--- title: "With only 48 directly-operated stores, the Traditional Chinese Medicine clinic Yuyantang has submitted its application for Hong Kong stocks, raising regulatory concerns under high gross margins" type: "News" locale: "zh-CN" url: "https://longbridge.com/zh-CN/news/276034454.md" description: "The Traditional Chinese Medicine clinic Yuyan Tang has submitted an application for listing on the Hong Kong Stock Exchange. Despite having only 48 directly operated stores, its net profit for the first three quarters of 2025 reached 55.5 million yuan, showing significant growth, with revenue increasing by 96.6% year-on-year. Compared to Tong Ren Tang, Yuyan Tang demonstrates higher profitability efficiency. The company focuses on the niche market of medicinal paste, which may face development and regulatory challenges in the future" datetime: "2026-02-16T04:46:29.000Z" locales: - [zh-CN](https://longbridge.com/zh-CN/news/276034454.md) - [en](https://longbridge.com/en/news/276034454.md) - [zh-HK](https://longbridge.com/zh-HK/news/276034454.md) --- > 支持的语言: [English](https://longbridge.com/en/news/276034454.md) | [繁體中文](https://longbridge.com/zh-HK/news/276034454.md) # With only 48 directly-operated stores, the Traditional Chinese Medicine clinic Yuyantang has submitted its application for Hong Kong stocks, raising regulatory concerns under high gross margins Original Production | "Entrepreneurship Frontline" under "Bullet Finance" Author | Zhang Jue Editor | Dan Zong Graphic Design | Qian Qian Review | Song Wen In 2024, Tongrentang, backed by a century-old brand, received up to 3 million patients but only achieved a net profit of 46.2 million yuan. In the first three quarters of 2025, profits further declined to 23.99 million yuan, reflecting the difficulty of achieving scalable profitability in traditional Chinese medicine services. **However, on the same track, a company that started later and is much smaller has demonstrated a completely different profitability efficiency.** Founded less than eight years ago and with only 48 directly-operated stores, Yuyantang (International) Holdings Limited (hereinafter referred to as "Yuyantang") recently officially submitted its prospectus to the Hong Kong Stock Exchange. In the first three quarters of 2025, Yuyantang achieved a net profit of 55.5 million yuan, surpassing the much larger Tongrentang in absolute terms, and boasting an astonishing growth rate: revenue increased by 96.6% year-on-year, and net profit skyrocketed by 192.2%. In this wave of Chinese medicine clinic IPOs, what allows Yuyantang to "rise against the tide"? As a Northeast Chinese medicine clinic branded with "intangible cultural heritage," what development and regulatory challenges will it face in the future regarding the category of medicinal paste? ## **1\. Family Chinese Medicine Clinic Going Public** As a family Chinese medicine clinic originating from Heilongjiang, Yuyantang has achieved explosive growth in performance within just seven years by deeply cultivating the niche market of medicinal paste, and is attempting to establish its leading position in the highly fragmented Chinese medicine service market. According to the prospectus, Yuyantang's operating income shows a clear step-like jump. In 2023 and 2024, its revenue was 150 million yuan and 215 million yuan, respectively, while in the first nine months of 2025, this figure surged to 284 million yuan. With the expansion of scale, the company's profitability has also significantly improved, with net profit increasing dramatically from the 20 million yuan level of the previous two years to 55.5 million yuan. Image / Company Prospectus Yuyantang's expansion path has a distinct regional character. In 2018, the first clinic opened in Harbin, and it has gradually expanded to cover northern provinces and cities such as Liaoning, Hebei, and Shandong As of now, the company has established 48 offline licensed medical institutions, but they are still only located in northern China, with the offline revenue from Liaoning, Heilongjiang, and Jilin provinces accounting for over 80%. This regional concentration is highly tied to the uniqueness of the company's core product, medicinal paste. In the cold, dry, and long winters of northern regions, medicinal paste, as a type of traditional Chinese medicine that is concentrated through long boiling and added with gelatin or honey, fits the local tradition of winter nourishment and chronic disease management due to its viscous nature and no need for boiling. However, the professional background supporting Yuyantang appears weak. Founder Guo Yang and his spouse hold 97.16% of the company's shares, and his sister Guo Yi is involved in deep operations, making it a typical family business. As the chairman of the board and general manager, Guo Yang does not have a full-time university degree and has never received systematic full-time education in medicine or traditional Chinese medicine. Guo Yang's career began in 2005, focusing on pharmaceutical management rather than clinical diagnosis and treatment. This academic gap seems quite abrupt in the traditional Chinese medicine field, which values mentorship and academic accumulation. Modern traditional Chinese medicine practitioners often need to undergo at least five to eight years of full-time higher education in traditional Chinese medicine, along with long-term clinical practice before they can practice. At 42 years old, Guo Yang is currently only a student at the Open University of China, pursuing an EMBA degree focused on business management from the China Europe International Business School. However, this does not hinder the growth of Yuyantang. **According to the prospectus, based on 2024 revenue, it ranks fifth among private chain traditional Chinese medicine service providers in China and second in the northern region.