Endogenous stability, high overseas growth, and breaking through consumption: Gushengtang's triple growth logic and confidence in high dividends

In 2025, the Hong Kong stock healthcare sector remains cool, with valuation contraction and logical reshaping intertwined, and most companies still struggling through the pain. While the consumer healthcare track is still digesting dual pressures, Gu Sheng Tang has provided its answer with a report card of “simultaneous quality and efficiency improvement”: the true leader possesses the ability to traverse cycles.

According to announcements, in 2025, Gu Sheng Tang’s revenue reached 3.25 billion yuan, a year-on-year increase of 7.5%; net profit was approximately 352 million yuan, up 14.6% year-on-year; operating cash flow was 620 million yuan, up 37%. The net profit growth rate is nearly twice the revenue growth rate, with core indicators such as gross profit margin, net profit margin, operating cash flow, and return on equity all showing comprehensive improvement.

Behind these numbers is a profound strategic shift: domestically shifting from “land grabbing” to “value integration,” overseas moving from “trial waters” to “scaling deployment,” and business extending from “serious medical care” to “consumer healthcare.” What exactly has this leading traditional Chinese medicine company done right?

High-Quality Growth: Not Just Bigger, But Stronger

In 2025, Gu Sheng Tang’s revenue growth of 7.5% may seem moderate, but breaking down the indicators reveals a typical “high-quality growth” scenario.

From the profit perspective, profitability quality has significantly improved. In 2025, the company’s net profit was about 352 million yuan, up 14.6%, with growth nearly double that of revenue. Gross profit margin increased from 30.1% to 31.2%, net profit margin from 10.2% to 10.8%. Amidst fluctuations in Chinese herbal medicine prices and tightened medical insurance cost controls, expanding gross profit margins against the trend is no easy feat. Behind this are enhanced bargaining power in the supply chain, refined management of physician costs, and the gradual realization of synergies post-mergers.

From cash flow, the company’s cash-generating ability has greatly strengthened. In 2025, operating cash flow was 620 million yuan, up 37.0%; free cash flow reached 390 million yuan, a surge of 67%. The cash flow growth far outpaces profit growth, indicating the company is truly earning real money, not just accounting profits. Accounts receivable ratio decreased by 1 percentage point year-on-year, with operational efficiency continuously optimized. By year-end, cash reserves stood at 1.08 billion yuan, providing ample ammunition for future acquisitions and expansion.

From shareholder return metrics, capital utilization efficiency has leapt. In 2025, return on equity rose from 12.9% to 16.1%, and diluted earnings per share increased from 1.22 yuan to 1.45 yuan, an 18.9% increase. All three dimensions point to a conclusion: Gu Sheng Tang is steadily advancing toward high-quality development.

From user stickiness, the customer base is becoming deeper, and endogenous growth is strong. In 2025, outpatient visits reached 6.01M, up 11%; offline consultation visits increased by 12.8%, with same-store growth of 10%. Mature stores remain competitive. New customers numbered 968k, with total visits approaching 30 million. Member retention rate was 84.9%, with an average annual member spending of 2,799 yuan and 4.9 visits per year. Users are voting with their feet, and stickiness is increasing.

Dual-Drive: Domestic Integration and Overseas Breakthroughs

In 2025, Gu Sheng Tang’s expansion logic underwent a qualitative upgrade: domestically shifting from “opening stores” to “integration,” and overseas from “trial waters” to “accelerated scaling.” Both legs move steadily and quickly.

On one hand, the company steadily expands domestically, leveraging low-cost windows for precise positioning.

By the end of 2025, Gu Sheng Tang operated 101 offline stores nationwide and in Singapore, with 22 new stores added during the year. It entered three new cities: Chengdu, Shantou, and Tianjin, with five more stores soon to complete acquisitions. Unlike previous years, the focus of acquisitions in 2025 shifted from “quantity” to “quality.”

Regarding acquisition costs, the company is acquiring high-quality assets at extremely low prices. CICC International pointed out in a research report that current medical asset prices are at a low point. Gu Sheng Tang recently acquired targets such as Jinan Xinyangguang Traditional Chinese Medicine Hospital, with transaction prices at only 0.8 times the 2025 sales multiple of the target company. This means the company is seizing offline traffic entrances at highly attractive valuation levels, backed by cash reserves of 1.08 billion yuan, ensuring strategic security.

