Recently, Spring Airlines released the "Corporate Value and Return Enhancement" Action Plan 2024, drawing a road map for continuously improving the quality of listed companies and enhancing investors' sense of return and gain.
So far, more than 1,000 companies listed on the Shanghai Stock Exchange (the SSE) have launched the "Corporate Value and Return Enhancement" Action Plan, covering a market value of about RMB 25 trillion, including 708 private enterprises and 298 central and state-owned enterprises. In addition, the coverage rate of the SSE 180 Index companies is nearly 80%.
On March 22 this year, the SSE issued an initiative to all companies listed on the SSE to encourage the special action of "Corporate Value and Return Enhancement". From the aspects of improving the quality of operation, increasing investors' returns, and accelerating the development of new quality productive forces, the SSE launched specific measures that are feasible, operable, and verifiable in a comprehensive, systematic, and targeted manner.
On the whole, the "people-oriented value" advocated by the special action is forming a consensus in the SSE. Through the beneficial practice of various measures taken by companies, it has effectively promoted high-quality development and investment value improvement, protected the legitimate rights and interests of investors, especially small and medium-sized investors, and promoted the healthy development of the capital market.
Significant phased achievements of the special action
The special action of "Corporate Value and Return Enhancement" advocated by the SSE cannot be simply seen as the implementation of repurchases, increase holdings, and dividend distribution. Its essence lies in harnessing the subjective initiative and main role of listed companies, employing multiple measures comprehensively to enhance the quality of listed companies and solidify the foundation for value creation.
Since the launch of the action plan, the companies listed on the SSE have effectively taken on the primary responsibility of enhancing their own investment value. Their operational capabilities, governance standards, return capabilities, and investment value have all seen significant improvements, marking a more pronounced trend toward high-quality development.
The performance of the Semi-annual Report in 2024 proves that the measures of "Corporate Value and Return Enhancement" have been implemented effectively. Among the companies listed on the SSE that have released the action plan, 158 have disclosed their semi-annual performance in 2024, of which 141 have achieved profitability, accounting for about 90%. Nearly 70% of them have achieved expected growth in performance, of which 29 have increased by more than 50%.
For example, in the first half of this year, China Mobile Limited and Shanghai Pudong Development Bank Co., Ltd., two blue-chip companies, achieved a net profit attributable to their parent company of RMB 80.2 billion and RMB 27 billion respectively. The net profit growth rates of Nexchip Semiconductor Corporation and Shanghai International Airport Co., Ltd. were 529% and 515% respectively. These companies focus on their core businesses, excel in their specialties, and operate solidly, becoming the "top students" of the real economy.
When observing the development of the companies listed on the SSE, it is essential to consider the "quantity" of performance growth, the "effectiveness" of transformation and the "quality" of development. ROE (return on equity) is an important indicator highly concerned by the capital market. According to the data of 2023, among the companies listed on the SSE that have released the special plan, 102 companies have an ROE greater than 15%, 456 companies have an ROE greater than 7%, and more than 400 companies have further increased their ROEs compared with those in 2022. Optimizing ROE reflects the steady improvement in the operational quality and efficiency of the companies listed on the SSE, which is crucial for enhancing sustained profitability and investment value.
Li Hong, Chairman of Willfar Information Technology Co., Ltd., stated that the company actively implemented measures such as expanding overseas markets and increasing income and saving on spending as outlined in the action plan. In the first half of 2024, the company achieved growth in both revenue and net profit. Overseas business revenue increased by approximately 93% year over year. The company achieved an ROE of 9.15%, a 15.53% year-over-year increase. Operational net cash flow, accounts receivable turnover days, and other operational efficiency indicators were all optimized.
Corporate value and return enhancement is a long-term and systematic special action. At the six-month mark after proposing the action plan, the companies listed on the SSE conducted regular assessments to evaluate the sustainability of the plan, its adaptability to long-term market and technological changes, and its continued ability to create value for shareholders and society. Currently, 57 companies have released semi-annual evaluation reports to explain the implementation of various measures and next steps for investors and enhance market confidence.
Based on the implementation progress and effect evaluation in the first half of 2024, Autel Intelligent Technology Corp., Ltd. updated the content of the company's action plan in combination with investors' opinions and suggestions. The company stated that enhancing the quality of company development and increasing investors' returns are not only essential for the growth of a listed company but also a responsibility that a listed company owes to its investors.
