The Hong Kong stock market is set to welcome a century-old traditional Chinese medicine (TCM) brand, Tongrentangcare (Stock Code: 02667.HK). The company officially launched its initial public offering on March 20, 2026, with the subscription period running until March 25. It plans a global offering of 108 million H shares, with a price range of HK$7.3 to HK$8.3. The Hong Kong public offering accounts for approximately 10% of the total, while the international offering makes up about 90%. Cornerstone investors have committed to 46% of the offering, and an over-allotment option (greenshoe) is included. China International Capital Corporation (CICC) is acting as the sole sponsor. Tongrentangcare is scheduled to commence trading on the Stock Exchange of Hong Kong on March 30, 2026. Currently, investment targets in the TCM medical services sector remain relatively scarce, and the addition of Tongrentangcare undoubtedly provides investors with a new, differentiated allocation option. More notably, this TCM services leader, carrying a 356-year brand heritage, is positioned at a strategic inflection point characterized by a profitability turnaround and AI empowerment. Its scarcity value has already gained recognition from institutional investors.
The cornerstone investor lineup, as disclosed in the prospectus, includes Aviation Port Technology Capital and Aurora SF. They have committed to subscribing to shares worth approximately HK$389 million based on the final offer price, accounting for over 46% of the issuance size. A cornerstone commitment exceeding 40% significantly reduces potential selling pressure on the first day of trading. In the recent context of Hong Kong IPO markets, this level of cornerstone support is relatively high, providing a crucial anchor of confidence for investor subscriptions. Furthermore, institutional capital continues to show strong interest in the TCM-plus-AI sector, actively seeking to position themselves in such scarce assets. If calculated at the mid-point of the price range, HK$7.8, the company is expected to receive net proceeds of approximately HK$771 million from the global offering. About 47.5% of these funds will be used to expand the TCM medical services network; approximately 23.6% will be allocated to enhancing TCM medical service capabilities. The use of proceeds is clear and focused on the scaled expansion of core business operations.
A detailed review of the prospectus reveals a unique expansion model where on-balance-sheet assets and "off-balance-sheet assets" are roughly balanced. Initially, the prospectus shows Tongrentangcare expands through acquisitions, asset-light new builds, and management services, having undertaken several acquisitions in Zhejiang and Shanghai starting in 2022, with these assets consolidated into its financial statements. However, further details indicate that "as of September 2025, the company had established a tiered TCM medical service network, comprising 12 self-owned offline medical institutions and one online hospital, as well as 12 offline managed medical institutions." This data tells another story: half of its network consists of these managed, or "off-balance-sheet," assets. This parallel expansion model combining self-owned and managed services is unprecedented in the TCM service industry. Revenue from management services demonstrated a compound annual growth rate of 124.78% from 2022 to 2024, with a year-on-year increase of 40.22% in the first nine months of 2025, boasting a gross margin exceeding 70%. The acceleration of this asset-light output model means the company can amplify profits without significantly increasing capital expenditure, which is expected to notably improve the overall profit structure and Return on Equity (ROE). This potential is a key reason for the optimism from cornerstone and institutional investors.
While the pace of external expansion slowed during the preparation for the Hong Kong listing, likely due to listing regulations, Tongrentangcare's performance remained robust, demonstrating the healthcare sector's characteristic resilience to economic cycles. From 2022 to 2024, total revenue grew from RMB 911 million to RMB 1.175 billion, achieving a compound annual growth rate of 13.6%. Revenue for the first three quarters of 2025 reached RMB 858 million. TCM medical services, as the core business, contributed over 84% of total revenue. After recording a net loss of RMB 9.23 million in 2022, the company quickly turned profitable in 2023 through efficient operational integration and refined management, achieving a net profit of RMB 42.63 million. Excluding one-off factors such as listing expenses in 2024, the adjusted net profit reached RMB 61.73 million, a significant increase of 29.0% compared to 2023. Gross profit surged from RMB 143 million in 2022 to RMB 222 million in 2024, with a high compound annual growth rate of 24.8%, nearly double the revenue growth rate, indicating that the real profitability growth of the core business far exceeds the surface numbers. Additionally, according to its disclosed use of proceeds, the company plans to acquire 5 new medical institutions, build 5 new medical institutions using an asset-light model, and provide management services to an additional 5-10 medical institutions. This signifies that its asset-light expansion model has entered a phase of standardized replication. As the company accelerates this strategy, it can substantially enhance profitability, following an expansion path less dependent on capital expenditure.
At the Tongrentang Group level, "AI + TCM" is no longer just a concept but an actively implemented strategy. The integration of AI with TCM possesses broad policy support and market application prospects. Tongrentang holds a competitive advantage due to its vast accumulation of TCM data, positioning it as a pioneer in this emerging field. In January 2026, the Beijing Municipal Economy and Information Technology Bureau signed a task contract with Tongrentang to support the development of an "AI-based platform for foundational capabilities in new TCM drug development." This indicates that the company's "AI + TCM" initiatives have gained policy backing and are expected to accelerate. As the core TCM services arm of Tongrentang, Tongrentangcare can rapidly implement AI applications in its operations, leveraging the group's AI strategy to outperform industry peers. Tongrentang has been actively promoting the practical application of AI in TCM, recently collaborating with Xiaomi's commercial marketing division to create an "AI Smart TCM Health Service Agent," deeply integrating traditional TCM wisdom with modern AI technology. Tongrentangcare will serve as the primary vehicle for implementing Tongrentang's AI + TCM strategy, utilizing its TCM medical service network as the operational scenario. Empowerment through AI products is expected to unlock significant growth potential. Within the Hong Kong stock market, there are currently no pure-play investment targets in the "AI + TCM" sector. The listing of Tongrentangcare will fill this void, and its scarcity is self-evident.
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