Since the domestic economic stabilization policy was strengthened at the end of September, the Hong Kong stock market has experienced a rapid rise and has returned to a consolidated trend. However, it can be seen that under the turmoil in the Hong Kong stock market, contrarian capital showed a recovery trend. The continued inflow of capital to the south may indicate the emergence of structural opportunities.

From an institutional perspective, Cathay Pacific Junan said in the research report that during the easing cycle of overseas global central banks, the country actively releases policy signals, and subsequent incremental policies are worth looking forward to. After the pullback, Hong Kong stocks have once again entered the allocation range, recommending interest-sensitive varieties that are supported by policies, have bottomed out, or are resilient, including the fields of medicine and electronics. SPDB International believes that it is recommended to focus on some individual stocks with medium- to long-term investment value in the Hong Kong stock market that lags behind in the early stages but has stable fundamentals.

Based on this, the author noticed Tongrentang Technology, a long-established enterprise in the field of traditional Chinese medicine. Recently, Tong Ren Tang Technology (01666.HK) issued an announcement explaining the basic situation of its results for the first three quarters and continuing to verify its high-quality fundamentals.

Revenue and profit both increased, demonstrating business resilience

According to the announcement, Tongrentang Technology's unaudited revenue for the first three quarters was about 5.484 billion yuan, and the unaudited net profit attributable to the owner of the parent company was about 0.546 billion yuan, maintaining a double upward trend in revenue and profit. Unaudited operating costs were about 3.307 billion yuan; by the end of the reporting period, its total unaudited assets were about 13.947 billion yuan.

Looking at the market environment, Tongrentang Technology's performance has shown resilience. Economic indicators related to consumption declined somewhat in the third quarter, and traditional Chinese medicine companies faced some pressure due to “consumer attributes.” In the first nine months, total retail sales of consumer goods increased by 3.3% year on year, down 0.4 percentage points from 3.7% in the previous six months. An industry company that has disclosed its three-quarter report also revealed that the rise in the price of Chinese herbal medicines has led to an increase in procurement costs.

It can be seen that Tongrentang Technology may be under pressure on both the revenue side and profit side, but it has achieved steady growth.

Furthermore, according to the information disclosed in the mid-term, according to statistics from the China Pharmaceutical Enterprise Management Association, the proprietary Chinese medicine industry saw negative growth in revenue and profit in the first half of the year, and the overall performance of Tongrentang Technology was also superior to the industry average.

Behind this, in the first half of the year, Tongrentang Technology sold 9 products with sales exceeding 0.1 billion yuan. Another 27 products had sales between 10 million yuan and 0.1 billion yuan, and 7 products had sales between 5 million yuan and 10 million yuan. Among the leading products, sales revenue of the Liuwei Dihuang Pill series, the cold clean-up granule series, the Xihuang Pill series, and the Sheng Mai Drink series increased by 3%, 20%, 25%, and 20%, respectively. At the same time, benefiting from the “large variety” development strategy, sales revenue of products such as the Zhibai Dihuang Pill series and the Acconitum Pill series all achieved double-digit year-on-year growth.

According to regional divisions, Tongrentang Technology achieved revenue of 3.552 billion yuan and 0.467 billion yuan for traditional Chinese medicine products in the mainland China market and other markets, respectively.

It is easy to see that Tongrentang Technology has strengthened growth and certainty with high-quality core products and a dual layout at home and abroad.

Supported by multiple factors, long-term growth can be expected

Looking ahead to the future market, the fundamentals of Tongrentang Technology are still stable, supported by multiple factors.

As can be seen, Tongrentang Technology is continuously strengthening its brand building and channel building, actively promoting R&D and innovation, and is expected to continue to consolidate its leading market position. At the same time, the policy is aimed at injecting new impetus, and we are optimistic that it will release more flexibility in the future as the industry becomes more prosperous.

For example, in September, the Traditional Chinese Medicine Administration issued several more notices to help the high-quality development of traditional Chinese medicine. With policy support, the grass-roots development path of traditional Chinese medicine will be smoother, and it is expected that the direction of inheritance, innovation, transformation and empowerment will benefit deeply. Tongrentang Technology will step on these main lines.

Tongrentang Technology has been exploring the coordinated development of inheritance and innovation, gathering famous parties, famous institutions, and famous experts to continuously implement multiple rounds of collaborative innovation action plans for proprietary Chinese medicines, etc., to enable product research and development, including efforts to create a high-end product line in the “Imperial Pharmaceutical 300” heritage series to meet consumers' demand for “classic Chinese medicines”. The series of products covered by it, such as Liuwei Dihuang Pills and Shengmai Drink, are popular in the market. The sales revenue growth rate of these products is impressive, as mentioned earlier.

It is also worth noting that in the first half of the year, Tongrentang Technology and Beijing University of Traditional Chinese Medicine collaboratively developed the innovative Chinese medicine, Astragalus granules, were approved for clinical trials, filling the gap in the field of chronic heart failure. Furthermore, this product is a completely innovative Chinese medicine with clear curative effects and mechanisms of action. The market prospects are broad, and it is expected to contribute considerable growth in the future.

Recently, information from the State Intellectual Property Office also showed that Tongrentang Technology applied for a patent called “Method and Application for Establishing Characteristics of a Traditional Chinese Medicine or Traditional Chinese Medicine Composition Formulation”. The application date is July of this year.

According to the patent abstract, the invention provides a method for establishing and applying a characteristic map of traditional Chinese medicine or traditional Chinese medicine composition preparations, which can effectively solve the problem that traditional Chinese medicine characteristic maps containing active ingredients in both baicin and huanglian cannot balance the overall detection of active substance components and accurate measurement of content, and characteristic maps obtained through this method can effectively achieve overall quality control of traditional Chinese medicine or traditional Chinese medicine composition preparations.

This will also add more guarantees to the quality of Tongrentang technology-related products, making them enhance their quality advantage.

epilogue

Generally speaking, under the trend of divergence in the Hong Kong stock market, Tong Ren Tang Technology has an opportunity to welcome a return in value. The track where it is located is supported by policies and the economy is recovering. At the same time, it has strong business resilience, and is still opening up more growth. Growth and certainty can be seen, and subsequent performance is worth looking forward to.