Against the backdrop of intensifying international turmoil and sluggish world economic recovery, China's economy has shown strong resilience and great potential, and a series of measures to promote the development and growth of the private economy have also been implemented since last year. With the support of the national policy, one of them, Fosun International (00656), a large private enterprise with national influence and business all over the world, has recently received frequent good news.
In addition to the solid results announced at the end of March, Fosun International's recently announced sale of Belgian insurance company Ageas and the listing of Luz Saúde, a leading private healthcare services provider in Portugal, continues to highlight the company's well-descriptive business strategy. In addition, the recent strategic cooperation with the Shenzhen Municipal Government is also regarded by the market as a "win-win" case led by technological innovation and globalization, which is worthy of investors' confidence in Fosun International's future growth.
The performance is stable and solid, and the fundamentals are good
Specifically, performance has always been the best "touchstone" in the secondary market, and the 2023 financial report has undoubtedly become the best verification that Fosun International is deeply engaged in industrial operations, financially stable, and worthy of long-term holding by investors. In terms of 2023 results, Fosun achieved total revenue of RMB198.2 billion during the year, representing a year-on-year increase of 8.6%; The net profit attributable to the parent company was 1.38 billion yuan, a significant increase year-on-year. The total revenue of the four core subsidiaries Yuyuan Co., Ltd., Fosun Pharma, Fosun Portugal Insurance and Fosun Tourism reached 142.69 billion yuan, an increase of 8% year-on-year, accounting for 72% of the total revenue.
In 2023, in addition to the resilient growth of performance fundamentals in the face of market adversity, what is even more rare is that as a listed company that can maintain a stable dividend payout ratio, it has maintained a payout ratio of 20% for many years, and has continued to give back to shareholders in the past 17 years since its listing, with a cumulative cash dividend of HK$25.6 billion. By the end of 2023, Fosun's adjusted NAV will be HK$19 per share, which is a good discount from the current closing stock price of HK$4.27 (April 23).
Balance of investment and withdrawal, value release
In a 2024 letter to shareholders, Guo Guangchang, Chairman of Fosun International, said: "Fosun's industrial operation strategy has gradually changed from 'prospecting' and 'prospecting' in various industries around the world to 'deep mining' and 'mining well'. ”
Zhitong Finance and Economics believes that this goal is also reflected in Fosun's emphasis in recent years to maintain strategic focus and strictly implement the advance and retreat of assets. On the one hand, it will withdraw some non-core and non-strategic assets in an orderly manner, and on the other hand, it will actively promote the listing of its high-quality assets to release value. Fosun's "orderly advance and retreat" to achieve a "balance between investment and withdrawal" should to a large extent make the Group's financial position healthier, and also provide reserves for its "deep mining" focusing on its core industries, further consolidating the puzzle of Fosun's core industries.
Taking the recent market attention on Fosun's sale of Belgian insurance company Ageas and the listing of Luz Saúde, a leading private healthcare service provider in Portugal, as an example, Fosun's successful business strategy of balancing investment and exit and advancing and retreating in an orderly manner fully demonstrates Fosun's successful business strategy of balancing investment and exit. On April 10, Fosun's Portuguese insurance company Fidelidade announced that Luz Saúde, in which it is a shareholder, has informed the market of its public offering plan to raise about 100 million euros of capital through the issuance of new shares to domestic and foreign institutional investors, and will apply for listing on Euronext Lisbon. On April 14, Fosun International announced the sale of its stake in Ageas, a Belgian insurance company, to BNP Paribas, accounting for no more than 8.19% of the total issued shares of the target company.
From the perspective of Fosun's strategic positioning as an innovation-driven global household consumption industry group, one of the important goals of Fosun's focus on the main track of the household consumption industry is to achieve predictable and stable profitability by improving its operational capabilities. Fosun will receive a transaction consideration of approximately EUR 626 million to EUR 670 million for the sale of its shares in Ageas and is expected to achieve an unaudited profit before tax of approximately EUR 60 million to EUR 65 million, which will not only help the Group streamline and optimize its investment portfolio, but also improve its financial performance and further strengthen its capital base.
In addition to adopting an appropriate exit mechanism, Fosun has been actively promoting its member companies to connect with the capital market, enhancing the liquidity of overall assets and releasing the investment value of enterprises through IPOs and other means. With regard to the listing of Luz Saúde, Fosun believes that this move will not only improve Luz Saúde's corporate governance level, contribute to its continuous expansion and long-term growth in the healthcare sector, but also fulfill its commitments in the strategic plan of the Portuguese healthcare ecosystem through the synergies between Luz Saúde and Fidelidade in the future.
"Embrace the light and the heavy" to enhance the operational capacity
After more than 30 years of development, Fosun has accumulated profound operational capabilities, through real estate securitization and bulk asset exit, and at the same time promoting industrial funds to help the industry grow and achieve remarkable results in asset-light operation.
Taking Fosun Tourism as an example, in 2023, Fosun Tourism gave full play to its operational strengths, and its global performance fully recovered, with annual revenue reaching RMB17.15 billion, a year-on-year increase of 24.5%, and profit attributable to shareholders of RMB310 million, achieving a turnaround. In 2023, it will continue to optimize its revenue structure, of which tourism operations will contribute more than 93%. With the steady improvement of its asset-light operation capabilities, Fosun Tourism's new product lines continue to land, and it is expected to seize the opportunity of opening up a new track of urban vacations in the Chinese market. In 2023, Club Med will open two new Mediterranean Ark Resorts.
Guo Guangchang pointed out at this year's results conference that Fosun will pay more attention to the ability of asset-light operation in the future, seize the opportunity of asset-light operation with the strategy of "supporting light and combining weight", and will continue to expand the "circle of friends", strengthen in-depth cooperation with local governments, state-owned enterprise platforms and more partners, and enhance operational capabilities through complementary advantages and win-win cooperation.
