HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

<ul>
<li>Retail pharmacies experienced performance decline in April and May. Due to negative policies, retail pharmacies will experience industry clearance. Therefore, we do not recommend investors to bottom-fish related stocks now.</li>
<li>There is a logic to biotech's performance from 2023 to present.The clearer the path of sustainable development, the better the stock price performance. They can be divided into three types.</li>
<li>YSB faces big risks and the outlook is not optimistic. If the final valuation of the Company is lower than <a href="https://www.smartkarma.com/entities/china-resources-pharmaceutical-group" target="_blank" data-smartkarma-citation="entities:22928:1" rel="noopener">China Resources Pharmaceutical</a> and <a href="https://www.smartkarma.com/entities/shanghai-pharmaceuticals-holding" target="_blank" data-smartkarma-citation="entities:228:1" rel="noopener">Shanghai Pharmaceuticals</a>, we wouldn't be too surprised.</li>
</ul>


Retail pharmacies experienced performance decline in April and May. Due to negative policies, retail pharmacies will experience industry clearance. Therefore, we do not recommend investors to bottom-fish related stocks now.
There is a logic to biotech's performance from 2023 to present.The clearer the path of sustainable development, the better the stock price performance. They can be divided into three types.
YSB faces big risks and the outlook is not optimistic. If the final valuation of the Company is lower than China Resources Pharmaceutical and Shanghai Pharmaceuticals, we wouldn't be too surprised.


China Healthcare Weekly (Jun23)-Retail Pharmacy's Dilemma, Logic to Biotech's Stock Price,YSB's Risk

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Event-Driven

<ul>
<li>Post market close tomorrow, Hang Seng Indexes will announce the changes for the <a href="https://www.smartkarma.com/entities/hong-kong-hang-seng-index" target="_blank" data-smartkarma-citation="entities:22899:1" rel="noopener">Hang Seng Index (HSI INDEX)</a> that will be implemented at the close on 7 June.</li>
<li>There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.</li>
<li>Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.</li>
</ul>


Post market close tomorrow, Hang Seng Indexes will announce the changes for the Hang Seng Index (HSI INDEX) that will be implemented at the close on 7 June.
There were no constituent changes to the index in March. We highlight ten profitable and eligible stocks that could be added to the index in June.
Changes to the Hang Seng Industry Classification System (HSICS) could lead to inclusions for the Information Technology industry while there could also be inclusions for the underweighted Healthcare industry.


Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June

China National Medicines A / Event-Driven

<ul>
<li>The "Entrusted Management Agreement" indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and <a href="https://www.smartkarma.com/entities/shanghai-shyndec-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:1952:1" rel="noopener">Shanghai Shyndec Pharmaceutical</a>. </li>
<li>The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. </li>
<li>Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.</li>
</ul>


The "Entrusted Management Agreement" indicates that horizontal competition issue will be completely solved within three years.This could pave the way for a future merger between Guorui and Shanghai Shyndec Pharmaceutical. 
The spin-off of Guorui won’t have material impact on China National Medicines Corporation (CNMC). After restructuring, CNMC will focus on “Beijing area pharmaceutical distribution + nationwide distribution of anesthesia/psychotropic drugs”. 
Based on strong/stable fundamentals as well as the dominant position in anesthesia and psychotropic drug business, CNMC’s future growth potential is promising. We share our views on the Company’s valuation.


China National Medicines (600511.CH) - After Restructuring, Performance Growth Is Guaranteed

Global Healthcare Analyst

Tina Banerjee

Sinopharm Group Co Ltd H / Equity Bottom-Up

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sinopharm-group-co-ltd-h" target="_blank" data-smartkarma-citation="entities:32:1" rel="noopener">Sinopharm Group Co Ltd H (1099 HK)</a> reported YoY and sequential growth in revenue and net profit in 4Q23. However, outlook for the sector remains bleak in near-term.</li>
<li>Last year, Sinopharm’s distribution business was impacted by anti-corruption campaign. The momentum of the campaign continues in this year also. This lowers conviction toward improving performance in 1H24 at least.</li>
<li>Despite of mid-single digit revenue growth, Sinopharm’s margin remains stagnant or is declining. Sinopharm still earns more than 70% revenue from low margin earning pharmaceutical distribution business.</li>
</ul>



