HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Fu Shou Yuan International / Equity Bottom-Up

<ul>
<li>According to the management, the performance of 24H1 should be better than that of 21H1, but Fu Shou Yuan's performance in 2024 full year may still fall short of expectations.</li>
<li>In the future, the development strategy of Fu Shou Yuan would rely more on endogenous growth. Without aggressive M&amp;A, long-term revenue growth rate could fall to single digit.</li>
<li>Special dividends will continue in the future. However, one major risk for Fu Shou Yuan is policy risk. The bottom line is the demand for the funeral industry always exists.</li>
</ul>


According to the management, the performance of 24H1 should be better than that of 21H1, but Fu Shou Yuan's performance in 2024 full year may still fall short of expectations.
In the future, the development strategy of Fu Shou Yuan would rely more on endogenous growth. Without aggressive M&amp;A, long-term revenue growth rate could fall to single digit.
Special dividends will continue in the future. However, one major risk for Fu Shou Yuan is policy risk. The bottom line is the demand for the funeral industry always exists.


Fu Shou Yuan (1448.HK) - Negative Growth in 24H1 Seems Inevitable

<ul>
<li>Fu Shou Yuan’s 2023 performance was indeed not good, with negative growth in 23H2.Shanghai alone has limited market capacity.No matter how strong it is, it cannot drive the national market.</li>
<li>Fu Shou Yuan has encountered difficulties in external expansion and M&amp;A, so it chooses to increase dividends. However, this means the Company may have to say goodbye to high growth.</li>
<li>The founder's “past bad record” and uncertain business outlook hinder the upward potential of valuation, which requires a high margin of safety.It’s better bought at low price to collect dividends.</li>
</ul>


Fu Shou Yuan’s 2023 performance was indeed not good, with negative growth in 23H2.Shanghai alone has limited market capacity.No matter how strong it is, it cannot drive the national market.
Fu Shou Yuan has encountered difficulties in external expansion and M&amp;A, so it chooses to increase dividends. However, this means the Company may have to say goodbye to high growth.
The founder's “past bad record” and uncertain business outlook hinder the upward potential of valuation, which requires a high margin of safety.It’s better bought at low price to collect dividends.


Fu Shou Yuan (1448.HK) - Due to the Pain Points, Investment Logic Changes

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>'s net profit grew 20.1% in FY23; and if not a withholding tax of Rmb87.4m, its net profit would have increased by over 30%.  </li>
<li>Including a special DPS of HK$0.2139, full-year payout ratio reached 98.5%. Still, it has net cash of Rmb2.7bn or 24% of its market capitalisation.</li>
<li>Profitability outlook is encouraging - structural demand increase, higher ASP, and well-contained costs. Its land reserve is enough to be consumed for 82 years.</li>
</ul>



Fu Shou Yuan (1448 HK)'s net profit grew 20.1% in FY23; and if not a withholding tax of Rmb87.4m, its net profit would have increased by over 30%.  
Including a special DPS of HK$0.2139, full-year payout ratio reached 98.5%. Still, it has net cash of Rmb2.7bn or 24% of its market capitalisation.
Profitability outlook is encouraging - structural demand increase, higher ASP, and well-contained costs. Its land reserve is enough to be consumed for 82 years.


Fu Shou Yuan (1448 HK): As Solid as It Goes

<ul>
<li>The high growth in 23H1 is unsustainable. 23H2 YoY revenue growth would be single-digit. Due to 23H1’s high base, we cannot rule out the possibility of negative growth in 24H1.</li>
<li>In the case of lower-than-expected external M&amp;A activities, Fu Shou Yuan has accumulated a large amount of cash, which would drag down ROE. So, current dividend policy still needs improvement. </li>
<li>Fu Shou Yuan's expansion would be relatively moderate. Double-digit revenue growth can still be expected in the long term. The market value of above RMB15 billion is more reasonable. </li>
</ul>


The high growth in 23H1 is unsustainable. 23H2 YoY revenue growth would be single-digit. Due to 23H1’s high base, we cannot rule out the possibility of negative growth in 24H1.
In the case of lower-than-expected external M&amp;A activities, Fu Shou Yuan has accumulated a large amount of cash, which would drag down ROE. So, current dividend policy still needs improvement. 
Fu Shou Yuan's expansion would be relatively moderate. Double-digit revenue growth can still be expected in the long term. The market value of above RMB15 billion is more reasonable. 


Fu Shou Yuan (1448.HK) - Magic Is About to Disappear, but Is Still Undervalued

<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

China

Fu Shou Yuan International provides burial and funeral services, along with other related services, across the People's Republic of China. Its core activities include selling burial plots, offering cemetery maintenance, and planning and hosting funeral arrangements. The company also manufactures and sells cremation devices and provides education services. It was founded in 1994 and is headquartered in Shanghai, China.

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Fu Shou Yuan International (1448 HK)

Fu Shou Yuan (1448.HK) - Negative Growth in 24H1 Seems Inevitable

Performance in 24H1 could be disappointing. Fu Shou Yuan's future growth will rely more on endogenous growth. Special dividends will continue, but...

Xinyao (Criss) Wang

Fu Shou Yuan (1448.HK) - Due to the Pain Points, Investment Logic Changes

Fu Shou Yuan’s 2023 result is indeed not good. 2024 is also challenging. Since high growth is impossible, it's time to lower expectations.This...

Xinyao (Criss) Wang

Fu Shou Yuan (1448 HK): As Solid as It Goes

Fu Shou Yuan sees 20.1% net profit growth in FY23, hindered by withholding tax. Its outlook is strong with high cash reserves and long-term land...

Osbert Tang, CFA

Fu Shou Yuan (1448.HK) - Magic Is About to Disappear, but Is Still Undervalued

Fu Shou Yuan's high growth brought by pandemic catalyst is unsustainable.24H1's growth would be under pressure.But Fu Shou Yuan is undervalued and...

Xinyao (Criss) Wang

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

We like Fu Shou Yuan for its sustained quality earnings stream and solid position in capturing the demand of China's aging population. The strong...

Osbert Tang, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

Fu Shou Yuan (1448.HK) - Negative Growth in 24H1 Seems Inevitable

Performance in 24H1 could be disappointing. Fu Shou Yuan's future growth will rely more on endogenous growth. Special dividends will continue, but...

Xinyao (Criss) Wang

Fu Shou Yuan (1448.HK) - Due to the Pain Points, Investment Logic Changes

Fu Shou Yuan’s 2023 result is indeed not good. 2024 is also challenging. Since high growth is impossible, it's time to lower expectations.This...

Xinyao (Criss) Wang

Fu Shou Yuan (1448 HK): As Solid as It Goes

​Fu Shou Yuan sees 20.1% net profit growth in FY23, hindered by withholding tax. Its outlook is strong with high cash reserves and long-term land...

Osbert Tang, CFA

Fu Shou Yuan (1448.HK) - Magic Is About to Disappear, but Is Still Undervalued

Fu Shou Yuan's high growth brought by pandemic catalyst is unsustainable.24H1's growth would be under pressure.But Fu Shou Yuan is undervalued and...

Xinyao (Criss) Wang

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

We like Fu Shou Yuan for its sustained quality earnings stream and solid position in capturing the demand of China's aging population. The strong...

Osbert Tang, CFA

Fu Shou Yuan sees 20.1% net profit growth in FY23, hindered by withholding tax. Its outlook is strong with high cash reserves and long-term land...