Translated by Andrew Vanburen from a Chinese-language piece in 21 CN
FOR MORE AND MORE PRC-listed firms, the myth of a blissful honeymoon is fast becoming a thing of the past.
Four new A-share listcos are already facing fines for indiscretions, and 21 have had loss-making first quarters.
Who are they and what’s going on with Chinese IPOs?
The inglorious 21 newcomers to Mainland China’s capital markets span the spectrum, from main board A-share enterprises to startups looking to raise capital on the two smaller listing platforms – the SME Board and the ChiNext, China’s answer to the Nasdaq.
Both of the secondary boards are based in the southern Chinese boomtown of Shenzhen.
As the first quarter reporting season approaches and investors brace for the deluge of financial results, it is quite likely that a fair (though investors will cry foul) number of listed firms will engage in the quick mask-change phenomenon usually reserved for Chinese operatic performances but also no stranger to the capital markets.
This schizophrenia, at least in terms of downside surprises for financial performance, is becoming more an established fabric of Mainland China-listed firms, especially the freshman class.
The number of rapid mask changers in the A-share markets is inching away from exception status and more towards the rule.
As of April 13, the number of newly-listed A-share firms already issuing first quarter profit warnings – including main boarders, SME listcos and ChiNext firms – stood at 48.
Among these unlucky 48, nearly half – 21 so far – have warned of significantly lower earnings for the first three months of this year.
So who are the culprits?
Dalian Insulator Group Co Ltd (SZA: 002606) and Wuhan Tianyu Info (SZA: 300205) are both swinging to a loss for the first quarter.
Shenzhen Jieshun Science and Tech (SZA: 002609) will once again report a net loss this quarter.
Meanwhile, the following A-share firms all saw January-March earnings drop by more than 50%: aluminum alloy play Suzhou Chunxing Precision (SZA: 002547), Wuhu Shunrong Auto Parts (SZA: 002555); circuit board maker Huizhou China Eagle Electronic Tech (SZA: 002579), vehicle braking systems manufacturer Zhejiang Vie (SZA: 002590), electric vehicle play BYD (SZA: 002594) in which Warren Buffett has a significant stake, television broadcast equipment maker Jiangsu Yitong High-tech (SZA: 300211), Anhui Anli Artificial Leather (SZA: 300218), Ingenic Semiconductor Co (SZA: 300223), Shandong Jincheng Pharma (SZA: 300233) and Shenzhen Refond Optoelectronics (SZA: 300241).
One can only hope that portfolios are not overstocked with the above counters.
That being said, there is still plenty of time for laggards to meet the first quarter reporting deadline.
But given the state of affairs so far, even the most upbeat investor can’t be too optimistic about the late-reporting A-share firms.
Meanwhile, some firms are facing punitive action from market regulators as they have shown an over 50% reduction in operating profit since listing last year.
They include two Shanghai-listed enterprises -- turbine maker Sinovel Wind Group (SHA: 601558) and Founder Securities (SHA: 601901).
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