The integration effects are also accelerating. Management revealed at the earnings call that in 2025, the focus of mergers and acquisitions shifted toward “scale-based business acquisitions,” with shorter investment recovery periods. CICC International noted that by 2026, with marginal recovery of endogenous growth, more and larger acquisitions financed by abundant cash, and active new business deployment, the company is expected to emerge from the trough ahead of peers.

On the other hand, the company is actively expanding overseas, with Singapore as a fast-replicating model.

In 2025, revenue from Singapore grew 228.0% year-on-year, reaching 968k yuan. By year-end, Gu Sheng Tang had 15 offline stores in Singapore.

The expansion model involves “acquisition + co-construction + self-build,” a clear and replicable approach.

Acquiring 100% equity of Da Zhong Tang, quickly entering the local market; forming strategic cooperation with the integrated digital medical platform 1doc to bring Chinese medicine services into Western medical family clinics; rapidly expanding through small clinics to achieve scaled deployment. The Zhong Tang store acquired in 2024, with monthly revenue approaching 1 million yuan in 2025 and a revisit rate of 45.6%, ranks among the top tier of domestic stores. Gu Sheng Tang’s operational model has initially been proven in Singapore.

More strategically significant is product export. Gu Sheng Tang’s three in-hospital preparations (Hair Growth and Benefit Granules, Shenqi Guben Granules, and Jianpi Run Chang Granules) have obtained certification from Singapore’s Health Sciences Authority (HSA). This marks an upgrade from “service network deployment” to “product standard export.” High-quality Chinese medicine preparations are scarce in overseas markets. Gu Sheng Tang is pushing high-margin, high-barrier in-hospital preparations abroad, enhancing product strength and building brand premium.

Many brokerages are optimistic about overseas growth potential.

PUYIN International explicitly believes that international revenue will become a major driver of overall growth. CMB International noted that the average transaction value in Singapore is about 1,500 yuan, roughly three times that of the domestic market, so expanding overseas share will lift the overall average transaction value. Besides Singapore, the company plans to enter Hong Kong and Malaysia by 2026, further expanding its overseas footprint.

Chart 1: Store coverage overview

Data source: Company data, compiled by Gelonghui

Consumer Healthcare: From Medical Treatment to Health Management, Opening a Second Curve

Traditional Chinese medicine is usually categorized as serious medical care, but Gu Sheng Tang’s 2025 financial report is breaking this boundary. The company has successfully entered the “medical + consumer” track, injecting new momentum into revenue growth.

Self-priced products are becoming core growth engines. In 2025, revenue from self-priced products grew 73.1% year-on-year, far exceeding overall revenue growth. Among these, in-hospital preparations surged 226.5%, with 19 products successfully registered. These preparations are not only carriers of efficacy but also key to breaking through the ceiling of medical insurance cost controls. Previously, the company’s in-hospital preparation center completed engineering, equipment acceptance, and trial production, and obtained medical institution preparation licenses. It will become a core asset continuously contributing high margins.

Self-funded projects also performed brilliantly. For example, in Guangzhou, the “self-funded nurse treatment project” saw revenue grow 129.5% in 2025, with a significant increase in service visits. Traditional Chinese medicine beauty, facial acupuncture, and pure Chinese medicine masks, which combine consumer attributes with high growth, are becoming new growth poles. These projects not only have high gross margins but also strong customer stickiness, and could become new pillars of revenue through scaled expansion.

Technological empowerment further amplifies the imagination space of consumer healthcare. In 2025, Gu Sheng Tang launched 13 “Traditional Chinese Medicine AI Avatars,” covering eight core specialties: oncology, dermatology, digestion, ENT, urology, mental health and sleep, rheumatology and immunology, and orthopedics. The user payment rate for AI avatars is about 90%, and expert recognition is around 85%. Through the “Traditional Chinese Medicine AI Avatar + offline young doctors” model, high-quality Chinese medicine resources are shared across regions, extending service scenarios from “medical treatment” to “health management.”

