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观点 | 再论优质央企的战略性配置价值

Opinion | Further Discussion on the Strategic Allocation Value of High Quality Central Enterprises

張憶東策略世界 ·  Mar 31, 2022 23:08

Source: Zhang Yidong Strategic World

Excerpts from the main points

I. since the beginning of the year, the central enterprises of Hong Kong stocks have outperformed the mainstream indexes of China and the United States.High-quality central enterprises in energy, telecom operators, finance, real estate and other fields led the rise.Logical reference (20220107 "A good opportunity for the allocation of Hong Kong stocks in High-quality Central Enterprises")

II. The short-term driving force for the revaluation of central enterprises-- the implementation of the policy of stabilizing growth at the 316 meeting of the Financial Committee

At present, the valuation of central enterprises is at the extremely undervalued level since the data are available, and the indicators such as PE, PB and dividend yield fully reflect pessimistic expectations.As of 20220330, the representative index of central enterprises, the Hang Seng Hong Kong Chinese Enterprises Index, had a price-to-earnings ratio of 6.4 and a price-to-book ratio of 0.80, both at an all-time low, and the dividend yield was 5.86%, an all-time high. The PE (TTM) of the central enterprises of Hong Kong stocks calculated by the holistic method is only 5.34.

2.2, confidence is more important than gold, and the weakening pressure on epidemic prevention and control will be the short-term driving force for the revaluation of central enterprises.Since February, there has been great pressure on the prevention and control of the epidemic in China, with weak infrastructure construction, housing sales and consumption, policies that are not as strong as market expectations, and low market sentiment. Follow-up observation of the epidemic prevention effect in Shanghai in early April, with the relief of the pressure of epidemic prevention and control, social and economic life will return to normal, and investor confidence will increase.

2.3. The follow-up driving force of the revaluation of central enterprises will be the implementation of the 316th meeting of the Financial Committee and the effectiveness of the policy of stabilizing growth.

  • First of all, when the steady growth policy is effective and effective, the central enterprises will benefit obviously, and the policy effect of stable growth will be reflected in the second quarter and the second half at the latest. 1) the performance of central enterprises related to the broad infrastructure industry chain directly benefits from stable growth. From the planning of major projects, the reserves of infrastructure projects are guaranteed, new urbanization, energy and new energy, new infrastructure, etc.; in addition, capital arrangement is the key to infrastructure. Fiscal expenditure is guaranteed and there is plenty of room for development. 2) in the steady growth stage, the "cash cow" central enterprises are more willing to increase dividends and release profits, and minority shareholders will benefit. In 2009, 2012, 2016 and 2020, when China's demand for stable growth was strong, the dividend rate of central enterprises in Hong Kong increased significantly.

  • Secondly, to resolve the risks of the real estate industry, high-quality central enterprises have significant financing advantages, which is the biggest beneficiary of this round of real estate supply-side reform and the main force of high-quality projects of mergers and acquisitions out of danger. On March 16, the special meeting of the Financial Committee of the State Council proposed that "it is necessary to study and put forward a strong and effective risk prevention and mitigation plan in a timely manner, and put forward supporting measures for the transformation to a new development model." The real estate industry should be regulated, but the starting point is to cure diseases and save people, to prevent and resolve run-on credit risks, and finally to achieve the goal of "supporting the commercial housing market to better meet the reasonable housing needs of property buyers" put forward by the Central Economic work Conference in December last year. Urban policies to promote the virtuous circle and healthy development of the real estate industry.

  • Third, in the stage of steady growth, the growth space of central enterprises, which is in line with the development direction of industrial transformation, has been further opened. In the stage of steady growth, the investment behavior of high-quality central enterprises across the industrial chain is often encouraged.

III. The medium-term driving force for the revaluation of central enterprises-- the reform of state-owned enterprises, mergers and acquisitions, and the expansion of new business.

  • 2022 marks the end of the three-year action on state-owned enterprise reform. By December 2021, the three-year action target has been completed by 70%; there is still 30% of the workload in 2022, and the reform is expected to be deepened.

  • They have sorted out the quantitative statements of reform objectives / results issued by 15 key central enterprises in the past year on the implementation of the "three-year Action Plan for State-owned Enterprise Reform". The focus is on the incentive mechanism, the introduction of external investors, mergers and acquisitions, increasing research and development, expanding new business, and so on.

Fourth, strategic suggestions: continue to emphasize the strategic allocation value of high-quality central enterprises.

