Carrying on a healthy tradition

June Chen

Traditional Chinese medicine provider Beijing Tong Ren Tang Healthcare Investment is looking to list in Hong Kong after swinging to a net profit of 44.59 million yuan (HK$49.04 million) in 2023 from two years of losses.

Tong Ren Tang is a reputed TCM brand with 355-year history.

Leveraging on this brand, Beijing Tong Ren Tang Healthcare Investment was the largest private TCM operator in terms of both outpatient visits and healthcare revenue in 2022, according to a Frost & Sullivan report.

However, due to the fragmented market and stiff competition, it only commands a 0.5 percent share in the sector.

Founded in 2015, Tong Ren Tang Healthcare Investment operates a chain of hospitals, clinics and medical institutions in Beijing, Shanghai, Zhejiang, Hebei, Shanxi, Guizhou, Heilongjiang and Liaoning.

Besides, the company has the rights from its parent, China Beijing Tong Ren Tang Group, to exclusively sell Angong Niuhuang pills - used for treating strokes, brain aneurysms, brain bleeds and carotid artery diseases - in Zhejiang province.

Seasoned physicians and proprietary medicines play a key role in boosting the reputation of TCM institutions and pharmaceutical players.

In the first half of the year, the six top TCM listed firms in the mainland accounted for around 53 percent or 12.22 billion yuan of the net profits of the 72 firms on the TCM board.

Yunnan Baiyao and Zhangzhou Pientzehuang Pharmaceutical ranked first and third in terms of profit, boosted by sales of proprietary Yunnan Baiyao and Pien tze huang medicines which are Class-1 TCMs and exclusively made by one producer.

But Tong Ren Tang Healthcare Investment does not have the exclusive rights to Angong Niuhuang pills, with at least four other firm producing this sought-after medicine.

Tong Ren Tang Healthcare Investment's rival Gushengtang (2273), which went public in the city in 2021, saw its interim profit in 2024 rise by 15.1 percent year-on-year to 107.3 million yuan, with almost all of its revenue coming from healthcare solutions or medical institutions.

Gushengtang maintains its competitive edge by building on its resources of TCM physicians. Its costs for physicians and materials rose by 37 percent to 764.4 million yuan over the same period.

Tong Ren Tang Healthcare Investment's revenue has been on the rise since 2021 and it raked in 895 million yuan in 2023, 28 percent more than a year earlier.

However, the increase was mainly due to its acquisition of a 65 percent stake in San Xi Tang Hospital and SXT Pharmacies in 2022.

SXT Hospital and SXT Pharmacies reported revenues of 195 million yuan and 167 million yuan and net profits of 30 million yuan and 16 million yuan last year.

If SXT's revenues were excluded, Tong Ren Tang Healthcare's revenue would be 533 million yuan, down by 23 percent from a year earlier.

And if SXT's net profit was excluded, it would have lost 2.14 million yuan in 2023 compared to a 14.66 million yuan loss in 2022.

Tong Ren Tang Healthcare has bank loans of up to 116 million yuan and it plans to use the proceeds from the IPO to pay off some of its debt. Besides, the company has pledged more than 40 percent of its equity in SXT Hospital and SXT Pharmacies to a bank to facilitate the acquisitions.

China's TCM market is expanding at a compound annual growth rate of 8.2 percent and is expected to be worth 2.12 trillion yuan in 2032.

The state-owned China Beijing Tong Ren Tang Group holds a 90 percent stake in Beijing Tong Ren Tang Healthcare Investment.

The group currently has three listed firms -- the Shanghai-listed Beijing Tong Ren Tang, Beijing Tong Ren Tang Chinese Medicine (3613) and Tong Ren Tang Technologies (1666) -- and if the IPO succeeds, Tong Ren Tang Healthcare Investment will become its fourth.