HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

Industry viewpoints:<ul>
<li>The 5th volume-based purchase (VBP) could be kicked off in May or June this year, and then officially implement in July.</li>
<li>The National Health Care Security Administration pays high attention to the promotion of "Internet +" medical insurance payment.</li>
<li>The specialized hospitals in China are expected to have more growth potential than general hospitals. 
</li>
</ul>Company news:News about the updated progress of new drugs from <a href="https://www.smartkarma.com/entities/innovent-biologics-inc" target="_blank" data-smartkarma-citation="entities:27452:1" rel="noopener">Innovent Biologics Inc (1801 HK)</a>, <a href="https://www.smartkarma.com/entities/shanghai-henlius-biotech-inc" target="_blank" data-smartkarma-citation="entities:27888:1" rel="noopener">Shanghai Henlius Biotech (2696 HK)</a>, and <a href="https://www.smartkarma.com/entities/everest-medicines-ltd" target="_blank" data-smartkarma-citation="entities:29224:1" rel="noopener">Everest Medicines (1952 HK)</a>.Market review: Last week, stock price for healthcare sector in A share increased 2.81%, while CSI 300 increased 2.45% over the same period of time. Risk disclosure:Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

Industry viewpoints:
The 5th volume-based purchase (VBP) could be kicked off in May or June this year, and then officially implement in July.
The National Health Care Security Administration pays high attention to the promotion of "Internet +" medical insurance payment.
The specialized hospitals in China are expected to have more growth potential than general hospitals. 

Company news:News about the updated progress of new drugs from Innovent Biologics Inc (1801 HK), Shanghai Henlius Biotech (2696 HK), and Everest Medicines (1952 HK).Market review: Last week, stock price for healthcare sector in A share increased 2.81%, while CSI 300 increased 2.45% over the same period of time. Risk disclosure:Policy risk, R&amp;D risk, Company risk and COVID-19 risk.

Asia Pac IPO & Placement Research, China biotech, Aequitas Research

Ke Yan, CFA, FRM

Asia Pac IPO & Placement Research, China biotech

IPOs and Placements coverage across Asia Pacific

Aequitas Research

We cover all listing across the Asia Pacific along with follow-up placements. As of Dec 2020, our team had covered 539 IPOs with a hit rate of 73.5% and 685 placements with a hit rate of 66.8%.

We combine fundamental bottom-up views with our proprietary quantitative framework to provide a holistic coverage across new listings and placements. Our coverage includes pre-IPO notes before the deal is launched, follow-up analysis once the deal is live and post-listing trading analysis as well.

Equity Capital Markets

Chaoju Eye Care Holdings / Equity Capital Markets

Chaoju Eye Care Holdings Limited is a leading ophthalmic medical service provider based in Northern China. The company is looking to raise up to USD 200m to list in Hong Kong.In previous note, we discuss that Chaoju is an eye specialist hospital with a geographical focus in the Northern region in China. The company started in 1988 as an ophthalmic clinic and currently operates 17 hospitals with a total GFA of 87,146 sqm as of January 2021. The company recorded revenue growth of 13% p.a. between FY18 and FY19. Having said that, around 60% of the total revenue came from three hospitals, namely Baotou Hospital, Hohhot Hospital, and Chifeng Hospital. The company plans to open 11 new hospitals in Inner Mongolia, Zhejiang, and Jiangsu in the next three years, representing a 9% GFA CAGR. Another notable driver for the company is a higher mix of consumer ophthalmic services, which have a higher gross margin than other segments. We are of the view that the company doesn't have strong backing from investors. Its growth prospects in terms of hospital expansion are only moderate despite a strong momentum in the ophthalmic sector in China. In this note, we compare the company with industry leader Aier Eye Hospital. We also assess the company's preliminary valuation.<h2>Our previous coverage on Chaoju Eye Care</h2><ul><li><a href="https://www.smartkarma.com/insights/chaoju-eye-care-pre-ipo-growth-prospect-far-from-being-impressive" target="_blank" rel="noopener">Chaoju Eye Care (朝聚眼科) Pre-IPO: Growth Prospect Far from Being Impressive</a></li></ul>

