A-shares Rare! A ST Company Worth Over 100 Billion Yuan Appears

Currently, in the A-share market, some ST companies have a market value exceeding many non-ST companies. Some ST companies have a market value over 10 billion yuan, and there are even ST companies with a market value exceeding 100 billion yuan. This phenomenon has attracted market attention.

Several experts interviewed by Securities Times believe that the reasons for this phenomenon are diverse and that the market should view the market value of ST companies rationally.

Rare in history: ST companies with a market value of 100 billion yuan appear in A-shares

In the minds of ordinary investors, ST companies (including ST and *ST types, the same below) are generally seen as synonymous with problematic companies. These companies usually have poor performance, many issues, and small market values. However, currently, a group of ST companies in A-shares are exceeding 10 billion yuan, and some even surpass 100 billion yuan.

Wind data shows that, as of now, there are 14 ST companies in the A-share market with a market value exceeding 10 billion yuan, including *ST Songfa, *ST Xin Chao, ST Renfu, *ST Chengchang, among others, with many exceeding 20 billion yuan. Among them, *ST Songfa’s market value has even surpassed 100 billion yuan, attracting widespread market attention. Its current market value even exceeds that of over 95% of non-ST companies.

It is worth noting that, like many ordinary listed companies, the stock prices of ST companies are also dynamically changing with market conditions and company fundamentals, so their market value is not fixed. From a fundamental perspective, *ST Songfa is expected to “remove the star and帽” (i.e., lift the risk warning). The company recently announced an application to revoke the risk warning on delisting.

Data shows that among the 14 latest ST companies with a market value over 10 billion yuan, as many as 11 companies will have a market value below 10 billion yuan by the end of 2024, and 5 companies by the end of 2025. On the other hand, many companies that once had a market value exceeding 10 billion yuan have seen their stock prices gradually decline after being subject to risk warnings, causing their market value to fall below 10 billion yuan. There have been cases in the past where companies with a market value exceeding 10 billion or even 100 billion yuan were subject to risk warnings and eventually delisted.

Characteristics of high-market-value ST companies

Analyzing the current ST companies with a market value exceeding 10 billion yuan, it can be found that the reasons for being ST are diverse, including poor financial indicators, audit issues, false records, etc. From an industry distribution perspective, these companies are widely spread across various sectors, with relatively more in defense military industry, pharmaceuticals, and biotech. Some of these ST companies have relatively large assets, with substantial fixed assets or high revenue scales; some hold important industry positions and have high strategic value in the supply chain; others have strong expectations for transformation, with the market highly anticipating restructuring, transformation, or business improvements.

Senior market analyst Gui Haoming pointed out that the high market value of some ST companies is due to multiple reasons, including their large scale, companies that are not actually losing money but are labeled ST for non-financial reasons, and the fact that they are favored by capital, with their stock prices driven up through restructuring concepts and other factors.

Yu Yang, Deputy Director of the Financial Development and State-Owned Enterprise Research Institute at China (Shenzhen) Comprehensive Development Research Institute and a registered international investment analyst, told Securities Times that the high market value of some companies under risk warning (ST, *ST) compared to non-ST companies is an objective result of the refined differentiation of valuation logic and individual valuation in the A-share market. It breaks the traditional stereotype that “ST companies are equal to low market value and low value.” The main reasons include:

1. Substantial improvement in the company’s fundamentals. Some companies are only ST due to short-term compliance issues or temporary operational fluctuations, not because their main business has collapsed. If they achieve performance turnaround, restore core business profitability, and upgrade their main business, the market will price them based on their true operational value, pushing their market value back to a reasonable level.

2. Capital operation and bailout expectations give rise to valuation premiums. Some ST companies are supported by state-owned capital or industrial capital, which through debt restructuring, asset injection, and business integration, help them escape difficulties. The market assigns a certainty premium to their “turnaround,” directly boosting their market value.

3. Transaction structure and capital behavior drive valuation. The ST sector is limited by institutional holdings, mainly driven by retail and speculative funds. Coupled with small market caps and high share concentration, they are more susceptible to positive catalysts, leading to temporary increases in market value. Meanwhile, the label of “ST” is gradually weakening in market perception.

