HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

Malo Medical Management / Equity Capital Markets

<ul>
<li>Malo’s revenue had good growth, but revenue scale is still small. At the current gross margin level, it would be difficult to generate decent profits considering the large SG&amp;A expenses.</li>
<li>Dental care expansion is difficult. Malo would face the challenging such as lack of high-quality dentists and centralized procurement. Both would drag down profits and cash flow.</li>
<li>We are not optimistic about <a href="https://www.smartkarma.com/entities/malo-medical-management" target="_blank" data-smartkarma-citation="entities:40035:1" rel="noopener">Malo</a>’s share price performance after IPO. This industry’s profit mode is not mature. Most of chain dental services providers are still in cash-burning expansion stage.</li>
</ul>


Malo’s revenue had good growth, but revenue scale is still small. At the current gross margin level, it would be difficult to generate decent profits considering the large SG&amp;A expenses.
Dental care expansion is difficult. Malo would face the challenging such as lack of high-quality dentists and centralized procurement. Both would drag down profits and cash flow.
We are not optimistic about Malo’s share price performance after IPO. This industry’s profit mode is not mature. Most of chain dental services providers are still in cash-burning expansion stage.


Pre-IPO Malo Medical Management - Profit Model Is Not Mature; Future Expansion Is Worrying

Shulan Health Management / Equity Capital Markets

<ul>
<li>Private general hospitals are the core business of Shulan, but the business model for general hospitals is not good - heavy assets, challenging operations, low profits, difficult to expand nationwide. </li>
<li>Even with the endorsement of renowned academician Dr. Li Lanjuan, whether Shulan's hospitals can attract constantly sufficient patient flow remains a question. Most patients still prioritize public hospitals for treatment.</li>
<li>Due to the lack of solid profit model and expansion model, we're not optimistic about Shulan's profitability and future financial performance. Shulan may be in a state of long-term loss.</li>
</ul>


Private general hospitals are the core business of Shulan, but the business model for general hospitals is not good - heavy assets, challenging operations, low profits, difficult to expand nationwide. 
Even with the endorsement of renowned academician Dr. Li Lanjuan, whether Shulan's hospitals can attract constantly sufficient patient flow remains a question. Most patients still prioritize public hospitals for treatment.
Due to the lack of solid profit model and expansion model, we're not optimistic about Shulan's profitability and future financial performance. Shulan may be in a state of long-term loss.


Pre-IPO Shulan Health Management - Hard to Bring Investors Expected Returns Due to Poor Profit Model

Equity Bottom-Up

Jinxin Fertility Group  / Equity Bottom-Up

<ul>
<li>China has started taking measures to optimize fertility policies. The inclusion of assisted reproduction technologies in medical insurance is a general trend, which would generate increasing demand in the future.</li>
<li>From the current domestic assisted reproductive industry chain, there is significant import substitution space and growth potential in the fields of related drugs, prenatal/newborn genetic testing, and downstream medical services.</li>
<li>Companies such as Livzon/BGI/Jinxin would be the direct beneficiaries of related policy. We analyzed the industry characteristics, investment rationale, key risks and comparison with peers of these companies. </li>
</ul>


China has started taking measures to optimize fertility policies. The inclusion of assisted reproduction technologies in medical insurance is a general trend, which would generate increasing demand in the future.
From the current domestic assisted reproductive industry chain, there is significant import substitution space and growth potential in the fields of related drugs, prenatal/newborn genetic testing, and downstream medical services.
Companies such as Livzon/BGI/Jinxin would be the direct beneficiaries of related policy. We analyzed the industry characteristics, investment rationale, key risks and comparison with peers of these companies. 


