Securities Daily｜Accelerated Valuation Reshaping of Core Assets of Leading SSE-listed Companies Promises Bright Future

Edited and Translated from Securities Daily

Since the beginning of this year, driven by multiple factors such as favorable policies, improved funding, and enhanced company quality, the valuations of listed companies have seen some recovery. However, it is also worth noting that valuation enhancement is a long-term and continuous task. According to the current performance of SSE-listed companies, their valuations have not yet returned to a reasonable range. Currently, a series of policy windows have opened, providing a significant opportunity for the market to reassess the investment value of leading companies. These long-undervalued leading companies (with a market value of 50 billion yuan and above, the same below) are expected to become the driving force in this round of market value enhancement.

Based on the current situation, it appears that the valuation levels of leading SSE-listed companies are relatively low, and the market has not yet fully explored and recognized the value of these companies. From the perspective of structural distribution, the valuation of SSE-listed companies is inversely related to their size. The overall P/E ratio of leading SSE-listed companies is 11.40 (excluding negative values, the same below), which is lower than that of small and mid-cap companies with a market value below 50 billion yuan (P/E averaged at 22.15). Low valuations indicate that blue-chip value stocks and technology manufacturing companies have a higher cost-performance ratio. From an industry perspective, the leading SSE-listed companies are mainly distributed across high-quality large-cap blue-chip sectors such as banking, oil and petrochemicals, and transportation. There are also companies in strategic emerging industries like semiconductors, mechanical equipment, and pharmaceuticals. Among them, the traditional economy holds a dominant position in leading companies. The valuation center of the above-mentioned large-cap blue-chip stocks is relatively low compared to that of the emerging technology industry. To some extent, the market has underestimated the value of these companies as core assets of China.

Overall, leading SSE-listed companies are cost-effective and highly valuable for long-term allocation whether compared within the same industry, across different markets, or against historical records. Currently, the value investment concept is gradually gaining recognition in the market, leading a new direction in capital market valuation theories. Both the main market investors and the market ecosystem have undergone positive changes. The regulatory authorities have also introduced a series of capital market policies aimed at establishing and fostering a capital market ecosystem that encourages long-term investment. Apart from changes in market investment philosophies, the value reversion of leading companies is supported by multiple rationales, supported by both business performance and valuation recovery. In recent years, with the steady advancement of high-quality development, leading SSE-listed companies have been on a stable growth trajectory, demonstrating good individual profitability and generally increasing global competitiveness.

Excerpted from Securities Daily on December 29, 2024

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