Citigroup reaffirms "buy" rating, profit growth can be expected for FOSUN INTL (00656)

This week, Citibank will hold the 2026 Pan-Asia Conference and will hold a strategic meeting with FOSUN INTL (00656) on May 19, followed by the release of the latest research report, reiterating a "buy" rating on FOSUN INTL with a target price of 5.6 Hong Kong dollars. Previously, Fosun, based on prudential principles, made a one-time non-cash impairment provision in the 2025 fiscal year for some real estate projects and non-core business units with signs of impairment, in order to better focus resources and investments on core high-growth areas. Citibank believes that the management has sent a clear signal, the impact of impairment has been digested, and does not involve debt covenant breaches. In the research report, Citibank pointed out that Fosun Health and Insurance business have performed well, and the Happy sector has shown signs of recovery as tourism and consumer-related businesses gradually resume. Since April, Fosun's A-share subsidiary companies have disclosed their first-quarter 2026 performance, showing a significant recovery in profitability after risk elimination. The core sectors of pharmaceuticals, insurance, cultural tourism, and consumption have shown strong overall growth. In the first quarter, Shanghai Fosun Pharmaceutical's revenue was 10.073 billion yuan, and net profit attributable to shareholders was 871 million yuan, with a year-on-year growth rate of 21.96% if non-recurring gains and losses are excluded. The innovative drug HLX43 is accelerating global clinical trials, with a potential market size of tens of billions of dollars. In terms of insurance business, Fosun Prudential Life Insurance disclosed its solvency report for the first quarter of 2026, showing that insurance business income reached 4.47 billion yuan, a year-on-year increase of over 77%, and continued profitability. In cultural tourism and consumer businesses, Shanghai Yuyuan Tourist Mart achieved operating income of 9.649 billion yuan in the first quarter, a nearly 10% year-on-year increase; net profit attributable to shareholders was 157 million yuan, a significant year-on-year increase of 203%. Fosun's Club Med and Sanya Atlantis businesses have shown strong performance during the Spring Festival and May Day holidays. During the May Day holiday, the number of inbound tourists to Sanya Atlantis Resort increased by 90% compared to the same period last year; Yunnan Lijiang Mediterranean International Resort received over 30,000 visitors, with an overall revenue increase of 11% year-on-year; Club Med Mediterranean Club's total revenue surged by 6% year-on-year; and Alpensia Ski World saw a 30% year-on-year increase in customer flow. On the financial side, Citibank is optimistic about Fosun's continuous optimization of its capital structure, and the acceleration of valuation recovery through active deleveraging and disposal of non-core assets. Fosun's management has explicitly stated that it will continue to take multiple measures to make the group's asset portfolio lighter and more transparent, accelerating valuation recovery. The company will reduce interest-bearing debt at the group level to below 60 billion yuan by accelerating the sale of heavy assets and non-core subsidiaries, and actively explore the possibility of non-public assets participating in the capital market. Furthermore, Citibank emphasized that Fosun's major shareholders and management plan to collectively increase their holdings by no more than 500 million Hong Kong dollars, and the company will implement a buyback of no more than 1 billion Hong Kong dollars, demonstrating full confidence in future development. Management also expects cash dividends for 2026 to be no less than 1.5 billion Hong Kong dollars, and the dividend payout ratio will increase from 20% to 35%, with the aim of further increasing the dividend payout ratio in the future. Previously, Goldman Sachs, UBS, Haitong Securities, and CITIC SEC also published research reports being optimistic about the valuation recovery prospects of FOSUN INTL. Brokerages generally believe that with the completion of impairment provisions and the clearance of historical burdens, Fosun's profit and dividend plans are clearer, liquidity remains under control, and the company is undergoing a value reevaluation. With the comprehensive improvement in the first quarter performance of its subsidiaries, it confirms Fosun's growth logic after the risk is cleared. Overall, Shanghai Fosun Pharmaceutical's core businesses such as health, insurance, and finance are stable, while its cultural tourism and consumer sectors are steadily recovering, and the growth momentum of FOSUN INTL is expected to continue to be unleashed.