4.1. Once again, it is still a good opportunity for high-quality central enterprises to embrace certainty and counter-attack in a world full of uncertainty.1) High-quality central enterprises have low valuation, safe performance, high dividends and high dividends, and have strong allocation advantages to defend and counterattack-- market falls, sustainable protection of high dividends, and resilience of low valuation. 2) in the medium-term uncertain investment environment, the investment style of embracing certainty and performance and valuation will be beneficial to the allocation of high-quality central enterprises. We still maintain that there is still a risk of medium-term adjustment in US stocks and even global stock markets, and the investment clock of US stocks will move towards a "quasi-stagflation period" in the second and third quarters.

4.2. Once again, under the opportunity of stable growth in the short term and revaluation in the medium term, high-quality state-owned enterprises with deep value, especially the Hong Kong stocks of high-quality central enterprises, are optimistic about the deep value.Be optimistic about the high-quality value stocks of central enterprises in the fields of real estate, finance, telecom operators, new energy operators, energy, building materials and so on. The text is listed in line with the current part of the proposed industry direction of some Hong Kong stock central enterprises and related subsidiaries, for reference, not recommended as individual stocks.

Risk hint: the global economic growth rate is declining; the monetary policy of China and the United States is not up to expectations; the risk of the big country game

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First, since the beginning of the year, the central enterprises of Hong Kong stocks have outperformed the mainstream indexes of China and the United States, and high-quality central enterprises in the fields of energy, telecom operators, finance, real estate and other fields have led the rise.

We released "A good opportunity for the allocation of Hong Kong stocks of High-quality Central Enterprises" on January 7 this year, taking a clear-cut stand that the central enterprises, known as the "eldest son of the Republic", are ushering in a new opportunity for revaluation in the Hong Kong stock market.

  • The norms are reliable: 1) Policy care, low regulatory risk. In the new era of common prosperity, regulatory policy orientation puts more emphasis on standardized development, and central enterprises are better able to adapt to changes in the policy environment. 2) the credit rating is high. Credit risk occurs frequently in 2021, but the advantages of convenient financing channels and low financing cost of central enterprises are highlighted.

  • High margin of safety: low valuation, corporate governance norms. Most of the central enterprises in Hong Kong stocks belong to deepvalue.

  • The proportion of foreign institutions is relatively low: there is another important reason why central enterprises can become a safe haven for the Hong Kong stock market in 2021: foreign selling pressure is relatively small in an environment of risk events such as Sell First then Ask.

In fact, the central enterprise representative index, the Hang Seng Hong Kong Chinese Enterprises Index (HSCCI), has become the brightest major index in Sino-US capital markets since the beginning of the year, rising 3.05 per cent from the beginning of the year to March 30 to outperform the mainstream index. Among them, from the beginning of the year to the end of February 11, it rose by 12.09%. After that, under the influence of the resonance fall of the global stock market under the conflict between Russia and Ukraine, and the fear of delisting of Chinese stocks, the central enterprises of Hong Kong stocks were also affected by the pond fish. However, after the 316 meeting of the Financial Committee to stabilize market confidence, Hong Kong stocks as a whole and central enterprises ushered in a period of obvious repair.

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Second, the short-term driving force for the revaluation of central enterprises-- 316Implementation of the policy of stabilizing growth at the Financial Committee meeting

2.1. at present, the valuation of central enterprises is at the extremely undervalued level since the data are available, and the indicators such as PE, PB and dividend yield fully reflect the pessimistic expectation of the market.

As a pillar of the national economy, the central enterprises of the "eldest son of the Republic" are significantly undervalued, showing the pessimistic expectations of China in the current market. As of 20220330, the Hang Seng Hong Kong Chinese Enterprises Index, the representative index of central enterprises, had a consensus forecast price-to-earnings ratio of 6.4 and a price-to-book ratio of 0.80, both at the lowest level since the data were available (2005). The consensus forecast dividend yield is 5.86%, which is the highest in history since the data were available.

The price-to-earnings ratio (TTM) of central enterprises in Hong Kong stocks calculated by the holistic method is only 5.34, the lowest since the data.

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2.2. Confidence is more important than gold, and the weakening pressure on epidemic prevention and control will be the short-term driving force for the revaluation of central enterprises.

Since February, China has been under great pressure to prevent and control the epidemic, with weak infrastructure construction, housing sales and consumption, policies that are not as strong as market expectations, and low market sentiment. Follow-up observation of the epidemic prevention effect in Shanghai in early April, with the relief of the pressure of epidemic prevention and control, social and economic life will return to normal, and investor confidence will increase.

