Currently, many companies that initially planned to list on the A-share market are shifting their focus to the Hong Kong market, with several leading firms such as Laopu Gold, Qunabox Group, APT Electronics, Mokingran, and Mixue Group making this transition. Neautus's situation is similar. Before initiating its IPO plan in Hong Kong, the company had submitted two applications for A-share listings from 2011 to 2023. Considering its future business strategies and an optimistic outlook on the Hong Kong market, the company voluntarily terminated its A-share counseling record in April 2024 and decided to list in Hong Kong. In fact, the choice of the Hong Kong market aligns more closely with Neautus's business and developmental direction.
TCM Decoction-ready Product Market Shows Positive Momentum, with Neautus Securing First-Mover Advantage
TCM decoction-ready products have evolved significantly, driven by technological advancement in processing methods and growing demand for standardized and convenient TCM treatments. These products are gaining broader international market acceptance and expanding rapidly in scale. According to Frost & Sullivan, China's TCM decoction-ready product market is projected to continue its growth at a CAGR of 5.7% from 2023 to 2030 and reachRMB409.7 billion in 2030.
Currently the TCM decoction-ready product market is relatively fragmented, with most market players operating on a relatively small scale and only a few enterprises achieving an annual output value exceeding RMB1 billion. Neautus is one of only three such companies, ranking second among TCM decoction-ready product manufacturers in 2023. Founded by Chairman Jiang Yun, the company pioneered the standardization and scaling of TCM decoction-ready products.
Neautus not only established the first GMP factory for TCM decoction-ready products in China but also serves as a pioneer and active promoter of the standardized and scaled development of this industry. With deep roots in the sector, it holds key core technologies for the production and processing of TCM decoction-ready products, producing high-quality products and leading the market. In 2003, Neautus became the first TCM decoction-ready product manufacturer in China to receive GMP certification from the National Medical Products
Administration (the NMPA).It has since remained committed to promoting industry standardization while steadily advancing its own large scale operations . Furthermore, in response to current trends, Neautus adopts a forward-looking dual-pillar strategy -maintaining its leadership position in the core TCM market while driving disruptive innovations tailored to modern consumers - rapidly establishing a presence in high potential segments
There are over 86,000 small-scale TCM clinics, pharmacies and medical institutions in China, many of which face significant unmet needs in procuring decoction-ready products. Leveraging its dual-pillar strategy, Neautus serves institutional clients, including over 1,000 hospitals and medical institutions, and major pharmacy chains primarily through offline channels. It also supports small pharmacies, clinics and individual practitioners through digital platforms, such as Jinfang Caotang and Jinfang Cloud (online TCM medicine platform), serving 5,200+ customers. This approach enables Neautus to tap into market potential while solidifying its development foundation.
Aligning with Policy and Market Demand, Strong Players Expected to Grow Stronger
The national centralized procurement policy and expanding market demand present significant opportunities for Neautus's future development. The fragmented nature of the TCM decoction-ready product market indicates that, with capital investment and technological advancements, larger enterprises have substantial potential for growth through consolidation or organic growth. Neautus, already possessing considerable scale and a leading position in the industry, is well-positioned to benefit from this trend.
The "Opinions on Enhancing the Quality of TCM and Promoting High-Quality Development of the TCM Industry*", released in the first half of the year, proposed "optimizing centralized procurement and bidding policies for TCM, achieving quality at a good price". It explicitly encourages centralized procurement that emphasizes both quality and affordability in the TCM decoction-ready product segment and advocates for the cultivation of well-known TCM brands. This policy allows quality TCM decoction-ready manufacturers to maintain reasonable profit margins. Neautus's high-quality products and strong brand value align closely with both national policies and market demand,under such supportive policy, its market share is expected to further expand, reinforcing its leadership advantage.
By targeting the full spectrum of TCM decoction-ready product market, particularly essential formula decoction-ready products, Neautus continues to consolidate its leading position in consumer TCM. The company's platform"Jinfang Caotang - Expert in TCM Decoction-ready Product Delivery" is designedspecifically for TCM clinics, offering quality TCM decoction-ready products and comprehensive delivery services. This further supports grassroot healthcare institutions and enhances Neautus's market presence.
In addition, the consumer-oriented stocks have always been favored in the capital market, often commanding higher valuation premiums. This is particularly true for leading companies in various niche markets, which possess wide moats and are suitable for long-term investment. For instance, "the first stock of traditional gold" - Laopu Gold (6181.HK) -shifted from the A-share market to the Hong Kong Stock Exchange and saw its stock price soar after its listing at the end of June 2024, rising over 21 times to date with remarkable performance. Similar to Laopu Gold's developmental path of "traditional method + modern technology", Neautus follows a dual-driven strategy of "medicine + consumption". Both companies may take different paths, but they converge in being impressive leaders within the consumer segments with amazing potentials. From a value investment perspective, their quality and potential are evident.
As the scope of medical insurance coverage gradually expands, consumer TCM leaders like Neautus can enhance quality and efficiency through refined, intelligent, and systemized operations. This opens new opportunities for sustainable growth and may lead to a 'strong-get-stronger' dynamic. Given these advantages, Neautus's IPO prospects appear highly promising. With deep roots in the industry, Neautus, if successfully listed, is poised to become the first publicly traded TCM decoction-ready product company on the Hong Kong market.
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