Weak subscription turnout, performance under pressure; Tongrentang Medical and Elderly Care Hong Kong IPO delayed

On March 30th, Beijing Tongrentang Medical and Elderly Care Investment Co., Ltd. (referred to as “Tongrentang Medical and Elderly Care”) failed to list on the Hong Kong stock market as scheduled. Three days earlier, on March 27th, Tongrentang Medical and Elderly Care suddenly announced a delay in its global offering and listing plans.

Experts point out that, in addition to tepid subscription interest, the deeper reasons for the delay in Tongrentang Medical and Elderly Care’s IPO include concerns over profit quality, nearly stagnant endogenous growth; severe valuation inversion lacking fundamental support; doubts about business independence, with revenue heavily reliant on related parties; reliance on mergers and acquisitions for expansion, with unverified integration capabilities, among others.

Public Offering Subscription Cold

According to the announcement on March 27th, Tongrentang Medical and Elderly Care stated that after considering multiple factors, including current market conditions, it decided to delay its global offering and listing on the Main Board of the Hong Kong Stock Exchange. Under these circumstances, the international underwriting agreement related to the international offering will not be signed, and the underwriting agreement for the Hong Kong public offering cannot take effect. The company will fully refund investors’ application funds and emphasized that it remains committed to completing the global offering and listing in a timely manner.

This is the fourth time Tongrentang Medical and Elderly Care has submitted an application to the Hong Kong Stock Exchange and faced setbacks. On January 26th, the company submitted its fourth application, successfully passed the hearing, launched the IPO on March 20th, with the offering scheduled to end on March 27th, and was to be listed on the Hong Kong Stock Exchange on March 30th, but canceled the listing only three days before.

The picture shows a pharmacist at Tongrentang Traditional Chinese Medicine Clinic preparing medicine for a patient. Xinhua News Agency photographer Li Xin captured this.

Industry insiders believe that the most direct reason for Tongrentang Medical and Elderly Care’s withdrawal from the Hong Kong IPO is the severe cold reception during the public offering phase, with market foot-dragging leading to the inability to advance the listing plan. Notably, delays in the global offering are not unique to this company; previously, BaiLi Tianheng also delayed its global offering and listing due to “current market conditions.”

According to data from the Futu NiuNiu App, the subscription multiple for Tongrentang Medical and Elderly Care’s public offering was only 4.85 times. It is understood that the margin subscription, or guarantee loan in the Hong Kong stock market, directly reflects market enthusiasm: the higher the multiple, the greater the market’s attention and participation; conversely, low multiples indicate subdued subscription interest. Tongrentang Medical and Elderly Care’s high subscription multiples sharply contrast with the extremely high subscription interest seen in other popular Hong Kong stocks at the same time, highlighting a capital flow diversion effect.

According to the prospectus, Tongrentang Medical and Elderly Care set its offering price at HKD 7.3 to HKD 8.3 per share, with an issue valuation of approximately HKD 3.4 billion to HKD 3.86 billion, corresponding to a price-to-earnings ratio of 67-84 times, far exceeding the average 25-30 times P/E ratio in the Hong Kong rehabilitation medical industry, and significantly higher than the valuation levels of other listed companies within the Tongrentang system.

Renowned tax and financial expert Liu Zhigeng believes that the core reason for Tongrentang Medical and Elderly Care’s 84 times P/E ratio, compared to industry peers and group companies, lies in its over-reliance on hype around the “old brand” concept, while its own profitability is weak and growth has stagnated. The disconnect between fundamentals and high valuation has led to market rejection.

Furthermore, regarding the use of raised funds, the announcement states that, besides expanding the traditional Chinese medicine medical service network and enhancing TCM medical capabilities, 18.9% of the proceeds will be used to repay certain bank loans, and 10% for operational funds, which has been questioned by the market as “debt repayment through listing.”

Currently, the Tongrentang Group has three listed companies: Tongrentang Co., Ltd., Tongrentang Technology, and Tongrentang Guoyao. If Tongrentang Medical and Elderly Care successfully lists in the future, it will become the group’s fourth listed company.