Sinopharm Group Co Ltd H (1099 HK) reported YoY and sequential growth in revenue and net profit in 4Q23. However, outlook for the sector remains bleak in near-term.
Last year, Sinopharm’s distribution business was impacted by anti-corruption campaign. The momentum of the campaign continues in this year also. This lowers conviction toward improving performance in 1H24 at least.
Despite of mid-single digit revenue growth, Sinopharm’s margin remains stagnant or is declining. Sinopharm still earns more than 70% revenue from low margin earning pharmaceutical distribution business.


Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook

<ul>
<li>At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.</li>
<li>We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.</li>
<li>The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.</li>
</ul>


At 82 index constituents currently, we expect the index committee to progress towards reaching 100 constituents. We are (highly) unlikely to reach the target this calendar year though.
We highlight nine stocks that have a decent chance at being added to the index over the next couple of rebalances. All companies are profitable and meet inclusion requirements.
The market consultation on proposed changes to the Hang Seng Industry Classification System (HSICS) could lead to more inclusions from the Information Technology sector from the June rebalance.


Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March

China

China Resources Pharmaceutical Group Ltd. operates as a pharmaceutical company. The Company researches and develops, manufactures, and distributes pharmaceuticals. China Resources Pharmaceutical Group provides products and services involving chemicals, biologics, health products, medical appliances, and others. 

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China Resources Pharmaceutical (3320 HK)

China Healthcare Weekly (Jun23)-Retail Pharmacy's Dilemma, Logic to Biotech's Stock Price,YSB's Risk

Retail pharmacies facing industry clearance due to negative policies.Biotech stock performance tied to sustainable development path. YSB faces...

Xinyao (Criss) Wang

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June

The move to 100 constituents is expected to drag on into 2025. We highlight 10 stocks that could be considered for inclusion in the HSI in June....

Brian Freitas

China National Medicines (600511.CH) - After Restructuring, Performance Growth Is Guaranteed

Horizontal competition issue will be solved within 3 years. The restructuring will increase the business concentration/scale/competitiveness of...

Xinyao (Criss) Wang

Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook

Sinopharm reported revenue and profit growth in 4Q23, but sector outlook remains bleak due to anti-corruption campaign. Subdued revenue growth and...

Tina Banerjee

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March

The announcement of the inclusions to the HSI at the March rebalance will be made post market close today. Most stocks are trading lower which is...

Brian Freitas

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Market Cap (USDm)

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China Healthcare Weekly (Jun23)-Retail Pharmacy's Dilemma, Logic to Biotech's Stock Price,YSB's Risk

​Retail pharmacies facing industry clearance due to negative policies.Biotech stock performance tied to sustainable development path. YSB faces...

Xinyao (Criss) Wang

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for June

The move to 100 constituents is expected to drag on into 2025. We highlight 10 stocks that could be considered for inclusion in the HSI in June....

Brian Freitas

China National Medicines (600511.CH) - After Restructuring, Performance Growth Is Guaranteed

Horizontal competition issue will be solved within 3 years. The restructuring will increase the business concentration/scale/competitiveness of...

Xinyao (Criss) Wang

Sinopharm Group (1099 HK): Sequential Recovery in 4Q23; Bleak Near-Term Outlook

​Sinopharm reported revenue and profit growth in 4Q23, but sector outlook remains bleak due to anti-corruption campaign. Subdued revenue growth and...

Tina Banerjee

Hang Seng Index (HSI) Rebalance Preview: Inclusion Candidates for March

The announcement of the inclusions to the HSI at the March rebalance will be made post market close today. Most stocks are trading lower which is...

Brian Freitas

Retail pharmacies facing industry clearance due to negative policies.Biotech stock performance tied to sustainable development path. YSB faces...

Sinopharm reported revenue and profit growth in 4Q23, but sector outlook remains bleak due to anti-corruption campaign. Subdued revenue growth and...