Chaoju Eye Care Holdings Limited is a leading ophthalmic medical service provider based in Northern China. The company is looking to raise up to USD 200m to list in Hong Kong.In previous note, we discuss that Chaoju is an eye specialist hospital with a geographical focus in the Northern region in China. The company started in 1988 as an ophthalmic clinic and currently operates 17 hospitals with a total GFA of 87,146 sqm as of January 2021. The company recorded revenue growth of 13% p.a. between FY18 and FY19. Having said that, around 60% of the total revenue came from three hospitals, namely Baotou Hospital, Hohhot Hospital, and Chifeng Hospital. The company plans to open 11 new hospitals in Inner Mongolia, Zhejiang, and Jiangsu in the next three years, representing a 9% GFA CAGR. Another notable driver for the company is a higher mix of consumer ophthalmic services, which have a higher gross margin than other segments. We are of the view that the company doesn't have strong backing from investors. Its growth prospects in terms of hospital expansion are only moderate despite a strong momentum in the ophthalmic sector in China. In this note, we compare the company with industry leader Aier Eye Hospital. We also assess the company's preliminary valuation.Our previous coverage on Chaoju Eye CareChaoju Eye Care (朝聚眼科) Pre-IPO: Growth Prospect Far from Being Impressive

Chaoju Eye Care (朝聚眼科) Pre-IPO: How Does It Fare Against Industry Leader

On January 4th, 2021, <a href="https://www.smartkarma.com/entities/chaoju-eye-care-holdings-limited" target="_blank" data-smartkarma-citation="entities:31119:1" rel="noopener">Chaoju Eye Care Holdings (CEC HK)</a> filed a prospectus with the Hong Kong Stock Exchange for listing on the Main Board. The Company's history could be traced back to the time when Zhang Xinghuan, the father of Chaoju's  founder, began his practice as a traditional Chinese medicine practitioner and then established a Chinese medicine clinic in 1921. Following in the footsteps of his father, Zhang Chaoju, as a pioneer of modern ophthalmology in Inner Mongolia and an entrepreneur in the field of ophthalmology services in China, founded a clinic that provided ophthalmology services in Baotou City, Inner Mongolia in 1988. Since then, Chaoju Eye Care has established an extensive network of ophthalmic hospitals and optical centers in North China. Regardless of the long history and professional background, how about this Company? The following mainly analyzed both the strengths and concerns for Chaoju.

On January 4th, 2021, Chaoju Eye Care Holdings (CEC HK) filed a prospectus with the Hong Kong Stock Exchange for listing on the Main Board. The Company's history could be traced back to the time when Zhang Xinghuan, the father of Chaoju's  founder, began his practice as a traditional Chinese medicine practitioner and then established a Chinese medicine clinic in 1921. Following in the footsteps of his father, Zhang Chaoju, as a pioneer of modern ophthalmology in Inner Mongolia and an entrepreneur in the field of ophthalmology services in China, founded a clinic that provided ophthalmology services in Baotou City, Inner Mongolia in 1988. Since then, Chaoju Eye Care has established an extensive network of ophthalmic hospitals and optical centers in North China. Regardless of the long history and professional background, how about this Company? The following mainly analyzed both the strengths and concerns for Chaoju.

Pre-IPO Chaoju Eye Care Holdings - Here Are the Strength and the Concerns

Equity Bottom-Up

Aier Eye Hospital Group / Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/aier-eye-hospital-group-co-ltd" target="_blank" data-smartkarma-citation="entities:1103:1" rel="noopener">Aier Eye Hospital Group (300015 CH) </a>released its third quarter report in 2020. The Q1-Q3 accumulated revenue was RMB8.565 billion, with a YoY growth rate of 10.78%. Net income attributed to shareholders in the first three quarters was RMB1.546 billion, up 25.6% YoY. Net income after deducting non-recurring gains and losses were RMB1.581 billion, up 27.99% YoY. Q3 single quarter revenue was RMB4.402 billion, up 47.55% YoY. Net income attributed to shareholders reached RMB870 million, up 62.34% YoY. Q3’s single quarter net income after deducting non-recurring gains and losses was RMB1.002 billion, up 85.49% YoY. Q3 performance was above expectations and demonstrated strong recovery from COVID-19.<figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/177/087/original/image_15095593861607389807321.png?1607389809" class="editor-image img-responsive" data-smartkarma-image-id="177087"></figure>Source: WIND

Aier Eye Hospital Group (300015 CH) released its third quarter report in 2020. The Q1-Q3 accumulated revenue was RMB8.565 billion, with a YoY growth rate of 10.78%. Net income attributed to shareholders in the first three quarters was RMB1.546 billion, up 25.6% YoY. Net income after deducting non-recurring gains and losses were RMB1.581 billion, up 27.99% YoY. Q3 single quarter revenue was RMB4.402 billion, up 47.55% YoY. Net income attributed to shareholders reached RMB870 million, up 62.34% YoY. Q3’s single quarter net income after deducting non-recurring gains and losses was RMB1.002 billion, up 85.49% YoY. Q3 performance was above expectations and demonstrated strong recovery from COVID-19.Source: WIND

Aier Eye Hospital(300015.CH) - The Largest Ophthalmic Chain in China with Promising Growth Potential

Asset Allocation & Fund Positioning, Copley Fund Research

Steven Holden

Asset Allocation & Fund Positioning

Copley Fund Research

Copley Fund Research provide research and data on asset allocation among Global and Emerging Market equity funds.  The analysis details absolute and relative positioning across countries, sectors and industries together with highly granular data on single stock and single fund allocations.  The data is updated monthly with time series going back to January 2011.

