Fosun International Advances 'Unicorn Strategy' in 2016: Focus on Light-Asset Growth and Ecosystem Integration

Since its founding, healthcare has remained one of Fosun’s core business segments. After more than two decades of development, Fosun’s healthcare division has emerged as a leader in China’s pharmaceutical and health industry, establishing decisive competitive advantages in pharmaceutical manufacturing, drug distribution and retail, medical devices and diagnostics, and healthcare services. In a recent exclusive media interview, Liang Xinjun, CEO of Fosun Group, highlighted the company’s strategic objectives for the year: reducing its debt-to-asset ratio and focusing on organic growth. VCBeat has summarized the key points from the interview.

Fosun International, which has been preoccupied in recent years with overseas project expansion and large-scale insurance M&A, has achieved remarkable results. The scale of investable assets under its insurance subsidiaries has expanded more than tenfold, surging from RMB 13.4 billion in 2013 to RMB 160.4 billion in 2015.

Unlike the previous aggressive global expansion characterized by a “land grab” approach, Liang Xinjun, Vice Chairman and CEO of Fosun Group, stated: “This year, we will focus more on organic growth and reducing our debt ratio,” adding candidly that “this year’s performance growth will satisfy the market.” In short, Liang Xinjun is full of confidence that the company will deliver a satisfactory result this year.

Leveraging asset-light models to drive asset-heavy operations and reduce the debt-to-asset ratio is a key priority this year.

Liang Xinjun stated that this year’s performance would satisfy the market, as the company is reducing risk through debt reduction and boosting organic growth via a “leveraging” strategy. Liang explained, “We primarily leverage heavy assets with light assets. The Group will vigorously develop its light-asset strategy to harness the natural high leverage of insurance businesses; therefore, reducing the debt ratio is our key task for this year.” In 2015, Fosun Group’s net gearing ratio stood at 69.3%, reflecting a multi-year downward trend. Liang asserted, “There is no doubt that the net gearing ratio will decline even more rapidly this year.” Regarding debt reduction measures, Liang elaborated, “Fosun still holds hundreds of billions in equities on its balance sheet that can be divested. The proceeds from these sales can either be used to repay debts and mitigate risks or be recognized as profits. Hence, I believe this year’s financial performance will be robust.”

Focus on Endogenous Growth

Endogenous growth is the main theme for Fosun this year. Liang Xinjun pointed out, “Fosun has already reached a substantial scale; going forward, we will focus more on endogenous growth and aim to create several impressive case studies that will be remembered by the market.” Currently, 75% of Fosun’s total assets and 95% of its profits come from three major segments: Wealth (such as insurance and finance), Health (such as healthcare and elderly care), and Happiness (such as entertainment and tourism). The next task is to integrate the ecosystem chain and accelerate endogenous growth. Liang Xinjun cited an example: “For instance, United Family Healthcare is China’s most premium private hospital, belonging to the Health segment. By partnering with insurance companies to launch ‘United Family Insurance,’ which covers high-net-worth families served by United Family Healthcare, we have successfully integrated the Health and Wealth segments.” In addition, Fosun is vigorously advancing its “Unicorn” strategy. Liang Xinjun stated that the company aims to invest in and cultivate high-potential “unicorns,” such as Guahao.com and Zhejiang MYbank.

Deeply Integrated with the Internet

As the internet sweeps across the globe, Fosun has accurately seized investment opportunities, deeply integrated into the internet sector, and established a flat mid- and back-office structure within the group. “We are consolidating Fosun’s back-office functions—including human resources, finance, legal affairs, and audit—into a network platform called ‘Fosun Connect,’ enabling front-line business teams to access these resources on demand,” explained Liang Xinjun.Liang Xinjun believes that within the internet sector, Online-to-Offline (O2O) models hold the greatest potential and offer boundless business opportunities. In particular, offline resources in traditional industries can be revitalized once integrated with internet technologies. “For instance, our recent collaboration with Sinopharm to establish an internet-based O2O pharmaceutical cold-chain logistics company was driven by Sinopharm’s extensive offline customer base.”Furthermore, Fosun previously formed a strong partnership with China Merchants Group. “The two companies are highly compatible, especially given China Merchants’ global leadership in logistics and port operations,” Liang Xinjun pointed out. “If this sector undergoes O2O transformation, the potential for growth is immense.”Known as the “Chinese Buffett,” Fosun International has grown over more than 20 years since its founding in 1992 to become China’s largest private enterprise, with a market capitalization approaching RMB 100 billion. The group controls multiple listed companies and operates across diverse sectors, including healthcare, finance, insurance, real estate, and the internet, with investments spanning the globe. As a leading figure in China’s investment community, Fosun’s leadership views on markets and industries may serve as a bellwether for broader trends.

