After the risk liquidation, where does the "certainty" of Fosun's new cycle come from?

Ask AI · How do Fosun’s innovative drug achievements support certainty in the new cycle?

Introduction: Fosun clears risks by 2025, with behind-the-scenes focus on core businesses and lightening the load, increasing certainty, and looking forward to a new cycle.

The just-passed 2025 was a “hurdle” for Fosun.

On March 30, Fosun International released its 2025 annual performance report, showing a book loss of 23.4 billion yuan, which surprised the market. But if we strip away the surface numbers, what we see is actually a company’s financial “risk clearance”: Fosun, following prudent financial principles, made a one-time non-cash impairment provision on real estate and non-core assets. This loss was almost entirely from non-cash impairments and did not affect the fundamentals and operations of the business.

In other words, this financial “slimming down” is Fosun shedding the baggage of the old cycle, further focusing on its core businesses, aiming to run more steadily and lightly in the new cycle.

From the warning of earnings in early March to the release of the financial report, Fosun International’s stock price rose nearly 20%, indicating that the capital market recognizes this approach. Several brokerages also issued research reports, suggesting that Fosun International’s valuation has room to rise and giving Fosun International an “overweight” rating.

Behind the Book Loss: “Clearing the baggage of history”

A closer look at the reasons for Fosun’s loss this time mainly involves the impact of the real estate downturn cycle, including revaluation of some real estate projects under its management, and goodwill and intangible asset impairments during the divestment of non-core assets. In fact, Fosun achieved revenue of 173.43B yuan in 2025, with an adjusted industrial operation profit of 4 billion yuan, maintaining a solid fundamental.

Overall, this is a one-time clearance of accumulated risks from the past, without affecting the company’s daily operations, cash flow, or business activities. Even after such a large impairment, Fosun’s adjusted net assets (NAV) still reached 133.5 billion yuan, with the true asset value remaining stable. Like renovating an old house, knocking down walls and replacing pipes makes a lot of noise, and the books record a renovation expense, but the load-bearing walls are still there, and the foundation remains untouched. Fosun’s core industries—pharmaceuticals, insurance, cultural tourism—are the load-bearing walls. The performance data shows that its four major core subsidiaries generated revenue of 128.24 billion yuan, accounting for 74% of the group’s total revenue. Fosun’s ongoing “industry focus” has already yielded clear results. Additionally, a closer look at the financial statements reveals that Fosun’s ability to generate cash remains strong, with core subsidiaries showing steady operating cash flows: Fosun Pharma’s net cash flow from operating activities was 5.21B yuan, Yuyuan Group 2.45 billion yuan, Hainan Mining 1.64B yuan.

As early as 2022, Fosun proposed a “slimming and strengthening” strategy to focus more on core businesses. After shedding the real estate cycle baggage this time, resources are no longer dispersed in non-core sectors but highly concentrated in advantageous sectors, sharpening Fosun’s development focus and continuously enhancing the competitiveness of its core businesses.

Even so, facing market doubts, Fosun chose the most direct response—its controlling shareholder and senior executives plan to increase holdings by no more than 500 million Hong Kong dollars, and the company launched a share buyback of no more than 1 billion Hong Kong dollars. In capital markets, nothing is more convincing than “insiders” putting real money on the table.

“Fixing the roof in sunny weather”: Achieving new and old kinetic energy conversion

What makes Fosun confident to “fix the roof in sunny weather” and buy back shares? The answer is that Fosun has completed the transformation of new and old kinetic energy, and the new kinetic energy can now support its future growth.

Innovation and globalization are becoming Fosun’s two most prominent growth engines.

Fosun started with PCR hepatitis B test kits, and has since made innovation R&D one of its core strategies. Over the past decade, Fosun has maintained high R&D investment, reaching 7.8 billion yuan in 2025. Taking Fosun Pharma as an example, its R&D expenditure in 2025 was 5.91 billion yuan, with over 70% invested in innovative drugs. Fosun Hanlin’s R&D spending was 2.49B yuan, an increase of over 600 million yuan year-on-year, all used for innovative projects. Additionally, Fosun actively embraces AI, launching self-developed medical AI platform PharmAID®, the world’s first full-scenario AI vacation assistant AI G.O, and actively capturing unicorn opportunities through PE/VC investments.

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Its global industrial operation network covering nearly 40 countries and regions provides strong momentum for Fosun’s development and has become a core competitive advantage. Since Fosun’s listing in Hong Kong in 2007, it has been among the earliest Chinese private enterprises to pursue globalization. By 2025, Fosun International’s overseas revenue reached 94.86 billion yuan, accounting for a record high of 55%, up nearly 5.4 percentage points from 2020.

Today, Fosun has entered the 3.0 era of globalization, shifting from “buy globally” to “profit globally,” moving toward a systematized global presence of products, services, and brands. For example, Fosun Pharma’s innovative drugs can now be listed in multiple overseas markets such as Europe and Southeast Asia. Core products like Hanlikang and Hanquyou from Fosun Hanlin have been approved and marketed in about 60 countries and regions worldwide. Yuyuan Group’s overseas expansion has achieved breakthroughs, with overseas insurance premiums in Portugal accounting for over 30%, and Hainan Mining actively deploying global resources. Fosun’s investments are being amplified by the deep synergy of global R&D, global production, and global markets.

