Following Guangzhou Bayunshan Pharma’s announcement that it plans to invest five billion yuan in high-end hospitals and a strong rally in the health care sector in China’s A-share market last week, several newspaper articles have appeared beating the drum for investing in so-called “private hospital concept stocks”.
One such article appeared on China Business Times 中华工商时报, a national business newspaper. The article attributes the strong stock market performance of several A-share listed pharma companies that have holdings of hospital-related assets to the government’s favorable policies and apparent hostility to foreign pharma companies. The author quotes a source estimating that a turning point has been reached for the private hospital industry. The source also listed a number of listed companies that he believed are poised to gain from the forthcoming private hospital boom – companies that are either already active in the private hospital industry or who plan to do so.
Equally bullish, Metropolis Express 都市快报, a Hangzhou newspaper, quotes an industry insider who says that many big investment institutions see private hospitals as the next big thing. The article compares private sector hospitals to private sector banks, reasoning that hospitals are better investments given government incentive policies and relative lower entry barriers for newcomers.
The positive outlook is not shared by everyone. Today, another newspaper, Private Economy News 私营经济报 took a skeptical view on the trend of pharma companies buying into the hospital industry. The article quotes Ge Jianqiu (葛剑秋), former vice president of Shanghai Pharma, who says that many pharma companies only do it to burnish their annual reports and many of these investors have no experience of running hospitals. Another source, Li Su (李肃), president of a corporate consultancy, expresses doubt as to whether such a trend will last. Li believes that over the long term, hospitals’ margins will be squeezed as medical reform deepens.
None of the articles mention Chindex International, a Nasdaq-listed company that began selling medical equipment from the US to China in the 1980s. Chindex now operates a chain of high-end private hospitals in Beijing, Shanghai, Tianjin and Guangzhou. While the clinics initially cater to expatriates living in China, the growing number of wealthy Chinese patients promise a rosy future for the hospital chain. The image above shows a gold-plated Ferrari (from Shanghai-based writer Abe Sauer), a typical sight outside Beijing Family United clinics.
Companies and brands affected
Shanghai Forsun Pharmaceutical (HKG:02196 SH:600196)
Guangzhou Baiyunshan Pharmaceutical (HKG:00874 SH:600332)
Chindex International, Inc. (NASDAQ:CHDX)
Aier Eye Hospital Group Co Ltd. (SZ:300015)
Topchoice Medical Corporation (SH:600763)
Shanghai Fosun Pharmaceutical (Group) (SH:600196)
Gansu Duyiwei Biological Phrmctcl Co Ltd. (SZ:002219)
Xian Kaiyuan Holding Group Co., Ltd. (SZ:000516)
Zhejiang DA Diagnostics Co Ltd (SZ:300244)
Da An Gene Co., Ltd. of Sun Yat-Sen Uni. (SZ:002030)
Shanghai Kehua Bio-Engineering Co., Ltd. (SZ:002022)
Beijing Leadman Biochemistry Co Ltd. (SZ:300289)
Jiangsu Yuyue Mdcl Eqpmnt & Sply Co Ltd. (SZ:002223)
Beijing Tongrentang Co., Ltd. (SH: 601607, Hong Kong related companies not mentioned in text HKG:8138 and 1666)
Yunnan Baiyao Group Co., Ltd. (SZ:000538)
Zhangzhou Pientzehuang Pharmaceutical Co. 片仔癀 (SH: 601607)
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