IPO Update | Tong Ren Tang Yi Yang, the leading player in China's non-public Traditional Chinese Medicine (TCM) hospital sector, has launched its Initial Public Offering (IPO). It is expected to be listed on March 30, with a minimum subscription amount of HKD 4,191.85 per lot.

Futu Information reported on March 20 $TONGRENTANGCARE (02667.HK)$ The company announced that it will conduct the IPO from March 20 to March 25 and plans to offer approximately 108 million shares globally, expecting to be listed on March 30.

Company Overview

Tong Ren Tang Yi Yang is a subsidiary of Tong Ren Tang, strategically focused on TCM medical services in China. The company provides comprehensive TCM medical services for individual clients, standardized management services for institutional clients, and various health products and other offerings. By combining 'medical treatment' with 'healthcare,' the company offers modernized, customized TCM medical services, integrating both medicinal and non-medicinal therapies to provide tailored treatment plans through standardized management, meeting diverse customer needs.

As of the latest practicable date, the company has built a tiered network of TCM medical services, including 12 self-owned offline medical institutions, one internet hospital, and 12 offline managed medical institutions. Leveraging the well-known brand 'Tong Ren Tang' and high-quality pharmaceuticals, the company has accumulated and integrated extensive online and offline medical resources. In terms of total outpatient and inpatient visits in 2024, the company is the largest TCM hospital group in China’s non-public TCM medical service industry, holding a market share of 1.7%.

Financial Overview

Tong Ren Tang Yi Yang's revenue increased from RMB 911.0 million for the year ended December 31, 2022, to RMB 1,175.1 million for the year ended December 31, 2024, representing a compound annual growth rate (CAGR) of 13.6%. The company's gross profit significantly rose from RMB 142.8 million for the year ended December 31, 2022, to RMB 222.5 million for the year ended December 31, 2024, representing a CAGR of 24.8%.

Source: Prospectus

Industry Overview

Traditional Chinese medicine has a history of thousands of years in China. Rooted in ancient Chinese philosophical thought, it promotes physical and mental health by integrating medicinal resources and holistic therapies. Compared to Western medicine, traditional Chinese medicine has fewer side effects and places greater emphasis on preventive care and long-term health management, particularly in the management of chronic diseases and the treatment of complex and difficult conditions. Through both medicinal and non-medicinal treatments, traditional Chinese medicine addresses various diseases and sub-health conditions, emphasizing the balance and harmony of the body's internal systems to promote overall well-being.

As an important component of China's medical services industry, the traditional Chinese medicine (TCM) healthcare sector has demonstrated strong performance and significant growth potential. TCM medical institutions are the primary participants in the TCM healthcare industry, with a decentralized distribution that mainly includes: TCM hospitals, TCM outpatient departments, TCM clinics, and other TCM medical institutions such as community health organizations offering TCM services.

Cornerstone Investor

Cornerstone investors have agreed to subscribe, or cause their designated entities to subscribe, for a total amount of shares corresponding to approximately HKD 389 million at the offer price, subject to certain conditions. Assuming the offer price is HKD 7.8 per H-share (the median of the indicative offer price range provided in this prospectus), the total number of shares subscribed by cornerstone investors will be 49,913,500. The cornerstone investors include: Aviation Port Technology Capital, Aurora SF.

Source: Prospectus

Use of Proceeds

In terms of use of proceeds, Tongrentang Healthcare is expected to receive net proceeds of approximately HKD 771 million from the global offering (assuming the over-allotment option is not exercised and based on the mid-point offer price of HKD 7.8). According to the prospectus, Tongrentang Healthcare intends to allocate the proceeds from the global offering for the following purposes in the specified amounts:

Approximately 47.5% will be used to expand the company’s TCM healthcare network to enhance service capabilities and meet the growing medical demands of an expanding customer base; around 23.6% is expected to be allocated between 2025 and 2029 to strengthen the company’s TCM healthcare capabilities, featuring synergy between medical treatment and eldercare as well as end-to-end service capacity; about 18.9% is earmarked for repaying certain outstanding bank loans; and approximately 10% will be used as working capital and for other general corporate purposes.

More reading:Tongrentang Medical and Health Prospectus

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