Fosun International Ltd

HKEX:656

Earnings Call Transcript 2019-Q2

[Unknown Executive]

[Interpreted] Dear shareholders, investors, analysts, banks, rating organizations and friends from the media, good morning. Welcome to the 2019 Fosun Interim Results Release. My name is [ Jeff Guo ]. And please allow me to introduce to you the leaders here: the Chairman of the Board, Guo Guangchang; and Executive Director and CEO, Wang Qunbin; Executive Director and also the Chairperson of Fosun Medical, Changying; Executive Director and Co-CEO, Xu Xiaoliang of Yuyuan; and Senior Executive and Chief Development Officer, Wang Can; and SVP and Vice Chairman of Yuyuan, Gong Ping; and Chair and VP of Fosun International, CEO of Fosun Hive and Vice Chairperson of Yuyuan.

So we have prepared the simultaneous interpretation. If you want to use this service, you can get it right.

So first, our executives will introduce the performance in the first half of the year, and then we'll have the Q&A.

So first, let's welcome Mr. Wang Qunbin to share with us the review and highlights.

[Qunbing Wang, executive]

[Interpreted] Dear shareholders, investors, partners, friends from the media, dear guests, good morning. First of all, I would like to say welcome to 2019 interim results release. And I just want to thank everyone for your care and support, and I want to thank friends viewing the live stream for your care and support for Fosun. And today, we are here to report the 2019 interim results and also the future development opportunities.

First of all, please allow me to introduce to you the highlights and also the business review of first half of the year. Fosun International is a technology-driven family consumer group. Despite difficulties in the first half of the year in respect of the macro economy in the world, we still got very good results. For a lot of parameters, we have broken the historical records and we often adhere to the principal of CNY 7.61 billion, up 11%. And as for our industrial operating profit, the number reached CNY 6.12 billion, up by 52%.

And as for the return on equity, the ratio is 13.6%. In the last few years, from 2014 to 2019, the average ROE was 13.4%. And as for the Hong Kong Exchange, ROE was only more than 6%. And for our leverage ratio, 53.2%. So we have often adhered to a very stable and healthy leverage ratio. And for the first time that we used the -- we adopted the interim dividend, now the ratio is HKD 0.13 per share.

Now let me introduce to you the business. So we are a technology-driven family consumer group. So the income focusing on the family consumers have grown continuously. Last year, the total revenue 5-year CAGR has reached 16%, and as for the 2C revenue 5 year CAGR, it has reached 36%. And as for the first half of 2019, the 2C revenue growth, year-on-year growth, was 52%. And then for the 2C revenue out of total revenue in 2019 first half, the ratio is 81.5%.

And as for our different sectors, first for health, since we focus on the family consumer, we provide the health and happiness and wealth. For health, the first half of the year, the year-on-year growth was 18%, and we did achieve some breakthroughs. For example, the first original biosimilar Hanlikan was now in the market and also for our small molecule treatment for breast cancer, we have got the FDA innovation drug approval fast tracked. And then for our cell treatment for the treatment of the CTX and hPRC cell therapy, we have got the exclusive license agreement. And also, we have achieved with more than 200 medical institutions the cooperation on AI medical corporation, and later, we will see the presentation on that.

Then for Happiness, the Y-o-Y growth of the first half of the year has reached 128%, stunning growth, historic. And also, Li Gao Lu was widely popular. And also for Atlantis, the revenue has reached CNY 656 million. And also for Wolverhampton Wanderers, we not only got very good ranking but also got quite a lot of profit. So for Happiness, later Xue Linnan will introduce to you about that sector.

Then for wealth business, it's mostly about consumption of finance. And for our insurance, we have initialized the digital transformation. So we have roughly 7%. So in wealth, H&A also had a successful digital and intelligent transformation. Our profitability ranked [ #1 ], and also we have acquired the FFT GmbH & Co., the world's leading provider of flexible, automated production line solutions. And now it's running smoothly. And that was the business review and highlights. And we note that wealth business had been growing pretty fast, up by 32%, reaching CNY 21.5 billion.

Since we focus on family customers to provide the 3 businesses, the number of customers continued to grow. And among that, the total number of our members, which means digitalized customers, the number of that has reached 340 million and a lot of customers are now being transformed digitally. So for Yuyuan, now every year we have the number of customers up to 15 million, and we know that there is still room for digitalization.

And as for our key products and brands. In the last 12 months, for the number of products with revenue over CNY 100 million, the number of that has reached 100-plus; and number of products with revenue of over CNY 1 billion, more than 10 products; and number of brands with the revenue over RMB 10 billion, we have 2: one is Club Med and the other is the gold brand -- the gold jewelry brand.

And for Fosun Group, since we focus on family customers, we need to build characterized and innovative products and brands. On the other hand, among our products, we do have a lot of synergies in our ecosystem. So in health, happiness and wealth, we have formed some compounded and integrated innovative products. For example, health plus insurance; or for example, the medical service plus insurance; and for example, the genetic testing plus insurance; and also, for example, the health and recovery plus insurance; and also, we have like marriage plus jury, and also FOLIDAY plus AHAVA.

So in the future, the compounded and integrated innovative products, extension and innovation to supplement to our portfolio. For example, for health, we've got 2 cell treatment therapies.

And also for happiness, we have invested in the renowned gemological colleges and certification institute, as IGI, to strengthen our product capability in happiness and fashion. And also -- we have also invested in launch for the pet food. We have become the exclusive Chinese distributor of Hills, the world's top pet prescription food brand.

And then for wealth, we also strengthened our product portfolio in Latin America by the acquisition of La Positiva. And then for our technology and innovation, we still adhere to the principle of technology-driven.