Operational Performance Continues to Underperform

Tongrentang Medical and Elderly Care is a traditional Chinese medicine medical group under the Tongrentang Group, established in 2015. Its predecessor was Beijing Tongrentang Investment Development Co., Ltd. and Beijing Tongrentang Medical and Elderly Care Industry Investment Group Co., Ltd. It completed a shareholding restructuring in June 2024 and was officially renamed Beijing Tongrentang Medical and Elderly Care Investment Co., Ltd.

Specifically, Tongrentang Medical and Elderly Care provides comprehensive Chinese medical services to individual clients, standardized management services to institutional clients, and offers various medicines and other products; combining “medical” and “nurturing,” it offers modern, customized TCM medical services, integrating herbal treatments and non-drug therapies, providing suitable treatment plans through standardized management.

The company disclosed that it currently operates 12 self-owned offline medical institutions and one internet hospital, along with 12 offline managed medical institutions. Revenue mainly comes from TCM medical services, management services, sales of health products, and other products.

Looking at performance data, Tongrentang Medical and Elderly Care’s revenue growth has plummeted sharply. In 2023, revenue increased by 26.6% year-on-year, but in 2024, the growth rate sharply declined to 1.9%, and in the first three quarters of 2025, the growth rate was only around 3%. Profitability is even more worrying; in 2024, the company’s net profit was 46.2 million yuan, with over one-third from one-time gains from hospital sales. After excluding non-recurring gains and losses, core profitability has significantly shrunk; in the first three quarters of 2025, net profit fell by 9.8% year-on-year, with continued decline in core earnings.

Industry insiders believe that the ongoing sluggish operational growth and poor profit quality are the core reasons why the Tongrentang Medical and Elderly Care IPO is not recognized by the market. The company lacks stable endogenous growth capacity, and its performance makes it difficult to meet listing expectations.

According to the latest performance report, in 2025, the revenue and net profit of Tongrentang Group’s listed companies, including Tongrentang Co., Ltd., Tongrentang Technology, and Tongrentang Guoyao, are all declining. Due to factors such as slowing market demand and intensified industry competition, Tongrentang Co., Ltd. saw a 7.21% decline in revenue and a 22.07% decline in net profit; Tongrentang Technology’s revenue fell by 10.69%, with a 24.06% drop in net profit; Tongrentang Guoyao’s revenue decreased by 6.1%, and attributable net profit fell by 20.6%.

“Delays in Tongrentang Medical and Elderly Care’s IPO, combined with the collective decline in the performance of its three listed subsidiaries, reflect multiple pressures facing the overall operation of the Tongrentang Group, including growth slowdown, lack of innovation, and a trust crisis in capital markets. The ‘growth ceiling’ and ‘re-capitalization’ are testing Tongrentang on two fronts,” Liu Zhigeng said.

High Goodwill Risks

Behind Tongrentang Medical and Elderly Care’s performance pressure is its business expansion heavily reliant on external mergers and acquisitions, with its own operational capabilities questioned. Rapid expansion through frequent acquisitions has resulted in substantial goodwill, creating significant financial risks, which is a key concern for investors and a deeper reason for the IPO withdrawal.

In recent years, Tongrentang Medical and Elderly Care has acquired multiple medical institutions. In 2022, it acquired Sanxi Tang Health Center and Sanxi Tang Guoyao Hall; in 2024, it acquired Shanghai Chengzhitang and Shanghai Zhonghetang.

According to the prospectus, as of 2022, 2023, December 31, 2024, and September 30, 2025, Tongrentang Medical and Elderly Care recorded goodwill of 187 million yuan, 161 million yuan, 263 million yuan, and 263 million yuan respectively, with goodwill accounting for as much as 37% of net assets. If goodwill and other intangible assets suffer impairment losses, it will adversely affect operating performance and financial condition. Additionally, goodwill impairment could negatively impact financial ratios, affecting the company’s financial health and various financing activities.

Despite the risks associated with high goodwill, Tongrentang Medical and Elderly Care still states in its prospectus that it will continue to acquire profitable traditional Chinese medicine medical institutions to further expand its TCM medical service network.

Liu Zhigeng believes that the reasons for the IPO delay go far beyond tepid subscription interest, including stagnating growth, inflated valuations, and heavy reliance on related-party transactions. Coupled with the Hong Kong market’s preference for tech stocks and rising risk aversion among investors, these reflect the broader difficulties faced by the traditional Chinese medicine and healthcare sector in capitalizing on its growth path.