HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>Fu Shou Yuan had a sharp decline in performance in 2024. The performance in recent years has often missed management guidance, which makes us question the integrity of management.</li>
<li>The “crisis” of Fu Shou Yuan has evolved from a short-term headwind to the failure of its long-term business model. Good dividends cannot conceal the problem of gloomy outlook.</li>
<li>Valuation logic is undergoing a transformation - from a leading company with "high growth/stable cash flow" to a struggling company with "weak growth/questionable profit model". 2025 performance may remain lower-than-expected.</li>
</ul>


Fu Shou Yuan had a sharp decline in performance in 2024. The performance in recent years has often missed management guidance, which makes us question the integrity of management.
The “crisis” of Fu Shou Yuan has evolved from a short-term headwind to the failure of its long-term business model. Good dividends cannot conceal the problem of gloomy outlook.
Valuation logic is undergoing a transformation - from a leading company with "high growth/stable cash flow" to a struggling company with "weak growth/questionable profit model". 2025 performance may remain lower-than-expected.


Fu Shou Yuan (1448.HK) - 2025 Outlook May Remain Sluggish Despite the Ugly 2024 Results

<ul>
<li>The sharp decline in revenue/profits indicates that Fu Shou Yuan’s business model is not as excellent as previously imagined. The Company’s performance would still be heavily influenced by macro factors.</li>
<li>Once Fu Shou Yuan slows down external expansion and explores endogenous growth, it usually doesn't require too much capital, which means the Company would have greater motivation to distribute dividends.</li>
<li>The economic downturn leading to performance headwinds is just short-term logic. In the long run, the logic behind the increasing demand in funeral industry has not changed. Valuation would rebound.</li>
</ul>


The sharp decline in revenue/profits indicates that Fu Shou Yuan’s business model is not as excellent as previously imagined. The Company’s performance would still be heavily influenced by macro factors.
Once Fu Shou Yuan slows down external expansion and explores endogenous growth, it usually doesn't require too much capital, which means the Company would have greater motivation to distribute dividends.
The economic downturn leading to performance headwinds is just short-term logic. In the long run, the logic behind the increasing demand in funeral industry has not changed. Valuation would rebound.


Fu Shou Yuan (1448.HK) - The Business Model Has "Flaws"

HK/China Equity Long-Short

Osbert Tang, CFA

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fu-shou-yuan-international" target="_blank" data-smartkarma-citation="entities:18168:1" rel="noopener">Fu Shou Yuan (1448 HK)</a> is likely to declare a special dividend in its FY23 result announcement as indicated in its board meeting notification.</li>
<li>Net cash at end-1H23 amounted to 14.5% of its current share price, providing room for imagination of the amount of special dividends. </li>
<li>Besides raising its yield, returning excess cash should raise its ROE. This will also demonstrate the management's confidence on the outlook and its financial position.</li>
</ul>



Fu Shou Yuan (1448 HK) is likely to declare a special dividend in its FY23 result announcement as indicated in its board meeting notification.
Net cash at end-1H23 amounted to 14.5% of its current share price, providing room for imagination of the amount of special dividends. 
Besides raising its yield, returning excess cash should raise its ROE. This will also demonstrate the management's confidence on the outlook and its financial position.


Fu Shou Yuan (1448 HK): Proposing a Special Dividend

<ul>
<li>
<a href="https://www.smartkarma.com/entities/fu-shou-yuan-international" target="_blank" data-smartkarma-citation="entities:18168:1" rel="noopener">Fu Shou Yuan (1448 HK)</a> has a solid 1H23 with net profit jumped 78% YoY. Its margin reached the highest level, reflecting resurgance in demand and good cost control.</li>
<li>Both volume and ASP growth led us to believe there is positive room for profitability improvements. Its balance sheet has also strengthened with net cash equals 17% of share price.</li>
<li>A 18.4% increase in pre-need contracts signed suggests encouraging underlying demand. More M&amp;As are added drivers to earnings prospects.</li>
</ul>



Fu Shou Yuan (1448 HK) has a solid 1H23 with net profit jumped 78% YoY. Its margin reached the highest level, reflecting resurgance in demand and good cost control.
Both volume and ASP growth led us to believe there is positive room for profitability improvements. Its balance sheet has also strengthened with net cash equals 17% of share price.
A 18.4% increase in pre-need contracts signed suggests encouraging underlying demand. More M&amp;As are added drivers to earnings prospects.


Fu Shou Yuan (1448 HK): More than Just a Recovery from Low Base

<ul>
<li>After a dip in earnings in FY22, <a href="https://www.smartkarma.com/entities/fu-shou-yuan-international" target="_blank" data-smartkarma-citation="entities:18168:1" rel="noopener">Fu Shou Yuan (1448 HK)</a> guides for an encouraging rebound in FY23 with at least 35% revenue and 30-35% net profit growth.</li>
<li>We think the 12.7% growth in earnings in 2H22, against -28.9% in 1H22, showed that pandemic impact has faded. It is still very well positioned to benefit from aging population. </li>
<li>Net cash equals 19% of its share price and its 13.9x PER for FY23 is not expensive relative to peers. We estimate, ex-cash, ROE is at a high of 24%. </li>
</ul>


After a dip in earnings in FY22, Fu Shou Yuan (1448 HK) guides for an encouraging rebound in FY23 with at least 35% revenue and 30-35% net profit growth.
We think the 12.7% growth in earnings in 2H22, against -28.9% in 1H22, showed that pandemic impact has faded. It is still very well positioned to benefit from aging population. 
Net cash equals 19% of its share price and its 13.9x PER for FY23 is not expensive relative to peers. We estimate, ex-cash, ROE is at a high of 24%. 


Fu Shou Yuan (1448 HK): Key Takeaways from Post-FY22 Call

China

Fu Shou Yuan International Group, Ltd. is a death care service provider in China.  The Company operates cemeteries and funeral facilities.

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Fu Shou Yuan (1448 HK)