Leading companies in the coal industry have more stable performance and are also constituent stocks of major indices, so the benefits may be more obvious. In addition, some undervalued and broken companies are also worth watching.
The Zhitong Finance App learned that CITIC Securities released a research report saying that on November 15, the Securities Regulatory Commission issued market value management guidelines, making special requirements for major index constituents to establish market value management systems and disclose valuation improvement plans for long-term broken companies. CITIC Securities believes that the disclosure of the “Guidelines” will support the dividend style, and the coal sector is expected to benefit. Leading companies in the coal industry have more stable performance and are also constituent stocks of major indices, so the benefits may be more obvious. In addition, some undervalued and broken companies are also worth watching.
The main views of CITIC Securities are as follows:
Market value management and supervision guidelines have been issued, and the investment value of listed companies is expected to increase.
According to the official website of the China Securities Regulatory Commission, on November 15, 2024, the Securities Regulatory Commission issued the “Supervisory Guidelines for Listed Companies No. 10 - Market Value Management” (“Guidelines”) to encourage listed companies tomergers and acquisitionsVarious methods such as restructuring, equity incentives, and cash dividends promote the increase in the investment value of listed companies, and make special requirements for formulating market value management systems for major index constituent stocks and disclosing valuation improvement plans for long-term broken companies. Furthermore, compared to the previous draft for comments, the provisions of the official draft added that if a listed company violates the guidelines, the Securities Regulatory Commission can take measures such as ordering corrections, regulatory discussions, and issuing warning letters. Major index constituent stocks have been added to the China Securities A500 Index and the GEM Mid-Cap 200 Index.
The coal sector is expected to benefit, and industry leaders may be the most obvious.
The “Guidelines” require listed companies to improve operating efficiency and profitability based on improving the quality of the company. We believe that the “Guidelines” focus more on the fundamentals of enterprises, and the dividend style is expected to be clearly supported. The coal sector, on the other hand, is part of the dividend style. Overall dividends are abundant, cash flow is strong, and it is expected to benefit in the short to medium to long term. Industry leaders in the coal sector may benefit more clearly because their performance is relatively stable, and they are also likely to be subject to the “Guidelines” requiring more major index constituents.
Nearly half of the coal companies have a dividend ratio of 5% or more, and some companies have broken current prices. A total of 6 sample companies are in the Shanghai and Shenzhen 300 and China Securities A500 indices.
Risk Factors:
Policies related to market value management guidelines fell short of expectations; macroeconomic fluctuations affected coal prices; and safety inspections were relaxed, leading to an increase in supply.
Investment Strategy:
Market value management guidelines for listed companies were released on November 15, 2024, which clearly supports the dividend style, and the coal sector as a whole is expected to benefit. We recommend: 1) leading companies with good performance and stable performance in the three-quarter thermal coal sector; 2) companies with high dividend rates and undervaluation in the coking coal sector. Additionally, we also recommend focusing on companies with relatively large breakdowns.