So around the 3 sectors of health, happiness and wealth, we adhere to the principle of 30% profit before tax. We invest that much in the technology and innovation. We focus on the competitive products through R&D, for example, the biomedicine and fintech. And also the competitive products through the design, for example, jewelry, fashion, apparel and creative fashion. And also, we use competitive product -- we also focus on competitive products through incubation, investment and BD, for example, biosimilar, medical technology and cell therapy.

The other important part is the AI-driven mid-office. We would fully invest in computer-driven technologies and scientific innovations: AI, big data, IoT and SaaS, so that our services and products will actually bring the ultimate experience for our users.

We still adhere to our strategy to globalize around the world in the developed countries. In the emerging countries market and the major cities, we all have our business and our team.

Now globally, you can see that 57% of our sales revenue comes from China, including Hong Kong SAR and Greater China region, 43% -- actually 27% comes from Europe, Africa and Middle East; 11% is from America, South America, North America; and 5% from other countries. We will continue to stick to our globalization strategy in the future.

In the meantime, at Fosun, we're continuing on evolving our FBS, which is Fosun Business System. Through the FBS, through the different mid-offices, we will leverage the computers, the AI system, to drive the development.

On the one hand, for our clients, we provide better products, specializing wealth, happiness and health. On the other hand, for our customers, we can actually better feed back their demands to all our organization. With such a system, FBS is actually enabling our employees much better. We also have the employee interfaces so that our employees will provide better services for the customers and to create value for the customers and for the organization. Of course, this kind of system is being evolved.

As for organization development, I think the key lies with talent. The talent at Fosun has an important characteristic, globalized and local. We have an important model, which is the global partner model. Now we have more than 50 global partners. And in the meantime, we also have partners in different internal groups.

As for the global partner model, need to expand through our production line, need to expand through the major projects and major functions and the major regions. We are evolving and deepening this model so that between the global partners, using this model, our key teams will better supplement each other to have better teamwork and to provide better support for a fast evolving of our organization and to create added value for that.

We have highlighted over and over again, our business is driven by technology, and it is centered with family customers. In process of development, we will always adhere to the stability, development. It means that we will constantly improve our ratings, and we will stay efficient. For Fosun International and for the companies we invest, ROE can be guaranteed for more than 50%. On the other hand, we also would like to see very good growth.

And that concludes my presentation. Now I would like to invite the CFO, Xue Linnan, Thomas, to report to you on some financial figures. Thank you very much.

[Linnan Xue, executive]

[Interpreted] Thank you, Qunbin Wang, for reporting on the review of Fosun International and also talked about the highlights. And now I would like to report to you about the 2019 first half financial standards.

In the first half, actually, we know that the environment is full of challenges. At Fosun International, our company's core business is family customers in the wealth, happiness and health. We try to provide good products and to have deep operation.

As for the revenue, we have seen a major growth. And we have seen 18% of growth in the health business. And in joy, we saw a 128% growth year-on-year. In wealth, we saw -- witnessed a 32% of growth year-on-year. And we see that the major 8 production lines are also presented to you now. And you can see that in the 8 production lines, the pharmaceuticals accounts for 66% of growth, and medical and health service (sic) [ medical equipment and diagnosis ] accounts for 11%, and the medical and health service accounts for 23%; the branded consumer goods for 29% -- for 71%, and tourism and culture accounts for 29%, and that includes the jewelry strategy of our company.

And the major growth comes from internal, say, internal growth, for example, organic growth. This is from the reorganization of Yuyuan and [indiscernible], the La Positiva acquisition, and this is also an important project, and that has played an important contribution to the growth of these 3 -- this part.

This year, we can see that, for the first time, we're listing the top 5 subsidiaries. And from this slide, you can see that it's the first time we show this, so that we can help you to understand better of the revenue structure.

The top 5 subsidiaries: you can see Fosun Pharma, Yuyuan, FTG and Fosun Insurance Portugal and the Peak Reinsurance. These companies, you can see that their revenue has increased by double digits, and the average growth was 32%. And in this field, we will continue to deep dive. In the future, we're going to actually reveal more information with you.

And now let's take a look at the profits breakdown by core business. In health, this year, the profit was CNY 900 million, and that was a 4% growth year-on-year. And in happiness, in the future, most of the profit will be from our business coming from the business operation from wealth and health and happiness, these 3 sectors.

And in terms of the stability of our products, of our assets, we also attach great importance, and our leverage ratio was 53.2%, and it has actually dipped compared with the numbers from last year. We anticipate balance between the 2 and to maintain a stable leverage ratio and to improve the profit level.

And we can see that the rating, the profit attributable to owners of the parent was 22% growing. And we saw that the 5-year CAGR book value per share was 15%.

In terms of stakeholder return, the management of Fosun has considered ROE as the major indicator. We can see that from 2018 to the first half of 2019, the average ROE was 13.6%, which is much higher than that in the Hong Kong market, but it still far from satisfactory. We set a target at 15% for our subsidiaries. And therefore, in terms of marketing and innovation and our R&D, we will continue to increase our investment and bring the ROE to higher than 15%. And we have seen that the ROE of Fosun International has been increasing.

And it is the first time to have the products we are working on. And the first original Chinese biosimilar, Hanlikan was approved. Now it's in the market. Now the sales work is as expected. ReNeuron stem cell treatment, 2 products, and it's for the post-stroke recovery and the retina treatment. We have got the right to continuously conduct the R&D for Petrobras in China. And then for the medical device and diagnosis, the revenue grew by 9.3%. And then for Shanghai Technology, the AI medical company, we have achieved the intent, and we have now cooperated with 200 organizations in China. And the generation for da Vinci operation robot, Xi is now in the market.

And last year, at the end of the year, the national authority has given the quota, and this year, the quota is being released now. Therefore, medical and health service -- the service in China grew by more than 21%; and for our Chancheng Hospital, it ranked #1 2 years in a row. And also for Harmony home health, we have got congress and also the health management in consumers' product, so we formed the twin drive of science and consumer.

