Essence Reiterates Buy Rating on Fosun with a Target Price of HKD7.5

HONG KONG SAR – Media OutReach Newswire – 5 July 2024 – On 28 June, Essence International Securities (“Essence”) published a research report, expressing its bullish stance on Fosun International’s (00656.HK) focus on core businesses in health, consumption, and finance. Essence believed that Fosun’s global business presence helps it to hedge risks and balance revenue streams. With the stabilization of the macroeconomic environment, Fosun’s fundamentals are poised for continued recovery. Essence maintained a “Buy” rating and a target price of HKD7.5 on Fosun International, implying a 78% upside from the current price.
According to Essence, the international rating agency S&P Global Ratings issued a rating report in late May, maintaining its “stable” outlook on Fosun International’s long-term issuer and issue credit ratings. Essence pointed out that Fosun has pursued a solid development of syndicated loan financing channels, coupled with a more favorable macroeconomic environment in China, Fosun’s credit quality has been stabilized and its refinancing conditions have improved. At the same time, Fosun has stepped up its efforts in divesting its non-core assets to facilitate its fund recovery as well as concentrating its resources on core industries, thereby reducing debt ratio and maintaining a sound financial position. In addition, Fosun’s global business presence helps it to hedge risks and balance revenue streams. With the stabilization of the macroeconomic environment, Fosun’s fundamentals are poised for continued recovery.
Essence further pointed out that looking ahead, Fosun will focus on its three core businesses in health, consumption and finance. In the health sector, Fosun will strengthen its global presence and optimize capital allocation. In the consumption sector, Fosun will continue to build upon its existing businesses and increase investments in the operations of jewelry, catering, resort, and baijiu. In the finance sector, Fosun will continue to restructure assets and divest some heavy assets.
Previously, securities firms such as Founder Securities and Kaiyuan Securities also published reports expressing optimism about Fosun International’s focus on core businesses, increased investment in advantageous industries, and steady profit growth, maintaining a “Recommended” or “Buy” rating on Fosun International.
Founder Securities believed that Fosun’s credit quality has further stabilized over the past year, and the asset quality of Fosun’s investment portfolio is expected to remain generally stable in the next 6 to 12 months. Fosun’s sound credit standing will help offset the impact of the downturn in the real estate industry and other unfavorable macroeconomic factors. As Fosun gradually adjusts and optimizes its various business segments, alongside the gradual economic recovery, the revenue and profits across these segments are expected to gradually improve. Founder Securities maintained a “Recommended” rating on Fosun International and raised the target price to HKD7.0.
Kaiyuan Securities also expressed optimism about Fosun’s ongoing investment in businesses with stable cash flows and profit growth potential. In addition, Kaiyuan Securities recognized the diversity and predictability of Fosun’s sustainable cash dividend income and maintained a “Buy” rating on Fosun International.
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