Fosun's Path to Globalization Cultivates Scarce Capabilities

There are two paths to globalization: one focuses on cost-effectiveness, exporting products, services or production capacity. The other, chosen by Fosun International (HKEX: 0656), is to become a truly global enterprise with a global vision – global presence, global operation and global development.

Recently, Guo Guangchang, Chairman of Fosun International, stated at the 2024 Fosun Semi-Annual Working Meeting that after more than 30 years of development, Fosun has become one of the few companies rooted in China with capability to operate globally.

The globalization journey of Fosun started with its listing in Hong Kong in 2007. Since then, it has spent 17 years forging unique globalization capabilities, transforming them into stable profitability and growth, and building a deep “moat”.

In 2023, Fosun International’s businesses spanned over 35 countries and regions, with overseas revenue reaching RMB89.2 billion, accounting for 45% of total revenue. The compound annual growth rate of overseas revenue over the past decade has reached 55%.

It is noteworthy that only very few Chinese companies can achieve such a global business scale and with such strong global operational capabilities like Fosun, while maintaining rapid growth and stable profitability.

How did Fosun achieve this?

Global Operations Beyond Simple “Going Global”

Today, Chinese companies have advanced their global expansion, embarking on the path of brand building.

Fosun International is a prime example of a Chinese private enterprise that went global early on and boasts mature operations with unique globalization capabilities.

In recent years, Fosun has undergone a powerful strategic transformation, focusing on its core businesses and continuously strengthening its industrial operation capabilities and advancing its globalization strategy. Its positioning as a global innovation-driven consumer group has become increasingly clear.

This explains why, in over 35 countries and regions around the world, people are likely to encounter Fosun’s products and services in various family consumption scenarios.

Obviously, Fosun has achieved true global operations, serving local customers all over the world. This goes far beyond the traditional, simple “going global” model.

How did Fosun do it?

From “Prospecting” and “Exploration” to “Deep Mining”

Fosun’s early overseas strategy was to “combine China’s growth momentum with global resources”, capitalizing on the rise of the Chinese consumption sector by “bringing in” high-quality overseas brands and products to achieve rapid growth.

Later, with China’s industrial upgrading, Fosun began exporting products and services to the world, particularly to emerging markets such as Africa and India. Its globalization strategy also evolved into a “mutual empowerment between China and the world”.

Today, Fosun has taken a step further to forge a unique globalization model - “Global Organization + Local Operations”, fostering cross-regional, cross-cultural and cross-organizational operation capabilities of Fosun’s global business ecosystem, thus providing new impetus for the enhancement and expansion of Fosun’s industry operations and business presence based on the characteristics of different countries and regions.

This is a qualitative leap in terms of globalization capabilities and in the process of evolution, Fosun has also formed two scarce capabilities.

The first is the ability to discover high-quality overseas businesses and acquire them through mergers and acquisitions. In Fosun’s words, this is called “prospecting” and “exploration”.

Identifying a good “mine” (asset) is no easy task.

Taking Fidelidade as an example, Fosun acquired an 80% stake (currently 85%) in the company in 2014 for over EUR1 billion. Previously, Fidelidade’s business market was relatively narrow, and its asset allocation was mainly focused on government bonds, making it less resilient.

Fosun’s role is more than just an investor. It has empowered Fidelidade with its vast global business network and resources, assisting Fidelidade to accelerate its global operations, especially its expansion in Latin America, to increase business scale and balance single-market risks.

Currently, the proportion of Fidelidade’s overseas gross written premiums has increased from 6% in 2017 to 33% in 2023, with a compound annual growth rate of 39% from 2017 to 2023.

Among them, Fidelidade has expanded most rapidly in Latin America, ranking first in market share in Bolivia and third in Peru.

Fosun has also empowered Fidelidade with its leading global investment capabilities, helping it continuously optimize its asset allocation structure.

As of December 2023, Fidelidade invested in corporate bonds, government bonds, other fixed-income products, real estate, and equity assets, accounting for 40%, 19%, 10%, 15%, and 10% of its AUM (assets under management), respectively. Its investment regions span Europe, North America, Latin America and Asia Pacific.

Clearly, its investment structure has achieved diversification and internationalization. From various indicators, Fidelidade is a rare and top-tier overseas asset.

Since then, Fosun has continued to “mine” in Portugal, investing in Luz Saúde, one of the country’s largest healthcare service groups, and Millennium BCP, the largest listed non-state-owned bank in Portugal, forming an “ecosystem synergy” between high-quality assets.

Fosun’s vision for “prospecting” and “exploration” is truly outstanding.

The second scarce ability is Fosun’s strong global operational and innovation capabilities, or the ability to “deep mine” and “mine well”.

For Fosun, it is more important to add value to the businesses it acquired, multiply asset returns, and make investments more worthwhile.

For example, Club Med, the global all-inclusive resort brand originating from France, officially joined Fosun in 2015 and has since blossomed across continents. In South America, Club Med has successfully seized growth opportunities, making Brazil its second-largest market globally by business volume. In North America, the newly opened Club Med Quebec Charlevoix in 2023 drove a 15.6% year-on-year increase in business volume for the entire region. In Asia Pacific, Club Med has established four snow resorts in Hokkaido, a popular ski destination, attracting a large number of tourists from Southeast Asia and China. In China, Club Med has grown from scratch to 11 resorts, becoming the world’s second-largest source market.

Another example is Fosun Pharma’s subsidiary, Shanghai Henlius, which has developed the ability to leverage the speed and cost advantages of clinical trials in China, the US, and the EU, accelerating applications in markets around the world. This approach goes far beyond simply exporting a single innovative drug.