  • Since the second half of 2021, the sales area of commercial housing across the country has continued to decline in the negative range compared with the same period last year. In the first two weeks of March 2022, commercial housing sales continued to decline in the negative range compared with the same period last year.

  • Judging from the current operating rate data of petroleum asphalt, the construction of infrastructure projects still lags behind the seasonality.

  • At present, the weakening of travel indicates that retail will continue to be under pressure.

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2.3. The follow-up driving force of the revaluation of central enterprises will be the implementation of the 316th meeting of the Financial Committee and the effectiveness of the policy of stabilizing growth.

First of all, at the stage when the steady growth policy is effective and effective, the central enterprises have benefited obviously.

On the one hand, the policy effect of steady growth will be reflected in the second half of the second quarter at the latest, and the performance of central enterprises will directly benefit from stable growth, first with the central enterprises related to the broad infrastructure industry chain, and then as China's overall economy stabilizes and recovers. Central enterprises in financial, real estate, energy, resources and other pillar industries of the national economy will achieve performance improvement.

  • From the perspective of major project planning, the reserve of infrastructure projects is guaranteed.According to the statistics of Xingzheng Construction team, on March 22, 2022, about 21 provinces and cities have disclosed plans related to major projects in 2022. In terms of annual planned investment, 21 provinces and cities have increased by 14.11% year on year in 2022. If calculated according to the provinces with comparable data, the growth rate of planned completion in 2022 is still 9.28%.

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  • From the perspective of major project planning, traditional railway public base and new infrastructure should be developed at the same time.The project reserve involves infrastructure (affordable housing, urban renewal as the focus), advanced manufacturing, strategic emerging industries, modern services, transportation, people's livelihood and social undertakings.

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  • Funding arrangement is the key to infrastructure construction, and the current fiscal expenditure has not yet made obvious efforts-from January to February, public revenue is still greater than expenditure, and subsequent fiscal expenditure is guaranteed and there is sufficient room for development.According to the calculation of Xingzheng Macro team, expenditure + cross-year carry-over funds + special debt under the deficit rate target, the growth rate of broad fiscal expenditure in 2022 is as high as 5.6%, and the scale of transfer payments from the central to local governments is nearly 9.8 trillion yuan, an increase of 18%, the largest increase in many years. In addition, the balance profit of more than 1 trillion yuan handed over by the people's Bank of China to the central finance is also an increase in the source of fiscal expenditure.

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On the other hand, in the stage of steady growth, "cash cow" central enterprises are more willing to increase dividends and release profits, and minority shareholders will benefit. In 2009, 2012, 2016 and 2020, when China's demand for stable growth was strong, the dividend rate of central enterprises in Hong Kong increased significantly.

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Secondly, to resolve the risks of the real estate industry, high-quality central enterprises have significant financing advantages, which is the biggest beneficiary of this round of real estate supply-side reform and the main force of high-quality projects of mergers and acquisitions out of danger.

From the perspective of policy orientation, the central government requires the virtuous circle and healthy development of real estate. In December last year, the Central Economic work Conference proposed to "support the commercial housing market to better meet the reasonable housing needs of property buyers and promote the virtuous circle and healthy development of the real estate industry as a result of urban policies." On March 16, the special meeting of the Financial Committee of the State Council proposed that "it is necessary to study and put forward a strong and effective risk prevention and mitigation plan in a timely manner, and put forward supporting measures for the transformation to a new development model."

So far this year, the policy has increased the demand for reasonable housing for home buyers. On March 4, a party and two sessions jointly issued the Circular on strengthening the Financial Services of New Citizens to encourage financial institutions to provide financial services to about 300 million new citizens. Since the beginning of this year, the down payment ratio of commercial housing and loan interest rates have been reduced one after another.

It is worth looking forward to the follow-up of mergers and acquisitions in the real estate industry, resolving risks and transforming to a new development model. High-quality central enterprises with credit rating advantages and financing advantages will usher in a period of development opportunities. (details of the relevant reports of the Xingzheng real estate team and the Xingzheng overseas real estate team)

  • On the one hand, the real estate industry to continue to regulate, the starting point is to save people, to prevent and resolve run-on credit risks, at the same time, it will not be "crying to feed" real estate demand big stimulus, the debt restructuring of out-of-danger real estate enterprises still need to be selected in accordance with the market-oriented way to prevent malicious evasion of debt.

