Fosun International Ltd

HKEX:656

Earnings Call Transcript 2018-Q4

[Can Wang, executive]

Shareholders, investors, analysts, bankers, rating agencies, working partners and friends from the media, good morning. Welcome to the 2018 results announcement webcast of Fosun International.

I am the CFO, Wang Can. In attendance, we have Chairman, Mr. Guo Guangchang; CEO, Mr. Wang Qunbin; Joint President, Mr. Chen Qiyu; and Joint President, Mr. Xu Xiaoliang.

In this meeting, there are 2 parts. First, we will report our 2018 results. After that, there will be a Q&A session. You can send your questions and your name and company name to IR mailbox, which is [e-mail]. Because of time, we may not be able to answer all questions. The IR team will continue to follow up after the end of the webcast. This is the first time we are announcing results via a live webcast. You can also download our results announcement, PPT and press release from the website. You can also choose to watch the English channel. After the end of this webcast, you can play back the video recording. At the same time, there will be text in Chinese, English, French, German and Portugal for you to choose for this webcast. If you have any need for assistance, please contact our IR team.

Now I will defer to Mr. Wang to go through our results highlights. Thank you. Mr. Wang?

[Qunbing Wang, executive]

Good morning. Now I am being authorized by the board to report to you all the 2018 results of Fosun International.

In 2018, our total revenue reached RMB 109.35 billion, up 24% year-on-year. Half of this revenue was from overseas markets. In 2018, profit attributable to shareholders -- or to parent company reached CNY 13.41 billion, a record high. CAGR for 10 years was as high as 26%. For the Health and Happiness Ecosystems, they were up 14% and 21% year-on-year, respectively.

At the end of 2018, there was impact from volatility in the capital markets. After adjustments, net asset value per share was HKD 24.84. Comparing with 22nd of March 2019 stock price, there is a clear room for improvement. Now FOLIDAY and Babytree had completed listing and major assets restructuring of Yuyuan had already been completed, so their share in the listed assets after adjustment is much higher.

At the same time, we maintain strong financial position. Gearing structure or asset and liability structure continues to improve. In 2018, the total debt over total assets was 53.7%, net gearing 49.8%. And average interest rate for the debts was 4.97%. We continued to create value for shareholders in 2018. Dividend per share was HKD 0.37, up 6%. Payout ratio was 20%, and the dividend was 3.25%.

In 2018, we continued to be focused on the operation of industries, and we also insisted on creating value for shareholders and invest for value. In 2018, the operations achieved very good results. For FOLIDAY, in 2018, net profits reached RMB 389 million. After adjustment, EBITDA was up 177.8% year-on-year. After reorganization of Yuyuan, in 2018, net profit exceeded RMB 3 billion. At the same time, with the establishment of FOLIDAY, we have also brought in a number of very good talents into the industry. We insist on making value investments. At the same time, we also achieved a balance between investment and divestment. For the whole year, new investment amounted to RMB 28.5 billion. There are 70 projects. And via making exits, we have recovered funds of RMB 17.1 billion.

We are very active in interfacing with the capital markets, and we are keen on listing our assets. In 2018, for FOLIDAY and Babytree, they are listed in Hong Kong. We have raised altogether RMB 4.3 billion. And reorganization of Yuyuan has been completed. At the same time, there is also Fosun Pharma Henlius and other projects that are in the preparation process for listing.

Now for the ecosystem segment, we have seen preliminary results. At present, we have already got 15 ecosystem member enterprises, and they are working with us. Altogether, we have ecosystem customers of more than 170 million.

Fosun International in 2018 continued to make more investment into technology and innovation. So we have new investments made, including in the area of health care, big data and AI. And then in Germany, there is a automated production system provider, FFT; and also a new energy battery enterprise; and so on. In January 2019, we had established Fosun smart technology mid-office. And then for globalization, we have already signed cooperation agreement with 10 working partners, and we are also making investment in operation in more than 30 countries.

In the past year, we are focused on our -- enhancing our product capability and brand. In February 2019, Fosun Hanlin developed Henlius, and the registration application was approved already. So this is the first approved biosimilar medicine developed by ourselves in China.

