S&P maintains a stable outlook for Fosun International's current BB-rating, and the overall tone is positive
On May 30, the international rating agency S&P released a report to maintain the stability of Fosun International's current BB-rating outlook.
In 2023, the company achieved asset sales of over RMB 25 billion, reducing holding company debt by approximately RMB 9 billion, and reducing total debt to RMB 89 billion. S&P fully affirms Fosun Group's asset withdrawal and debt reduction achievements in the past two years, and expects Fosun Group to continue to push forward the exit of assets in the pipeline. The company expects Fosun Group debt to continue to decline at a rate of about 10 billion dollars per year for the next 2-3 years. We keep our profit forecast unchanged. We expect net profit to be 40.9/55/ 7.12 billion yuan for 2024-2026, yoy +196.8%/34.4%/29.5%, EPS 0.5/0.7/0.9 yuan, and the current stock price is 9.0/6.7/5.2 times PE. We are optimistic that the company will focus on the main business, increase the layout of dominant industries, and maintain a “buy” rating.
The company's refinancing environment has improved, and financing channels have continued to expand. By the end of 2023, bank loans accounted for about 70% of the holding company's debt (about RMB 89 billion), compared to 46% in mid-2022. At the same time, Fosun also maintained the activity of issuing smaller amounts for a short period of time in the domestic public bond market. As of the end of 2024Q1, pledged loans accounted for about 20% of Fosun International's total debt. The refinancing of offshore syndicated loans completed by Fosun International in early May has increased dramatically, and improvements in refinancing conditions have expanded from the onshore capital market to the offshore capital market. The sale of HAL on May 27 increased certainty about the company's disposal of unlisted assets. Fosun International is expected to return $15 billion in cash from asset disposal in 2024 (including only currently signed projects with clear buyers). At the same time, it also recognizes the diversity and visibility of Fosun Group's sustainable cash dividend income. The dividend revenue for 2024 is expected to be $55-6.5 billion.
Based on a global business layout, focusing on consumption and science and innovation, Fosun currently has a deep industrial layout in more than 35 countries and regions on five continents. In 2023, the share of overseas revenue has reached 45%, and the investment in science and innovation has reached 7.4 billion yuan/yoy +14%. In terms of cultural tourism, Fosun Travel & Culture continues to advance its global layout. 2024Q1's revenue was 7.16 billion yuan/yoy +15.8%, and unaudited net profit to mother increased steadily compared to the same period in 2023. As of April 13, 2024, Club Med's number of bookings for the first half of 2024 increased by about 13% compared to the same period in 2023, and an increase of approximately 50% over the same period of 2022. For businesses with stable cash flow and potential for profit growth, the company continues to increase its layout. On April 12, Shenzhen and Shanghai Fosun Hi-Tech signed a strategic cooperation framework agreement. The two sides will gather high-quality innovative resources to further strengthen cooperation in biomedicine, cultural and sports tourism, fashion consumption, etc.
Risk warning: Consumption recovery falls short of expectations, risk of global strategy and post-investment integration, risk of capital market fluctuations.