  • On the other hand, it is necessary to encourage the development of "good kids" of supply-side reform, encourage high-quality central enterprises in line with the "three green lines" to merge and reorganize high-quality projects of real estate enterprises, and prevent the spread of credit risks in the whole industry. at the same time, encourage high-quality central enterprises to continue high-quality and healthy development.

Third, in the stage of steady growth, the growth space of central enterprises, which is in line with the development direction of industrial transformation, has been further opened. In the stage of steady growth, the investment behavior of high-quality central enterprises across the industrial chain is often encouraged.

Take the new energy power operators as an example, under the background of "double carbon", in the year of steady growth, power operators will be encouraged to make more effective investments to boost growth, which is more urgent than the normal economic environment-March 13. Xinhuanet released the report of the Ministry of Finance on the implementation of the central and local budgets in 2021 and the draft central and local budgets in 2022, which proposed to promote the solution of the funding gap of renewable energy power generation subsidies. Its investment behavior will drive the growth space to be further opened up.

III. The medium-term driving force for the revaluation of central enterprises-- the reform of state-owned enterprises, mergers and acquisitions, and the expansion of new business.

The 14th meeting of the Central Committee for comprehensively deepening Reform on June 30, 2020 examined and adopted the three-year Action Plan for the Reform of State-owned Enterprises (2020-2022), which emphasized "promoting the layout optimization and structural adjustment of the state-owned economy." enhance the competitiveness, innovation, control, influence and risk resistance of the state-owned economy. "

2022 marks the end of the three-year action on state-owned enterprise reform. By December 2021, the three-year action target has been completed by 70%; there is still 30% of the workload in 2022, and the reform is expected to be deepened.

We have sorted out the quantitative statements of reform objectives / results issued by 15 key central enterprises in the past year on the implementation of the "three-year Action Plan for State-owned Enterprise Reform". The focus is on the incentive mechanism, the introduction of external investors, mergers and acquisitions, increasing research and development, expanding new business, and so on.

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IV. Strategic suggestions: continue to emphasize the strategic allocation value of high-quality central enterprises

4.1. Once again, it is still a good opportunity for high-quality central enterprises to embrace certainty and counter-attack in a world full of uncertainty.

High-quality central enterprises have low valuation, performance security, high dividends and high dividends, strong defensive counterattack allocation advantages-market decline, sustainable protection of high dividends, rising, repair flexibility of low valuation.

First of all, based on undervalued, safe performance, sustainable high dividend and high dividend, most high-quality central enterprise stocks, especially high-quality central enterprise Hong Kong stocks are suitable for high dividend strategy.

The income of high dividend strategy comes from two parts, one is low valuation, the other is high dividend; our research shows that high dividend stocks can be defended against the trend, undervalued stocks can fight back at the bottom, and sustainable high dividend stocks have the attribute of "defensive counterattack". For more information on logic, please refer to the dividend yield factor "defensive counterattack" of the 20200429 "Hong Kong stock winner strategy".

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Capital style will be conducive to the configuration of high-quality central enterprises.We still maintain that there is still a risk of medium-term adjustment in US stocks and even global stock markets, and the investment clock of US stocks is gradually moving from an "overheated period" to a "quasi-stagflation period".

On the one hand, US stocks may be shrouded in stagflation investment clock in the second and third quarters, so be careful from the late second quarter to the third quarter.. Inflation in the United States is likely to remain relatively high in the second and third quarters, and the risk of continued Fed tightening should not be underestimated, and the current "soft landing" of the US economy expected by the Federal Reserve and the US stock market may not be easy to achieve.

  • At present, there is still a fluke in the US stock market and even the global market, believing that "the expectation of raising interest rates is already price in, and once the US economy weakens, the Federal Reserve will relax."The bitmap of the Fed's FOMC meeting in March showed that interest rates had been raised seven times in 2022. On the contrary, the market thought that the profit had been exhausted and began to rebound.

  • However, the risk of persistently high inflation in Europe and the United States this year cannot be ruled out. High inflation in the United States has been unanimously expected in the first half of the year, but in the second half of the year, under the influence of the war between Russia and Ukraine, the impact of the global epidemic on the supply chain, and the tight labor markets in Europe and the United States, especially if energy and food prices remain high, high inflation in Europe and the United States will continue. According to the estimates of Xingzheng Macro team, the overall platform of US core PCE in 2022 may be higher than 3%.

  • Do not rule out the possibility that the Fed will remain hawkish under high inflationary pressure until there is a real recession.

