After strategic trade-offs, lightening the load, looking for hidden value signals through FU SHOU YUAN's interim report

On the evening of August 29, Fu Shou Yuan (01448) disclosed its mid-term performance for 2025. On the surface, it appears that Fu Shou Yuan is experiencing a period of performance pressure, but in reality, it conceals a report card of long-term considerations. Zhitong Finance noted that the significant deviation of the company's core financial data from its past operational trajectory is actually due to Fu Shou Yuan's proactive strategic clearance of "one-time" factors, which not only effectively alleviates historical burdens but also likely creates more space for future development.

The interim report shows that Fu Shou Yuan, based on the current operating environment and fully considering market expectations for the future, prudently decided to make impairment provisions for goodwill and related assets involved in certain cemetery projects, with a total amount of 217 million yuan. It is undeniable that Fu Shou Yuan's "one-time" clearance action has amplified the company's short-term performance fluctuations, but this is actually a strategic trade-off made proactively based on the long-term goal of high-quality development. As the saying goes, "One should always look at the bigger picture," Fu Shou Yuan, now lightened of burdens, can fully focus on key matters such as branding, technology, and cultural innovation, thereby continuously solidifying the resilient foundation of its development. From this perspective, it is hard to say that Fu Shou Yuan at this stage is not closer to high-quality development.

Unfazed by Short-term Fluctuations, Committed to High Dividends

In the face of the complex economic situation in 2025, Fu Shou Yuan has fully leveraged its initiative to respond to external environmental challenges.

During the reporting period, Fu Shou Yuan achieved revenue of 611 million yuan. Breaking down the revenue structure, cemetery services, as the company's largest revenue source, contributed 477 million yuan in the first half of the year, accounting for approximately 78.1%. In the first half of the year, to respond to changes in the economic environment across various regions, funeral consumption behaviors, the evolution of the competitive landscape, and the impact of value-added tax on grave sales services, Fu Shou Yuan proactively adjusted its strategy. On one hand, Fu Shou Yuan continued to deepen product innovation and enrich its product matrix, while also actively lowering the average price of products to allow more customers to enjoy high-quality cemetery services; on the other hand, Fu Shou Yuan developed more product categories in different price ranges based on existing products to target incremental customer groups, thereby enhancing market share.

In the first half of the year, Fu Shou Yuan's funeral services achieved revenue of 122 million yuan, accounting for approximately 20%. Additionally, the company had a small portion of revenue from other services, generating 14.628 million yuan during the period, accounting for 2.4%.

Meanwhile, under "stress testing," Fu Shou Yuan's profitability indicators still maintained considerable resilience. Data shows that during the reporting period, the company's net profit attributable to shareholders after deducting non-recurring items was 198 million yuan, still maintaining an excellent level in the industry.

Moreover, it is particularly commendable that despite currently facing phase difficulties of stagnant growth, Fu Shou Yuan remains committed to high dividends for shareholders. According to the financial report, Fu Shou Yuan plans to distribute an interim dividend of 7 Hong Kong cents per share, with an interim payout ratio of 75.5% after deducting non-recurring gains and losses, which not only reflects Fu Shou Yuan's high regard for shareholder returns but also reaffirms the management's confidence in the company's long-term development Zhitong Finance believes that the confidence behind Fu Shou Yuan's generous dividends is partly based on the company's still healthy financial condition. According to the interim report, although the goodwill impairment provision affected the company's current profits in the first half of the year, this matter did not result in actual cash outflows, and the company's cash flow remained at a healthy level during the period. In addition, as of the end of the reporting period, Fu Shou Yuan's cash reserves still amounted to 2.32 billion yuan, and its strong financial strength is sufficient to support long-term development.

Beyond the healthy financial condition as a "foundation," another important reason supporting Fu Shou Yuan's high dividends for many consecutive years is the clarity of the company's long-term development path. According to the financial report, Fu Shou Yuan is further solidifying the foundation for long-term development around three key dimensions: branding, technology, and cultural innovation. With such a Fu Shou Yuan, its growth potential should not be underestimated.

Accumulating Momentum from Three Dimensions

Due to the current complex and severe external environment, the domestic effective demand growth momentum is insufficient, and the foundation for the continuous recovery of the economy still needs to be consolidated, while residents' consumption capacity needs further enhancement. Against this backdrop, customer consumption behavior in the funeral service scenario tends to be cautious, and competition in the industry is showing a trend of further strengthening. To respond to the new changes in the economic environment and customer consumption behavior, Fu Shou Yuan continues to enhance its core competitiveness around the three dimensions of branding, technology, and cultural innovation.