Fosun insurance, well, in 2018 altogether launched 60 different products. And altogether, we have customers of more than 550,000 people, up 746% year-on-year. Premium was up 782% year-on-year. And then we have expanded to Guangdong, Beijing, Shanghai. Especially in Guangdong, there are also 6 branch organizations. For FOLIDAY, we have Atlantis Sanya, which was opened in April 2018. In 2018, operating revenue was RMB 752 million. In 2019 CNY period, occupancy was as high as 93%. And then for Club Med, in 2018, 5 resorts were opened, including 2 Joyview resorts. At the same time, in China there are more and more tourists. In 2017, it's from 200,000 to 243,000 in 2018.

For Yuyuan, revenue was up 14.6% year-on-year. And then for jewelry and fashion, it's up 14.7%. In February 2018, we have established Fosun fashion. In 2019 February, we have established Fosun brand management company. So this helps the entry of international brands into China. Lanvin appointed the new CEO as the (sic) [ and the ] creative director. And in 2019 February, we successfully organized the 2019 fall/winter fashion show at the Paris Fashion Week, and this is well received.

And then at the same time, Wolverhampton Wanderers, in 2017 to 2018 season, won championship in the England -- in the English league. And it had successfully entered the English Premier League. Besides, it had also entered the e-sports area and formed team to join FIFA Online Star League.

In 2018, Portugal Fidelidade insurance company achieved market share of 34.7% in the Portuguese market. In early 2019, it had completed 51% shareholding acquisition of an insurance company in Peru, so it had entered the South American market. In 2018, BCP's net profit reached EUR 301 million, up 61.5% year-on-year. Number of active customers reached 4.9 million. And it has signed a cooperation agreement with UnionPay of China and also Ant finance.

In 2018, in terms of the capital markets strategy, we had made a lot of achievements. As you all know, in 2017, we had completed the listing of 10 projects. So based on the foundation of 2017, in 2018, in July, the major asset restructuring of Yuyuan had been completed. Altogether, CNY 22.4 billion worth of assets were injected. And then at the end of 2018, Fosun International held 68.58% of Yuyuan's shareholding. And then in November, Baobaoshu, which is the biggest and most active mother and baby social media platform in China, was listed in Hong Kong. In December, the biggest recreation and tourism resort, Fosun Holiday, was listed in Hong Kong stock market.

In 2019, we are going to push forth the listing of a number of assets in the capital markets. For example, Fuhong Hanlin Fosun Pharma had already submitted A1 materials to the Hong Kong exchange. It is expected that it will be listed in 2019 in Hong Kong. And right now there are a number of projects in the pipeline waiting for listing.

And then we are very active in working in the capital markets, and we also strive to achieve a balance between investment and divestment. In 2018, there are 70 new investments, with a value of altogether 25 -- RMB 28.5 billion. And half of them -- almost half of them are overseas projects. In 2018, we made new investments in Baihe Jiayuan, Tsingtao Brewery, St Hubert, Lanvin and Wolford. In February 2019, we also made an offer to acquire a German fashion brand, TOM TAILOR. In 2018, divestments included Focus Media, Sun Paper. Altogether, the amount was CNY 17.1 billion.

Last year, we continued to make more investment in scientific innovation. And through R&D and incubation, investment and mid-office building, we improved our innovation ability and operating efficiency. In 2018, we focused on R&D and incubation in the area of biomedicine, cell immunology, surgery robotics and AI imaging. So we made big investments in these areas, and we saw very important progress. At the same time, we invested in a number of frontier areas. And we used and applied those technology in existing operations to improve our service efficiency and operation capability. At the same time, within our own ecosystems, we have built our smart mid-office. For Fosun Cloud, there are more than 10 ecosystem members who are being provided with cloud computing and smart technology service. Smart -- our smart technology mid-office integrated all resources of our ecosystems. For example, we have Onchain providing global procurement resources and synergy service. And youlè and ZZKUR technology up -- enhanced our member companies' and customers' operating efficiency.

Now I'm going to talk to you about our ecosystem member-building situation. As you know, in February 2018, we officially announced the youlè member loyalty scheme. And at the same time, we also actively encourage our other member companies to establish the member loyalty scheme to enhance customer experience. And through the offline outlets, sales representatives, online portals, these are our touch points with customers. And so our ecosystem member companies can provide for the needs of global households. Finally, we have -- through the youlè channel had already connected with 170 million Fosun ecosystem customers. My part is ended here.

