Goldman Sachs Reiterates "Buy" Rating on Fosun, Recognizing Fosun’s Core Business-focused Strategy and Healthy Recovery of Core Businesses

HONG KONG SAR - Media OutReach - 12 September 2023 - Fosun International Limited (HKEX stock code: 00656, "Fosun International" or the "Company"), together with its subsidiaries ("Fosun" or the "Group"), announced its interim results at the end of August 2023. Goldman Sachs recently published a research report, recognizing the healthy recovery of Fosun's core businesses and expressing its bullish view on Fosun's strategy of focusing on the development of core businesses where it boasts clear competitive advantages. Goldman Sachs assigned the Company a target price of HK$7.7, with approximately 57% upside.

Goldmans Sachs pointed out that Fosun International's 2023 interim results was in line with its expectations, the Group achieved a total revenue of RMB97.06 billion, representing a year-on-year increase of approximately 11%; the key indicator reflecting the Company's operational capabilities - industrial operation profit, if excluding the profit of disposed enterprises (including transactions yet to be completed), representing a significant year-on-year increase of 66%, demonstrating significant improvement in the profitability of core businesses. Taking Fosun's Happiness segment as an example, Fosun Tourism Group (FTG) and Yuyuan saw a strong recovery. Goldman Sachs pointed out that the net profit improvement was mainly attributable to profit turnaround from FTG with solid recovery in Club Med and Atlantis Sanya; and the notable net profit growth for Yuyuan (a year-on-year increase of 226%) was driven by Yuyuan's jewelry and fashion business (a year-on-year increase of 35%).

Goldman Sachs said while acknowledging the continued challenges from the macro environment such as weak consumption sentiment, geopolitics, higher interest rate, Fosun has proactively implemented its business streamlining and core business-focused strategy, centering family consumption, and enhancing asset-light operations, therefore, Fosun's management is optimistic for the Company to weather through economic cycles. Goldman Sachs also recognized Fosun's efforts in the disposal of non-strategy and non-core assets and its active efforts in exploring financing channels, thereby maintaining a steady debt to capital ratio. As of 30 June 2023, Fosun's cash and bank balances and term deposits were abundant, reaching approximately RMB115 billion, its total debts to total capital ratio was 51.8% and the average cost of debt was around 5.3%, maintaining at a manageable level. In the first half of 2023, cash inflow from divestment amounted to more than RMB14.0 billion at the holding company level and more than RMB20.0 billion at the consolidated level. In January 2023, Fosun High Technology successfully entered into a syndicated loan agreement for an amount of RMB12 billion with eight domestic banks. As of 30 June 2023, the Group had no material offshore bonds due in one year.

Looking ahead, Goldman Sachs believed that after divesting its non-strategy and non-core assets, the Group would be able to focus more on its core businesses and empowering its subsidiaries to further improve underlying business performance in coming years. The firm sees value at the current level and looks for more signs of execution on deleveraging and earnings recovery, therefore it maintained its Buy rating on Fosun.

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