And we have formed the mutual supplementation inside [ this fission ]. We cover from biosimilar to the new immunology drug and also the small molecule to the gene editing to medical devices. We have formed a quite strong full series pipeline. And then for the JV introduction, we have cooperated with Intuitive to have this operation robot company. And also, we have formed the Fosun Kite.

And then in BD introduction, in the small molecule to biopharmacy, to the immunology, the device and also diagnosis in stem cell, we have also introduced a lot of products. And we as a company of ecosystem, we have a big advantage. We can have the co-movement on a cross-technology platform level. So for example, we can have joint medicine. For example, for the Henlius, we have the big molecule. And now we can have the co-use of drug of big molecule and small molecule. And also we can have the oncolytic virus drug combined with the Henlius PD-1 drug, and we can combine the oncolytic drug and the CAR-T and so on. And then for the managed precision medicine, we have the precision radiopathy and also the precision medicine.

And then for the health insurance, when you combine and integrate our services and our health, big data and our products and also our recovery service. And we have released in the health insurance sector a lot of innovative products, for example, the UFH insurance and also the breast cancer insurance. So if they are diagnosed, you can still apply for the insurance.

And we hope that we can use more synergies on a cross-platform level to promote our product. And then we hope to use health management to really have the full life cycle coverage of the family. We have the health insurance, health management and health service and also the Sinocare and recovery of the health management service and also the organizations to provide the global health care service. Thank you.

Next, let's welcome Xiaoliang Xu to introduce about happiness family -- happiness product.

[Xiaoliang Xu, executive]

[Interpreted] Okay. Xue just introduced to you about the mega health. So I think possibly here are -- so for the happiness family in FOLIDAY and in Yuyuan, in all aspects in respect of our movie, culture, sports and in all sectors, we have got early growth.

So let me introduce to you about the happy family. So first, of course, the results. In the first half of the year for the happiness family, the revenue was CNY 30.9 billion, and it's 2.28x compared to last year. And our profit is CNY 1.822 billion, up by 86%. And of course, with the support of good product and good service, we got very good leaping development in the first half of the year.

So let me introduce to you about different segments. First, sports. Let's talk about the wolf -- the Wolverhampton Wanderers. Each game was wonderful, and now they rank 6. And they are just outside the door of the sixth giant of technology that was postponed until now. So Fosun invited Lee, Ang and also Will Smith to do the movie. So I think this is a good combination of good content and good technology. So I hope that you can watch this movie in October.

And also in fashion segment, China and in wool, wield its charm among the Chinese consumers.

Then let's take a look at our tourism sector. In Hong Kong, we have already released our interim results. In the first half of the year, the revenue has reached CNY 9 billion and the profit was CNY 490 million, and we have reached breakeven and achieved profit.

Let's take a look at the star products. For example, the 3.0 version of Atlantis continued to shine. So we can see that the number of visitors has reached 2.46 million, 3x of the same time last year. And also, the revenue has reached CNY 656 million, and the number means that, basically, for this number, it's like the 3-year total of the surrounding hospitals. And also on the big platform, TikTok, Atlantis has got 1.8 billion posts. So we know that for a good product, a lot of people will talk about it. And as for the average daily rate has reached CNY 2,371 million, up by 52%.

Indeed, a good product will actually be the key for a continuing growth. And we can see that the C Show in Atlantis was also receiving very good feedback. According to the data we have, in the first half, we have presented C Show to more than 120,000 families, and so they feel the only amazing shows and also they have enjoyed the great performance and had great fun.

In Club Med, the first half revenue has reached CNY 6.9 billion and has accommodated more than 750,000 high-end tourists, and it is in 22 countries and regions. And we have seen growth in every resort. In China, in Anji and Beidaihe, we have opened new resorts, and we have a new brand Joyview, the third resort in Beijing was opened in July.

In the second half of this year, there will be 8 resorts preparing to be opened. And we have seen a great momentum of FTG growth. In the whole FTG, there are 2 important projects to invest. One is in Taitung Foryou City, and it is in a very good position. It is only 20 minutes from the Shanghai Home [ Shop ]. And in the future, this can provide better services, expands to modern people. And it will be a great new choice for the Yangtze River delta tourists.

And there will be also one of the biggest indoor skiing field in Asia. And we know that Club Med has operated half of their skiing field. So Club Med has a newer experience. They have proficient experience in managing the skiing field. And we hope that we can also leverage that kind of capability and experience to provide even better experience for the Chinese tourists.

And this is also under construction. We hope that this can be in grand opening before 2020, the Winter Olympics. Another major project is located in the beautiful Lijiang of Yunnan Province. And this is just next to -- at the foot of Yulong Snow Mountain, and this will be a cluster of hotels and also resort. And we know that there is a historical navigation line, which is [indiscernible] line, and we will resume that line so that more global tourists can relive such an experience and enjoy the beautiful region in Yunnan province.

All of these are great projects to look forward to, and we have witnessed that all the classmates at FTG has implemented the strategy, which is, every day is a holiday, and we hope that we can bring better end product and more happiness for the families around the world.

And the flagship of happiness sector Yuyuan and the first half report was also released, and the revenue was CNY 19.6 billion, and that was a one-time growth, and the net profit was CNY 1.02 billion, and that was a 78% of growth year-on-year.

In Yuyuan, including in-house -- in the happiness part, we have also witnessed a fast growth. In jewelry, there are 2 core brands, one is Laomiao, which is specialized in rings, and the other specialized in love. And these 2 brands, in different channels, have expanded very much in the first half of this year, and the new store has reached 327. So now we have more than 2,417 stores covering 30 provinces and cities, and we will continue to work on the projects with higher gross profit. With a new distribution improvement, we hope that there will be a better performance in Yuyuan.

