Summary of Fosun Pharmaceutical Conference Call Company Overview - Company: Fosun Pharmaceutical - Industry: Healthcare, specifically focusing on innovative drugs and biopharmaceuticals Key Points and Arguments Turnaround Potential - Fosun is expected to experience a turnaround with improved profitability across all segments, particularly in innovative drugs [1] - The innovative drug portfolio is considered underappreciated, and divestment of non-core assets is anticipated to enhance financial stability [1] Market Performance - Fosun Pharma's A-share has underperformed compared to peers, with a year-to-date increase of only 29% versus MSCI China healthcare's 74% [2] - The H-share has increased by 86%, primarily due to a narrowing A-H premium, which decreased from 62% to 34% [2] - The subsidiary Henlius has surged by 274% year-to-date, indicating strong market performance in innovative drugs [2] Management Changes and Growth Targets - A new chairman was appointed in June, and a 2025 employee stock ownership plan (ESOP) was announced, targeting a 20% net profit CAGR and 19% sales CAGR for innovative drugs from 2024 to 2027 [2] - This guidance suggests potential upside to street estimates and is expected to drive a meaningful turnaround [2] Valuation Insights - New drugs are projected to drive 68% of Fosun's valuation, contributing to 45% of total drug sales by 2030, up from approximately 30% in 2025 [3] - The innovative portfolio of Henlius is valued at Rmb72 billion, with significant contributions from core drug candidates [3] Financial Strategy - Management has focused on reducing high debt levels by divesting non-strategic assets, achieving a return of approximately Rmb5 billion from asset sales in 2024-1H25 [4] - A commitment to Rmb3 billion in annual capital returns over the next three years is expected to improve capital structure and resource allocation for innovation [4] Share Rating and Price Target - A recommendation to upgrade A- and H-shares to Overweight (OW) with price targets raised to Rmb42 for A-shares and HK$33 for H-shares [5] - Projected 20% net profit growth in 2025 and a 20% CAGR for 2025-2027, driven by an 18% CAGR in new drug sales from 2025 to 2028 [5] R&D and Pipeline Developments - Fosun's internal R&D team has been re-prioritizing pipelines, focusing on high-value projects while discontinuing less promising ones [29] - Recent out-licensing deals indicate a strong R&D platform, with potential for significant market opportunities in various therapeutic areas [31] Subsidiary Performance - Henlius, holding a 63.4% stake by Fosun, is crucial for Fosun's valuation, contributing significantly to new drug sales [44] - Other subsidiaries like Gland Pharma and Sisram are also expected to show improvement, contributing positively to Fosun's growth [44] Financial Forecasts - Revenue forecasts indicate a gradual recovery, with new drugs expected to account for an increasing share of total sales [48] - The overall valuation framework suggests that innovative drugs and biosimilars will be the primary drivers of growth moving forward [45] Additional Important Insights - The market has not fully recognized the improving growth prospects of Fosun, which is seen as a mixed bag due to its diverse segments and past earnings challenges [10][11] - The company is strategically focusing on enhancing R&D efficiency and resource allocation to bolster its innovative capabilities [30] This summary encapsulates the critical insights from the conference call regarding Fosun Pharmaceutical's current status, future prospects, and strategic initiatives.
复星医药:转机在望;将 A 股和 H 股评级上调至增持