From in-hospital preparations to nurse treatments, from AI avatars to light clinics, Gu Sheng Tang is building a diversified “rigid medical + health consumption” ecosystem. This track offers a broader moat and longer growth curve than single medical services.

Valuation Reassessment: Policy, Capital, and Shareholder Resonance

Fundamental improvements are internal strength, valuation repair is external manifestation. Currently, Gu Sheng Tang is in a window of policy, capital, and shareholder resonance.

From the policy side, industry dividends continue to increase.

In 2025, the State Council issued documents such as “Opinions on Improving the Quality of Chinese Medicine and Promoting High-Quality Development of the Traditional Chinese Medicine Industry” and “Implementation Plan for the Strengthening of Medical and Health Foundations,” explicitly supporting the entire Chinese medicine industry chain and talent cultivation. Five departments jointly issued documents to promote “Artificial Intelligence + Medical and Health,” focusing on supporting large models for Chinese medicine diagnosis and treatment. Gu Sheng Tang’s 42 medical consortium collaborations, 147 master inheritance studios, and 13 Chinese medicine AI avatars all align closely with national policy directions.

From the return on investment perspective, the company’s shareholder return efforts are unprecedented.

In 2025, the company spent 470 million Hong Kong dollars repurchasing shares 79 times, totaling 10.31M shares, most of which have been canceled; total dividends for the year are expected to reach 213 million yuan, with a high payout ratio of 60.5%; founder Tu Zhi-liang increased holdings 8 times during the year, totaling 15.71M Hong Kong dollars. In February 2026, the company issued $110 million convertible bonds to Boyu Capital, with a conversion price of HKD 37.77 (a 22.23% premium over the closing price on the agreement date), with 55% of the funds allocated for share repurchases.

Management explicitly stated that in the coming years, they will maintain a dividend payout ratio of over 50%. “High dividends + large buybacks + management shareholding increase” send the clearest confidence signals to the market.

However, from a valuation perspective, the company’s valuation remains at a historic low.

According to WIND data, as of April 2, Gu Sheng Tang’s stock price was HKD 27.10, with a PE (TTM) of 16.3x, and an estimated 2026 PE of about 11.2x. The company expects 2026 revenue growth to rebound above 15%, making its valuation level quite attractive.

Chart 2: Company PE BAND

Data source: WIND, compiled by Gelonghui; data as of April 2

Consensus among multiple brokerages has already formed: they are collectively giving “Buy” or “Overweight” ratings. According to WIND, the consensus target price is HKD 41.94, nearly 99% above the April 2 closing price. Policy dividends, performance growth, shareholder returns, and low valuation together often mark the starting point of a new valuation re-rating cycle.

Chart 3: Some brokerage ratings

Data source: WIND, compiled by Gelonghui

Summary: Standing at the Starting Point of a New Growth Cycle

Looking back at 2025, Gu Sheng Tang completed a strategic upgrade amid uncertainties.

Faced with macroeconomic uncertainties, it did not halt expansion but chose to conduct high-quality domestic M&A at low valuation levels; in response to market competition, it decisively jumped out of the red sea, achieving explosive overseas growth through “small store models” and “product export”; under industry cost-control pressures, it penetrated high-margin consumer scenarios via in-hospital preparations and AI empowerment; amid market volatility, it used genuine buybacks and dividends to safeguard shareholder interests.

From the core financial indicators, the improvement in net profit margin (from 10.2% to 10.8%), the strong growth in operating cash flow (+37.0%), and the rise in ROE from 12.9% to 16.1% all confirm the effectiveness of its “high-quality growth” strategy.

Looking ahead to 2026, with accelerated overseas store deployment and continued domestic M&A, brokerages generally project about 20% revenue growth. More importantly, with Boyu Capital’s support, Gu Sheng Tang’s financial strength and strategic resources are further enhanced, and its cross-sector integration in healthcare + consumer fields is worth期待.

As Gu Sheng Tang wrote in its annual report: “Make Chinese medicine a part of mainstream global medicine.” This is both a vision and a path. In this 2025 report card, we see not only the inheritance and innovation of Chinese medicine but also a listed company’s responsibility and commitment to shareholders, markets, and the future.

For investors, Gu Sheng Tang may very well be standing at the start of a new growth cycle.