** However, such rankings have limited reference significance in the industry, as there are differences in market definitions and the scope is somewhat vague. For example, Tongrentang Medical, which recently re-submitted its application to the Hong Kong Stock Exchange, claims to be ranked first in the "non-public traditional Chinese hospital medical service" industry, but its statistical criteria focus on outpatient and inpatient visits and include traditional Chinese hospitals with inpatient qualifications. In addition, competitors like Gushengtang and Ruici Medical demonstrate stronger overall strength in registered capital, number of physicians, and national layout. This means that Yuyantang's so-called "fifth" or "second" is defined within the very narrow scope of "private chain traditional Chinese outpatient clinics." Image / Photo Network, based on VRF protocol Considering that there are over 50,000 private traditional Chinese medicine service providers in China, with the top five participants accounting for only 19.3% of the market share, these leading advantages are not sufficient for Yuyantang to form a barrier. ## **2\. Not relying on medical insurance or famous doctors, repurchase rate 81%** In the context of the traditional Chinese medicine service industry generally facing pressure from medical insurance cost control, Yuyantang has demonstrated a distinctly different operating model Currently, most leading private traditional Chinese medicine institutions in China heavily rely on the medical insurance settlement system. Taking Tongrentang Medical Care as an example, its prospectus reveals that in 2024, 56.6% of its revenue will come directly from public medical insurance plans. With the comprehensive implementation of the DRG/DIP payment reform in 2025, the logic of bundled payments by disease types makes it difficult for the individualized labor value of traditional Chinese medicine to be fully reflected under Western medicine standards, and the profit margins of traditional Chinese medicine hospitals are being strictly limited. **In contrast, Yuyantang has adopted a fully self-paid model, completely disengaging from the medical insurance settlement system.** This means its operations are not constrained by medical insurance cost control, the centralized procurement of traditional Chinese medicine, or prescription monitoring, allowing for a high degree of pricing freedom. In the first nine months of 2025, Yuyantang's average order price reached 392 yuan, increasing by 40% in less than two years. In provinces like Shandong and cities like Tianjin, the average order price has already reached 420 yuan. Under the premise of not going through medical insurance reimbursement, and with most of its traditional Chinese medicine clinics located in second and third-tier cities in the north, this level of average transaction price demonstrates a strong "money-earning ability." Image / Company Prospectus Additionally, the data in Yuyantang's prospectus shows customer stickiness. As of the first nine months of 2025, Yuyantang's customer repurchase rate reached 81.1%, with customers averaging 16 to 17 visits per year. Yuyantang's repurchase logic is fundamentally different from that of traditional Chinese medicine institutions like Gushengtang. Gushengtang's core barrier lies in its famous doctor resources, driving customer flow by attracting renowned traditional Chinese medicine practitioners from public hospitals to practice at multiple locations and offering a high proportion of consultation fee sharing, essentially creating a platform model led by famous doctors. In contrast, Yuyantang does not rely on endorsements from famous doctors; its driving force and customer loyalty stem from the business characteristics of its medicinal paste conditioning. For chronic disease groups such as hypertension, diabetes, and spleen-stomach weakness, medicinal paste is often used as a long-term health management solution, leading patients to have a long-term medication demand. For this price-sensitive group with high expectations for long-term efficacy, Yuyantang has transformed medical services into a high-frequency consumption behavior through standardized intangible cultural heritage medicinal paste products, achieving repurchase performance far exceeding the industry average. **In terms of operational efficiency, Yuyantang's inventory turnover days are only 11 days.** This figure is not only far lower than the hundreds of days turnover period of traditional Chinese medicine manufacturing enterprises but also significantly better than the average of about 30 days in the traditional Chinese medicine clinic industry. The extreme turnover efficiency stems from its central production facility model based on sales-driven production. The company achieves prescription-based dispensing and decoction of clinical formulations through real-time inventory management, greatly reducing the risk of raw material and finished product backlog. Currently, since over 80% of Yuyantang's revenue is still concentrated in the three northeastern provinces, the company's supply chain radius is short and response speed is fast, combined with precise demand forecasting brought by high repurchase rates, supporting its small-batch, high-frequency procurement strategy This combination of pure self-payment, high repurchase rates, and regional concentration allows Yuyantang to quickly recover cash. According to the prospectus, its cash equivalents were only 33.78 million yuan in 2023, growing to 99.95 million yuan in the first nine months of 2025, and just two months later, by the end of November 2025, cash equivalents had rapidly reached 124 million yuan. Image / Company Prospectus **However, this also means that the company has little buffer space to cope with upstream price increases or supply interruptions of medicinal materials, and it reflects that Yuyantang has not yet begun to face the challenges of scaling. If it attempts to expand beyond Northeast China or even the northern regions, its production, logistics, and supply chain responses may encounter tests.** ## **3\. Is there "excessive profit" in the unregulated medicinal paste?