Now I will defer to Mr. Wang Can to go through the financial review for 2018.

[Can Wang, executive]

Thank you, Mr. Wang, for going through all the results highlights. Now let me report to you the full year financial review for 2018.

2018 is a year full of challenges. If you look at geopolitics, macro economy and the capital market, there are a lot of uncertainties. And you see huge volatility in the mainland and Hong Kong stock markets. Under these circumstances, well, because we have diversified assets portfolio and globalized layout, we insisted on both investment as well as assets operation, so for the seventh consecutive year, we achieved growth. This is really not easy.

In 2018, for Fosun International, for the first time, our revenue exceeded CNY 100 billion, up 24%. If you do not include the incomparable factor, for example, the revenue being consolidated into the financial statements after reorganization of Yuyuan, then the adjusted revenue growth was 16%. So we can see growth in this segment. And for 3 major ecosystems, the health and happiness, revenue grew faster, reaching 73% or 29% growth, respectively. And profit attributable to parent company shareholders reached RMB 13.41 billion, up 2% year-on-year. If you analyze the source of profits, well, actually, the growth mainly came from the Happiness and Wealth Ecosystem, the finance segments and investment segments, major deals. At the same time, we also made an impairment of CNY 1.1 billion for Folli Follie. At the same time, our fair value change loss was affected by the stock price change in the secondary market. And so comparing with last year, there was a bigger decline. However, we benefited from the profit contribution of the operation of this industry. So overall speaking, in 2018, profit attributable to shareholders was still up from last year.

In 2018, EPS was CNY 1.57, there a slight increase. At the end of 2018, the book value per share for Fosun International was HKD 14.49, up 3%. It's higher than the share price of Fosun International. After adjustment, NAV per share was HKD 24.84, and there is quite a big drop from the end of last year. This is mainly because of the fluctuation in stock price of our subsidiaries as well as JVs, for example, Fosun Pharma, Yuyuan and so on. When the capital markets overall recovered in 2019, as of last Friday, after adjustment, NAV per share had risen quite significantly. And the short-term fluctuations are very difficult to anticipate in the capital markets. Well -- so we are going to dig deeper into the operations and our assets.

In 2018, we successfully completed the reorganization of assets of Yuyuan. Babytree and FOLIDAY were listed in Hong Kong. And after adjustment, the NAV per share of these listed assets was on the rise. In the future, we'll continue to take advantage of the opportunities in the capital markets. And through listing and reorganization, we will further release the per value -- per share value of Fosun International and its liquidity.

In the past 10 years, for our profit attributable to shareholders, the CAGR was 26%. And for EPS, CAGR was 22.3%. Fosun International in the past 7 years achieved good results. In the past 7 years, profit attributable to parent company had a CAGR of more than 20%, and then EPS CAGR was 16.8.%

So we have reorganized Yuyuan. And then for the finance and insurance segments, for the non-insurance and financial business scale, it is expanding. And for Fosun International, now we are dividing into -- we are splitting the data for insurance and finance, and they are listed separately.

In 2018, for the Health Ecosystem, revenue was CNY 29.09 billion, up 29% year-on-year. Revenue growth mainly came from contribution from Fosun Pharma. For Health Ecosystem, in 2018, profit was CNY 1.48 billion, up 14%. Because of technological R&D and innovation, Fosun Pharma's contribution to the Health Ecosystem came down, but if you add in the investment, still there is still rapid growth for the Health Ecosystem. For the Health Ecosystem segment, in 2018, there was still rapid growth.

Happiness Ecosystem in 2018 recorded revenue of CNY 44.16 billion, up 73% year-on-year. It mainly came from the incorporation of revenue into the financial statements after reorganization of Yuyuan. And also, there is improvement to the results of Atlantis Sanya and also Club Med. FOLIDAY revenue was up 38% year-on-year. For Happiness Ecosystem, profit was CNY 2.57 billion, up 21%. This is mainly because of a turnaround of FOLIDAY. And after reorganization, the attributable profit was up CNY 510 million.