Only in this way can it better meet global production quality and commercialization standards, bringing substantial returns.

In 2022, Shanghai Henlius licensed two independently developed monoclonal antibody biosimilar drugs to renowned biopharmaceutical company Organon. This licensing deal alone is expected to bring in potential revenue of approximately USD541 million, setting a new record for out-licensing of biosimilar drugs globally in the past five years.

This demonstrates the immense potential that Fosun’s global operations capabilities bring.

Stable Profitability Supports Market Revaluation

As a global company with its roots in China, Fosun possesses capabilities that are extremely scarce among Chinese enterprises, solidifying strong profit expectations and a solid safety cushion.

As Guo Guangchang said at the 2024 Fosun Semi-Annual Working Meeting, “In the future, Fosun will continue to firmly advance its globalization strategy, transforming its globalization capability into sustained profit growth.”

This expected profit growth stems from the global industrial ecosystem that Fosun has built by continuously focusing on its industries and strengthening its industrial chain.

It is noticeable that after 17 years of globalization, Fosun has entered a season of bountiful harvest, with its successful cases of “going global” as below:

- Club Med continues to expand its global market and has become one of the most important sources of revenue and profit for Fosun Tourism Group (FTG). Recently, FTG has announced a profit alert, expecting its profit attributable to equity holders of the company in the first half of 2024 to be no less than RMB300 million. Undoubtedly, Club Med should have made a significant contribution.

- Fidelidade has experienced rapid growth in its global operational capabilities and profitability after joining Fosun, achieving a net profit of EUR180 million in 2023.

- Fosun Pharma invested RMB5.937 billion in R&D in 2023, ranking third among listed pharmaceutical companies on the A-share market and placing it in the top tier of innovative pharmaceutical companies alongside Jiangsu Hengrui and BeiGene. In the first quarter of 2024, it achieved revenue of RMB10.157 billion and a net profit attributable to the owners of the parent company of RMB610 million.

- Shanghai Henlius became the first profitable “18A” biopharmaceutical company on the Hong Kong stock market in 2023, achieving a net profit of RMB546 million for the year.

These are the result of Fosun’s years of efforts. These also demonstrate Fosun’s unique global integration and innovation capabilities, which are continuously being transformed into stable profitability.

In addition, the world’s leading da Vinci surgical robot, under the support of Fosun Pharma, has embarked on the path of localization by combining the advantages of China’s local supply chain and manufacturing capabilities, further enhancing its global competitiveness.

Yi Kai Da (ejilunsai injection), a CAR-T cell therapy product introduced through Fosun Pharma’s collaboration, became the first CAR-T product approved for marketing in China. In the past three years, this innovative therapy has benefited over 700 lymphoma patients in China.

Easun Technology, a subsidiary of Fosun, is also an outstanding example of global integration and innovation. In 2023, Easun Technology seized the opportunity presented by the restructuring of the global automotive industry, securing new overseas orders worth RMB6.3 billion, a significant increase of 62% year-on-year.

These cases demonstrate that Fosun’s globalization capabilities will ultimately be recognized by the capital market.

“Different member companies and business units have different levels of global presence and capabilities,” said Guo Guangchang. “We hope that each one can excel, not only in conventional overseas markets but also by building capabilities in the Middle East, Latin America, Southeast Asia, and Africa.”

Fosun has acted swiftly in this regard. The latest news is that the first Club Med resort in the Middle East will be located in Oman. Fosun Pharma is stepping up its registration efforts in emerging markets, aiming to rapidly establish product portfolios in Africa, the Middle East, Southeast Asia, and Latin America within 2 to 3 years.

On 6 June, the first batch of Shanghai Henlius’ HANQUYOU (China-developed monoclonal antibody biosimilar approved in China, the EU and the U.S.) was shipped from Shanghai to Saudi Arabia, following the successful launch of its first self-developed innovative anti-PD-1 monoclonal antibody HANSIZHUANG being approved for marketing in Indonesia.

Sisram Medical has chosen the Middle East as a starting point for its medical aesthetics business, and then achieved significant expansion in Asia Pacific and North America.

These substantial achievements fully demonstrate the globalization gene has been deeply embedded in various sectors of Fosun, driving its long-term growth.

In the past few years, the volatile internal and external environment, with frequent “black swan” events, has led to many transforming and upgrading Chinese large scale enterprises facing rare cold receptions in the capital market, with their stock prices fluctuating dramatically.

Investors are eager to know what is driving the future growth of these large enterprises.

Fosun’s globalization capabilities provide an insight. Through firmly adhering to its focus strategy, Fosun has not only achieved globalization in its four core areas of pharmaceuticals, tourism and culture, consumption, and insurance, but also achieved steady profit growth. These core areas are promising industries worth cultivating. More importantly, they can act as “stabilizers” during market turmoil and act as “amplifiers” of performance growth in favorable market conditions.

It is certain that Fosun International has greater stability and growth potential compared to any single industry.

In 2024, in the face of the complex global macroeconomic environment and the unprecedented changes in the world, there is a new wave of Chinese companies “going global”. They may face headwinds and obstacles along the way, yet the integration and opening-up of globalization is an inevitable trend. Despite the thorns ahead, Chinese companies should move forward courageously.

Undoubtedly, profound global operations are extremely scarce capabilities, crucial for the survival and development of enterprises. As a pioneer in the globalization of Chinese enterprises, Fosun possesses a profound global business presence and a strong global operational capability, it has proven that it is on the right track and is progressing steadily and boldly.