The answer sheet of core enterprises: Innovation achievements entering the value realization cycle

In 2025, domestic innovative drugs exploded, and this year also marks the concentrated realization of Fosun’s innovation strategy achievements, with many core listed companies delivering impressive results and the new kinetic energy becoming more defined.

Fosun Pharma’s full-year revenue in 2025 was 41.5 billion yuan, with a net profit attributable to the parent of 3.37B yuan, up over 21% year-on-year. It also achieved multiple global bilateral licensing and co-development agreements, with potential milestone amounts exceeding 4 billion USD. As the absolute leader in the health sector, Fosun Pharma has shifted fully to innovation-driven endogenous growth, with innovative drug revenue increasing nearly 30% year-on-year to 45k yuan. Seven innovative drugs with 16 indications have been approved for listing domestically and abroad, six innovative drug applications have been accepted, and nearly 40 innovative drugs have received approval for clinical trials from regulators in China, the US, and Europe. Several core products have entered critical clinical stages.

Fosun’s biopharmaceutical innovation platform, Fosun Hanlin, achieved a net profit of 827 million yuan, with revenue and profit growing for three consecutive years. Besides HLX43, the world’s first PD-L1 ADC to enter Phase II clinical trials, several other promising blockbuster drugs are under development.

In the wealth sector, Portuguese insurance’s net profit exceeded 200 million euros, with over 30% of international business. Dingrui Reinsurance’s total premiums in 2025 grew 25% year-on-year to 2.2 billion USD, with a net profit of 190 million USD, achieving nearly 200 million USD in annual net profit for three consecutive years. Domestic, Fosun United Health Insurance and Fosun Prudential Life Insurance both saw significant increases in revenue and profit, maintaining profitability for many years. The stable insurance business contributes steady cash flow to the group.

The happiness sector also has highlights. Yuyuan Group activates consumption through scene innovation, with revenue around 36.4 billion yuan in 2025, with consumer industries as an absolute pillar, increasing their share to 72%. The Yuyuan Lantern Festival, as a phenomenon IP, attracted over 6 million visitors across six regions in China, with sales exceeding 1.2 billion yuan; overseas versions of the lantern festival entered Thailand and Vietnam, celebrating the 50th anniversary of China-Thailand diplomatic relations, successfully exporting Chinese cultural IP. Fosun Tourism also performed well, with annual revenue reaching 17.76 billion yuan, a record high, thanks to continuous improvement in global operations.

In manufacturing, Hainan Mining’s revenue grew 8.62% in 2025, with operating cash flow increasing nearly 18%. The new energy business achieved a crucial breakthrough from zero to one, with the Maribu Guni lithium mine producing 45k tons of lithium concentrate, the first batch arriving in Hainan Free Trade Zone, becoming the first “zero tariff” imported new energy mineral after the port’s customs closure, fully enjoying the policy dividends of the free trade port. Steady performance and clear strategic direction led Hainan Mining’s market value to increase over 64% throughout the year.

Lightening the load for the future: Multiple certainties anchoring a new growth cycle

What does the capital market value most? There may be many answers, but certainty is definitely one of them. After risk clearance, the market sees a clearer, more certain Fosun.

The 2025 performance report shows that Fosun International’s NAV per share reaches HKD 18.1, about 75% discount to the current stock price.

This certainty is multi-dimensional: financial burdens have been cleared, and the profit paths of the four major sectors—health, happiness, wealth, and manufacturing—are clear. Especially, the insurance business provides stable cash flow and long-term funds, and the results of innovation and globalization continue to be realized, making future growth promising.

At the March 31, 2025 annual performance briefing, Fosun’s management engaged in in-depth exchanges on market concerns. Chairman Guo Guangchang explained the impairment: “We are resolutely exiting assets with poor profitability and subpar value, focusing resources on high-growth core sectors.” He also admitted, “There will be short-term pain, but in the long run, all these efforts are to make Fosun more stable and farther-reaching.”

The continuous rise of Fosun’s stock price already reflects the market’s attitude. In March, multiple institutions such as Citi, UBS, and Guotai Haitong issued research reports, believing that with the realization of impairments and risk clearance, the company’s fundamentals are improving, profitability and dividend plans are clear, liquidity is manageable, and Fosun’s 2026 performance is expected to grow strongly, with an “overweight” rating.

Risk clearance, performance realization, and continuous achievement of innovation results, along with ongoing deep cultivation of global industries, suggest that the market’s valuation logic for Fosun will shift toward “innovation premium.” At the current bottom of the stock price, the upside potential will gradually unfold.

“Strive to gradually restore RMB 10 billion profit scale; aim to recover RMB 60 billion in funds at the group level; reduce total group liabilities to below RMB 60B, and strive to achieve an investment-grade rating,” Guo Guangchang stated in a recent letter to shareholders. It is reasonable to believe that Fosun, shedding burdens and lightening the load, will move steadily toward a new cycle of stable growth with greater certainty. As Guo Guangchang said, Fosun aims to “stand on the floor of value and dance with the cycle,” and in the future, “we will not chase short-term quick wins but build a long-lasting foundation.”