4. Sector and asset attributes support valuation. A few ST companies fit high-end manufacturing, strategic emerging industries, or possess core assets and scarce business attributes. Based on sector valuation systems, the market prices them higher, making their market value surpass that of traditional non-ST targets.

In summary, this phenomenon reflects that A-share valuation is becoming more rational and personalized. The market value is not necessarily linked to the ST label, but high-market-value ST companies are only examples within the sector and do not represent the overall characteristics of the ST sector.

Yintai Securities strategist Chen Jianhua told Securities Times that since the establishment of the risk warning system in the A-share market, it has undergone multiple major revisions. The regulatory approach has shifted from simply “protecting investors” to “eliminating the weak, normalizing delistings, and promoting high-quality development.” He believes that with further improvement of trading systems, the scope of risk warnings in the A-share market has significantly expanded, which in some ways breaks the stereotype that ST stocks are junk stocks. Therefore, he thinks it is inappropriate to judge market value solely based on the ST label. Some companies under “other risk warnings” may still have certain competitive advantages in assets and ongoing operations, so their market value can still be substantial.

Rational view on the market value of ST companies

Experts generally agree that a rational view of the market value and investment potential of ST companies is necessary.

Yu Yang believes that the investment value of ST companies includes several aspects:

1. Valuation recovery from turnaround. For targets with stable main businesses but temporarily labeled ST due to short-term issues, once rectified and帽 (risk warning lifted), the risk discount will disappear, and valuation will return to normal industry levels, offering significant recovery gains.

2. Institutional benefits from capital operations. Relying on bankruptcy restructuring, asset reorganization, and state-owned enterprise bailout systems, high-quality assets injection and debt forgiveness can lead to fundamental operational improvements, allowing investors to share the benefits of restructuring.

3. Opportunities from mispricing. After being ST, passive reduction of holdings by institutions can cause stock prices to oversell. If the company’s fundamentals haven’t substantially worsened, this can create a temporary valuation gap.

4. High elasticity of trading. Overall, ST companies tend to have lower market caps and higher stock price volatility. Under favorable conditions like operational improvement and capital operations, they have high price elasticity, suitable for professional investors to speculate.

Regarding the core potential risks of ST companies, Yu Yang pointed out several aspects:

1. Forced delisting risk. Triggering delisting indicators related to finance, transactions, regulations, or major violations will lead to delisting, posing extreme risk of principal loss, which is the most core risk for ST companies.

2. Financial and internal control risks. Many ST companies have issues such as losses, internal control failures, and disclosure violations, with significant uncertainties about financial authenticity and ongoing viability.

3. Market liquidity risk. The overall trading activity of the sector is low, and some targets may experience continuous limit-downs or liquidity exhaustion, making it difficult to realize assets.

4. Valuation bubble burst risk. Targets driven solely by hype without fundamental support may see valuations deviate from reality, leading to rapid price corrections and significant market value reductions once expectations fall.

5. Shareholder equity dilution risk. The likelihood of bankruptcy restructuring increases, and operations like debt-to-equity swaps and private placements during restructuring can significantly dilute small shareholders’ interests, risking imbalance in profit distribution.

Yu Yang reminds that the ST sector is a high-risk investment area. Its investment value only exists in cases of substantial fundamental improvement, high certainty in capital operations, and core competitive advantages in main businesses. Ordinary investors should fully recognize the risk attributes, adhere to cautious principles, strictly control positions and risk exposure, and avoid blindly participating.

Chen Jianhua also pointed out that under the current risk warning system, it is clear that companies labeled ST have significant flaws in some aspects. Therefore, the overall ST sector remains one of the highest-risk areas in the market. He recommends that investors participate rationally, avoid blindly following trends, and focus more on fundamentals, carefully assessing the company’s ongoing operations, compliance, and comprehensive rectification to truly grasp the investment opportunities brought by fundamental improvements in ST-listed companies.