Chinese Cemetery Giant Cashes In on High-End Funeral Demand

(Bloomberg) -- As China prepares to shut down for annual tomb-sweeping holidays, one Hong Kong-listed operator of cemeteries is winning over investors and analysts with margins that are double Apple Inc.'s.

Fu Shou Yuan International Group Ltd., which runs graveyards from Shanghai to Chongqing, has jumped more than 60 percent in the past year, almost three times the pace of Hong Kong's Hang Seng Index. All seven analysts covering the stock have a buy rating, while they project the shares will gain a further 22 percent over the next 12 months, according to data compiled by Bloomberg.

Rising incomes in China are fueling demand for upscale funeral services. Fu Shou Yuan, whose 2013 initial public offering was almost 700 times oversubscribed, offers pre-need contracts and an online portal where clients can purchase everything from headstones to burial plots and flowers. A funeral package can cost up to 500,000 yuan ($80,000) according to state media reports.

"The stock is very special because it is like a property developer and a consumer product stock at the same time," said Frank Yip, an analyst at UOB Kay Hian Ltd., who has a buy rating on the company. "Its land bank is very crucial for profitability in the future."

The soaring cost of burial plots is a key driver in Fu Shou Yuan's earnings, according to China International Capital Corp. While the number of plots stayed flat in 2017, the average selling price increased by 17 percent to 102,416 yuan, CICC said in a March 19 report. That helped give the $2 billion company a gross margin of 80 percent last year, compared with Apple's 38 percent.

To contact the reporter on this story: Kristine Servando in Hong Kong at kservando@bloomberg.net.

To contact the editors responsible for this story: Richard Frost at rfrost4@bloomberg.net, Philip Glamann

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