Fosun International: FY25 a Year of Reset; Significant Net Losses as Pre-Warned
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UBS published a first-read analysis of Fosun International (0656.HK), characterizing FY2025 as a reset year after the company reported a widened net loss of RMB 23.4 billion, up from RMB 4.3 billion in 2024. This significant loss aligns with the profit warning issued in March and was primarily driven by non-cash impairment provisions related to real estate and non-core businesses, including Yuyuan, Baihe Jia yuan, and St Hubert.
Stripping out these impairments, industrial operating profit remained stable at RMB 4 billion, flat year-on-year. The debt-to-capital ratio increased from 52% to 57.1% due to the substantial reserves reduction, though financing costs decreased, and liquidity remains manageable. Sector performance was mixed: the Health segment saw a 59% profit increase, while the Happiness and Smart Manufacturing segments suffered deep losses due to asset write-downs.
Management aims to clear legacy issues, accelerate non-core asset disposals, and focus on profitable growth, targeting an annual profit of RMB 10 billion and holding company debt reduction to achieve an investment-grade rating eventually. The company suspended its FY25 dividend but plans to increase the payout ratio to 35% for FY26, committing to a minimum distribution of HK$1.5 billion. UBS assigns a Neutral rating with a 12-month target price of HK$5.40, applying a discount to the 2026E net asset value via a sum-of-the-parts valuation.