Neautus TCM, a RMB 1.3 Billion Revenue Leader in Chinese Herbal Decoction Pieces, Files for Hong Kong Listing for the Third Time

The traditional Chinese medicine (TCM) industry is reaping dual dividends from favorable policies and market growth. As the core hub of the TCM supply chain, the market size for TCM decoction pieces has surpassed RMB 300 billion, with projections indicating it could reach RMB 408.7 billion by 2030. However, behind this vast market lies a entrenched landscape characterized by fragmentation, dispersal, and disorder. More than 2,000 companies compete for market share, with the top five players accounting for less than 3% combined, making cutthroat competition the industry norm.

On this trillion-yuan “golden track,” Sichuan Neautus Traditional Chinese Medicine Co., Ltd. (hereinafter referred to as “Neautus”) stands out as an indispensable industry benchmark. As the second-largest player in China and the undisputed leader in the niche segment of toxic processed TCM decoction pieces, Neautus has dedicated more than two decades to the field. With annual revenues consistently surpassing RMB 1.3 billion and a portfolio of over 770 types of decoction pieces, the company has also propelled DNA barcode technology to international pharmacopoeial standards.

Neautus’s Path to the Capital Markets Has Been Tortuous. After two unsuccessful attempts to list on the A-share ChiNext Board in 2011 and 2020, the company filed its prospectus with the Hong Kong Stock Exchange for a third time on April 30, 2026, seeking a listing on the Main Board of HKEX. The joint sponsors are GF Securities and ABC International. This marks Neautus’s third filing for an IPO in Hong Kong since April 2025. As a veteran player in the traditional Chinese medicine (TCM) decoction pieces industry, Neautus’s prospectus is not merely a fundraising document; it reads more like a microhistory encapsulating the modernization and capitalization journey of China’s TCM decoction pieces sector.

Neautus’s IPO journey serves as a typical microcosm of the capitalization of traditional Chinese medicine enterprises.

Founded in 2001, Neautus is rooted in Wenjiang, Chengdu, Sichuan. Leveraging the unique advantages of Sichuan’s authentic medicinal herb resources, the company has gradually established a nationwide sales network, secured its position among the industry’s top tier, and long incorporated public listing and financing into its development strategy.

In 2011, Neautus made its first attempt to list on the ChiNext Board of the Shenzhen Stock Exchange, becoming one of the earliest Chinese manufacturers of traditional Chinese medicine (TCM) decoction pieces to seek access to the capital market. At that time, valuations in the TCM sector were sluggish, industry standards and regulations had not yet been unified, and the company’s scale was still relatively small; consequently, its initial public offering (IPO) ultimately came to nothing.

After nine years of silence, policies to revitalize traditional Chinese medicine (TCM) have been intensively implemented, with centralized procurement of TCM decoction pieces becoming normalized, significantly enhancing industry certainty. In 2020, Neautus submitted its A-share IPO prospectus for the second time. However, amid tightening regulatory scrutiny and uncertain profitability expectations under centralized procurement, Neautus voluntarily withdrew its application in 2021, once again halting its journey toward an A-share listing.

After several tentative forays into the A-share market, Neautus ultimately chose to list on the Hong Kong stock exchange. The company filed its initial application with the Hong Kong Stock Exchange (HKEX) in April 2025, submitted a second application in October of the same year, and updated its prospectus in April 2026, demonstrating its firm commitment to listing on the HKEX Main Board. Compared with the A-share market, the Hong Kong market offers a more mature and inclusive valuation framework for traditional Chinese medicine (TCM) enterprises. This listing venue also better aligns with Neautus’s expansion strategy in Southeast Asia, facilitating access to international capital and overseas distribution channels.

After 14 years of capital marathon, it is not only an inevitable choice for Neautus to seek capacity expansion and brand upgrading, but also a key step in its global layout.

The Chinese herbal decoction pieces sector appears vast but is, in reality, highly fragmented. According to Frost & Sullivan data, the market size of Chinese herbal decoction pieces in China reached RMB 306.7 billion in 2024, with over 2,300 enterprises holding production qualifications. The combined market share of the top five companies was only 2.7%, indicating a lack of dominant market leaders.