Regardless of the industry in which one invests, Liang Xinjun has always adhered to the principle that “timing is crucial.” For instance, when should one invest in the infant and child care sector within the health industry? Liang Xinjun points to data, stating, “Over 40% of China’s population was born in the seven years before and after 1963; the second baby boom occurred in the seven years before and after 1988; and the third baby boom arrived around 2015.” Therefore, the period around 2015 presented an optimal window for investing in the infant and child care industry, including products such as infant formula, diapers, and strollers. “Extending this logic further, adding six or seven years to 2015 brings us to around 2023, when children from the third baby boom would be entering primary school,” Liang Xinjun remarked with a smile. “By then, it would be time to invest in primary education!”

In recent years, Fosun has systematically structured its healthcare portfolio, focusing primarily on four areas: population aging, the baby boom, oncology, and sub-health conditions. Liang Xinjun pointed out, “Healthcare investment is by no means as simple as opening a few hospitals.” In December 2015, Fosun Hospital, a wholly-owned subsidiary of Fosun Pharma, invested RMB 250 million to jointly establish Wenzhou Geriatric Hospital with Wenzhou Traditional Chinese Medicine Hospital. This move targeted investment opportunities in the elderly care market driven by population aging. Fosun provided capital, while Wenzhou Traditional Chinese Medicine Hospital contributed medical expertise, talent, equipment, and other resources. The two parties achieved mutual benefits by leveraging physical medical entities to deepen their involvement in elderly care services.Regarding healthcare, Fosun also places significant emphasis on tapping into online resources. Liang Xinjun cited an example: “Guahaowang (now renamed WeDoctor Group), which we invested in last year, is expected to become profitable this year and is poised to become a unicorn soon.” Currently, WeDoctor Group is China’s largest mobile internet healthcare company. Additionally, Fosun has invested in platforms such as “Mingyi Zhudao,” “Yaoshibang,” and “Mommy Knows.”

Tourism has been a key area of heavy investment for Fosun in recent years. For instance, following the acquisition of Club Med completed last March, the company plans to open 15 new Club Med resorts in China over the next three years. According to Liang Xinjun, Club Med leverages its management expertise and ability to drive customer traffic to “unlock” the potential of underperforming tourism and vacation assets in China, such as ski resorts in Northeast China and holiday villages in Guilin. “This approach not only boosts local hotel occupancy rates and revenues but also allows Fosun to avoid heavy asset investments, creating a win-win situation.” Similarly, Fosun invested in Cirque du Soleil, the world’s largest live entertainment producer, last April. While building proprietary venues would be time-consuming and resource-intensive, many stadiums in China remain underutilized. By leveraging Cirque du Soleil’s resources to activate these idle stadiums, Fosun has again achieved a win-win outcome. In 2015, Fosun’s revenue increased by 27.6% year-on-year to RMB 78.8 billion, while net profit rose by 17.3% annually to RMB 8.04 billion. The investment and insurance businesses (both part of the “Wealth” segment) collectively contributed more than 60% of the group’s profits, amounting to RMB 2.93 billion and RMB 2.10 billion, respectively. In terms of growth rate, internet finance led the way. Although this segment recorded losses in 2014, it generated over RMB 100 million in profit in 2015.UnicornLiang Xinjun pointed out that the Internet is the focus of Fosun’s future development. Its key projects, such as Zhejiang MYbank and Cainiao, are also part of Fosun’s “Unicorn” strategy. For example, Zhejiang MYbank, in which Fosun holds a 25% stake, primarily provides financial services to small and micro enterprises and individuals through the Internet. Since its launch in June 2015, it has achieved remarkable results within just a few months. Currently, it serves over 800,000 small and micro enterprises, with cumulative loans reaching RMB 16 billion, and a non-performing loan ratio below 0.5%. In addition, Fosun has ventured into innovative finance and overseas financial platforms, covering factoring, financial leasing, corporate credit reporting, and other areas.

Source: Hong Kong Economic Times