For the Wealth Ecosystem in 2018, revenue came down 9%. If we deduct the impact of Ironshore concerning the revenue being -- revenue consolidation, then revenue was up 3%. For insurance segment, profit was CNY 2.38 billion, down 15% year-on-year. This is mainly because of market fluctuation. The investment gain was not as expected. Besides, there is the German Hauck & Aufhäuser private bank business growth. So for finance segment, profit was CNY 1.25 billion, up 13% year-on-year. This is mainly because of result improvement of BCP. In 2018, BCP achieved net profit of almost EUR 300 million.

For the investment segment, profit was CNY 5.73 billion, down 2% year-on-year. This is mainly because of change in fair value because of fluctuation in the secondary markets, but I need to say that for industrial and the [ bulk ] operation business, well, Nangang steel in 2018 performed very well. Attributable net profit was CNY 4 billion, up 25%. At the same time, ROC oil also achieved the best results since being acquired by Fosun.

Now I think you are more interested in the balance sheet. As said, every day, we have to be very careful. We are like stepping on very thin layer of ice, so we have to make sure that we are -- we maintain stability. At the same time, we have a long horizon.

As of the end of 2018, total debt over total assets was 53.7%. This is a rather comfortable and safe level. This year, perhaps, if you are interested in Fosun, you will realize that we have set out this total debt over total assets. In the past, we used net gearing ratio. That is we used the interest-bearing liabilities minus cash. And this year, we want to show you all interest-bearing debts and also other debts comparing with capital, so then you will know our actual leveraging. For big companies listed in Hong Kong, they mainly use this kind of indicator. So we hope that there is another dimension for you to have full understanding of leveraging level of Fosun International.

Now this indicator will help investors and media friends to have better understanding of our leveraging. In 2018, our average debt interest rate was 4.97%, and it's only up 25 basis points from 2017. It's controlled within 5%. And in the second half of last year, the tight funding situation had been alleviated. And the state had promulgated a number of policies to solve financing problem for private companies. So in the second half, our financing cost was better than the first half, and we also further improved our maturity profile of our debts. At the end of 2018, for mid- to long-term debts more than 1 year, the share was 63.6%, up 2.6 percentage points. If you look at source of debt and currency breakdown, the onshore and offshore ratio was 55% and 45%, so this is rather safe and balanced and diversified. It matches our asset base as well.

Looking towards the future, in terms of business improvement and optimization of our leveraging, we will try to strike a balance, and we want to continue to enhance our profitability amidst stability. In the first half of this year, we worked more with renowned financial institutions and banks, so unutilized credit facilities are on the rise. In 2018, we cooperated with HSBC and also Standard Chartered, Shanghai bank, Pufa Bank, Dalian bank, Xinhua Insurance and so on in order to establish strategic working relationship to achieve win-win situation.

Recently, for major analysts who had written reports on Fosun, well, they had given an opinion of buy. And according to analysts, the NAV per share after adjustment is HKD 22.1, higher than our stock price, so it seems that analysts are full of confidence in our future developments. And we are also full of confidence at the same time.

So that's all in my part. Now I will defer to Mr. Guo Guangchang to share with you our future development strategies.

Thank you.

[Guang chang Guo, executive]

Shareholders, investors, analysts, banks, rating agencies, working partners, media friends, good morning. Just now Mr. Wang Can had already made a presentation. He reported on our 2018 financial performance and operating results. Thank you very much for your support to Fosun International and myself in the past year. Thank you, everybody.

2018 is not an easy year. Well, there are a lot of changes in global, political and economic scenes, so many challenges were brought to us. With our hard work, we have achieved very good results. Our C2M ecosystem strategy is being implemented. All 3 ecosystems achieved rapid growth. This is our foundation, so we are full of confidence in the future. In 2019, we'll be focused on our product capability, ecosystem developments. And we will work hard to enhance shareholder return. So we are focused on [ 1 plus N ] structure. One is to build an ecosystem. N means that we will work hard to create more groups and enterprises, for example, pharma and FOLIDAY. Our goal is to create healthy, happy and wealthy products and brands for all 1 billion families in the world.

