New Stock Outlook | Baoji Yuanhe IPO: Relying on Baoji Pill to Secure the Top Market Share in Hong Kong, but Encountering Challenges in the Local Market and Idle Production Capacity.

With "proprietary Chinese medicine + traditional Chinese medicine clinics" as dual drivers, and owning the century-old Hong Kong brand Chinese medicine products "Baoji Pills and Tianxi Pills", Baoji and Hui, which have steadily increased performance, are gearing up for a sprint on the Hong Kong Stock Exchange. It is understood that Baoji and Hui recently submitted an application for listing on the main board of the Hong Kong Stock Exchange, with Huafu Jianye Enterprise Financing as the exclusive sponsor. The company is a leading Chinese medicine group in Hong Kong, and according to Frost & Sullivan, based on the 2025 terminal market sales, the company ranks first in the Chinese medicine market in Hong Kong, with a market share of 9.2%, and second in the concentrated Chinese medicine granules market in Hong Kong, with a market share of 25.2%. The company's performance has been strong, with revenues of HK$339 million, HK$361 million, and HK$464 million for the fiscal years 2024 to 2026, with a compound growth rate of 17%, and net profits attributable to shareholders of HK$59 million, HK$43 million, and HK$71 million, with a compound growth rate of 9.7%. In addition, the operating cash flow is relatively healthy, with net inflows of HK$15 million, HK$73 million, and HK$50 million respectively during the above-mentioned period, with cash and cash equivalents of HK$53 million as of May 2026. Baoji and Hui are wholly-owned subsidiaries of the listed company JBM HEALTHCARE (02161) on the Hong Kong stock market. This listing is intended to attract more investors to optimize Baoji and Hui's equity structure on the one hand, and to obtain development funds and an independent financing platform on the other hand, or to accelerate the globalization of its business. While the core business is experiencing steady growth, capacity utilization is relatively low. It is understood that Baoji and Hui can be traced back to 1998, initially as a pharmaceutical company, Jacobson Pharmaceuticals, gradually expanding into various fields including brand health. In 2021, Jacobson Pharmaceuticals spun off its health business and listed it on the Hong Kong stock market under the name JBM HEALTHCARE. In 2023, Jacobson Pharmaceuticals and JBM HEALTHCARE completed a reverse equity operation, with JBM HEALTHCARE becoming a wholly-owned subsidiary of the company. In 2025, it acquired Tianxi Hall and Health Hall Chinese Medicine Group, expanding its Chinese medicine clinic services. Currently, the business includes brand Chinese medicine products and Chinese medicine clinic services. The Chinese medicine clinic services acquired in 2025 contributed a small portion of the revenue at 8.6%, with the core revenue coming from brand Chinese medicine products. This business has shown steady performance, with revenues increasing from HK$340 million in 2024 to HK$424 million in 2026, with a compound growth rate of 11.67%. The company's portfolio of brand Chinese medicine products is diverse, with over 100 combinations as of March 31, 2026. Core products include Baoji Pills, Tianxi Hall Tianxi Pills, Ten Ling Oil, Feiying Huoluo Oil, and Zhen Tong Ba Huoluo Oil, with Baoji Pills having a history of 130 years and Tianxi Hall Tianxi Pills having a history of 120 years, making them the company's top two flagship products. In 2026, the company's top six products contributed 45.1% of business revenue, with Baoji Pills contributing 36.3%. In addition, Baoji and Hui have created a vertically integrated Chinese medicine platform that connects products, Chinese medicine physicians, and patients through the acquisition of Chinese medicine clinics. As of March 2025, it operates 40 strategically located clinics in densely populated residential areas, providing professional diagnostic services by 51 registered Chinese medicine physicians. Although this business is still in the early stages, by June 2026, the company is expected to become the fifth largest private chain of Chinese medicine clinics in Hong Kong, with the largest private chain specializing in orthopedic Chinese medicine clinics expected to significantly increase its performance in 2026. The company's market is concentrated in Hong Kong, with a small portion in mainland China, Singapore, and Macau. In the 2026 fiscal year, the revenue contributions from these regions were 86%, 3%, 5.1%, and 2.5%, respectively. The company sells its products through direct sales and distribution channels, with direct sales accounting for the majority, relying on Chinese medicine practitioners, with Chinese