[HK IPO Subscription] Tongrentang Medical Care, a time-honored traditional Chinese medicine healthcare provider, is it worth subscribing to?

Hello, I'm Lu Xian. I research the investment field and share overseas information.

The previous article shared Sturgeon Technology. Today, let's look at Beijing Tongrentang Medical and Healthcare Investment, the traditional Chinese medicine (TCM) medical platform under Tongrentang. The company is not selling Chinese patent medicines, but operates TCM hospitals, outpatient departments, clinics, and an internet hospital. Brand recognition is high, but revenue has shown almost no growth for years, and the valuation is not cheap.

1. Overview of the New Share Issuance

Company Name: Beijing Tongrentang Medical and Healthcare Investment Co., Ltd. (02667.HK)

Global Offering Size: 108,153,500 H Shares

Hong Kong Public Offering Size: 10,815,500 Shares

International Offering Size: 97,338,000 Shares

Issue Price: HK$5.48—HK$6.21

Board Lot: 500 Shares

Minimum Subscription Fee: HK$3,136.31

Cornerstone Investors: 3 in total, subscribing for approximately 46.79% of the Global Offering at the upper price limit

Greenshoe: Yes

Sponsor: CICC

Reallocation Mechanism: Mechanism B

Subscription Period: June 26—July 2

Allotment Results Announcement: July 3

Expected Grey Market Trading Time: July 6, 16:15—18:30

Listing Date: July 7

Market Capitalization: Approximately HK$2.55 billion—HK$2.89 billion

Group A Tail: 1,600 lots

Group B Head: 1,800 lots

Top of the Hammer: 10,815 lots

2. Analysis of the Company's Fundamentals

Tongrentang Medical and Healthcare is a TCM medical services platform under the Tongrentang Group. The company currently owns 13 offline medical institutions and one internet hospital, while managing 13 offline medical institutions. Its business includes TCM medical services, hospital management, and health product sales.

Based on the total number of outpatient and inpatient visits in 2025, the company is the largest TCM hospital group in China's non-public TCM hospital medical services industry, with a market share of 1.5%; it ranks second by revenue, but with a market share of only 0.2%. While the ranking sounds high, it also indicates the industry is highly fragmented, and the company's actual market control is not strong.

Financial performance is relatively stable but lacks growth. From 2023 to 2025, the company's revenue was RMB 1.153 billion, RMB 1.175 billion, and RMB 1.171 billion, respectively; net profit was RMB 42.63 million, RMB 46.20 million, and RMB 33.75 million, respectively; net profit attributable to owners was RMB 22.34 million, RMB 36.86 million, and RMB 27.48 million, respectively. The gross profit margin has remained at 18.9% for three years, and the net profit margin was only 2.9% in 2025.

Cash flow is better than profit. In 2025, net cash inflow from operating activities was approximately RMB 120 million, and cash and cash equivalents at year-end were approximately RMB 288 million. However, the company's profitability is thin, and newly added hospitals may continue to drag down profits during their initial operating phase.

The company's biggest advantage is the "Tongrentang" brand, as well as ready-made doctor, hospital, and pharmaceutical resources. But this brand is licensed from the group and is not owned by the listed company itself. There are also ongoing connected transactions between the company and the Tongrentang Group, including drug procurement, trademark licensing, property leasing, and management services.

Policy risks are also relatively direct. In 2025, revenue directly settled through medical insurance accounted for 58.4% of the company's total. Centralized procurement of Chinese herbal decoction pieces, centralized procurement of Chinese patent medicines, medical insurance cost control, and zero-margin sales of TCM formula granules will all suppress drug and medical service revenue. The company has already anticipated that revenue and gross profit margin will face pressure in 2026, and annual net profit will continue to decline.

In terms of valuation, based on the issue price, the company's market capitalization is approximately HK$2.55 billion to HK$2.89 billion. Based on the 2025 net profit attributable to owners, the corresponding P/E ratio is approximately 81x to 91x. For a traditional medical services company with stagnant revenue and declining profits, this valuation is clearly not low.

3. New Share Subscription Analysis and My Action

The main points of interest for this new share are the Tongrentang brand, state-owned background, and stable profitability, not a high-growth story. The 3 cornerstone investors collectively subscribed for approximately HK$296 million, locking in about 44.08% of the Global Offering at the upper price limit. The cornerstone proportion is high, with a 7-month lock-up period.

The issuance size is not large, and it's also difficult to get into the Stock Connect. The fundamentals lack flexibility. Revenue has been almost stagnant for the past three years, profit declined in 2025, and it will be affected by centralized procurement and medical insurance cost control in 2026. The company plans to use about 26.3% of the raised funds to repay bank loans, which is also difficult to directly translate into growth in the short term. The estimated first-hand winning rate is 6%, with all Group A lots allocated by ballot, and Group B head has a chance to secure one lot.

This stock is a second-time listing, mainly depending on whether the market maker will control the price.

My action: I pass.

$TONGRENTANGCARE(02667.HK)