In the future, first, we will work on management. Many friends will ask how we can manage this very huge ecosystem. I think, in terms of management, one important point is to be focused on our corporate culture and value in order to build our own culture. At the same time, we need to build a multilayer partner system, so we will build a platform of global working partners. And then we have to build a very speedy organization with 7/24 hours communication. And then the creation of the smart mid-office is also an important point for our future development.

Second, empowerment. We need to incubate industries, and we should have the ability of turning around. And then vertically we need to connect the whole industrial chain, and things should be cross-disciplinary. And then the third thing is realization of value. We will actively search investment opportunities amidst uncertainty, and we will promote the listing of more and more enterprises. So we will make sure that we will do the right thing, and we will also do difficult things if necessary.

So with a deep enterprise, we see a lot of opportunities for investment in the world and because we have the turnaround ability and we are working on 2 legs. We have investment as well as business operation capability, so in the future, value of Fosun should be based on not only investment but also enterprise or industrial chain. In this way, we are able to have a maturity effect. So for industrial operation, in the world we will identify more investment opportunities, so we have more confidence in our management. We have found our future development path very clearly. I hope that you will continue to support us. Our future will definitely be brighter.

Thank you very much.

[Can Wang, executive]

Now we will move on to Q&A session. Let me remind you, please state your name and name of organization in your question. And please send your question and information to the IR mailbox, [e-mail].

[Can Wang, executive]

Here's a question. We have received a question, and that is, "Sometime ago, you talked about deep industrial operation and investment strategy. So now you want to directly face up to the capital markets, so can you explain in greater detail this strategy?" Mr. Wang, please?

[Qunbing Wang, executive]

Thank you for the question. All along, our foundation is industrial operation. At the same time, value investment is a way to enhance our operation capability. At the same time, we actively interface with the capital market to aid our industrial development. In 2018, if you refer to our achievements in the capital market, for example, Yuyuan asset reorganization, the listing of Babytree, FOLIDAY's listing in the Hong Kong stock market, these show that our value investment has achieved good results in the capital markets, especially the listing of FOLIDAY. We started with investing in Club Med, and we hold shares in Club Med. And then we also developed the Atlantis IP brand and products. Of course, we are also promoting the development of more brands, FOLIDAY and so on. So regarding in-depth industrial operations and synergy and high-speed growth and so on: So our companies were successfully listed in Hong Kong, so these abilities of Fosun actually complements one another and facilitate one another. Of course, on these 3 points, first of all, our core and our foundation is still industrial operation. This is what we have adhered to all along. I talked about the listing of FOLIDAY. In fact, in early stage, if you look at the development of Fosun Pharma, I think Fosun Pharma is familiar to the whole world. Based on industrial operation, Fosun Pharma made investments in the capital markets and also invested more in R&D, so it is a process of integration and growth. Secondly, apart from industrial operation, we have to insist on value investment. So through investment we can upgrade our industrial operation. Regarding investment, there are a few points I want to make. First, as said in the presentation, [ 1 plus N ] building. So 1 is our ecosystem. And N means development of enterprises and industries in Health, Happiness and Wealth Ecosystems. Besides, we will be the holding company of shares. So in this way, we can better promote the synergy in the ecosystem. Apart from holding shares, we will take active part in strategic investment. We also promote insurance funds to make asset allocation to facilitate synergy in industries. And about investment, the third point is we have to continue to do value investment, traditional value investment, i.e. investment in big projects. The second area is that we have to invest more in areas where there is positive prospect. Then we will be in a better position to invest in good opportunities. For example, our investment in Club Med, well, it grew very fast. And now we are investing in Lanvin because we think that Lanvin has a big growth potential. Third, in the area of value investments we have to make active investment in technological innovation. So we have to be wise in investment; in investing into innovation projects, especially the early-stage ones, especially in the area of big health. So health, happiness and wealth. There are many other technological innovation projects that are around the building of our smart mid-office. And third, we actively promote the interface of our N enterprises or industries with the global capital markets. If you look at Fosun International's ecosystem, well, actually, we have a lot of projects that have the potential to be listed in Hong Kong and other stock markets. Thank you.

