This week, Citigroup held its 2026 Pan-Asia Conference and conducted a strategic meeting with FOSUN INTL (00656) on May 19, subsequently issuing a new research report. The report reiterated a "Buy" rating on FOSUN INTL, maintaining a target price of HK$5.6. Previously, adhering to the principle of prudence, FOSUN INTL made a one-time non-cash impairment provision for certain property projects showing signs of impairment and for goodwill and intangible assets in some non-core business segments during the 2025 fiscal year. This move aims to better concentrate resources and focus on high-growth core sectors. Citigroup views management's actions as sending a clear signal that the impact of these impairments has been digested and does not involve any breach of debt covenants. The Citigroup report further highlighted that FOSUN INTL's health and insurance businesses are performing stably and well, while the happiness segment is showing signs of recovery as tourism and consumer-related businesses gradually rebound. Since April, FOSUN INTL's A-share subsidiaries have disclosed their first-quarter 2026 results, indicating a clear trend of profit recovery post-risk clearance. Core sectors including pharmaceuticals, insurance, culture and tourism, and consumer goods are experiencing strong overall growth. FOSUN Pharma reported first-quarter revenue of RMB 10.073 billion and net profit attributable to shareholders of RMB 871 million. Excluding non-recurring gains and losses, the net profit attributable to shareholders increased by 21.96% year-over-year. The innovative drug HLX43 is accelerating its global clinical trials, with a potential market size reaching tens of billions of US dollars. In the insurance business, the solvency report for the first quarter of 2026 disclosed by Fosun United Health Insurance showed insurance business income of RMB 4.47 billion during the reporting period, a year-over-year increase of over 77%, with continued profitability. For culture, tourism, and consumer businesses, Yuyuan Inc. achieved first-quarter operating revenue of RMB 9.649 billion, a nearly 10% year-over-year increase; net profit attributable to shareholders was RMB 157 million, a significant year-over-year increase of 203%. The performance of Club Med and Sanya Atlantis, under Fosun Tourism Group, remained impressive during the Spring Festival and May Day holidays. During the May Day holiday, the number of inbound tourists at the Sanya Atlantis resort surged by 90% compared to the same period last year; the Mediterranean International Resort in Lijiang, Yunnan, received over 30,000 visitors cumulatively, with overall revenue up 11% year-over-year; total revenue from Club Med's domestic resorts in China increased by 6% year-over-year; and visitor traffic at Alpine Snow World grew by 30% year-over-year. Financially, Citigroup is optimistic about FOSUN INTL's ongoing efforts to optimize its capital structure and accelerate valuation recovery through active deleveraging and the disposal of non-core assets. FOSUN INTL's management has clearly stated that it will continue to employ multiple strategies to make the group's asset portfolio lighter and more transparent, thereby accelerating valuation recovery. The company plans to optimize its asset portfolio by accelerating the sale of heavy assets and non-core subsidiaries, aiming to reduce group-level interest-bearing debt to below RMB 60 billion. It will also actively explore possibilities for bringing non-listed assets to the capital market. Furthermore, Citigroup emphasized that FOSUN INTL's major shareholders and management plan to collectively increase their holdings by up to HK$5 billion. The company will also implement a share repurchase of up to HK$10 billion, fully demonstrating confidence in its future development. Management also anticipates a cash dividend of no less than HK$1.5 billion for the 2026 fiscal year and plans to raise the dividend payout ratio from 20% to 35%, with a commitment to continuously increase the payout ratio in the future. Previously, Goldman Sachs, UBS, Guotai Junan Securities, and CITIC Securities also issued research reports expressing optimism about FOSUN INTL's valuation recovery prospects. Brokerages generally believe that with the completion of impairment provisions and the clearance of historical burdens, FOSUN INTL's profit and dividend plans have become clearer, liquidity remains at a controllable level, and the company is poised for a revaluation. The strong first-quarter 2026 performance of its subsidiaries confirms FOSUN INTL's growth logic following risk clearance. Overall, with core businesses like pharmaceuticals, health, and insurance finance remaining solid, and the culture, tourism, and consumer sectors steadily recovering, FOSUN INTL's growth momentum is expected to continue.
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