HK/China Equity Long-Short

Osbert Tang, CFA

Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/lung-fung-group-holdings-limited" target="_blank" data-smartkarma-citation="entities:46142:1" rel="noopener">Lung Fung Group (2290 HK)</a> is still 37.3% below its IPO price, despite a sharp rebound following its better-than-expected FY26 results. </li>
<li>Its same-store sales have consistently outperformed, and the start for 1Q FY27 appears encouraging. With an ROE of 72.7% for FY27, its 1.9x P/B is undemanding. </li>
<li>At a 4.8x FY27F PER and a 12.6% dividend yield, the stock is extremely cheap and trades at a steep discount to its HK-listed peers. </li>
</ul>



Lung Fung Group (2290 HK) is still 37.3% below its IPO price, despite a sharp rebound following its better-than-expected FY26 results. 
Its same-store sales have consistently outperformed, and the start for 1Q FY27 appears encouraging. With an ROE of 72.7% for FY27, its 1.9x P/B is undemanding. 
At a 4.8x FY27F PER and a 12.6% dividend yield, the stock is extremely cheap and trades at a steep discount to its HK-listed peers. 


Lung Fung Group (2290 HK): Still Looks Undervalued

Equity Capital Markets

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<li>
<a href="https://www.smartkarma.com/entities/lung-fung-group-holdings-limited" target="_blank" data-smartkarma-citation="entities:46142:1" rel="noopener">Lung Fung Group (2290 HK)</a>, a leading Hong Kong-based chain retail store of beauty, health and pharmaceutical products, is seeking to raise HK$672m net proceeds.</li>
<li>When compared with <a href="https://www.smartkarma.com/entities/sa-sa-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa (178 HK)</a>, it has higher operating and net margins, and also better net profit for FY27.  </li>
<li>At the high-end of IPO price range (HK$6.38), it trades on 9.2x FY27 PER. At par to Sa Sa's 12x, there will be a 29% upside potential to HK$8.25. </li>
</ul>



Lung Fung Group (2290 HK), a leading Hong Kong-based chain retail store of beauty, health and pharmaceutical products, is seeking to raise HK$672m net proceeds.
When compared with Sa Sa (178 HK), it has higher operating and net margins, and also better net profit for FY27.  
At the high-end of IPO price range (HK$6.38), it trades on 9.2x FY27 PER. At par to Sa Sa's 12x, there will be a 29% upside potential to HK$8.25. 


Lung Fung Group (2290 HK) IPO: Too Cheap to Ignore

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sa-sa-international-holdings-limited" target="_blank" data-smartkarma-citation="entities:20143:1" rel="noopener">Sa Sa (178 HK)</a>'s positive profit alert suggests net profit will reach HK$150m in 1H FY26/27, equaling a 2x YoY increase, ahead of the consensus. </li>
<li>2H net profit has been historically better than 1H, meaning the market's full-year forecast of HK$277m provides room for an upgrade. The Jul retail sales trend also supports this.</li>
<li>Despite a 106% YTD rally, its 2.7x 12-month P/B is only slightly above average. With an ROE of 21-24% and net cash of HK$0.16, valuations remain not stretched.</li>
</ul>



Sa Sa (178 HK)'s positive profit alert suggests net profit will reach HK$150m in 1H FY26/27, equaling a 2x YoY increase, ahead of the consensus. 
2H net profit has been historically better than 1H, meaning the market's full-year forecast of HK$277m provides room for an upgrade. The Jul retail sales trend also supports this.
Despite a 106% YTD rally, its 2.7x 12-month P/B is only slightly above average. With an ROE of 21-24% and net cash of HK$0.16, valuations remain not stretched.


Global Healthcare Analyst

Tina Banerjee

<ul>
<li>Lung Fung Group launched Hongkong IPO to raise up to HK$ 797.5B.  They are a Hong Kong-based chain retail store of beauty, health and pharmaceutical products under ‘‘Lung Fung’’ brand.</li>
<li>Lung Fung Group intends to use the IPO proceeds to enhance sales network, upgrade IT systems, repay loans, brand management &amp; marketing, strengthen supply chain, strategic investment and working capital.</li>
<li>The valuation seems reasonable considering the near to medium term outlook. We would recommend that investors can surely buy into the issue keeping the medium-term investment horizon in mind.</li>
</ul>


Lung Fung Group launched Hongkong IPO to raise up to HK$ 797.5B.  They are a Hong Kong-based chain retail store of beauty, health and pharmaceutical products under ‘‘Lung Fung’’ brand.
Lung Fung Group intends to use the IPO proceeds to enhance sales network, upgrade IT systems, repay loans, brand management &amp; marketing, strengthen supply chain, strategic investment and working capital.
The valuation seems reasonable considering the near to medium term outlook. We would recommend that investors can surely buy into the issue keeping the medium-term investment horizon in mind.


Lung Fung Group IPO: New Stores Driving Growth Is Enough To Bring In Investor Footfall

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>The revenue growth in FY2023-FY2025 was 50% CAGR. However, YoY growth dropped from 84.7% in FY2024 to 21.8% in FY2025, indicating that a turning point for high-speed growth has emerged.</li>
<li>Lung Fung has formed an absolute SKU leading advantage in the industry. However, as consumer spending in Hong Kong is approaching saturation, where will the next growth point lie?</li>
<li>Considering that Lung Fung’s growth rate is higher than industry average, but accompanied by a decline in growth/high financial leverage, valuation would be above industry average but with limited premium.</li>
</ul>


The revenue growth in FY2023-FY2025 was 50% CAGR. However, YoY growth dropped from 84.7% in FY2024 to 21.8% in FY2025, indicating that a turning point for high-speed growth has emerged.
Lung Fung has formed an absolute SKU leading advantage in the industry. However, as consumer spending in Hong Kong is approaching saturation, where will the next growth point lie?
Considering that Lung Fung’s growth rate is higher than industry average, but accompanied by a decline in growth/high financial leverage, valuation would be above industry average but with limited premium.


Pre-IPO Lung Fung Group (PHIP Updates) - Some Points Worth the Attention

Hong Kong

Lung Fung Group Holdings Limited conducts cosmeceutical retail chain businesses. The Company sells pharmaceutical, health, and beauty products. Lung Fung Group Holdings markets products online and offline.

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Lung Fung Group (2290 HK)