And in terms of food and drinks, we have seen there are many renowned brands. They have become more popular. And Li Gao Lu, on your seat, there is this one brand, and this is from Shanghai with a local brand. And going after it's launched for 2 months, the sales has reached more than 1 million cans. And we hope that we can bring the sales to more than 1 trillion cans, and we hope that we can achieve that target. And we also see that a large amount of products are being launched. In the first half of this year, we have invested CNY 700 million in the mushroom cooperation, Ruijie. And all of these are going to be better -- building a better network for products and revenue. With the population labor bonus in food and consumer products, we see great potential as those can be sold to more than 4 billion, and we see the great potential, thus.

In food and drink, Songyuelou, the first noodles -- #1 noodles from Songyuelou, from 0 to 1, we have seen amazing, surprising numbers. In Yuyuan, the daily revenue was CNY 1.5 million per month, actually, and it has a -- every 300 square meters and the square meter efficiency was 50,000. And we know that in the business sector, if it is more than 10,000, it is already very high, and this square efficiency has reached 50,000. That is amazing, and we believe that this can be extended to a chain brand. And Songyuelou noodles, you can think about that. That is going to be promoted to the tourist attractions on the speed train, all of these areas, we can extend the chain.

And we have seen that with the Hot Pot, Haidilao. 300 stores of Haidilao with a market value of CNY 100 million. That's why we look forward to a chain brand in these noodle restaurants as well with 150 years of history.

And another brand Songyuelou, with the green veggie buns, every day we can sell 4,000. And in the first half of this year, when Premier, Li Keqiang, came to Shanghai, he also visited this Songyuelou in the evening. And we have seen that historical brand after we reshined it. There is a great potential in the market. We will continue to deep dive in this sector.

And in the Yuyuan area, this slide you can see on the screen, the red ones are the areas which Fosun are working on, including the BHC, the building we are in. In Yuyuan Phase I, it has been also under construction. It is a comprehensive upgrading, covering the whole Yuyuan area. In Huangpu District, in the next 2 or 3 years, we will see a lot of new space being open to the public.

In the second half of 2019, Yuyuan will focus on this to work on the cultural landmark better. And this is Jingrong Lo. This is a new building at Yuyuan.

The next photo, a bite of south of Yangtze River, this is also a restaurant. And the new Lu Bo Lang, so on and so on.

In happiness, Yuyuan will continue to expand its arrangement. And this is also worth looking forward to. After the mid-autumn day, Yuyuan will have a new project, and this is something you will see. This is a more dazzling Yuyuan in the evening. All of these are under preparation.

In terms of the other part, 1 week ago, in Yuyuan, one of our key projects, we have been owning it for 5 years, which specialized in fashion, which is the Wuhan International Fashion Center (sic) [ Yunshang International Fashion Center ] in Yunshang. And there is more than 3,000 merchants, 600 original brands will be gathered here, from designers to manufacturers, to the channels, to the consumers. They will be connected in an organic manner.

And we have also selected the position at Hanjiang, a place with 500 years of history. This is also the source of fashion in Wuhan and that will further let us see the C2M growth, the C2M potential using industrial technique to meet the demands, to use the flexible industrial change to enable the fashion industry. And this will be representing Wuhan and China to be in the leading position of the new fashion industry.

In the future, we will see that scattered in China, there will be different projects from Fosun Hive, in financial, in health, in logistics, science and technology, all of these will be further flourishing in China.

I went through the business in happiness. In general, there are 5 dimensions to provide services in good scenarios and good content, good products and good models for our clients. We will continue to expand the arrangement in business.

In the end, the ultimate target we will provide happiness in the ecology, in the Fosun ecology, to work together with health and wealth to provide, firstly, happy ecology for all of the consumers.

And I would like to say thank you to your support, and we will continue to work hard. Thank you.

[Qunbing Wang, executive]

[Interpreted] Thank you, Xiaoliang. And last but not least, I would like to invite Ping Gong to share with us on some future prospects.

[Ping Gong, executive]

Just now classmate Wang and the other classmates from Fosun has shared with you the highlights of our performance in the 2019. I would like to say thank you to all the shareholders and investors for your long-term trust and support. Thank you very much.

We cherish this opportunity to talk with you. Especially in the past, we had communication more with overseas investors, and now we also value the communication with investors and shareholders from China, and we believe this kind of communication is of higher efficiency, and we have received more understanding and support from you, and they have talked a lot actually.

And me, I would highlight a few aspects and report to you. First, in the past couple of years, in terms of strategy, we're more focused. We focus on family consumption, the 3 major aspects: health, happiness and wealth. And we have formed the different production lines and better products.

I think in terms of strategy, it has showed that it's potential of success. And also, it has presented deficiency preliminarily, and we will work on it step-by-step and to do even better. And secondly, in terms of strategy, one thing that we focus is on the productivity. We believe that we can actually do better by our hard work step-by-step.

Everyone at Fosun, now we spend more efforts and time to study the clients and to hone our products on R&D and on innovation. And I think that is the focus that we are continuously adherent to.

So what is a good product? For a good product, it needs to be unique.

And for the customers, especially for our family consumers, we need to solve their pain point. We need to make them like it. How do we build a good product? And it was very clear to us. First, we focus on scientific innovation. So for our Henlius, we spent 11 years on 1 product. So for such a very good product like Hanlikang, we will continue to build products like that. Because in the last 10 years, we have always been putting more effort in our development.

So in innovation and development, we will strengthen our cooperation with other partners. For example, we have introduced da Vinci robot in the past. And also, we introduced a CAR-T drug and the best technology in the world. And also, I think for good products, since we invest in the global landscape, not only just for investment, we want to get the good product and technology. For example, for our -- for example Mediterranean Club, it was a very good product for the family. And also, like the Club Med, they are the biggest skiing and tourism and ski yard operator.

