Key investment points:
I. what stage has the current reform of state-owned enterprises reached?
The reform of state-owned enterprises has been developing in depth for more than 40 years. Since the three-year action plan for the implementation of state-owned enterprise reform was put forward by the national two sessions in 2020, it has entered the stage of full implementation.
II. What is the progress of the three-year action plan for the reform of state-owned enterprises (2020-2022)?
70% of the three-year action plan has been completed in 2021. In the decisive year of 2022, the three-year action of state-owned enterprise reform must be completed with high quality. In 2022, we should pay close attention to the “three remarkable achievements”, that is, we should achieve remarkable results in building a modern enterprise system with Chinese characteristics, promoting the optimization of industrial layout and improving the vitality and efficiency of enterprises.
III. why is the “spring market” optimistic about the main line of state-owned enterprise reform?
In 2022, the market value may become an important indicator of concern. Under the goal of “managing capital”, the reform demands of “preventing the loss of state-owned assets” and “improving the asset securitization rate of state-owned enterprises” have been reflected in the reform objectives of various regions. We believe that 2022, as the test year of the three-year action plan, will give relevant state-owned enterprises more motivation to actively manage market value and deliver company value.
In 2022, real estate, private enterprises and other entities may face certain downward pressure, and state-owned enterprises are relatively dominant. The real estate downturn is the biggest potential challenge for the macro economy next year. Under the condition of “real estate is not fried”, it is difficult to restart the real estate cycle. Moreover, the base in the first half of 2022 is relatively high, and the current enterprise model of mainstream private real estate with high debt, low cash flow and low profit margin is difficult to sustain. In this context, blue chips and state-owned enterprises are relatively dominant.
IV. can the reform of state-owned enterprises bring excess returns?
At the index level, the theme of state-owned enterprise reform has obvious excess returns. The “double hundred index” Rose 32.9% in 2021, significantly outperforming the Shanghai Composite Index (3.9%) and the Shanghai and Shenzhen 300 (- 6.2%). The “SOE reform index” increased by 21.1% in 2021, significantly outperforming the Shanghai index.
V. what are the excess returns of the three ways of state-owned enterprise reform?
(1) reorganization and Merger: the first notice date of reorganization information has a strong profit-making effect; After the completion of the reorganization, there is an overall excess return. The five companies reorganized in 2021 rose significantly on the day of the reorganization information notice, while the profit-making effect near the announcement date of the completion of the reorganization was not obvious. The “2020 restructuring index” Rose 17.0% in 2021, while the Shanghai and Shenzhen 300 fell 6.2% in the same period.
(2) introduction of war Investment: the excess return of state-owned enterprises and central enterprises introducing strategic investors is significant. After 2020, the number of state-owned enterprises and central enterprises that announced the introduction of war investment in A-Shares increased significantly from 14 in 2019 to 36 in 2020 and 26 in 2021. Build the “war investment index” with equal weight of 36 companies in 2020, which increased by 16.3% in 2021 and decreased by 6.2% in Shanghai and Shenzhen 300 in the same period.
(3) Equity Incentive: the implementation of equity incentive in state-owned enterprises and central enterprises can significantly improve their performance. Since 2018, the state-owned enterprises and central enterprises that announced the equity incentive plan (excluding those that failed to pass) have held the plan for two weeks after the announcement date, and the median annualized excess return relative to the Shanghai and Shenzhen 300 has reached 15.7%, but the excess return has fallen rapidly after one month. Therefore, for institutional investors, the operability of buying according to the announcement date of the plan is not large, and the focus on equity incentive mainly lies in the achievement after implementation.
Equity incentive will lock in the company’s profit / revenue growth in the next three years, and the introduction and completion of the scheme will significantly promote the company’s performance. For the central enterprises and state-owned enterprises that implemented equity incentive in 2018, the median growth rate of revenue and net profit in 2018 (19% / 22%) was significantly improved compared with 2017 (13% / 21%), and was significantly better than the average level of Shenwan secondary industry. Central enterprises and state-owned enterprises that implemented equity incentive in 2019 and 2020 also significantly improved their performance in subsequent years.
Vi. how to screen the investment targets of state-owned enterprise reform?
We maintain the characteristic judgment that the market in spring will be dominated by the repair of undervalued blue chips. Its leaders of central enterprises deserve special attention, focusing on the equity incentive made in 2020-2021 and benefiting from the high dividend (dividend index) central enterprises in the field of intensive development of central finance. In the past two years, the debt default rate of state-owned enterprises deviated from that of private enterprises. The debt default rate of state-owned enterprises was significantly lower than that of private enterprises, and the leaders of state-owned enterprises had a high dividend rate. Based on the logic of steady growth and undervalued value repair, state-owned enterprises are expected to take the lead in benefiting.
Three factor screening: (1) select state-owned enterprises and central enterprises that have completed restructuring and merger in 2021, introduced strategic investors, or implemented equity incentive scheme in 2022; (2) Screen high boom industries and racetracks. Select high prosperity tracks such as new energy infrastructure and power operation, military industry, medicine and new materials. (3) Select the enterprises with high valuation and cost performance, and select the targets with valuation lower than 50th according to the quantile of PE and Pb in recent ten years. According to the key industries of state-owned enterprise reform, 2022 state-owned enterprise reform targets are selected from bottom to top. (see the text for specific stocks)
Risk warning: the policy implementation is not as expected, and the historical income does not represent the future
