This week, A-shares will experience a surge in IPO activity.
On the evening of June 7th, Hua Hong Semiconductor (1347.HK) announced that the China Securities Regulatory Commission (CSRC) has agreed to the registration of the company's Science and Technology Innovation Board (STAR Market) IPO. According to public reports, Hua Hong Semiconductor plans to raise 18 billion yuan to invest in projects related to the company's main business; on the evening of June 9th, the Shanghai Stock Exchange announced that Syngenta, which withdrew its materials from the STAR Market to focus on the main board, will have its IPO hearing on June 16th, with plans to raise 65 billion yuan.
In addition to these, China Huadian Corporation, which has been privatized and delisted from the Hong Kong stock market for over two years, plans to IPO its new energy sector, namely Huadian New Energy, with plans to raise 30 billion yuan, and the company will have its IPO hearing on June 15th.
Note that the total amount of funds raised through IPOs by just these three companies will exceed 100 billion yuan!
Moreover, each company will set a "historic record."
Hua Hong Semiconductor's plan to raise 18 billion yuan will not only make it the largest IPO of the year on the STAR Market but also the third-largest listed company since the market's inception, following SMIC (688981.SH) and BeiGene (688235.SH); Syngenta's plan to raise 65 billion yuan will make it the third-largest IPO ever, following the Agricultural Bank of China (601288.SH), PetroChina, and China Shenhua, and it will be the largest A-share IPO in nearly 13 years; Huadian New Energy's plan to raise 30 billion yuan will set a new record for fundraising in the A-share new energy sector and become the largest-scale IPO in history.
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Because of this, this week's IPOs are hailed as a gathering of mega companies. Of course, it also signals a significant draw on the A-share market!
So, what is the fundamental situation of these three companies?
Let's start with Hua Hong Semiconductor.Hua Hong Semiconductor is the world's largest foundry for smart card IC manufacturing and the largest domestic foundry for MCU manufacturing; in the functional device sector, Hua Hong Semiconductor ranks first globally in power device wafer foundry capacity, and it is also the only company with both 8-inch and 12-inch power device foundry capabilities.
In simple terms, Hua Hong Semiconductor is the second-largest chip foundry company in China, with SMIC (SMIC International) being the first.
In terms of performance, from 2020 to 2022, Hua Hong Semiconductor's operating income grew from 6.737 billion yuan to 16.786 billion yuan, and its net profit attributable to the parent company increased from 505 million yuan to 3.009 billion yuan. The gross margin improved from 17.6% to 35.59%, which can be considered quite impressive. Regarding equity, Hua Hong Semiconductor is a state-owned enterprise with a solid background, with the Shanghai Municipal State-owned Assets Supervision and Administration Commission as the actual controller, holding a 51.59% stake, and the equity is relatively concentrated.
Now, let's talk about Syngenta.
In 2017, China National Chemical Corporation spent $43 billion to acquire Swiss Syngenta; in 2020, China National Chemical Corporation began to reorganize with its agricultural chemical sector, naming it Sino Agrochemical Technology, which was later renamed Syngenta Group.
In terms of market share, Syngenta ranks first in the global crop protection industry and third in the seed industry, and it is the leader in both the Chinese crop protection and seed industries, making it a leader in China's modern agricultural service industry. In terms of performance, from 2020 to 2022, Syngenta's operating income grew from 158.779 billion yuan to 224.845 billion yuan, and its net profit increased from 4.539 billion yuan to 7.864 billion yuan.
From these two companies, we can summarize the following characteristics:
First, both are state-owned enterprises with a solid background. Second, one is a key player in the technology sector, and the other is a key player in the agricultural sector, both being giant enterprises. Third, both companies are directly related to the country's comprehensive competitiveness and the realization of Chinese-style modernization. Fourth, both companies have good operating performance.
What about Huadian New Energy?
Huadian New Energy's main business is wind power and solar power generation, with wind power accounting for more than 75%, making it one of the largest new energy companies in China.In terms of performance, from 2020 to 2022, Huadian New Energy's operating income grew from 16.447 billion yuan to 24.453 billion yuan, and its net profit increased from 4.418 billion yuan to 8.458 billion yuan. In terms of equity, Huadian New Energy is a subsidiary of China Huadian Corporation, with 100% indirect ownership by the State-owned Assets Supervision and Administration Commission (SASAC).
That is to say, similar to the previous two companies, Huadian New Energy is also a state-owned enterprise, a giant company in an important field, and an enterprise that is directly related to the advantages of Chinese-style modernization.
However, it must be said that, despite the company's solid fundamentals and development prospects, the fundraising scale of over a hundred billion yuan also has a very obvious blood-sucking effect on the stock market.
In 2022, A-share newly listed companies increased by 425, raising a total of 585.828 billion yuan. Although the number of IPO companies declined by nearly 100 compared to 2021, the amount of IPO funds has grown for four consecutive years. You may not have a direct feeling. In 2015, half of the time, the A-share turnover exceeded 1 trillion, but the IPO fundraising amount was 15.7639 billion yuan. That is to say, now, after 7 years, under the background of little change in A-share turnover, the amount of IPO funds has increased nearly three times.
According to PwC statistics, as of the end of May 2023, the Shanghai Stock Exchange, Shenzhen Stock Exchange, and New York Stock Exchange ranked the top three in global fundraising. Among them, the Shanghai Stock Exchange raised 89.5 billion yuan, the Shenzhen Stock Exchange raised 66.6 billion yuan, and the New York Stock Exchange raised 41.1 billion yuan. In terms of financing amount alone, China has surpassed the United States to become the global NO.1.
However, a cruel reality facing our retail investors is:
Although the number of A-shares is becoming more and more, the daily turnover has always remained around a trillion, how can the stock prices rise?