HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Thematic (Sector/Industry)

<ul>
<li>China issued the “Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035)”, where some statements are different from those in the  "14th Five-year Plan" and the 20th National Congress report.</li>
<li>We analyzed our interpretation and speculated the “wind direction” behind the difference in statements, so as to identify some possible changes in China healthcare industry in 2023.</li>
<li>
<em> The Outline</em> is not only in line with the adjustment of COVID policies,but also highly relevant to the major contradictions/changes in internal and external situations. Investors need to follow the trend.  </li>
</ul>


China issued the “Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035)”, where some statements are different from those in the  "14th Five-year Plan" and the 20th National Congress report.
We analyzed our interpretation and speculated the “wind direction” behind the difference in statements, so as to identify some possible changes in China healthcare industry in 2023.

 The Outline is not only in line with the adjustment of COVID policies,but also highly relevant to the major contradictions/changes in internal and external situations. Investors need to follow the trend.  


Identify New Directions of China Healthcare in 2023 – Major Changes In Highest Level Policy Document

Equity Capital Markets

Hygeia Healthcare Group / Equity Capital Markets

<ul>
<li>The government has changed its tone and started to encourage social capital to run hospitals, indicating that the previous concerns about the policy risk on Hygeia has been relieved.</li>
<li>At this stage, Hygeia has more investment value, greater expansion space and higher market demand than <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</a>. Meanwhile, the Company performs better in trans provincial expansion than Topchoice. </li>
<li>Due to large investment/“heavy asset” model, Hygeia would continue to face capital pressure. Its expansion pace may not be as fast as expected if it hopes to control expansion quality. </li>
</ul>


The government has changed its tone and started to encourage social capital to run hospitals, indicating that the previous concerns about the policy risk on Hygeia has been relieved.
At this stage, Hygeia has more investment value, greater expansion space and higher market demand than Aier Eye Hospital. Meanwhile, the Company performs better in trans provincial expansion than Topchoice. 
Due to large investment/“heavy asset” model, Hygeia would continue to face capital pressure. Its expansion pace may not be as fast as expected if it hopes to control expansion quality. 


Hygeia Healthcare Placement (6078.HK)- The Prospect Is More Certain After the Policy Risk Is Removed

<ul>
<li>Fujian will lead 27 provinces to launch the centralized procurement of electrophysiological medical consumables. Its scale is comparable to the national VBP. Unlike many people's optimism, we see potential concerns.</li>
<li>The centralized procurement of orthodontic materials and brackets led by Shaanxi Province has made new progress, which is beyond the expectations of many people since invisible braces are included.</li>
<li>We analyzed China HPV market potential and valuation logic. We expected that the valuation of related companies would have a significant downward space ahead.</li>
</ul>


Fujian will lead 27 provinces to launch the centralized procurement of electrophysiological medical consumables. Its scale is comparable to the national VBP. Unlike many people's optimism, we see potential concerns.
The centralized procurement of orthodontic materials and brackets led by Shaanxi Province has made new progress, which is beyond the expectations of many people since invisible braces are included.
We analyzed China HPV market potential and valuation logic. We expected that the valuation of related companies would have a significant downward space ahead.


China Healthcare Weekly (Oct.21) - Electrophysiology VBP; Orthodontics VBP New Progress; HPV Vaccine

Equity Bottom-Up

Hygeia Healthcare Group / Equity Bottom-Up

<ul>
<li>Hygeia had good performance in 2022H1,mainly because its business layout is mostly in lower-tier cities and its medical services belong to rigid demand. So, the impact of pandemic was limited.</li>
<li>Hygeia is better than Topchoice and Aier Eye Hospital. The business model of specialized hospital is better than that of general hospital. Among for-profit hospitals, we are bullish on Hygeia.</li>
<li>We think Hygeia will keep strong growth momentum in the future due to high demand. But pandemic and policy risk would weigh on valuations/sustainable bullish sentiment. Short-term trades are recommended.</li>
</ul>


Hygeia had good performance in 2022H1,mainly because its business layout is mostly in lower-tier cities and its medical services belong to rigid demand. So, the impact of pandemic was limited.
Hygeia is better than Topchoice and Aier Eye Hospital. The business model of specialized hospital is better than that of general hospital. Among for-profit hospitals, we are bullish on Hygeia.
We think Hygeia will keep strong growth momentum in the future due to high demand. But pandemic and policy risk would weigh on valuations/sustainable bullish sentiment. Short-term trades are recommended.


Hygeia Healthcare Group (6078.HK) 22H1 - The Logic and the Outlook

<ul>
<li>We still haven’t seen the “industry clearing”. When an industry no longer has entry barriers/first mover advantage, it will inevitably bring about the collapse of expectations for the future.</li>
<li>If the total retail sales of consumer goods do not maintain well, the probability of endogenous growth problems is high, which will be reflected in the decline of companies’ valuation.</li>
<li>It’s more reasonable for the share prices of those companies that have entered VBP to rise. For those that haven’t been included in VBP, the risk is much higher.</li>
</ul>


We still haven’t seen the “industry clearing”. When an industry no longer has entry barriers/first mover advantage, it will inevitably bring about the collapse of expectations for the future.
If the total retail sales of consumer goods do not maintain well, the probability of endogenous growth problems is high, which will be reflected in the decline of companies’ valuation.
It’s more reasonable for the share prices of those companies that have entered VBP to rise. For those that haven’t been included in VBP, the risk is much higher.


China Healthcare Weekly (Sep.16) - Industry Clearing, Bottom of Healthcare Sector, Endogenous Growth

China

Topchoice Medical Investment Corporation provides dental and oral health care services.

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Topchoice Medical (600763 CH)

Identify New Directions of China Healthcare in 2023 – Major Changes In Highest Level Policy Document

China issued the Outline of the Strategic Plan for Expanding Domestic Demand (2022-2035), where some statements have changed, leading to the change...

Xinyao (Criss) Wang

Hygeia Healthcare Placement (6078.HK)- The Prospect Is More Certain After the Policy Risk Is Removed

The government has changed its tone to encourage social capital to run hospitals. So, policy risk is removed. Hygeia has more expansion space...

Xinyao (Criss) Wang

China Healthcare Weekly (Oct.21) - Electrophysiology VBP; Orthodontics VBP New Progress; HPV Vaccine

Unlike others' optimism,we see potential concerns in electrophysiology VBP; Orthodontics VBP is beyond expectation since invisible braces are...

Xinyao (Criss) Wang

Hygeia Healthcare Group (6078.HK) 22H1 - The Logic and the Outlook

Hygeia's business layout is in lower-tier city and its medical service belong to rigid demand,making business volume more stable.It's our top pick...

Xinyao (Criss) Wang

China Healthcare Weekly (Sep.16) - Industry Clearing, Bottom of Healthcare Sector, Endogenous Growth

We still haven’t seen the “industry clearing” of healthcare. The decline of total retail sales of consumer goods will lead to endogenous growth...

Xinyao (Criss) Wang

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52-week Range

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