And with our ecosystem, we are building better products. For example, for our health insurance, Fosun doesn't want to be just a large-scale financial investor or holding company. And our investment are just for one purpose. We want to integrate and strengthen our ecosystem to build a better ecosystem. So in the future, our health insurance's focus would be on health.

And in 2019, why can't we achieve a growth rate of more than 600%? The fundamental result was that when our consumers buy our insurance, it's not just buying the insurance. Through the insurance policy, they got our service and they got our health management product, the best drug and the medical devices. Since Fosun has a lot of the expertise in health, in health insurance, we got a lot of information. For example, we sell the policy to, for example, customers that already has breast cancer. Because in the past, the other insurance companies would not do that. But since we already merged our health insurance and services, we are confident enough to use our therapy and services to stabilize the patients and help them recover. That's why I said that we want to build this ecosystem.

The ecosystem is also not the purpose. The core of the ecosystem is that through the ecosystem, we can build a lot of more hit products. And for us, for the group and for all the classmates, we're very confident that we have a lot of good products and portfolio, and we are on the brink of explosive development. We have the C2M strategy, and we had a lot of layouts already established. Our main task is to finish the layout in the world, aiming at getting more products and more accumulation.

Now the products are about to boom. And our focus is clear. We want to go from 0 to 1 and from 1 to end for the products, and our management have reached the consensus on our strategy. So for the future, for Fosun, we would like to have stability on our strategy and go 1 step at a time with our partners and investors to adhere to the mission to make the families in the world happier. And thank you for keeping your confidence in us. Thank you.

[Can Wang, executive]

[Interpreted] Then let's start the Q&A. The investors and friends here can pose questions, okay? That gentleman at the back with the white shirt.

[Unknown Analyst]

[Interpreted] So my name is [ Kin Xing ] and I have questions for the leaders. We saw that Fosun as a group focusing on family business, so you focus on the 3 sectors of health and happiness and wealth. So you have the 1 plus end product and I just want to ask for the science-driven and diverse service and products, so in the midterm and long term, how do you support the synergy and coordinated development of different businesses? And also in the next 1 and 2 years, what kind of plans do you have? And what do you want to do?

[Qunbing Wang, executive]

[Interpreted] First, thank you. Thank you for the good questions. I think for Fosun group, in the next 1 to 2 years, maybe it's not just 1 to 2 years. In the long term, we will still focus on the family customer-centric business. And also, we would use good product as the breakthrough point. And also, we will be employee-oriented. So good products is one of the key points for us.

And secondly, with that in mind, we still need to remember 2 things. One is health, happiness and wealth business products. And for the second part, we need to focus on the ecosystem, the integration among different product lines.

And the third is just like you said, we need to be science and technology-driven, just like Mr. Guo said. We need to provide our customers with unique and new products, for example, Hanlikang and also the health insurance. For example, the breast cancer insurance, plus the drug, plus the medical service. So we need to do new things that doesn't exist in the market yet. And we already said that we will maintain a 30% profit ratio in the investment of R&D.

So in the next 1 to 2 years, you will see new products in the market. For example, for our products that exceed CNY 100 million, we have 100 of them; and as for the products above CNY 1 billion, more than 10; and also we have 2 brands above CNY 10 billion. So in the next 10 years, we want to multiply those numbers by 10.

So we are continuously accumulating our product lines, for example, for Fosun Health, we have a very good product line. And then for the happiness, for Yuyuan and FOLIDAY, we are building some hit products and Internet celebrity products and we're building IPs.

And fourthly, the other important thing is that we would use the product as the breakthrough point. And we want to make our family members, family member customers enjoy the good product and service. And also for our family customers, we want the number of that to grow. We want the family customers to have a great link to our company and service. We want to have customer loyalty, and our hope is that since we have the good products, I hope that each of our products and brands can have like 1,000 activities and campaigns to create more links and connections. And that can be shared among the members.

And fifthly, as we said before, we need to have a very smart system as FBS smart interim office. So for the connection and organization of activities, it can become more intelligent, precise and effective. And the other thing is that we can upgrade our products very fast and more conveniently and provide better services to our family customers.

And sixthly, still, we will take advantage of our investment capabilities through investment and through the JV cooperation and through the license in and BD and, of course, our globalization strategy and capability, we can gain access to more better products. In the next 1 or 2 years or in the long-term future, we can put them into the market.

And of course, while trying to get access to the good products, we will still adhere to the value-based investment principles. We cannot just say, yes, it's a good product, we can sacrifice a lot of other things. No, we still need to maintain our principle so that our investment and return can really be effective from the shareholders' perspective. Thank you.

[Can Wang, executive]

[Interpreted] So the gentleman in gray standing at the back.

[Unknown Analyst]

[Interpreted] I have 2 questions. So my name is [indiscernible]. So for the 3 segments happiness, health and wealth. So I just want to talk -- understand the storyline and the connection among the 3. And as for Fosun for the 3 segments, you talked about the ecosystem. So how is the enabling or enabler represented?

And also, I just want to ask the focus of strategy in China and outside of China. What is the difference among the 2 areas?

[Qunbing Wang, executive]

[Interpreted] Thank you for the question. So for the 3 segments, you are talking about the connection. Actually, there are a lot of connections. First, we all focus on the family customers and among the different products, we have different ecosystems and different combinations. And the third thing is that for the family customers, a lot of our digital systems and a lot of our management processes can be shared and learned from. And fourthly, the globalization for a lot of globalized resources, they can all share among the different segments.