Neautus has firmly secured its position in the industry’s first tier, leveraging its years of deep-rooted expertise in technology, production capacity, and distribution channels.Based on 2024 revenue, Neautus ranks as the second-largest supplier of traditional Chinese medicine (TCM) decoction pieces in China, with a market share of 0.4%. Its competitive advantage is more pronounced in the niche segment of toxic TCM decoction pieces, where it tops the industry with a 1.7% market share, establishing itself as the leader in this specialized field.Toxic processed Chinese herbal slices represent a high-barrier market segment characterized by three key features: limited production qualifications, high technological barriers, and stringent regulatory oversight. The Measures for the Administration of Medical Toxic Drugs lists only 28 varieties of toxic processed slices. Neautus is capable of producing 10 major varieties among them, covering core products such as Fa Banxia (processed Pinellia tuber), Baifupian (processed white Aconite root), and Heishunpian (processed black Aconite root), thereby firmly securing its position to capitalize on the dividends of this scarce niche market.

Production capacity and quality control constitute the core competitive moat enabling Neautus to maintain its market advantage. Its Chengdu production base covers a total construction area of approximately 44,000 square meters and has undergone continuous capacity expansion in recent years. By 2025, its designed production capacity reached 11,526 metric tons, with a capacity utilization rate consistently maintained above 82%, demonstrating a high degree of alignment between production and sales. Furthermore, as the first traditional Chinese medicine (TCM) decoction piece enterprise in China to achieve Good Manufacturing Practice (GMP) certification, Neautus pioneered the integration of molecular biology with traditional processing techniques. Its independently developed DNA barcoding technology has been included in both the Chinese Pharmacopoeia and the British Pharmacopoeia, enabling precise identification of the botanical origins of TCM materials. Additionally, the company has established a professional testing laboratory accredited by the China National Accreditation Service for Conformity Assessment (CNAS), with test results recognized in over 70 countries and regions worldwide, thereby achieving full-process traceability and control from raw material procurement to finished product release.

Upstream in the industrial chain, Neautus has deepened its layout of authentic medicinal materials by securing GAP-certified planting bases in core production regions such as Sichuan and Southwest China, thereby ensuring raw material quality and supply stability from the source. On the production side, the company has introduced intelligent production lines to standardize processing techniques; the implementation of smart factories has helped reduce costs and improve efficiency. In terms of distribution channels, Neautus has established a four-pronged matrix comprising hospitals, pharmaceutical trading companies, chain pharmacies, and retail terminals. Meanwhile, it has incubated the Jin Fang Cao Tang brand and the Jin Fang Yun online platform, piloting O2O TCM procurement and personalized dispensing services, gradually extending its reach from the B2B sector to the B2C retail market.

Looking at industry competitors, Neautus has established differentiated competition with leading enterprises such as China Traditional Chinese Medicine (China TCM), Baiyunshan, and Shenwei Pharmaceutical. For instance, as a central state-owned enterprise platform, China TCM boasts a revenue scale more than ten times that of Neautus and nationwide channel coverage. In contrast, Neautus has built differentiated barriers by leveraging its leadership in toxic processed TCM decoction pieces, authentic Sichuan medicinal herbs, and internationally certified technologies. By focusing on niche, high-margin segments, it avoids homogeneous price wars and has carved out a unique growth path within a fragmented industry. Currently, Neautus’s products cover over 30 provinces across China, with partnerships exceeding 1,000 medical institutions. Its products are also exported to Southeast Asian markets with strong demand for traditional Chinese medicine, such as Vietnam and Malaysia, forming a market pattern characterized by “deep domestic cultivation and overseas penetration.”

Leveraging the industry’s essential demand characteristics and its deep channel cultivation advantages, Neautus has maintained steady revenue growth over the past three years; however, profit volatility, fluctuating gross margins, cash flow pressures, and rising inventory levels have become prominent features of its financial statements.

From a revenue perspective, Neautus has achieved steady growth,Revenue increased from RMB 1.146 billion in 2023 to RMB 1.335 billion in 2025, marking three consecutive years of steady growth. This growth was primarily driven by two factors: first, the continuous expansion of channels in public hospitals, with successful bids in centralized procurement bringing in new customers; in 2025, the company won bids for 29 product varieties and 55 specifications in China’s national centralized procurement, adding 1,183 partner hospitals. Second, sales volume of conventional herbal decoction pieces continued to rise, offsetting a slight decline in revenue from toxic herbal decoction pieces and supporting overall revenue growth.

However, the profitability side exhibits significant volatility.In 2024, Neautus’s net profit declined by 14.3% year-on-year from RMB 104 million in 2023 to RMB 89 million, primarily due to rising prices of raw traditional Chinese medicinal materials and increased administrative expenses associated with IPO preparations, which compressed profit margins. In 2025, as raw material costs decreased and the sales proportion of high-margin standard decoction pieces rose, net profit rebounded to RMB 106 million, returning to a growth trajectory.

