Stable S&P rating supports Fosun's globalization and innovation

HONG KONG, Oct 23, 2024 - ( JCN Newswire ) - HK equity market experienced snap adjustment rally in September, and is now entering stock picking phase before new round of catalyst arrives. Now is the period when investors explore resilient names whose fundamentals is robust enough to weather market turbulence. Fosun International (00656) fits into this category, with its continuous efforts on innovation and globalization, combined with solid delivery on financial result and attractive valuation.

Fosun International is one of the few leading enterprises rooted in China with global operational capabilities. Since its establishment in 1992, Fosun International has built an industrial presence in more than 35 countries and regions worldwide, continually enhancing its global operational capabilities. It has now become a global innovation-driven consumer group.

Enhancing innovation capabilities while delivering robust global operational capabilities

Over past decades, Fosun has been enhancing and deepening its globalization capabilities via launching new products and advancing its international operation.

Take pharmaceutical products for example, the biosimilar HANQUYOU has pioneered the international market expansion for Fosun. With licensing agreements covering approximately 100 countries and regions and marketing approvals in 48 countries and regions, HANQUYOU has become the China-developed biosimilar with the most marketing approvals.

Thanks to the overseas expansion of biosimilars, Fosun has not only established its reputation internationally, but has also gained experience in the globalization of first-in-class drugs. HANZISHUANG, the world's first anti-PD-1 monoclonal antibody approved for the first-line treatment of small cell lung cancer (SCLC) independently developed by Shanghai Henlius, is an example of success. Fosun's overseas expansion of biopharmaceutical has resulted in the advancement of both first-in-class drugs and biosimilars. In 2023, Shanghai Henlius became the first first-in-class pharmaceutical company among its peers to achieve profitability through product sales.

In terms of operations, Fosun International focuses on organization evolution and global resource integration. By leveraging regional advantages, it establishes a profound industrial presence and localized operations to continuously benefit its industries and brands.

For example, in the tourism sector, Fosun Tourism Group (FTG) has achieved remarkable growth through its unique asset-light operating model, global presence and global operations. FTG's subsidiary Club Med, which operates 67 resorts worldwide, achieved a record-high business volume of RMB8.89 billion in the first half of 2024, representing a year-on-year increase of 10.3%. Its business in the Europe, Middle East and Africa (EMEA) region and the Americas continued to grow, while its business in Asia-Pacific region recovered significantly. In May 2024, Club Med signed an agreement in Oman for the launch of its first resort in the Middle East.

Notably, there are very few domestic tourism companies that adopt an asset-light operating model and are equipped with global operational capabilities, making FTG a benchmark for the development of China's tourism industry. In addition, Fosun International continues to drive innovation and optimization in the consumption and insurance sectors, making positive impact on China's economic growth and industrial upgrades.

As Fosun International enhances its focus on its "products + operations", its globalization capabilities are gradually bearing fruit, while its innovation capabilities are further developing. This approach has effectively strengthened its advantages in core industries such as tourism, consumption, pharmaceuticals, and insurance, garnering market optimism.

S&P affirms Fosun International's "stable" rating outlook, noting that creditworthiness remains steady

Recently, Fosun International received further recognition in the international rating agencies. On 21 October, S&P released a report acknowledging Fosun's successful asset divestment and debt reduction efforts, assigning it a stable rating outlook.

Specifically, S&P acknowledges the improvement of Fosun's liability structure, noting that bank loans now account for 73% of the holding company's debts, up from 46% in mid-2022. Fosun International completed a USD888 million offshore syndicate in September 2024, reflecting an increase in both bank participation and size compared to the syndicate due in May. S&P regards this as a clear evidence of recovery in offshore bank refinancing channels.

The smooth access to financing channels reflects the confidence of domestic and international financial institutions in Fosun's financial position and business strategy. This not only reduces Fosun's reliance on public market financing but also allows for better support of liquidity management and greater flexibility to manage the pace of future asset divestment. S&P expects Fosun's asset recycling could continue to drive further debt reduction.

The positive evaluation from S&P affirms Fosun International's strong execution of its globalization and innovation capabilities. Over the past two years, the remarkable improvement in its balance sheet and enhanced financial resilience have been evident. Additionally, this endorsement reinforces the company's investment value.

Overall, as the outlook for the Chinese economy improves, especially with the implementation of key policy initiatives, the Hong Kong stock market holds significant growth potential. Thanks to its global presence, integrated innovation, and asset-light operating strategy, Fosun International is enhancing performance certainty and strengthening its financial resilience against risks. As its global operations continue to expand, industry-leading advantages strengthen, and the benefits of technology innovation accelerate, Fosun is poised to capitalize on the next wave of growth in the Hong Kong stock market.