A-shares see billion-yuan market cap ST company emerge; experts advise rational perspective

Currently, some ST companies in the A-share market have a market value exceeding many non-ST companies. Some ST companies have a market value of 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 are diverse and that the market should view the market value of ST companies rationally.

In the past, ordinary investors generally regarded ST companies (including ST and *ST cases) as synonymous with problematic companies. These companies typically have poor performance, many issues, and small market values. However, the current A-share market is breaking this stereotype, with a growing group of ST companies valued at over 10 billion yuan, and some exceeding 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, and *ST Chengchang, many of which are valued at over 20 billion yuan. Among them, *ST Songfa’s market value has exceeded 100 billion yuan, attracting widespread market attention.

Analyzing the current ST companies with a market value over 10 billion yuan reveals that the reasons for their ST status are varied, including unsatisfactory financial indicators, audit issues, false records, and more. From an industry perspective, these companies are widely distributed across various sectors. Notably, industries such as defense and military, pharmaceuticals, and biotechnology have relatively more companies. Some of these ST companies have relatively large assets, with substantial fixed assets or high revenue scales; others hold important industry positions with high strategic value in the supply chain; some are expected to undergo transformation, with the market holding high expectations for 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 size, companies that are not loss-making but are labeled as ST for non-financial reasons, and the use of restructuring concepts by capital to drive up stock prices and market value.

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 listed companies under risk warning (ST, *ST) compared to non-ST companies is an objective result of the refined valuation logic and differentiated pricing of individual targets in the A-share market. This breaks the traditional stereotype that “ST companies are low market value and low value.”

Chen Jianhua, a strategy analyst at Yintai Securities, said in an interview 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 “survival of the fittest, normalized delisting, and high-quality development.” He believes that with further improvement of trading systems, the scope of risk warning coverage has significantly expanded, which to some extent breaks the stereotype that all ST stocks are junk stocks. Therefore, it is not appropriate to judge their market value solely based on ST status. Some companies that are labeled as ST due to “other risk warnings” may still have considerable assets and operational capacity, maintaining a certain market value.

Regarding the core potential risks of ST companies, Yu Yang pointed out several aspects: First, the risk of forced delisting. Triggering financial, trading, regulatory, or major illegal delisting indicators could lead to termination of listing, posing extreme risks of significant principal loss for investors—this is the most core risk for ST companies. Second, financial and internal control risks. Many ST companies generally face issues such as losses, internal control failures, and disclosure violations, with significant uncertainties regarding financial authenticity and ongoing operations. Third, market liquidity risk. The overall trading activity in the sector is relatively low, and some targets are prone to continuous limit-downs or liquidity exhaustion, making them difficult to realize. Fourth, valuation bubble burst risk. Targets driven solely by hype without fundamental support have valuations that are seriously detached from reality, and after expectations fall short, stock prices may rapidly decline, leading to market value shrinkage. Fifth, shareholder equity dilution risk. The likelihood of bankruptcy restructuring increases, and operations such as debt-to-equity swaps and targeted issuance during restructuring could significantly dilute the interests of small and medium shareholders, risking an imbalance in profit distribution.

Chen Jianhua also noted that under the current risk warning system, it is undeniable that companies labeled as ST generally have obvious flaws in some aspects. As a result, the overall ST sector remains one of the highest-risk areas in the market. Investors are advised to participate rationally, avoid blindly following hype, and focus more on fundamentals, carefully assessing the company’s ongoing operations and compliance and governance improvements.

(Edited by: Zhang Yan)