medicine practitioner sales accounting for 41.5% in the 2026 fiscal year. However, overall, the customer concentration is not high, with the top five customers contributing 24.3%, 22.8%, and 35.2% of revenue in the fiscal years 2024 to 2026, respectively. In terms of production capacity, Baoji and Hui have two GMP-certified manufacturing facilities in Hong Kong, mainly producing Baoji Pills, Feiying Huoluo Oil, and from June 2026, Tianxi Hall Tianxi Pills and other medicinal oils, with utilization rates remaining at 61% to 75% during the past period. The company also expands its brand supply by producing its own brand of concentrated Chinese medicine granules and other Chinese medicine products through third-party manufacturing. With the expansion of global markets, especially the accelerated release of the Singapore market, capacity utilization is expected to increase, driving sustained performance growth. Several products ranked as industry leaders in Hong Kong, with abundant cash flow to drive expansion of two main businesses. From an industry perspective, the core revenue of Baoji and Hui is in Hong Kong, where the Chinese medicine market size is growing steadily. According to Frost & Sullivan, the market size was HK$11.79 billion in 2025, with a compound annual growth rate of 4.6% from 2020 to 2025, expected to reach HK$15.09 billion by 2030, with a compound growth rate of 5.1%. The competition in the Hong Kong Chinese medicine market is fierce, with the top five participants contributing 31.9% in 2025. Baoji and Hui are the leaders in the Hong Kong Chinese medicine market, ranking first in the industry with a 9.2% market share based on terminal market sales, and also leading in specific markets, such as second in the concentrated Chinese medicine granule market in Hong Kong with a 25.2% market share; first in the gastroenterology Chinese medicine market with a 20.2% market share; and first in the gynecology Chinese medicine market with an 11.8% market share. It is worth mentioning that the Chinese medicine clinic services are a new business that the company entered in 2025. According to Frost & Sullivan, the industry size was HK$6.37 billion in 2025, with a compound annual growth rate of 1.6% from 2020 to 2025, but expected to reach HK$8.08 billion by 2030, with a higher compound growth rate of 4.9%. The company's 40 clinics make it the fifth largest private chain of Chinese medicine clinics in Hong Kong, with a certain scale advantage and little difference in quantity among the top five. Baoji and Hui have a healthy financial position to explore the markets of two major categories of business. On one hand, the cash flow is relatively stable, with continuous net inflows of operating cash flow. On the other hand, there is virtually no interest-bearing debt, making the financial position relatively healthy. From the fiscal years 2024 to 2026, the company's profitability has been relatively stable, with gross profit margins of 49.6%, 46.9%, and 48.2%, with the gross profit margin for Chinese medicine products increasing year by year, but the gross profit margin for the new Chinese medicine clinic services business is lower at only 17%, and the net profit margin is mainly affected by core sales expenses, with a net profit margin of 17.4% in the 2026 fiscal year. The company's strong profitability has allowed it to maintain positive operating cash flow every year, with a net inflow of HK$50 million in the 2026 fiscal year. Furthermore, the company has virtually no interest-bearing debt, with cash and cash equivalents of HK$53 million as of May 2026, but it is important to note that the amount of trade and other payables, especially the amounts owed to intermediate holding companies and related subsidiaries, has led to negative current liabilities over the years. The company's revenue is highly dependent on Hong Kong, so this listing is expected to bolster cash flow and expand into mainland China and other markets. In conclusion, Baoji and Hui have shown steady performance growth, with some fluctuation in profitability, but with a continuous net inflow of operating cash flow, healthy finances, core products with a century-old history, and leading positions in some segments of the industry, showing clear competitive advantages. With the core Hong Kong market continuing to grow, driving revenue growth, the company still has room to improve capacity utilization, actively expanding into global markets, and is poised to create new growth points. However, the company still faces some significant risks, including high revenue dependence on the Hong Kong region, potential lower-than-expected global expansion, and high levels of trade and other payables, which should be carefully considered.