And then you are talking about the enabling. I think we have a lot of things going on there. First, we can enable the customers. And second, we can have this kind of ecosystem cooperation among products to enable. And also, we have a lot of sales channels and also the globalized channels and resources that can be shared. And fourthly, from the management perspective, a lot of systems can be shared and also, the FBS that is being upgraded right now, it can be shared as well. And fifthly, for talents, we have globalized talent. And for the different product lines, different portfolios, we can enable them with those.

And you are also asking about overseas market. So for the overseas development, the good products in China, we're now trying to let them go global, especially in Asian market. And for example, in Africa, in childhood, every year, we are trying to reduce the death using the Artesunate and we are trying to cooperate with African government officials to reduce or eliminate malaria. And we want to globalize our product. And with investment and cooperation, we hope to use foreign products in China to enable our customers' pursuit of happiness. And also we can use foreign talents and technology as well. So in overseas market development, we will adhere to the clear globalization strategy.

[Can Wang, executive]

[Interpreted] Next gentleman in the white shirt.

[Unknown Analyst]

[Interpreted] I have a question. My name is [indiscernible]. From the sector layout, so in lot of segments where you have the layouts. So in the future, do you have any plans to set foot in other segments? That is the first question.

The second question is that you have acquired a lot of overseas companies. And also, you have introduced that business to China. So do you have any plans to introduce the business in China to overseas market? And what is the right direction?

[Guang chang Guo, executive]

[Interpreted] I think I can be very direct. In the first couple of years, in Fosun, we work on product layout on the original layout and now in the original layout, globally with the industry layout, I think we have basically finished that.

Coming back to family and consumption, now our major mission is to deep dive in the regions and to deep dive in industries. As we said, in the different niche industries, and many production lines with great product identity. Now what we need to do is to strengthen this product and to grow them bigger. And if we have any other things to supplement our production line, we will continue to work on that.

From an investment perspective, Fosun will focus more on the investment of holdings, and we will support our existing production lines and to strengthen our investment in the holdings. And we also will continue to give attention to investment in unicorns, especially the companies that have the leading technology in certain industry. I found your question very good. On the one hand, the global vision is that we will organize the production line to enhance our capability in this entire ecosystem. On the other hand, the good products from China, the good models from China, we hope to bring them to the global market. As Qunbin Wang has mentioned, in Africa, we have the sales revenue of CNY 200 million of Artesunate and we have such a hope to eradicate malaria in Africa, so that we can make the African people to be more healthy. This is the new globalization, which is driven in 2 directions.

And I'd like to add one more point. The products for families, when we talk about that, you would find that confusing because you think that consumer products are related to families. But I think different products have different attributes. For example, with tourism, business travel, these are more individual, right? And our Club Med is different. Atlantis, it is more suitable for a family. And we can see that it comes with a very strong family attribute, health. To look from the surface, you think it is for individuals. But actually, when you are sick, one individual is sick, the entire family is involved. Therefore, with mega health industry, it comes with a natural family attribute. And with the classification of wealth, health and happiness, internally, we focus on overlapped area. We believe this is a very big ecosystem.

Health is more than health of personal physic. It is also the health of mental health. And wealth, it is not only in terms of money, I think it's also related in how we feel satisfied with our life. And I believe a person who is truly happy actually will suffer from less illness. You have to know that many illness comes from the different weight of problems, internal problems. And we believe that this comes from a different healthier lifestyle.

[Can Wang, executive]

[Interpreted] This gentleman in blue shirt, please.

[Unknown Analyst]

[Interpreted] I am from Guosen Securities. I am [ Sha Tien ], an analyst. I have 2 questions. On the one hand, globalization is a main feature from Fosun International and it is also of great competitiveness so that we will divert some resources to the global market. And now we can see that Fosun has business in different countries and investments in many industries. So my question is, how do we manage globally? For example, the management of projects after investment or how to connect them with the necessary resources? If possible, can you also share, how can we form such a great competitiveness globally?

And the second question is for Mr. Gong for the Fosun Hive real estate property. I would like to know about your next plan.

[Ping Gong, executive]

[Interpreted] So just now, I found your question is very good. Fosun International is driven by technology and innovation, and it is focused on family customers, but we know that it has to be supported by property. Therefore, with Hive, it is a multifunctional physical space, a traditional property plus industries, and that is Fosun Hive.

Fosun Hive actually covers tourism, catering, consumption, health, financial, industries. Especially in 2019, Fosun Hive has witnessed more project implementation, other than Xiaoliang has mentioned. The project Hanzheng in Wuhan, it is a complex of clothes, wholesale, fashion design and so on and so on. BFC, the building we're in today, the retailing will also be brought to you in December. And you will see that, that covers all kinds of business operations. For example, parenting and health and we have high-end clinics [indiscernible] in the different industries. Other than we promote Hive in different property companies in tourism, Atlantis, in Club Med, and 4U city in Lijiang and Taicang and the business property. For example, [ Zhonghuan ] the department in the store in [indiscernible] and [indiscernible] in October. There is also a national landmark park, and there is also a commercial complex in Xi'an.

In December, in Shanghai, there will be a major shopping mall just across the road of IKEA. In China and overseas, we also have some projects, for example, NY 28 in New York, the business operation, for example, retailing and selling. We have also witnessed a satisfactory performance. So we are thinking in Asia and North America in terms of combining different business operations from this year until 2 years later, there will be myriads of landmark projects.

These landmark projects being implemented, it will bring a great revenue from the renting and there will be 3 focus in the future dimension. One is to develop in the different industries. This is to combine our capabilities in wealth, health and happiness. It is not just a pile of bricks, a single building.

Second, to develop in the financial part. In the development of property building in terms of operation of these properties, we will continue to highlight its attributes in the financial part.

And thirdly, in the emerging industries in China, for example, in the 2 bay areas, in the core cities, in the core areas in overseas, we will continue to work on these projects and to deliver projects for Fosun Hive. Thank you very much.