Accounts receivable is Neautus' biggest financial concern.A deep analysis of the balance sheet reveals that Neautus is facing the typical predicament of a “B2B business.”As of the end of 2025, its trade receivables and notes receivable amounted to RMB 614 million, accounting for 46% of that year’s revenue. The days sales outstanding (DSO) increased from 145 days in 2023 to 162 days in 2025., but the massive accounts receivable are testing Neautus's operational efficiency and risk resistance.

For its IPO on the Hong Kong Stock Exchange, Neautus has outlined clear use-of-proceeds plans, focusing entirely on expanding its core business and strategic upgrades. The company aims to precisely target incremental growth sectors within the industry, break through the growth bottlenecks of its traditional business, and establish a second growth curve. According to the prospectus, the funds raised will be primarily allocated to six key areas, each closely aligned with industry trends and addressing the company’s weaknesses.

The raised funds will be primarily allocated to capacity upgrades and digital transformation, including the expansion of production bases, the introduction of intelligent processing lines, and the upgrading of existing digital smart manufacturing systems. Secondly, additional investment will be directed toward brand building and channel expansion, with increased advertising expenditures and sales team deployment, as well as the establishment of flagship stores for traditional Chinese medicine (TCM) products across China to strengthen offline physical channels. Thirdly, the company will layout research and development of personal health products, leveraging its advantages in TCM decoction piece raw materials to develop health supplements based on the concept of "medicine and food homology" and customized wellness products, thereby entering the trillion-yuan general health industry sector.

Fourth, prioritize the expansion into overseas markets in Southeast Asia by establishing localized sales channels in Vietnam and Malaysia. Leveraging the rigid demand for Traditional Chinese Medicine (TCM) among local Chinese communities, export mature decoction piece products and processing standards, replicate successful domestic models, and capture the global dividends of TCM exports. In 2024, China's annual export value of TCM medicinal materials and decoction pieces exceeded US$1.2 billion, with Southeast Asia serving as the core market, indicating substantial potential for international expansion.

Meanwhile, a portion of the funds raised will be allocated to strategic investments and potential acquisitions in the upstream supply chain, focusing on the consolidation of authentic Chinese herbal medicine planting bases to secure raw material sources and hedge against price volatility risks; the remaining funds will supplement working capital to alleviate cash flow pressures arising from inventory and accounts receivable, thereby ensuring the stability of daily operations.

Overall, Neautus has a clear fundraising rationale: internally, it aims to address production capacity gaps, expand into the retail sector, and enhance product value-added; externally, it seeks to capitalize on the opportunities of expanding into Southeast Asian markets; and upstream, it integrates the supply chain to solidify cost barriers. Transforming from a single-slice manufacturer into a diversified platform encompassing “production, retail, overseas expansion, and general health,” its capital-empowered strategic layout lays the groundwork for future performance growth.

However, the future development of Neautus following its listing remains subject to multiple uncertainties. The traditional Chinese medicine (TCM) decoction pieces industry is highly fragmented, with small and medium-sized manufacturers engaging in intense price competition, leading to slow industry consolidation and making it difficult for the company to further increase its market share. Meanwhile, the scope of products included in centralized volume-based procurement (VBP) for decoction pieces continues to expand, exerting persistent downward pressure on prices and potentially squeezing corporate profit margins over the long term. In addition, raw materials account for a significant proportion of Neautus’s costs; cyclical fluctuations in TCM herb prices and compliance controls on wild-harvested herbs pose supply chain risks, which will also constrain its future operational growth and valuation ceiling.

Yet, within crisis lies opportunity. Neautus also possesses irreplaceable advantages for breaking through: an exclusive barrier in toxic TCM decoction pieces, core technologies certified by both the Chinese and British Pharmacopoeias, control over authentic medicinal herb resources in Southwest China, a first-mover advantage in expanding to Southeast Asia, and the channel expansion benefits brought by winning bids in centralized procurement. These strengths provide the confidence to navigate industry cycles.

Against the backdrop of normalized centralized procurement, accelerated industry consolidation, and the rising tide of globalization, the capital markets await answers to critical questions: Can Neautus leverage Hong Kong stock market capital to achieve production capacity upgrades and successfully expand its retail presence overseas? Can it alleviate the dual concerns of inventory buildup and profitability? And can it evolve from the industry’s second-largest player into a comprehensive market leader? Meanwhile, Neautus’s journey toward capitalization offers a valuable reference model for the transformation and upgrading of countless time-honored traditional Chinese medicine brands.