Tongrentang Expands Overseas with 740 Million RMB Revenue and 72.03% Gross Margin

VCBeat (WeChat: vcbeat), March 28 news.Tongrentang (600085.SH), a time-honored brand of traditional Chinese medicine, released its 2016 annual report on the evening of yesterday. During the reporting period, it achieved operating revenue of RMB 12.09 billion, a year-on-year increase of 11.0%; net profit attributable to shareholders of the parent company amounted to RMB 930 million, up 6.6% year on year, with earnings per share of RMB 0.68.

Notably, data on Tongrentang’s core business by region shows that its domestic revenue reached RMB 11.27 billion, with a comprehensive gross profit margin (including both industrial and commercial segments) of 44.01%; overseas business revenue amounted to RMB 743 million, with a gross profit margin of 72.03%. Historical data indicates that this has already been its overseas businessSeven Consecutive Years of Growth(We found that this segment generated RMB 330 million in revenue in 2010), with a compound annual growth rate of approximately 20%, while maintaining a high gross profit margin.

According to VCBeat, Tongrentang was founded in 1699 during the reign of Emperor Kangxi of the Qing Dynasty and boasts a history of over 300 years. The company operates across three major sectors: modern pharmaceuticals, retail commerce, and healthcare services. It has established a corporate structure comprising six secondary groups, three institutes, and two reserve units, and currently owns three listed companies. The group offers more than 1,500 products, including pharmaceuticals, hospital preparations, health supplements, food items, and cosmetics, supported by 28 production bases and 83 modernized production lines.

Meanwhile, Tongrentang is committed to building its global brand presence, with its trademarks registered in over 100 countries and regions, laying a foundation for trademark protection in future business expansion. Currently, Tongrentang operates more than 130 retail outlets across 26 countries and regions. According to incomplete statistics, the number of overseas visitors seeking consultations and medical services at Tongrentang’s overseas pharmacies has exceeded 30 million, which is also the primary driver behind the rapid growth of its international business.

Overall, financial report data show that Tongrentang achieved operating revenue of RMB 12.091 billion, a year-on-year increase of 10.96% from RMB 10.897 billion in the previous year. In addition, the company’s self-owned store network continued to expand, with a total of 571 stores established as of the end of the reporting period, while service standards and capabilities continued to improve.

Tongrentang believes that, in the face of slowing economic growth, accelerated adjustments in the industry landscape, and market consumption momentum yet to fully recover during the reporting period, the company’s management has remained committed to strengthening its foundations and focusing on its core business. By prioritizing its brand and product advantages, Tongrentang has promoted product strategies such as “one product, one policy,” “one region, one policy,” and “category-specific policies.” These efforts have effectively driven sales of major products, emphasized the long-term cultivation of second- and third-tier products, and further enhanced brand image through the establishment of dedicated Tongrentang product counters. This approach centrally showcases product features, facilitates customer product selection, and pushes sales activities closer to the end consumer.

In addition, the financial report shows that Tongrentang’s operating costs in 2016 amounted to RMB 6.532 billion, a year-on-year increase of 10.81%. Regarding the rising costs, Tongrentang stated that the overall price level of raw materials for traditional Chinese medicine (TCM) continued to rise in line with the price index. In response, the company has closely monitored the price trends of TCM raw materials and timely replenished its inventory to effectively mitigate the cost pressures resulting from price increases for certain raw materials.

From a segmental perspective, Tongrentang’s industrial and commercial operations demonstrated steady growth. In 2016, revenue from the pharmaceutical manufacturing segment reached RMB 7.5 billion, representing a year-on-year increase of 10.72%. Among these, core products such as Angong Niuhuang Wan are estimated to have grown by over 10%, and the Ejiao series also achieved growth exceeding 10%. Tongren Niuhuang Qingxin Wan, Tongren Wuji Baifeng Wan, and Tongren Dahuoluo Wan maintained stable growth, while other second- and third-tier product lines generally sustained organic growth. Revenue from the pharmaceutical commerce segment amounted to RMB 5.78 billion, up 10.93% year on year. The company continued to steadily advance the development of its proprietary retail network, with the total number of stores reaching 571 by the end of 2016.

Tongrentang Technologies’ net profit grew by 10.1%, and Tongrentang Chinese Medicine’s net profit increased by 18.6%. In 2016, the subsidiary Tongrentang Technologies recorded revenue of RMB 4.67 billion, a year-on-year increase of 14.7%, with net profit reaching RMB 596 million, up 10.1% year on year. The sub-subsidiary Tongrentang Chinese Medicine generated revenue of HKD 1.084 billion, a year-on-year increase of 11.7%, and net profit of HKD 420 million, up 18.6% year on year. Its overseas business has expanded to 19 countries and regions, with its retail network comprising 67 outlets as of the end of 2016.

Revenue by Industry and Region

Securities firms’ research reports indicate that the development of traditional Chinese medicine (TCM) has been elevated to a national strategy, with relevant policies actively encouraging the expansion of TCM services and the promotion of TCM culture. Tongrentang boasts a strong brand heritage and abundant TCM resources. By pursuing a dual-pronged approach of “quality medicines plus quality medical services,” it is poised to become a leader in the TCM services sector.

As of the morning close, Tongrentang’s stock price stood at 31.72, with a total market capitalization of RMB 43.503 billion.