Enhance core competitiveness through capital market
Following the theme of promoting improved quality of listed companies, the special action suggests that listed companies should enhance quality and efficiency based on local conditions. This includes optimizing asset structure and business layout through methods like high-quality industry mergers and acquisitions to enhance core competitiveness. The State Council’s guidelines on strengthening regulation, forestalling risks, and promoting the high-quality development of the capital market also explicitly encourage listed companies to focus on their main businesses and enhance the quality of their development through the comprehensive use of methods such as M&A and restructuring, restructuring, and equity incentives, thereby driving listed companies to increase investment value.
Statistics show that more than 60 companies have actively responded to the "Corporate Value and Return Enhancement" Action Plan. By focusing on their main businesses, they have advanced external development opportunities aligned with companies' long-term strategic direction and optimizing business layout through capital operations such as M&A and restructuring.
In the action plan, China CSSC Holdings Limited stated that the company will leverage the M&A and restructuring capabilities of listed companies, along with financial and resource integration advantages, to promote innovation and collaborative development among upstream, midstream, and downstream enterprises, as well as large, medium, and small enterprises.
The SSE not only gathers industry "giants" but also hosts niche market champions. Through M&A and restructuring, optimal resource allocation has been achieved, continuously enhancing market competitiveness. So far this year, the main board of the SSE has seen 18 companies disclose M&A and restructuring plans. Based on the disclosed plans, M&A and restructuring serve as crucial means for listed companies to strengthen their chains, enhance their competitiveness, and increase investment value. For instance, Grandblue Environment acquired HKEX-listed company Canvest Environmental Protection in a privatization way, demonstrating strategic cooperation supported by the State-owned Assets Supervision and Administration Commission of the People's Government of Guangdong Province and State-owned Assets Supervision and Administration Commission of People's Government of Foshan Municipality in restructuring the emerging industry, aiming to become a key player in the environmental industry chain.
Industrial mergers and acquisitions that conform to national strategies and pursue scientific and technological innovation will be the main theme of M&A and restructuring. The companies listed on the STAR Market actively use innovative measures provided by the "STAR Market Eight Measures" to follow the trend and strive to improve the quality of their development.
Since the release of the "STAR Market Eight Measures" two months ago, STAR Market has seen 14 M&A and restructuring cases successfully implemented. Companies listed on the STAR Market such as United Nova Technology Co., Ltd., Suzhou Novosense Microelectronics Co., Ltd., and Jiangsu Aidea Pharmaceutical Co., Ltd. make full use of institutional tools to further optimize the allocation of enterprise resources, strengthen synergistic effects in products, technologies, customers, management and other aspects, and enhance their core competitiveness and intrinsic value.
Obvious transformation of industries to "new"
In the past year, "new quality productive forces" has become a popular term, with the development of new quality productive forces considered an intrinsic requirement and key focus for driving high-quality development.
The special action encourages the companies listed on the SSE to accelerate the development of new quality productive forces, increase R&D investment, speed up the transformation of innovation achievements, optimize talent incentive mechanisms, and actively enhance operational efficiency through technological breakthroughs and innovative allocation of production factors. Statistics show that approximately 330 companies listed on the SSE mentioned new quality productive forces in the "Corporate Value and Return Enhancement" Action Plan.
Ma Yunshuang, President of CRRC Corporation Limited, stated that conducting the special action of "Corporate Value and Return Enhancement" is beneficial for listed companies to expedite the development of new quality productive forces, enhance the value creation and investment value of listed companies, and effectively protect interests of investors.
"The spirit of the special action aligns naturally with the company's medium to long-term strategies," stated Ma Yunshuang. "In recent years, the company has actively expanded its business footprint and market presence in rail transit equipment and clean energy equipment sectors to enhance intrinsic value. By emphasizing innovation, we are accelerating the cultivation of new quality productive forces. In June of this year, the 'Fuxing High-speed Train' won the special prize of the National Science and Technology Progress Award."
According to the statistics, in the National Science and Technology Awards announced in June this year for the year 2023, 92 companies listed on SSE made the list, marking a record high over previous years. This includes a wide range of fields from infrastructure to high technology, showcasing the outstanding performance of the companies listed on the SSE in high technological thresholds, high innovation, and high application value areas.
Taking companies listed on the STAR Market as an example, the capital market guides various resources to converge toward sci-tech innovation, empowering the development of new quality productive forces. For example, in the first half of 2024, ACM Research (Shanghai), INC.'s R&D investment ratio reached 16.24%, surpassing the pledged R&D investment intensity of 15% in the action plan.
Nexchip Semiconductor Corporation has accelerated the transformation of R&D achievements. In the first half of 2024, the company obtained 151 new invention patents and 36 utility model patents. Additionally, its 55 nm mid-to-high-end BSI and stack-type CIS chip process platform achieved mass production, while the 40 nm high-voltage OLED display driver chip entered small-scale production. Ningbo Ronbay New Energy Technology Co., Ltd. has further enhanced its leading edge in industry technology. The new generation of ultra-high nickel materials has achieved a technological breakthrough, undergone testing with key customers, and is set to enter mass production soon.