[Can Wang, executive]

Next question. Well, this question is for me. "I am more interested in the leveraging level of the company. So is the finance costs controllable? In recent period, are you investing in big projects?" Now concerning financing costs, in 2018, our average debt cost was 4.97%. As of the end of 2018, total debt over total assets was 53.7%, so it is a comfortable level. As I said in my presentation, in second half 2018, we made use of different policy windows because the government formulated a number of policies to help private enterprises to solve difficult financing problem. So in terms of interest rate and also currency market, there is improvement. So for short-term loans below 1 year, its share came down to 36.4%; over 1 year, 63.6%. So this is about our debts. In 2018 January, Moody upgraded our rating to Ba2. Outlook is stable. So this means that concerning -- our diversified investment portfolio and our good investment track record and our sustainable growth are being recognized. We will continue to maintain stable gearing ratio. So that's about our safety of our debts. Are we going to invest in big projects? Investment is one of the dual strategies of Fosun, so we will continue to look for opportunities that are in line with our investment expectations, but of course, I cannot disclose the progress of projects. If there is anything, we will -- if there's any new updates, we will let you know in due course.

Third question. "Sometime ago, the management talked about in-depth business operation and investment, a dual approach or strategy. So you will also do empowerment to develop capable, globalized enterprises. To achieve that talent is most important, so in management as well as talent recruitment, what is your plan?" Mr. Guo, please?

[Guang chang Guo, executive]

How to organize and also talents, these are things that I have been most concerned about. And people are our most valuable assets. In Fosun, we are making investment in operation in 30 countries so we position ourself as a globalized enterprise from China. So regarding people, we do not only trust Chinese people. We trust value and nurture every employee of Fosun, so we adopt a partner scheme. We have 50-odd people from different industries and places. They are our global partners, and they are entrepreneurs and also experts in different industries and positions. Besides, these people are not only from China. Some are from Japan and France. So we have outstanding people all over the world. We also attach importance to nurturing young people. Many post-80s people have become our global partners. And we also attach importance to the structure design -- organization structure design. In this way, we can build our big ecosystem. As such is now we strive to build [ 1 plus N ] ecosystem. 1 is the ecosystem, and N means companies with very deep integration and operation capability, for example, Fosun Pharma and FOLIDAY. For people, well, we attach the most importance to entrepreneurship. So I think everyone needs to be in good condition. Each of them should be entrepreneurial enough. That's my answer. Thank you.

[Can Wang, executive]

Next question. "For your big health business, it is developing fast in 2018. Net profit was up 14%. So can you tell us the strategy of this ecosystem and future plan? Besides, can you please let us know the recent development of Fosun Pharma? And is R&D expenses on the high side? So have you thought of listing on the innovation board of the stock market?"

[Qiyu Chen, executive]

Right, for our Health Ecosystem, well, we insist on whole industrial chain. Besides, China will be the core that we will develop in the whole world. In the process, we attach a lot of importance to 2 areas: first, pharmaceutical medical device; and [ bank notice ]. We want technology and innovation to drive developments of our products and service. So in this way, we are able to satisfy unsatisfied medical needs. Besides, in relation to medical insurance and medical service, we want to create a closed loop and also in the mother and baby area, so we will offer good-quality off-line and online service to satisfy customers' needs. With this full industrial chain layout, for all household customers in the world in relation to disease prevention, diagnosis, treatment, rehabilitation and elderly care, we'll offer comprehensive services to meet their needs. Apart from Fosun Pharma, which you are very familiar with, our Health Ecosystem also includes medical insurance business under Fosun Health and also Babytree providing mother and baby service. And also there's overseas medical enterprise and also our global health care group. So with this chain, together with Fosun health, we can cover all aspects of big health. In the whole industrial chain strategy, we will strengthen each and every aspect. We want to make it -- make them all very competitive, and we want to achieve synergy and support among different aspects. For example, in terms of innovation and development of pharmaceutical business, we will integrate it with technology. And it will also be connected to medical insurance. For medical service development, it will be interfaced with medical insurance product as well. In recent period, Fosun's big health segments will continue to invest more in innovation and R&D. We hope innovative products can be the driving force for growth. And for insurance and health care and pharmaceuticals, we hope to offer more competitive products and services. Finance, insurance will support all these services and products. For Fosun Pharma, yesterday, the annual report was issued. In 2018, revenue was 24.9 billion, up 34.45%; net profit 2.7 billion; R&D expenses 2.5 billion. Behind these, in 2018, we achieved some breakthroughs in our results. First, overseas global sales revenue. Well, we completed Gland Pharma's and other companies' integration. And then Alma laser medical device company was listed in Hong Kong. So these overseas and global businesses achieved rapid growth with very good efficiency. Next, our R&D investments. If you look at rating and also biosimilar and innovative small-molecule drugs and also cell clinical trials and so on, we can see that our achievements are significant in the R&D area. Besides, we also invest in [ Guayong ] holding. Last year, we completed integration with that group, and for its future development, there is going to be a big area for developments. So in 2018, overall development of Fosun Pharma was very effective. In the future, we will continue to do a good job in innovation and developments so we'll be well placed in the China market. And in the coming few years, there will be fast product structure adjustments. Concerning use of medicine in hospitals, there will be a shift towards high-end innovative drugs, especially for treatment of cancer. So with this change, we hope to achieve a leapfrog development for Fosun Pharma. And then in relation to R&D expenses, I think R&D represents the future of our competitiveness, so we will be prepared to invest more. For Fuhong Hanlin, on the 13th of November 2018, we submitted listing application. And we are actively expediting the listing process. If there is further update, we will let you know. Thank you.