The more flexible and efficient asset-light operation capability is expected to enable Fosun to continue to broaden its growth boundaries, lay a solid foundation for the company to go through a longer cycle, and make it possible for its performance to climb in multiple points.
The "deep mining" strategy focuses on the two core growth engines of "globalization" and "innovation".
In 2023, Fosun will continue to focus on "deep mining", deepen its global operations, and have an in-depth industrial layout in more than 35 countries and regions. In 2023, Fosun's overseas revenue will account for 45%, with a ten-year compound growth rate of 55%. For Fosun, globalization is not only a "two-way rush" between the world and China, but also extends to the endogenous development of ecological enterprises at home and abroad, encouraging ecological enterprises to actively expand into markets outside their home country in their respective fields.
Zhitong Financial APP learned that Hanqu You, independently developed and produced by Henlius, Fosun Pharma's biopharmaceutical platform, has been approved for marketing in more than 40 countries and regions, becoming the domestic biosimilar with the largest number of approved countries and regions. Its first innovative H drug, Hansizhuang, was approved for marketing in Indonesia, becoming the first domestic anti-PD-1 monoclonal antibody successfully marketed in Southeast Asian countries. Club Med, a subsidiary of Fostar Tourism, has a global marketing business in more than 40 countries and regions on six continents and operates 68 resorts. The Yu Garden Lantern Festival, a national intangible cultural heritage project and held for 29 consecutive years, went to sea for the first time, attracting nearly 200,000 local tourists in Paris. Fosun Portugal continued to expand its presence in South America, Africa and other foreign markets, with a total premium of 1.70 billion euros for its international business, up 10.6% year-on-year.
Relying on its long-term accumulation of scientific and technological innovation capabilities, Fosun's "world's first" and "China's first" achievements continue to emerge. Argesun, the second-generation artesunate for injection for the treatment of malaria, independently developed by Fosun Pharma, has become the first "one-step artesunate injection" prequalified by the World Health Organization. Han Qu You, independently developed and produced by Henlius, is the first monoclonal antibody biosimilar approved in China and Europe, and has been approved for marketing in more than 40 countries and regions. The self-developed Hansizhuang is the world's first targeted PD-1 monoclonal antibody approved for the first-line treatment of extensive-stage small cell lung cancer. Fosun Kite's Yikaida is the first CAR-T cell therapy product approved for marketing in China, bringing more treatment options and hope for a cure for lymphoma patients in China. Intuitive Fosun's domestically produced da Vinci Xi surgical system was successfully approved by the State Food and Drug Administration, and was put into production and marketed, realizing "Made in China, Joint R&D, and Global Sales".
In 2024, Fosun will continue to focus on its main business, continuously improve its innovation capabilities, and be recognized at a higher level. On April 12, the Shenzhen Municipal Government and Fosun signed a strategic cooperation framework agreement to further strengthen cooperation in the fields of biomedicine, culture, sports and tourism, and fashion consumption by gathering high-quality innovation resources. In March, Fosun Pharma, together with Shenzhen Guidance Fund and other seven-party investors, planned to jointly invest in the establishment of a RMB5 billion biomedical industry fund, and all the funds raised will be invested in the fields of biomedicine, cells and genes. Rehabilitation Capital, a subsidiary of Fosun Pharma, won the bid through the public selection of Shenzhen and exclusively managed the fund.
It is not difficult to see that relying on its long-term accumulated innovation and global operation capabilities, Fosun is building a moat of competitiveness in a number of advantageous industries such as health, tourism and culture, ensuring stable profit growth in the future, and promoting the high-quality, sustainable and long-term development of the Group.
The financial situation is stable, and the major banks are optimistic about the value of Fosun
In the face of the complex and volatile global economic situation, Fosun has taken proactive measures to continuously optimize its capital and asset structure, broaden financing channels, reduce the scale of debt, and provide solid support for the implementation of the "deep mining" strategy.
In 2023, Fosun will continue to optimize its debt structure, emphasizing the importance of debt reduction and deleveraging, and implementing this strategy at the subsidiary level. As of the end of 2023, the Group achieved cash return of approximately RMB40 billion at the consolidated statement level; The Group's consolidated interest-bearing debt decreased by RMB15 billion from the end of 2022, and the Group-level interest-bearing debt decreased by RMB9.2 billion from the end of 2022, and the total consolidated statement and Group-level debt continued to decline. The Group's total debt-to-total capital ratio was 50.4%, a decrease of 2.9 percentage points from the end of 2022. The Group's cash, bank balances and time deposits reached RMB92.46 billion, with a healthy financial position.
In May 2023, after the international rating agency Standard & Poor's upgraded Fosun's rating outlook to "stable" and affirmed the sustainability of Fosun's financial strategy and future development, Citibank, UBS, Founder, Kaiyuan, Huaxi Securities and other domestic and foreign institutions published research reports, optimistic that Fosun will firmly implement its business-focused strategy and achieve a balance between investment and exit, and all of them have given "buy" or "recommend" ratings. UBS said in its report that as Fosun continues to implement the "slimming and fitness" strategy, its profitability is expected to further improve, and dividends to shareholders will continue to increase in the future, and gave Fosun International a target price of HK$6.30, an expected increase of about 57%.
In the view of Zhitong Finance APP, with the "deep mining" strategy focusing on its core business, the asset optimization strategy of investment and withdrawal balance, and its stable financial position, Fosun International is not only able to cope with uncertainties and grow against the trend through the cycle; At present, the group has completed the strategic focus of its core business, and believes that with the support of the company's good fundamentals, Fosun International's future growth potential is promising, which is worthy of investors' long-term attention.