Incident Overview
On March 27, 2024, Fosun International disclosed its 2023 annual report. In 2023, the Group achieved revenue of 198.2 billion yuan, +8.6% year-on-year; industrial operating profit of 4.9 billion yuan, +20% year-on-year (excluding the impact of withdrawing companies); and net profit to mother of 1.38 billion yuan, an increase of 2.21 billion yuan over the previous year. As of the end of 2023, the Group's consolidated reporting level interest-bearing liabilities decreased by $15 billion year on year. The ratio of total debt to total capital was 50.4%, down 2.9 pct from the end of 2022. Cash and bank balances and term deposits reached $92.46 billion. In 2023, the international credit rating agency S&P upgraded Fosun International's rating outlook to “stable.”
Analytical judgment:
Steady revenue growth and continued dividends to give back to shareholders
The Group's total revenue in 2023 reached 198.2 billion yuan, +8.6% year-on-year, and continued to grow for 3 consecutive years, mainly due to the Group's diversified global asset layout and solid industrial operation capabilities. The Group's industrial operating profit in 2023 reached 4.9 billion yuan, up 20.4% year-on-year from the same caliber in 2022 (excluding the impact of withdrawing from operating companies), mainly driven by Fosun Travel & Communications turning a loss into a profit and boosting the performance of BCP, a joint venture located in Portugal. The company's dividend payout rate remained stable, and continued dividends returned to shareholders. The dividend rate in 2023 reached 20%, cash dividends of HK$310 million, and the cumulative total cash dividends over the 17 years of listing reached HK$25.6 billion.
Core industry performance is strong. Overall, the global business portfolio withstands macro-cyclical risks. Overall, the total revenue of the four core subsidiaries Yuyuan Co., Ltd., Fosun Pharmaceuticals, Fosun Portugal Insurance, and Fosun Travel & Culture rose 8% year-on-year, and continued to account for 72% of the group's total revenue, mainly driven by gold jewelry, which is the main business of Yuyuan Co., Ltd., as well as the outstanding performance of ClubMed and Sanya Atlantis, a subsidiary of Fosun Travel & Communications. Global business helps the Group withstand macro-cyclical risks. By the end of 2023, the Group's overseas revenue accounted for 45% of total revenue, with a 10-year compound growth rate of 55%. The core subsidiary achieved global expansion under the Group's power. Among them, Fosun Portugal Insurance's international business premiums increased 11% year on year, and Yiyao Technology's new overseas orders in 2023 rose 62% year on year to 6.291 billion yuan.
The balance and liability structure continues to be optimized to continuously consolidate the foundation of performance
Since 2022, Fosun International has accelerated the exit of non-strategic non-core assets and consolidated the liquidity cushion: in 2022, the group achieved more than 40 billion yuan in non-strategic non-core asset withdrawals and a cash return of 29.3 billion yuan; in 2023, it continued to firmly implement asset-light operations, achieving a contract of nearly 20 billion yuan and a cash return of 27.3 billion yuan. The main projects include AmeriTrust, Nanjing Nangang Steel, Jianlong Co., Ltd., Shanghai Pan Asia Shipping Co., Ltd. and issued special plans (REITs) for BFC asset support. At the same time, it emphasized the importance of debt reduction and deleveraging, and continued to reduce total debt. As of the end of 2023, the Group's consolidated interest-bearing debt fell -7% year on year to 211.9 billion yuan, of which the Group's interest-bearing debt fell -9% to 88.8 billion yuan. The Group's total debt to total capital ratio was 50.4%, down 2.9 percentage points from the previous year; cash and bank balances and term deposits reached $92.46 billion, and the financial situation was stable. In view of Fosun's improved credit situation and smooth progress in deleveraging and asset disposal, S&P Global upgraded Fosun's rating outlook from “negative” to “stable” in May 2023, and confirmed Fosun's rating and stable outlook again in September 2023.
Investment advice
Considering the impact of the Group's future exit from non-core non-strategic assets as a drag on performance, we lowered our previous 2024-2025 and added 2026 profit forecasts: estimated revenue for 2024-2026 is 2,299/2680/305.8 billion yuan, respectively (previously 2024-2025 forecasts were 2,396/275.9 billion yuan), and net profit to the mother for 2024-2026 is expected to be 15/20/24 billion yuan, respectively (the previous forecast for 2024-2025 was 57/ 7.7 billion yuan); EPS (diluted) corresponding to 2024-2026 was 0.18/0.24/0.29 yuan, respectively (the previous forecast for 2024-2025 was 0.69/0.93 yuan, respectively). The PE corresponding to the closing price of HK$4.3 on April 8, 2024 (the HKD exchange rate is 1HKD=0.9237RMB on the day of the closing price) was 26.37/19.07/15.79 times, respectively, maintaining the “buy” rating.
Risk warning
Volatility in capital markets; consumer recovery falls short of expectations; geopolitical impacts