[Unknown Executive]

[Interpreted] I would like to add a few points. Fosun has a clear position. Fosun is a Chinese company which develops globally. So we will deep dive in Chinese market to improve our investment in China, to further invest in China. And with such a global status, China will be more open. China has to be more open.

Therefore, as a global company from China, we are a great example of being open to the global market. In terms of globalized management, we stick to a strategy GloCal, which is global plus local. We believe that we need to be deeply combined with local teams. We have such a system called Global Partners. Therefore, with Fosun from the management team, especially the global partners, they are not only from China. They're also from the United States, they're also from France, from Japan, from Germany. I think Fosun is not only managed by Chinese people. We're managed by global elites.

And Fosun Hive, I would like to add on 1 point. We have presented a great group of Fosun cities. For example, Hanzheng in Wuhan and Xi'an 1935 and also Club Med and Atlantis and the BFC where we are right now. From 0 to 1, now it is even easier for us to obtain these profits because we have such a practice from the market. And our products are warmly welcomed by local government, and we have received great feedback from the market, from [ either E2M ], we have laid great foundation for that. Thank you very much.

[Can Wang, executive]

[Interpreted] Thank you very much. Since we are close to our schedule, we'll be open up for 2 questions from [indiscernible] and one question online. This lady in white shirt, please?

[Unknown Analyst]

[Interpreted] I am from [indiscernible] Funds. I have 2 questions. One is in regarding of FTG. In July this year, there a project related to engage in the holdings of Thomas Cook. And Thomas Cook is a senior company. If we have the holdings of this company, what is it going to bring for this company? Because we highlight ROE to reach the target of 15%. And in terms of overseas asset, valuation is cheaper relatively. But in terms of ROE, maybe it's not as high. Therefore, if Fosun has the holdings right in terms of the funds arrangement, can you share something with us?

Second question, we have also seen that there is a grand framework at C2M development. In regarding of this, can you also share the points with us?

[Unknown Executive]

[Interpreted] With C2M, okay, I can answer that part. I can observe about TCG and Thomas Cook regarding the detail. As the notice has shared with you, Fosun International and FTG, in this notice, we have clearly stated that we are not 100% sure on the holding of Thomas Cook or there is no binding agreement. We are proactively participating in this right now. Okay, so this is the first point.

And secondly, with Thomas Cook, if in the end, we reach our target, we will continue to adhere to our investment strategy in value. We will still maintain the target to have a very good ROE and a relatively good IRR. This is the important foundation for this kind of investment.

And also thirdly, based on the second point, if this investment plan adheres to the investment principle, then I think if we have that rent and that market, I think it will supplement to our FOLIDAY, okay?

Let me introduce to you about the C2M. So I think this lady talked about this grand plan of C2M. Well, it seems like it's grand, but when we try to execute, it's down to earth. It's in every little bit of detail, it's on the demand and also the expectation of our customers on every small point. So if we focus, then it's easier to implement. So actually, Mr. Wang talked about the C2M. So I just want to add a little few things.

So how do we promote C2M? On the group level, we have this CDO, Chief Development Officer to support the implementation. It's not just like I will single handedly do it, it's about the organization. So from the HQ level, we have the customer operation department and the sales department and also the BD department. And just like Mr. Guo said, we want to promote the BD of the ecosystem and the products.

And also, it's not just in the HQ, in the enterprises in the Fosun ecosystem, we have the COO, CTO, where the brand and marketing and interim office, VP or SVP to focus on the issues. This will have the organizational guarantee and also the strategy execution. I think everything is about digitalization. And in the first half of the year, the 2C business has grown by 52%. And now the ratio is more than 80%. That is the progress that we have. And also for the C2M progress, so in the interim working meeting, our 2C logic is that only by innovation and leading can we really lead development. And for 2B, sometimes we need to follow.

So for 2C how do we lead the market? We need to focus on the demand. And as for the 515 Fosun Happy Family Alliance, for the first time, we used live stream to cooperate with Lee, Ang, the first Internet celebrity on Taobao. We did this on a combination platform. So have you heard of Lee, Ang? Well some of you do, but if you don't, please try to search him. And we did this first trial and our first trial really landed. And then on 6/'18, it's like we cannot achieve it because it's 24x7, always busy. So I went to New Zealand and Korea and every campaign was a hit. So that means, as long as we mind the demand of the consumers, then C2M strategy would definitely progress. And also, I hope that you can support and as Fosun customer or partner, if you have any feedback on product please consult me. Thank you.

[Can Wang, executive]

[Interpreted] So the second row, gentleman in blue.

[Unknown Attendee]

I'm an investor. I just have 2 questions. In the ecosystem for health and happiness and wealth, we can include a lot of listed companies. So in the ROI and also in the financial indicators, what do we focus on? That is the first thing in terms of parameters and indicators.

And second thing is that Mr. Guo already said that for our stock price, Fosun is still quite undervalued. And we are trying to buy back. And as investors, I think the biggest, the largest way to get return is to buy back and then sell, right? So do we have any plan to do that in the future?

[Qunbing Wang, executive]

[Interpreted] Thank you. First, when we invest or when we do projects, we have the value-creation principle and strategy. As you said, we hope that the ROE can be 15% or higher. Now it's, of course, not there. But for our KPI, the ROE, 15% is an important parameter, and if we don't reach it, yes, we will have to deduct some score.

And second thing is, for the benefit of ones that are now in the investment phase. For example, for the Henlius, we hope that we can have this marketized estimation. And we hope that the estimation can grow by 20% or more every year. And, of course, that number needs to be reflected by a third-party order. It should be reflected by IPO or something like that.

And for the third part is that we're not a holding company, we are just one of the shareholders. And for those projects in the standard, of course, the IRR should reach 20% or more.