Global Research - Analysis of 165 prominent Global equity funds, combined AUM $335bn
GEM Research - Analysis of 127 prominent global EM equity funds, combined AUM $250bn

Asset Allocation - Global and GEM Equity

Cross Asset Strategy

Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.The list is headed by <a href="https://www.smartkarma.com/entities/jiangsu-hengrui-medicine-co-ltd" target="_blank" data-smartkarma-citation="entities:14128:1" rel="noopener">Jiangsu Hengrui Medicine (600276 CH)</a>, one of the standout domestic holdings within the Health Care sector, followed by <a href="https://www.smartkarma.com/entities/china-tourism-group-duty-free-corp-ltd" target="_blank" data-smartkarma-citation="entities:12278:1" rel="noopener">China Tourism Group Duty Free Corp Ltd (601888 CH)</a> and <a href="https://www.smartkarma.com/entities/luxshare-precision-industry-co-ltd" target="_blank" data-smartkarma-citation="entities:12310:1" rel="noopener">Luxshare Precision Industry (002475 CH)</a> .Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn

Last month saw China allocations hit record levels across Asia Ex-Japan, Emerging Market and Global active long-only funds.  The average China weight in Asia Ex-Japan funds stands at a record 50.96%, in active GEM funds a record 37.63% and in active Global funds an all-time high of 5.33%However, these increases have come at the expense of greater concentration.  Among Global managers, the top 10 largest China stock holdings now account for 62% of total China allocations, among GEM and Asia Ex-Japan funds just under 50% - an all-time high across all 3 investor groups. Dedicated China managers, however, are more diversified.  In this analysis, we look at the differences between dedicated China funds and their regional peers.  We find that Asia, GEM and Global managers are more concentrated in the Consumer Discretionary and Communication Services sectors, whereas dedicated China managers are more diversified across Technology, Industrials and Health Care stocks.  Regional funds are also underinvested in China A-Shares compared to dedicated China managers, who are running significant overweights vs the MSCI China benchmark.We identify the next generation of Chinese stocks outside of the big index names by following the lead of dedicated managers in the region.  We provide a list of 40 stocks, identified as 'Next Generation' stocks due to their widespread investment in dedicated China funds, but that are currently underowned by Asia Ex-Japan, GEM and Global investors.The list is headed by Jiangsu Hengrui Medicine (600276 CH), one of the standout domestic holdings within the Health Care sector, followed by China Tourism Group Duty Free Corp Ltd (601888 CH) and Luxshare Precision Industry (002475 CH) .Analysis taken from our Global, GEM, Asia Ex-Japan and China fund universes.  Global:  386 Active Funds, combined AUM $750bn                                                                                        GEM:  242 Active Funds, combined AUM $370bn                                                                                          Asia Ex-Japan: 98 Active Funds, combined AUM $70bn                                                                              China:  119 Active Funds, combined AUM $50bn

China's Next Generation:  Diversifying Away from Tencent and Alibaba.

China

Aier Eye Hospital Group Co., Ltd provides ophthalmological services.  The Company's services include ophthalmological diagnosis and treatments.

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Aier Eye Hospital Group (300015 CH)

China Healthcare Weekly (Apr.2)

This article analyzed the upcoming 5th volume-based purchase, the "Internet +" medical insurance payment, the specialized hospital market...

Xinyao (Criss) Wang

Chaoju Eye Care (朝聚眼科) Pre-IPO: How Does It Fare Against Industry Leader

We compare Chaoju Eye Care with industry leader Aier Eye Hospital (A-share). We also assess the company's preliminary valuation.

Ke Yan, CFA, FRM

Pre-IPO Chaoju Eye Care Holdings - Here Are the Strength and the Concerns

This article analyzed Chaoju Eye Care in terms of both the strength (market position, financial position) and the concerns (risk of future...

Xinyao (Criss) Wang

Aier Eye Hospital(300015.CH) - The Largest Ophthalmic Chain in China with Promising Growth Potential

This article analyzed China's largest ophthalmic chain Aier Eye Hospital in terms of market potential, development mode, financial position and...

Xinyao (Criss) Wang

China's Next Generation: Diversifying Away from Tencent and Alibaba.

China exposure is becoming more concentrated in a small number of large cap stocks. We identify the next generation of China stocks by analyzing...

Steven Holden

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