[Can Wang, executive]

Thank you, Mr. Chen. Here's another question. "Now for the happiness segment, there is FOLIDAY and also Yuyuan which had just completed its reorganization. And in February 2018, the Fosun Fashion Group was established. So what is the positioning of each of them? Now Fosun owns almost 70% of Yuyuan after reorganization. Do you have any future plan about its development?"

[Xiaoliang Xu, executive]

Thank you. Thank you very much for your interest in our Happiness Ecosystem. If you look at FOLIDAY and Yuyuan, they are very important platforms and groups in this ecosystem. If you look at FOLIDAY is positioning is to be the biggest recreational and tourism resort in the world. FOLIDAY's concept is very good. We want you to be able to integrate life, work and also tourism in your daily life every day. So every day is a holiday. FOLIDAY last year was listed. In Southern China, in Hainan we established the first Atlantis. And every day, there was growth. Now it leads the Hainan traveling market. And at present, after listing, we will expand our layout in China and the global market, so we will actually serve more and more households in the traveling scenario. Well, Fosun Fashion was also established last year. The positioning is that it will be deeply rooted in China, but it will be a leading group in the whole world. In Fosun Fashion there's already a group of brands with strong brand capability. Each has its own clear brand strategy. We have also brought in from the world a strong team for each brand. Now if you look at Lanvin, they have new CEO and designer. In 2019, in the Paris Fashion Week, the new Lanvin products were well received in the market. We believe the creation of the fashion group will continue to bring more good brands in and we will serve more and more households. For the reorganized Yuyuan, it is a flagship platform in our Happiness Ecosystem. Yuyuan has a clear, new strategy. We hope it will lead the renaissance of Chinese culture. It will be rooted in China, but it will become a world-class group. In fact, there are 3 dimensions. We want to create more enterprises about happiness of households. We have already set up 6 groups. And for these enterprises, we hope the industries and the cities can be better integrated. So we are going to establish some landmark companies in each of these industries. So there will be scenarios connecting households in our industries, so we hope that eventually there will be membership platform for household members. And finally, all these will help our Happiness Ecosystem. In 2019, Yuyuan has done more in IP plan in the whole world, and it has also created a partnership scheme. We have 15 Yuyuan global partners already. In the future, there will be more. At the same time, we will actively achieve more integration. In terms of management for Yuyuan, after reorganization, we hope that it will be more effective in the Happiness Ecosystem. So Fosun investors, I hope you can have better experience or more experience of our online, off-line products, scenarios and models. And we hope to deliver more happy experience to you. Thank you.

[Can Wang, executive]

Thank you very much for the answer. The sixth question is, "In technology and innovation, Fosun has made many plans. You will incubate and invest in many companies. And there is the innovation and technology platform, so what will be the impact on Fosun International and Fosun's group of companies concerning that technology and innovation board?"