On the other hand, in the face of the uncertainty of the economic outlook, US stocks will pay more attention to the performance and valuation.

  • Expectations of a US recession in the next phase will continue to be a source of disruption for US and global stock markets, making investors more conservative. Historical experience shows that a flat or even upside-down yield curve often heralds a recession, with spreads on 10-2-year Treasuries narrowing rapidly, with an upside-down on March 29.

  • Under the cycle of raising interest rates, it is not easy for the economy to "soft landing". In the 13 cycles of raising interest rates by the Fed since 1954, only three of the 13 cycles that did not cause a recession were 1965-1966 and 1983-1984.

  • However, the probability of a real recession in the US economy in 2022 is small, and the resilience of the US economy and the profitability of high-quality companies in US stocks should not be underestimated. At present, it is still in the early stages of the Fed's interest rate hiking cycle, and high-frequency economic data in the United States still show that it is "overheated". The instant reversal of 10-2-year US debt does not mean a short-term recession. and Treasury spreads for 3 months to 10 years are not upside down.

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4.2. Once again, under the opportunity of stable growth in the short term and revaluation in the medium term, the high-quality state-owned enterprises with deep value, especially the high-quality central enterprises in Hong Kong, are optimistic about the deep value.

Be optimistic about the high-quality central enterprises in the fields of real estate, finance, telecom operators, new energy operators, energy, building materials and so on.

Real estate:Improved fundamentals of "true value stocks" ushered in a good opportunity for medium-and long-term allocation. With the strengthening of stable growth policies, the mitigation of real estate risks in the mainland, and the gradual return of the performance of the real estate sector to a reasonable range of stable growth, inner housing stocks will be further divided. I am more optimistic about the high-quality central real estate companies with the advantages of sound and solid fundamentals, excellent cash flow, high financial security, strong anti-risk ability, and falling financing costs.

Bank:On the one hand, the asset quality of banks continues to improve. In the 2018-2020 stage, three years of strict non-performing identification; by the first half of 2021, the comparison of overdue loans of more than 90 days with non-performing loans of listed banks has significantly dropped to 63.5%, indicating that the asset quality exposure of listed banks is more advanced; therefore, with the precise support of the current policy of tax reduction and fee reduction and the precise support of the main body frustrated by the epidemic, the pressure of provision for bad debt losses caused by the epidemic can be controlled. On the other hand, social integration is expected to pick up under steady growth, leading to a revaluation.

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Telecom operators: 1)In the new era of "Alliance of everything", the profit margin of the new operator is expected to be improved. Revenue side: 5G penetration leads to the increase of ARPU value (average income per paying user), cost side: a) the co-construction and sharing of 5G base stations by operators will ease the pressure of capital expenditure and depreciation; b) the digital transformation will lead to a decline in sales expenses. 2) there is an increase in non-traditional telecom services, and the emergence of 5G innovative applications in the 2B/2C market is expected to further open up the growth space for operators. According to GSMA 2019 statistics, the proportion of non-traditional telecom business revenue of Telecom, China Unicom and China Mobile is 17%, 13% and 9% respectively, significantly lower than the average level of 22% of other global communications giants.

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Building materials:Under the condition that funds and projects are guaranteed, we remain optimistic about infrastructure investment; under the requirements of ensuring the reasonable housing demand of residents, at least the completion chain under delivery also has a certain degree of certainty, and the market driven by the demand for construction and building materials with appropriate valuation is worth looking forward to.

Energy:In the medium to long term, under the background of "double carbon" and the increasing demand of the whole society, the supply of energy companies is limited, the pattern of supply and demand is improved, the fluctuation of some energy prices is reduced, and the stability of profits is relatively rised. therefore, the valuation center will move up in the medium term; in the short term, the certainty of high dividends in a year of steady growth is commendable. It is worth noting that in the short term, energy companies can not completely get rid of the sensitivity of their profits to price fluctuations, but in the case of high dividends and prices with safety cushions, if the market is volatile, it can be based on the valuation safety margin bargain configuration.

Power operators:In the medium and long term, the demand in the "double carbon" era has high certainty-on the one hand, the demand comes from the replacement of coal power by new energy generation, and on the other hand, it also comes from the incremental space of electricity consumption of the whole society under the trend of electrification and low carbon. In the short and medium term, after the negative factors of the early performance are gradually digested by the market, the distribution of new energy subsidies in the year of steady growth is expected to drive power operators to carry out a new round of investment, thus further opening up the growth space.

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