China Population Policies Impact on Healthcare Companies Series - Part 1

Hygeia Healthcare Group / Equity Bottom-Up

<ul>
<li>In 2022, Hygeia maintained stable revenue growth but with lower-than-expected profit performance. We think Hygeia’s profitability would improve gradually in the future as more and more new hospitals become break-even.</li>
<li>Different from Aier/Topchoice, Hygeia’s acquired hospitals would be directly incorporated into the listed company, which means all aspects of consideration would be prudent. This is clearly more beneficial for investors/shareholders.</li>
<li>Hygeia’s business model has proven to be replicable.The implementation of DRG policy has no significant impact on profitability. Hygeia is expected to have higher valuation than Aier/Topchoice in the future.</li>
</ul>


In 2022, Hygeia maintained stable revenue growth but with lower-than-expected profit performance. We think Hygeia’s profitability would improve gradually in the future as more and more new hospitals become break-even.
Different from Aier/Topchoice, Hygeia’s acquired hospitals would be directly incorporated into the listed company, which means all aspects of consideration would be prudent. This is clearly more beneficial for investors/shareholders.
Hygeia’s business model has proven to be replicable.The implementation of DRG policy has no significant impact on profitability. Hygeia is expected to have higher valuation than Aier/Topchoice in the future.


Hygeia Healthcare (6078.HK) - Profits Fell Short of Expectations, but the Outlook Remains Positive

Shanghai Haohai Biological Tec / Equity Bottom-Up

<ul>
<li>The General Office of the State Council issued favorable policy for TCM industry. However, TCM still has to face VBP, therefore <a href="https://www.smartkarma.com/entities/zhangzhou-pientzehuang-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:15709:1" rel="noopener">Zhangzhou Pientzehuang Pharmaceutical Co. (600436 CH)</a> and Gushengtang are our top picks..</li>
<li>Pfizer is in talks to acquire Seagen in a deal worth over US$30 billion, but we remain conservative about whether this transaction would ultimately bring expected contributions to Pfizer.</li>
<li>Haohai’s business model fails to bring ideal performance. Increasing competition/declining gross margin cast doubts on the outlook of medical aesthetics business. We’re not optimistic about its potential valuation upside.</li>
</ul>


The General Office of the State Council issued favorable policy for TCM industry. However, TCM still has to face VBP, therefore Zhangzhou Pientzehuang Pharmaceutical Co. (600436 CH) and Gushengtang are our top picks..
Pfizer is in talks to acquire Seagen in a deal worth over US$30 billion, but we remain conservative about whether this transaction would ultimately bring expected contributions to Pfizer.
Haohai’s business model fails to bring ideal performance. Increasing competition/declining gross margin cast doubts on the outlook of medical aesthetics business. We’re not optimistic about its potential valuation upside.


China Healthcare Weekly (March.3) - TCM New Policy, Pfizer to Acquire Seagen, Haohai Biological

China

Topchoice Medical Investment Corporation provides dental and oral health care services.

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Topchoice Medical (600763 CH)

Pre-IPO Malo Medical Management - Profit Model Is Not Mature; Future Expansion Is Worrying

Malo is still at early stage of development, with unsatisfactory gross margin, which would affect its profitability and expansion outlook in the...

Xinyao (Criss) Wang

Pre-IPO Shulan Health Management - Hard to Bring Investors Expected Returns Due to Poor Profit Model

Even with the endorsement of renowned academician Dr. Li Lanjuan, Shulan's profitability/national expansion ability remain a concern.Investors...

Xinyao (Criss) Wang

China Population Policies Impact on Healthcare Companies Series - Part 1

China's population problem is already very serious. So, the government has begun to take a series of measures to optimize fertility policies. We...

Xinyao (Criss) Wang

Hygeia Healthcare (6078.HK) - Profits Fell Short of Expectations, but the Outlook Remains Positive

It takes time for Hygeia to deliver stable/good profit performance considering its business nature. Due to its replicable development model, there...

Xinyao (Criss) Wang

China Healthcare Weekly (March.3) - TCM New Policy, Pfizer to Acquire Seagen, Haohai Biological

New favorable policy for TCM industry was released. We analyzed our top picks. Pfizer is in talks to acquire Seagen, but we're conservative about...

Xinyao (Criss) Wang

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