TONGSHIFU experienced a severe decline on its first day of trading on the Hong Kong Stock Exchange on March 31, 2026. The stock closed at HK$30.5, representing a drop of 49.17% from its IPO price of HK$60. This resulted in a loss of nearly HK$1.9 billion in market capitalization, making it one of the worst-performing new listings of the year in Hong Kong. This outcome stands in stark contrast to its public offering, which was oversubscribed by 59.55 times, indicating high enthusiasm from retail investors. However, the international placement was only 1.56 times subscribed, reflecting a notably cold reception from institutional investors. The stock had already fallen 30% in the gray market prior to its official debut, and selling pressure remained intense despite the stabilizing effect of the over-allotment option.
Calculated based on the 2025 net profit of approximately 47.9 million yuan, the IPO price of HK$60 corresponded to a price-to-earnings ratio exceeding 70 times. This valuation was significantly higher than that of comparable consumer stocks such as POP MART. The bursting of this valuation bubble was the direct trigger for the first-day plunge. TONGSHIFU's operations reveal three underlying concerns.
First, the market ceiling is extremely low, and profitability has deteriorated sharply. The overall size of the copper cultural and creative products market is only about 1.6 billion yuan. Even with TONGSHIFU holding a 35% market share, the industry is characterized by competition for existing market share, lacking significant growth potential. In 2025, the company's revenue increased by approximately 8.1% year-on-year to 617 million yuan, but its net profit fell by about 39.4% to 47.9 million yuan. The gross profit margin declined from 35.4% to 33.7%, indicating a consistent pattern of revenue growth without corresponding profit improvement.
Second, the business is highly concentrated and heavily reliant on online channels. Revenue from copper products consistently accounts for over 95% of total income, while new categories such as plastic trendy toys contribute less than 3%, highlighting the absence of a second growth engine. The business is highly sensitive to copper prices, which have been rising steadily in recent years, while the company's ability to raise prices is limited. Online channels contribute over 70% of revenue, but the average customer spending has decreased from 958 yuan to 598 yuan, suggesting the brand is compelled to offer discounts to penetrate lower-tier markets. As of June 2025, inventory stood high at 147 million yuan, representing nearly 48% of revenue for the same period, posing a non-negligible risk of impairment.
Third, early capital investors are exiting, leaving retail investors to bear the risk. Shareholders affiliated with Xiaomi collectively hold over 22% of the company and still hold substantial paper gains. Meanwhile, the company's operating cash flow was only 22.66 million yuan, indicating some financial strain. When a market leader with a 35% share is mired in issues such as profit deterioration, a narrow market, and a singular business structure, a negative reaction from the capital market is hardly surprising.
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