And fourth, sometimes, we invest in some products or the projects in product, we have this kind of quantified standard on return. So if we return -- if we get -- reach the standard on the return, as Mr. Guo said, if you want to get that much return, you have to be unique. You have to be creative. And you have to realize the combination that others can't. Then you can create unique value for the customer. And then you can share the value.

And then for the stock price, from the management perspective, we are paying a lot of attention to it. And for our teams, we are always focusing on that. And as for the buyback and write-off, I think in the past, we did a lot. And in the future, I think that's one of the approaches that we grow I think. Thank you.

[Can Wang, executive]

[Interpreted] So the first row.

[Unknown Analyst]

[Interpreted] So your strategy is quite different from [ books ] here. And you are quite good at grasping the industry cycle. And also, you are good at turnaround strategies and Warren Buffett said that for a turnaround, it's really hard to use it to turn the table for a company in recess. I think you did a successful turnaround in equipment and then in Fosun Fashion, you started to invest in Folli Follie, and after many years of experienced accumulation. So I just want to ask whether that reaches your expectation. And then in the next 3 to 5 years, what is your expectation or plan for Fosun Fashion? Can you give us some expectation?

And also, Fosun is in a lot of sectors. Of course, with the diversification, sometimes the price can be discounted. And with the increase of numbers of sectors involved, of course, our management is good, but still, you only have 24 hours a day. So you cover more than 10 segments or sectors. So how do you make sure that the teams in different sectors are the best in class, so you can really turn around and reach ROE 15% to reduce to -- reduce the situation where you can reduce the price or discount? Okay. Just 2 questions.

[Qunbing Wang, executive]

[Interpreted] Thank you, and we welcome questions. So for Fashion, you asked about turnaround. Actually, in the interim meeting, Mr. Guo talked about the turnarounds. And turnaround is like a car. At first, maybe it's going downhill. And during the downhill ride, you need to decelerate. And then you need to turn and you cannot just accelerate. It needs to overcome the mountain and then come into track. And I think turnaround is really difficult, but from the past experience of Fosun, we are trying to build this capability so we can operate and then turn around.

And I think there are several points that are important. First, you need to have holdings. Actually, we are just one of the stakeholders or shareholders you can just watch. You cannot provide support. You cannot enable. And for example, in Fashion, all of the brands are held by Fosun. So for a turnaround, for a good brand to revitalize, we still need to have good products that fit the consumer need in this era.

And, of course, behind products are the people. So during the turnaround, we really focus on the people, especially we dare hiring young employees, for example, Joann. Among the big designers, the heavyweight designers, we hired the youngest with the best imagination and his design really shocked the design world.

And also, we need to have a good CEO and CFOs, we need to have a good team. Then we can have the turnaround. This is really important. And also, finally, for the turnaround or to really continuously work on the product or brands, you still need to focus on the customer demand. You need to make your industry chain or supply chain flexible, then you can react fast. Thank you.

[Unknown Executive]

[Interpreted] So I just want to add a few things. To be clear, I just want to say, Fosun is not an investment company. But investment capability is always one of our key capabilities, and we have internalized the capability into the industry development strategy of Fosun. In every sector, we focus on the internal development. And also, we focus as well on the capability brought by investment. And Fosun is not a real estate company, but still, we have the capability. And it has been internalized into the construction of Hive cities and also in our pharmaceutical industry and medical sector. For example, we know how to build a good hospital. We're a good pharmaceutical company. So we won't throw those capabilities away. Fosun is not just a medical company. We focus more on the R&D in medical sector to bring unique products for the family consumers or customers.

So we have 2 ways to define a company. One is that we start from our own perspective, maybe I'm a real estate or I'm a medical company. The other company starts from the customer perspective. No matter how many capabilities we have, those are just capabilities. We just serve the customers. So for Fosun, we don't focus on our capabilities. We focus on what kind of problems we can solve for the customers with our capability. And we position ourselves as a surplus provider for the family customers. We provide the health, happiness and wealth for the families. And of course, the capabilities are important. But customers are even more important.

So we are not a diversified investment company. We are a company focusing on the family customers. And we are a science-driven group. And in order to become that, we need to strengthen our investments, R&D and even the real estate development capabilities. Those are capabilities and the purpose is to serve our customers.

So let's not just look at how many products we make. We are in different fields. Actually, we are quite focused on the family business, and we focus on also the 3 sectors and also the productivity. And let's not just dwell upon this topic on yes, Fosun is a diversified company focusing on investments. Those are just means and methodologies. Let's just pay attention to whether the product is good and whether the brand is good and everything is difficult.

[Guang chang Guo, executive]

[Interpreted] I have talked with my management, and they usually say, "-san Guo, this is really difficult." I said, "Why would I need you if it is not difficult?" All the things we do are difficult. They are of extreme difficulty. If it's easy, then the returns will then I don't need you to do that. So with Fosun, we do the difficult thing. We do the right thing. We do the things that need time. We are not that lucky to create a mega sector immediately. We spent a lot of time. We worked so hard. Once we reach the target, once we created our own blueprint, we were fine, but we're at another level. There is a long way to go. This is like you roll a snowball or this is also like we're building a tall building. Because it is very difficult, it's worth all of the persistence from all the classmates at Fosun. And because it's difficult, it's worth your attention to support a long-term development. Okay. Thank you.

[Can Wang, executive]

[Interpreted] Thank you very much. And now let me brief you on the further arrangement. Thank you very much for being here with us on this announcement. And we're going to give you a small gift of products from Fosun, so that you can have a better understanding of Fosun. We're also going to give you a tour in BFC, our ecosystem, our artistic center. At 11:45, we'll have lunch together. At 1:30, there will be the visit for listed company's management.

[Presentation]

[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]