Firstly, in terms of brand building, Fu Shou Yuan understands that in a Chinese society that values filial piety and respect for the elderly, people's aspirations for a better life extend beyond "life" to "matters after death." Therefore, the brand IP that Fu Shou Yuan is committed to creating needs to have high recognition while also possessing considerable emotional carrying capacity.

During the reporting period, Fu Shou Yuan's original series of short videos "I Am a Tree (Chuan-Yu Edition, Qi-Lu Edition, Zhong-Yuan Edition)" won the Excellent Works Award in the "Civil Affairs China" section at the 15th Beijing International Film Festival. This work deepens the public's understanding and respect for the value of life while providing a more concrete and profound perception of Fu Shou Yuan's brand cultural connotation. Moreover, in the first half of the year, Fu Shou Yuan also appeared on giant screens at key urban landmarks such as East Nanjing Road and Huaihai Middle Road in Shanghai; and established deep promotional cooperation with cross-industry partners like Spring Airlines, achieving innovative cross-border marketing that realized brand dissemination beyond its original circle.

In terms of phased results, Fu Shou Yuan's brand building has clearly achieved outstanding results. In the first half of the year, Fu Shou Yuan, along with well-known brands such as Mengniu, Hengyuanxiang, and Ping An Leasing, won the "Annual Responsible Brand Award" at the 14th Public Welfare Festival; at the same time, Fu Shou Yuan was also shortlisted for the "2024 World Innovation Brand Top 500" list at the Davos World Brand Summit, with a brand value of 2.916 billion USD, a brand index of 492.45 points, and a global ranking of 380.

As an important foothold for Fu Shou Yuan to deepen its positioning as an "innovative leader in the funeral and life technology service field," Fu Shou Yuan continued to advance its digital transformation in the first half of this year. On one hand, Fu Shou Yuan has created a digital life service system centered on "Digital Memorial Hall, AI Remembrance, Fu Shou Online, and Commemorative Family Yuan," integrating cutting-edge technology into the entire business process of cemeteries and funeral services, comprehensively covering users' diverse scenario needs On the other hand, FU SHOU YUAN has effectively implemented the 3JI concept of "marking beautifully, recording thoroughly, and commemorating long" through technological means, enhancing service experience and operational efficiency. For instance, in the product design phase, FU SHOU YUAN has further increased the design and research efforts for ecological, land-saving, and artistic products based on the 3JI concept, integrating digital technology and actively promoting the market launch process, striving to meet the diverse demands of a broader and more varied customer base in terms of products and services, reflecting respect and reverence for every unique life.

According to the management of FU SHOU YUAN at the company's performance meeting, as of the end of August this year, the number of registered users on "FU SHOU YUAN Service Online" and the volume of online orders have significantly increased year-on-year. The trend of these two sets of data indicates that online consumption habits are gradually being formed, while also confirming that FU SHOU YUAN's digital transformation has achieved substantial phased results.

Cultural innovation is also an important lever for FU SHOU YUAN to enhance its competitiveness. In the first half of the year, FU SHOU YUAN deeply explored and disseminated resources related to cultural history and cultural sages, continuously reaching a wider audience through new media methods such as short videos and live broadcasts, thereby enhancing its cultural influence and improving its connection with society. Additionally, FU SHOU YUAN focuses on creating a communication platform that integrates Haipai culture and red emotional sentiment, actively "empathizing with memories, resonating with history, and vibrating with the times," gathering social resources and forces from all walks of life to enhance the cultural foundation of the enterprise.

Conclusion

Overall, it can be said that FU SHOU YUAN's 2025 mid-term report is a seemingly contradictory yet deeply insightful performance report with long-term considerations. It is undeniable that due to the proactive goodwill impairment, FU SHOU YUAN has endured short-term pain from performance pressure. However, as stated by the management at the company's performance meeting, based on the current sorting of various projects, the risk of similar impairments occurring in the future is relatively low. Moreover, it is increasingly important to note that FU SHOU YUAN is accelerating its momentum in the three dimensions of branding, technology, and cultural innovation.

From an investment perspective, the subsequently lightened FU SHOU YUAN not only has a high dividend "foundation," but also the performance rebound potential under a low base should not be underestimated. Thus, the recent performance fluctuations of FU SHOU YUAN may just be the "deep squat" before the next "jump."