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Fu Shou Yuan (1448 HK － US$1.4 billion) is China’s largest death care provider, conducting funerals and operating cemeteries across 40 cities in 19 provinces.
The company was founded in Shanghai in 1994 by taking over assets from a collectively owned enterprise. And its Shanghai operations continue to be important for the business, representing close to 50% of revenues.
Fu Shou Yuan’s main business is selling burial plots to families of recently deceased individuals. It also sells funeral services, sells its landscaping expertise to third parties and constructs cremation machines for sale in China and beyond.
Its pricing power is strong. Families tend to look for cemeteries close to where they live. In China, filial piety is a virtue and caring for the elderly is taken seriously. In addition, people will typically want to be buried close to their deceased partner or other family members. And finally, the decision on where to bury your loved one is often taken in haste and during emotional duress. In other words, price is not the key determinant in people’s decision on where to buy a burial plot.
In his 1987 book One Up on Wall Street, Peter Lynch mentions that one of his favorite stocks was funeral services operator Service Corporation, which had been a 40-bagger in the previous decade. Service Corporation was a serial acquirer, buying up small funeral homes at low multiples and consolidating them into a single entity.
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