Further consolidation of asset value hub
Many companies listed on the SSE, while introducing the "Corporate Value and Return Enhancement" Action Plan, have also implemented measures such as increased holdings, repurchases, and dividend distribution, following distinctive paths to realize value and align company value with intrinsic value.
Hongyuan Green Energy Co., Ltd. was the first to propose a cash dividend before the Spring Festival. The company has been distributing dividends annually since its listing, with a total cash dividend of RMB 1.717 billion from 2020 to 2022. In 2023, the company's cash dividend ratio reached 44%, with multiple dividend distributions.
Bank of Beijing Co., Ltd. has announced that since its listing in 2007, it has cumulatively distributed dividends totaling RMB 64.768 billion. In the future, the company will further enhance the stability, continuity, and predictability of dividend distribution by considering various factors comprehensively, promptly allowing investors to share in the results of value creation.
Many companies also convey confidence and stabilize expectations through means such as increased holdings and repurchases when disclosing their plans. Since 2024, the SSE has disclosed 388 new repurchase plans among companies that have been committed to the special action, with a repurchased amount of RMB 29.169 billion and an amount to be implemented of RMB 8.922 billion-RMB 23.877 billion; 208 new holdover plans have been disclosed, with an increased holding amount of RMB 6.237 billion and an amount to be implemented of RMB 2.459 billion-RMB 6.472 billion.
Deepening market communication and carrying out investor relations management are powerful means for listed companies to promote investment value. In this regard, the special action encourages continuous enrichment of investor communication methods, expansion of communication channels, and improvement of transparency. Visual forms such as presentation meetings, graphic brief reports, and short videos are adopted to interpret periodic reports and temporary announcements to improve the readability of announcements.
The companies listed on the SSE have stated in their action plans that they will continuously improve the information disclosure mechanism with investors' needs as the core, better transmit corporate value to the market and investors, and consolidate a long-term, stable, and trustworthy relationship between companies and investors. The performance of the annual report in 2023 indicates that the companies listed on the SSE have been fully covered.
Support the resilience of capital market valuation
The Central Financial Work Conference proposed to promote the entry of medium and long-term funds into the market, and establish the concepts of rational investment, value investment, and long-term investment. The "Corporate Value and Return Enhancement" Action Plan has released the companies' planning and confidence in high-quality development to the market and effectively boosted the stock price.
Statistics show that in 5 and 10 trading days after the announcement, the average cumulative increase deviation of company stock prices in the SSE relative to the market was about 2.43% and 4.08%, forming a positive cycle among enterprise development, stock price, and investors. Among them, Shang Gong Group Co., Ltd., Shengyi Electronics Co., Ltd., Heilongjiang InterChina Water Treatment Co., Ltd., and other companies increased by more than 100% after disclosure, and 34 companies increased by more than 30% after disclosure.
As a non-mandatory action, "Corporate Value and Return Enhancement", the companies listed on the SSE actively formulate plans, which means that the companies have clear planning and positioning for future development. Through the disclosure of the action plan, investors also have a three-dimensional understanding of the companies' long-term planning, R&D innovation, shareholder returns, standardized operation, and other aspects.
Meng Xiangjun, General Manager of Peric Special Gases Co., Ltd., said that the company's investment value has been gradually explored by the market, which further stimulated the endogenous power and sense of responsibility for the company's development.
Besides, the action plan is also a solemn and sincere statement of the company to market investors. At present, more than 1,000 companies listed on the SSE have issued the announcement of "Corporate Value and Return Enhancement", which represents that a number of listed groups with excellent management and high returns have been formed in the SSE. The improvement of the quality of listed companies has strongly supported the stability and overall improvement of the macroeconomic market and laid a solid foundation for the stable and healthy development of the capital market.
In terms of promoting listed companies to enhance investment value, the State Council’s guidelines on strengthening supervision, forestalling risks, and promoting high-quality development of the capital market proposes to formulate guidelines on market value management for listed companies and study to incorporate market value management into internal and external evaluation systems. About 84 companies listed on the SSE proposed to carry out market value management in their action plans.
For example, China Shenhua Energy Company Limited stressed the need to establish and improve its characteristic market value management system, organize a number of safeguard measures through special working groups, systematically carry out market value management, give full play to the role of market price discovery and resource allocation, promote the sustainable development of the company, and help fully realize the company's value and shareholders' interests in the capital market.
The above information is provided for reference purposes only and does not constitute investment advice.
