The healthcare services arm of the Tong Ren Tang group enjoys a high-profile TCM brand, but its profit margins lag far behind industry peers



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<h4>Key Takeaways:</h4>



<ul>
<li>Tong Ren Tang Healthcare ranks as China's biggest private-sector hospital network focused on traditional Chinese medicine, with 1.7% of the market</li>



<li>Making its fourth listing bid, the company needs funds to acquire more medical institutions in an ambitious expansion plan</li>
</ul>



When it comes to traditional Chinese medicine, Tong Ren Tang remains one of the country's most trusted brands, backed by 350 years of history.



Founded by an imperial court physician, the company supplied herbal medicines to the Qing dynasty. However, the group's newer healthcare services business has taken a distinctly modern approach, pursuing an aggressive expansion strategy through multiple acquisitions.



The company, Beijing Tong Ren Tang Healthcare Investment Co. Ltd., has now launched a fourth attempt at a Hong Kong listing, seeking an injection of funds to continue along its ambitious growth path. Its application, submitted at the end of January, has CICC acting as sole sponsor.



The firm was established in 2015 to serve as Tong Ren Tang's primary provider of healthcare services using traditional Chinese medicine (TCM). If it finally achieves its IPO goal, the services company will become the group's fourth listed entity. The already floated businesses – Tong Ren Tang (600085.SH), Tong Ren Tang Technologies (1666.HK) and Tong Ren Tang Chinese Medicine (3613.HK) – focus on manufacturing and sales of TCM products.



Meanwhile, the group's as-yet unlisted healthcare services operator has built a business model in which it runs clinics, provides management services for medical partners and delivers digital healthcare consultations. The network includes 12 self-owned medical institutions, 12 managed institutions and one internet hospital. The company logged around 2.98 million outpatient visits across its online and offline business in 2024, making it the largest TCM-focused hospital group in China, outside of the public sector, with a market share of 1.7%.



But despite its market position, Tong Ren Tang Healthcare suffers from obvious weaknesses in its earnings profile. The company reported annual revenue of 1.15 billion yuan ($170 million) in 2023 and nearly 1.18 billion yuan a year later, followed by turnover of 858 million yuan in the first nine months of 2025. Net profit came in at 42.63 million yuan, 46.20 million yuan and just under 24 million yuan over the same time frames. Notably, net profit for the first three quarters of 2025 fell 9.76% from the year-earlier period, while gross margin slipped 0.7 percentage points from 18.9% in 2024 to 18.2%. On this metric it lags other listed members of the Tong Ren Tang family and trails far behind industry peer Gushengtang (2273.HK) with a gross margin of more than 30%.



The company's three main revenue sources are healthcare services, management services and sales of TCM products. Healthcare services have consistently been the main driver at more than 84% of total revenue during the reporting periods. Operational and management services are provided to partner medical institutions, while healthcare product sales are conducted through its subsidiary Zhejiang Sanxitang Chinese Medicine. However, product sales within the group are dominated by two of the listed companies, Tong Ren Tang Technologies and Tong Ren Tang Chinese Medicine.



The benefit of a time-honored brand cannot override business risks, as highlighted by the prospectus. The firm's license to use the Tong Ren Tang trademark is set to expire in April 2026. The agreement allows for a three-year renewal but leaves room for uncertainty. The dependence on inter-group business is also a potential risk exposure. During the first three quarters of 2025, income from management services and product sales to related parties within the Tong Ren Tang group totaled 88.09 million yuan, or 10% of total revenue.



<h4>Acquisition-led growth</h4>



A review of Tong Ren Tang Healthcare's growth trajectory highlights the critical role of acquisitions. Two institutions – Beijing Tong Ren Tang TCM Hospital and Zhejiang Sanxitang TCM Healthcare Hospital – have consistently generated more than half of total revenue over the period covered by the prospectus, illuminating the risks of a highly concentrated income base.



The purchase of Sanxitang's hospitals and pharmacies in 2022 was a turning point. After consolidation, Sanxitang generated roughly 30% of total revenue while contributing more than 40% of gross profit, directly driving a 22.1% year-on-year surge in revenue from TCM healthcare services in 2023. However, the earnings boost has proven difficult to sustain. In search of new momentum, the company bought TCM healthcare centers Shanghai Chengzhitang and Shanghai Zhonghetang in 2024, taking 70% and 60% equity stakes respectively. With those operations folded into earnings, revenue for the first nine months of 2025 marked a 3% year-on-year rise.



However, Sanxitang has begun to show signs of strain as the earnings engine. To avoid internal competition within the group, Sanxitang's business model shifted from high-margin retail to lower-margin wholesale operations. As China's consumer confidence and retail demand slipped, Sanxitang's revenue and gross profit both fell in the first nine months of 2025. Revenue from the Beijing region also declined 16.8% year on year in 2024, hit by the impact of asset transfers and adjustments to medical insurance policies. Meanwhile, continued acquisitions pushed the company's goodwill balance sharply higher, from 161 million yuan at the end of 2023 to 263 million yuan by the end of September 2025. The total was equivalent to 36% of net assets, well above the widely recognized 30% safety threshold and planting potential impairment risks for the future.



The prospectus lays out an ambitious expansion plan. The company aims to acquire five medical institutions by the end of 2029, while also establishing five new facilities under an asset-light model. Sustained acquisition-driven growth will require substantial capital, yet the company's cash position is relatively tight, and some of the equity gained in prior deals has already been pledged as loan collateral. This may explain why Tong Ren Tang Healthcare is so eager to proceed with a listing after three abortive attempts. Ultimately, the investor response will hinge on the company's ability to integrate its assets and convert them into sustainable profits.



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Benzinga Disclaimer: This article is from an unpaid external contributor. It does not represent Benzinga’s reporting and has not been edited for content or accuracy.

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Tong Ren Tang Healthcare, a leading private-sector hospital network in China focused on traditional Chinese medicine (TCM), is making its fourth attempt to list on the Hong Kong stock exchange to fund its expansion. Despite its strong brand and market position, the company faces challenges with profit margins and revenue growth. In 2023, it reported revenues of 1.15 billion yuan but has seen a decline in net profit. The firm relies heavily on acquisitions for growth, with a significant portion of revenue coming from a few key institutions. The expiration of its trademark license in 2026 poses additional risks.

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