** In the capital market, high gross margins are often seen as a reflection of core competitiveness, but for a traditional Chinese medicine clinic that heavily relies on medicinal paste, Yuyantang's comprehensive gross margin of 62.1% (for the first three quarters of 2025) exudes a sense of "excessive profit." This gross margin not only far exceeds that of its peers and private medical specialty giants but even rivals some medical beauty institutions. For example, in the first three quarters of 2025, Tongrentang's healthcare gross margin was 18.2%, while the gross margin of Gushengtang was around 30%; the gross margin of Ganzhicao Technology, which submitted its application to the Hong Kong Stock Exchange almost simultaneously with Yuyantang, was 26.9%. Medical specialty institutions with higher technical barriers, such as Aier Eye Hospital, had a gross margin of 49.3% during the same period, while the health check institution Meinian Health had a gross margin of 38.3%. Huaxi Biological, which has a highly profitable medical beauty raw material business, had a gross margin of 70.7% during the same period. Yuyantang, positioned at the end of medical services, derives its high gross margin from its medicinal paste business, which is in a regulatory gray area. Under current regulations, medicinal paste is classified as a customized preparation. According to the management regulations for traditional Chinese medicine preparations, these products, which are processed according to a physician's prescription for individual patients, are not subject to the strict approval management of traditional Chinese medicine preparations in medical institutions. This means that medicinal paste bypasses the relatively strict clinical trial and quality evaluation system imposed by drug regulatory authorities on finished proprietary Chinese medicines. As the national level has yet to issue unified standards for formulation, prescription rights, and circulation scope, the production and pricing rights of medicinal paste are effectively in the hands of traditional Chinese medicine clinics. Image / Photo Network, based on VRF protocol This current situation of self-configuration and self-pricing allows for high premiums and high margins in the formulation of traditional Chinese medicine (TCM), while also providing fertile ground for TCM clinics to offer expensive prescriptions. Driven by profit motives, the private TCM industry generally faces issues of excessive diagnosis and treatment. Many TCM clinics attract patients with low consultation fees and then generate more profits by prescribing a large number of medications. Even the publicly listed TCM leader Gu Sheng Tang has faced penalties for excessive treatment, duplicate charges, and providing unnecessary medical services. In July 2025, a subsidiary of Gu Sheng Tang was fined by the Shanghai Pudong Medical Insurance Bureau for excessive diagnosis and treatment and overpayment issues. In June, its Ningbo Haishu Gu Sheng Tang TCM Clinic was also penalized locally for over-standard charges. In recent years, the standardization of the domestic TCM industry has been continuously promoted. In addition to increasing regulatory scrutiny of downstream diagnosis and treatment, the research and production of traditional Chinese medicine itself have also become increasingly stringent. The newly revised "Implementation Regulations of the Drug Administration Law of the People's Republic of China," published in January this year, clearly require that the evaluation of the effectiveness of traditional Chinese medicine should be consistent with its clinical positioning, combining TCM theory, human experience, and clinical trial data to comprehensively assess the safety and effectiveness of traditional Chinese medicine. Currently, the clinical application of TCM formulations is almost in a blank area of evidence-based medicine, lacking rigorous experimental data support. This means that **as management continues to mature, in the future, TCM formulations may no longer be able to stand firmly solely on human experience and intangible heritage.** In addition, the three-year window period stipulated in Article 75 of the National Medical Products Administration's "Special Provisions on the Registration Management of Traditional Chinese Medicine" will end in July 2026. At that time, any traditional Chinese medicine products with safety data marked as unclear will face the issue of being unable to register again. Image / Photo Network, based on VRF protocol Although this regulation directly targets traditional Chinese medicine products, the regulatory intent emphasizing the confirmation of clinical safety data has clearly covered the entire TCM industry. Despite the continuous improvement of standards for TCM formulations such as TCM prescriptions, with more standardized production qualifications, filing procedures, and distribution standards, under the backdrop of strict regulation, TCM formulations are likely to become a key focus of future policies. As the IPO process for Hong Kong stocks becomes stricter, whether the distinctly "non-standardized" Yu Yan Tang can successfully go public remains to be observed. \\\* The cover image in the text is from: Photo Network, based on VRF protocol ### 相关股票 - [WAI YUEN TONG (00897.HK)](https://longbridge.com/zh-CN/quote/00897.HK.md) - [SAU SAN TONG (08200.HK)](https://longbridge.com/zh-CN/quote/08200.HK.md) ## 相关资讯与研究 - [Sino Medical Sciences Tech Plans Hong Kong Listing; Shanghai Shares Up 3%](https://longbridge.com/zh-CN/news/281123167.md) - [Styland Subsidiary Commits US$3.4 Million to Alpha Perpetual Income Fund](https://longbridge.com/zh-CN/news/281380835.md) - [Trump to sign order to pay tens of thousands of DHS employees](https://longbridge.com/zh-CN/news/281556389.md) - [Yukon Metals Expands Star River Footprint After High-Grade Gold Hit](https://longbridge.com/zh-CN/news/281583530.md) - [Grace Life-Tech Holdings FY revenue USD 13 million](https://longbridge.com/zh-CN/news/281224946.md)