends to give back to investors. According to statistics, as of June 30, approximately 832 SSE-listed companies have disclosed related programs for "improving quality and efficiency and increasing returns," including 201 state-owned enterprises (SOE) and 631 private enterprises, with a total market value of RMB 19.75 trillion. These programs include increasing dividend payouts, enhancing return on investment (ROI), and increasing investments in strategic emerging sectors.

2024 is set to be the inaugural year of market value management for SOEs. In January this year, the State-owned Assets Supervision and Administration Commission of the State Council proposed the inclusion of market value management effectiveness in the performance evaluation of leaders of central SOEs. It also urged the timely use of various capital tools like repurchases, dividends, and increases in shareholding to achieve a mutual rise in company value and investor returns. At the Lujiazui Forum on June 19, Wu Qing, Chairman of the China Securities Regulatory Commission, underscored the importance of actively encouraging listed companies to enhance their investment value.

High dividends are considered the cornerstone of valuations for SSE Main Board companies. Statistics indicate that over a thousand companies listed on the SSE Main Board have implemented dividends for three consecutive years, with nearly 1,100 of them distributing dividends exceeding 30%. Additionally, over 200 companies have maintained cash dividend payout ratios above 40% for three consecutive years, while more than 120 companies, including China World Trade Center Co., Ltd. and Shanghai Lujiazui Finance & Trade Zone Development Co., Ltd., have sustained cash dividend payout ratios exceeding 50% for three consecutive years.

As of June 30, over 362 companies listed on the SSE Main Board have dividend yields surpassing 3%, an increase of 157 companies compared to the end of 2020. Additionally, 138 companies have dividend yields exceeding 5%, marking an increase of 67 companies since the end of 2020. This steady growth highlights the rising number of high dividend-yield companies.

Since 2023, a stronger dividend culture has taken shape on the SSE Main Board, further solidifying the position of large-cap and blue-chip companies as pillars of dividend performance. China World Trade Center Co., Ltd. has consistently distributed cash dividends for 25 consecutive years since its listing in 1999, boasting an average annual dividend yield exceeding 50%, which is significantly higher than the average level in the A-share market. In 2023, the company announced a special cash dividend of RMB 1.3 per share, with an impressive dividend payout ratio of 104%, which has already been executed. In terms of dividend yield, the company consistently maintains a rate above 4%.

China Yangtze Power Co., Ltd., the world's largest hydropower company, has distributed cumulative cash dividends exceeding RMB 180 billion since its listing in 2003, with a dividend rate of 64.53%. Over the past decade, its market value has increased by over RMB 500 billion. In 2023, the company once again distributed a significant amount in dividends, proposing a distribution of RMB 8.2 per 10 shares totaling RMB 20.064 billion and accounting for 73.66% of its net profit.

Moreover, China Yangtze Power Co., Ltd. has included provisions in its articles of association for "mid-term profit distribution," creating institutional conditions for multiple dividend distributions within the year. Several companies, including the “Big Four” banks, have also approved arrangements for mid-term profit distribution in 2024, setting clear market expectations.

Developing towards high ROI has become a key tool for increasing valuations for SSE Main Board companies. In addition to rewarding investors with cash dividends, SSE Main Board companies aim to enhance investment efficiency to effectively boost their investment values.

With the key performance indicators for central SOEs shifting from "two profits and four ratios" to "one profit and five ratios" in 2023 with the addition of ROE, the enhancement of value creation capabilities for central SOEs listed on the SSE Main Board has started to show results. According to statistics, 107 central SOEs have seen an increase in ROE compared to 2020, with CNOOC Limited and Aluminum Corporation of China Limited increasing their ROEs by 13.94 and 10.34 percentage points respectively compared to 2020.

Looking at the performance forecasts for the first half of this year, many central SOEs have presented outstanding results. For instance, as the shipping market rebounds and the transportation sector shows clear signs of recovery, Guangzhou Baiyun International Airport Company Limited is projected to achieve a net profit attributable to its parent company of RMB 404 million to RMB 494 million in the first half of 2024, reflecting a year-on-year increase of 155.67% to 212.48%. In the domain of public utilities, Beijing Jingneng Power Co., Ltd. is anticipated to generate a net profit attributable to its parent company ranging from RMB 869 million to RMB 959 million, marking a year-on-year rise of 135.90% to 160.33%. Similarly, Guangxi Guiguan Electric Power Co., Ltd. is expected to report a net profit attributable to its parent company of RMB 1.387 billion to RMB 1.487 billion in the first half of the year, representing a year-on-year growth of 51.93% to 62.88%.

In addition, strategic investment and capital operations in emerging sectors have also become a new focus for value improvement for companies listed on the SSE Main Board. Traditional sectors are actively fostering innovation and modernization, advancing towards new quality productive forces. Statistics show that the compound annual growth rate of R&D investment over the past three years has been 20% in transportation, 13% in steel, and 21% in public utilities. Furthermore, average R&D investments in architectural decoration, petroleum and petrochemical, non-ferrous metals, and several other sectors have surpassed RMB 500 million respectively.

Notably, as part of the three-year action plan for SOEs, central and other SOEs have proactively advanced scientific and technological R&D and innovation. They have also leveraged capital market instruments, such as mergers and acquisitions, to enhance quality and efficiency and to cultivate new quality productive forces.

Guangzhou Automobile Group (GAC) is resolutely progressing its intelligence and electrification initiatives. On April 25, GAC Motor announced a strategic partnership with Huawei, concentrating on advanced research and development in intelligent chassis and human-machine interaction. The company plans to introduce a new flagship model in 2025, aimed at accelerating the scope and pace of its intelligent offerings. Meanwhile, GAC Aion is advancing the development of mapless intelligent driving. The second generation of the AION V will feature mapless intelligent driving capabilities, offer an impressive range of 750 km, and enable a rapid 15-minute recharge for an additional 370 km of driving. Moreover, GAC Toyota and GAC Honda are consistently accelerating their shift toward intelligent connected new energy vehicles, increasing the proportion of electric vehicles in their lineups.

Avicopter Plc. achieved a comprehensive listing of the entire AVIC helicopter business by acquiring assets, thereby expanding its development opportunities in dual-use helicopter sectors. Similarly, China Shipbuilding Industry Group Power Co., Ltd. solidified its market-leading position by integrating the Group's diesel engine power business through strategic mergers and acquisitions.

The above information is provided for reference purposes only and does not constitute investment advice.