[ET Net News Agency, 8 October 2019] HSBC Global Research initiated coverage on Fosun
International (00656) with a "buy" rating and a target price of HK$15.5.
The research house said Fosun has evolved from a diversified investment company to
become an integrated consumer company that targets families. HSBC sees Fosun as set to
benefit from China's sustainable household income growth and consumption upgrade, for its
40% GAV exposure to its Health and Happiness segments.
It said the earnings quality of the company is also improving as Fosun continues to
focus more on the operation of its key portfolio companies, like Fosun Pharmaceutical
(02196), Shanghai Yuyuan (Shanghai code: 600655), Fosun Tourism Group (01992) and various
insurance platforms (to account for 68% of total net profit in 2021, up from 55% in 2015),
and rely less on financial investment for earnings growth.
Fosun International delivered a 2% growth in net profit to RMB13,406m last year,
supported by the fast-growing Happiness segment. HSBC expects the company to recapture
double-digit earnings growth in the coming years (11% CAGR in 2018-21), led by the
Happiness segment (30% CAGR in 2018-21).
In addition, Fosun distributes an interim dividend for 2019, the first time in history.
HSBC expects it to continue raising its payout gradually to 25% in 2021, implying a 20%
CAGR in DPS during 2018-21 and an attractive 2019 yield of 5%. (KL)