[Qunbing Wang, executive]

Thank you very much for this question. This is a good question. Well, in Shanghai, concerning the creation of the technology and innovation board, this is very favorable to Fosun. Fosun International's strategy is to serve the 1 billion families in the world. We want to develop healthy, wealthy and happy ecosystem, so there will be products and services around these 3 areas and they will be driven by technology and innovation. We hope that for the whole world we can provide innovative products and services. So all along, for Fosun, we have invested more and more in technology and innovation. Our investment is of different types. Well, we invest in R&D and incubation and development, for example, Fuhong Hanlin and also VC investment. We also collaborate with others. We have built our internal smart mid-office. So in these areas, in the past, we had many early-stage projects which had -- which were not profitable yet. For example, Fuhong Hanlin, back then, it was difficult for it to be listed on Asian market. With the technology and innovation board, then more enterprises of this type can enter the Asian market earlier. So for mainland investors, we can create more value. Of course, if you look at big health, just now you have heard a lot about Fuhong Hanlin. In terms of technology and innovation, well, we achieved a lot of growth in a number of projects. For example, we have leading medical imaging company, [indiscernible]. And then we have already launched products that are being used in 100 hospitals. Apart from big health, we also have other technology and innovative companies now in the area of happiness and wealth areas as well. If you look at the building of our smart mid-office, we have some good technology and innovation projects. Now if you talk about [indiscernible] technology, it's established in 2008, and it focuses on the Internet and communication technology. For example, WiFi chip and Bluetooth chip technology development. Its development is very good besides [indiscernible] information. So it does not only work in China. It is also globally leading in this technology. So we have a lot. So concerning the establishment of the technology and innovation board, we really feel very excited. Concerning our future development, we will have better market -- a better capital market to support our investment and development in technology and innovation. Then more products and services can be offered to achieve happy life.

[Can Wang, executive]

Thank you, Mr. Wang. Because of time, we will take the last question here, so if there are still questions not answered, after the webcast, our IR department will follow up with you. Now this question is for Mr. Guo. Everyone is worried about downturn of the economy. In 2019, what are the opportunities and challenges for Fosun? Mr. Guo, please? Mr. Guo?

[Guang chang Guo, executive]

I think, at any point in time, especially in 2019, yes, there are a lot of challenges. However, we have seen many opportunities. First, if you look from a regional point of view, we are still optimistic about China. China market is big enough and the structure is complicated enough, so there are enough opportunities. Concerning the Chinese economy, we are relatively optimistic. Of course, there are a lot of potential problems, but as long as there is continuous open and reform, the economic potential can be released. For young people and entrepreneurs in China, they work very hard. They have a strong demand for happy life, so that's why they work very hard. From a regional point of view now India, Africa, Brazil, Europe still have a lot of room. In these areas, in these regions, Fosun has made good layout already, so we'll continue to look for opportunities. Since we have the [ 1 plus N ] model and also we have accumulated very in-depth experience in different industries, then concerning happiness, health and wealth, we see even more opportunities. We invest in good enterprises at appropriate times. Because we have global industrial operation and industrial consolidation capability, then we can look for very good companies. Now good brands like Lanvin may encounter a lot of problems, but we can invest in good companies and good brands at very low cost, and then we can do the business well. Then we can see further opportunities, and we can create even higher return for shareholders. So our first opportunity comes from the depth of industry. And then as Mr. Wang just said, technology and innovation. Global technology development is faster than any one point in time in history, so this brings more opportunities to Fosun's development. Next, C2M strategy and the deepening of this strategy. On the C end, no matter whether it's online or off-line, I think the content is very rich. On the M end, we have accumulated many good products through innovation and technology. Besides, there will be more enterprises with better cooperation, so products are more diversified and rich on the M end. So with this big C2M structure, we see even more opportunities. And then in this way, through the building of the smart mid-office, we can see technological empowerment. And then in terms of building ecosystems, we can be faster. Now back to the building of ecosystems, we see more development opportunities. So in 2019, there are still a lot of opportunities for us to speed up our development. I hope you will continue to support our development. Thank you.

[Can Wang, executive]

Thank you, Mr. Guo, for your answer. And once again, thank you, shareholders, investors, analysts, banks, rating agencies, business partners, friends of the media for watching this webcast. Thank you for your continuous support. We will end our webcast here.

Thank you very much. Thank you.