Zhuozheng Medical’s Third Bid For HKEX Listing; Debt Ratio Above 200% And Repeated Compliance Penalties

Zhuozheng Medical Holdings Limited (Zhuozheng Medical), A Provider Of Mid‑To‑High‑End Private Healthcare Services, Is Making Another Push To List On The Hong Kong Stock Exchange, With Haitong International And Pu Yin International As Joint Sponsors. This Marks The Company’s Third Attempt Following Lapsed Filings In May 2024 And March 2025.

Zhuozheng Medical Targets Middle‑ To High‑Income Cohorts. From 2014 Through 2021, It Secured Financing From Tencent, Tiantu Capital, And H Capital. In A Climate Where Individual Spending Is Turning More Conservative, Whether This Mid‑To‑High‑End Positioning Still Constitutes A Sound Business Can Be Partly Discerned From Its Prospectus.

Major Regions’ Revenue Contribution Declines

The Prospectus And Tianyancha Indicate Zhuozheng Medical Was Founded In 2012, With Domestic Operating Entities Including Shenzhen Zhuozheng Ruixiang Management Consulting Co., Ltd. And Shenzhen Zhuozheng Medical Investment Consulting Co., Ltd. Since Inception, It Has Focused On Delivering A Range Of Specialty Services Via Private Facilities And An Online Healthcare Platform.

As Of The Prospectus Signing Date, Zhuozheng Medical Owned And Operated 19 Medical Institutions (17 Clinics And Two Hospitals), Strategically Covering 11 First‑Tier Cities In China, While Running Four General Clinics In Singapore And One In Malaysia.

According To Frost & Sullivan, Measured By 2024 Revenue, Zhuozheng Medical Is China’s Third‑Largest Private Mid‑To‑High‑End Comprehensive Healthcare Provider. As Of End‑2024, By Number Of Chinese Cities Covered And 2024 Paid Patient Visits, It Ranked First And Second Among Comparable Groups.

The Company’s Revenue Primarily Derives From Medical Services, Comprising Physical And Online Care. During 2022–2024 And January–August Of This Year, Revenue Was RMB 473 Million, RMB 690 Million, RMB 959 Million, And RMB 696 Million, Respectively. From 2022 To 2024, The Compound Annual Growth Rate Was 42.3%.

Profitability Emerged Only In 2024. Within The Reporting Periods, Net Results Were RMB –222 Million, RMB –353 Million, RMB 80.227 Million, And RMB 83.211 Million.

Despite Operating An Online Platform To Integrate Digital And Offline Care, The Share Of Revenue From Online Services Fell Each Year: 4.5% In 2022, 3.3% In 2023, 2.4% In 2024, And 2.1% In January–August This Year (Down 0.4 Percentage Points Year On Year).

Conversely, Physical Medical Services’ Revenue Share Rose Annually To 83%, 85.8%, 91.1%, And 92.1% Across Periods.

A Notable Trend, However, Is The Declining Revenue Share From Key First‑Tier Markets. Shenzhen’s Contribution Dropped From 31.7% In 2022 To 26.4% In 2024, Then To 25.4% In January–August (Down 1.7 Percentage Points Year On Year). Guangzhou Fell From 24.9% To 20.9%, Then To 19.7% (Down 2 Percentage Points Year On Year). Chengdu Shifted From 11.2% To 10.1%, And Registered 10.2% In January–August (Versus 10.1% A Year Earlier).

Other First‑Tier And New First‑Tier Cities Each Contributed Single‑Digit Shares, While Singapore’s Contribution Hovered Around 0.6%. The Prospectus Notes Zhuozheng Medical’s Services Are Aimed At Affluent Consumers With High Disposable Income And Purchasing Power.

Given The Overall Downtrend In First‑Tier City Contributions And The Minimal Overseas Share, The Headroom For Future Growth Warrants Reflection—Especially As Private Healthcare Institutions Occupy An Ambiguous Space Within China’s System.

Business Consultant And Corporate Strategy Expert Huo Hongyi Observes That China’s Private Healthcare Sector Is Still Maturing, With Dynamic Adjustments In Regulatory Detail, Pricing Mechanisms, And Commercial Health Insurance Integration. Coverage By Commercial Health Insurance Remains Low, Adding Uncertainty. Post‑Pandemic, Middle‑Class Consumption Has Become More Rational, And Growth Among First‑Tier City Middle Classes Has Slowed. For Firms Concentrated In Such Cities, Adjusting Geographic Strategy And Structuring A Tiered Layout Based On Cost And Consumption Potential Is Advisable.

At The Gross Margin Level, The Company Reported 9.3%, 19.3%, 23.6%, And 24% Across Periods, Mainly Benefiting From Higher Margins In Physical Care (2.1%, 15.2%, 21.9%, And 22.3%).

The Company Attributes The Increase In Physical Care Margins To Improved Operating Efficiency And Scale Economies From More Visits, Alongside Cost Control.

Administrative Expenses Were The Primary Outlay: RMB 183 Million, RMB 192 Million, RMB 264 Million, And RMB 140 Million, Accounting For 38.7%, 27.8%, 27.6%, And 20.1%. In January–August This Year, Administrative Expenses Fell 21% Year On Year, Mainly Due To Lower Share‑Based Compensation And Employee Salaries And Benefits.

Huo Hongyi Notes That Reductions In Employee Compensation—A Core Component Of Administrative Costs—May Reflect A Slower Store Expansion Pace And Fewer New Hires, Or Proactive Cost Optimization Based On Prudence About Future Profitability. As The Company Only Turned Profitable In 2024, Management May Seek To Consolidate Results Through Streamlining And Optimizing Compensation Resources.

Regardless Of The Cause, He Emphasizes That Private Healthcare’s Core Competitiveness Is Closely Tied To Service Quality. If Cost Cuts Lead To Loss Of Core Medical Staff Or A Deterioration In Patient Experience, Long‑Term Development Could Be Harmed. Cost Control That Preserves Service Quality Constitutes A Positive Efficiency Gain.

Debt Ratio Exceeds 200%, Multiple Clinics Penalized

The IPO Proceeds Are Intended To: Build An AI Application Talent Pool And Pursue Strategic Collaboration And Procurement With Leading Institutions And Companies; Upgrade Existing Facilities And Establish New Ones To Deepen Penetration And Broaden Patient Coverage; Acquire Well‑Performing Institutions In First‑Tier And New First‑Tier Cities When Appropriate; And Fund Working Capital And General Corporate Purposes.

In 2014 And 2021, Zhuozheng Medical Completed Multiple Financing Rounds From Tencent, Tiantu Capital, And H Capital. Following The Final USD 60 Million Round, The Company’s Valuation Jumped From USD 15.6 Million In 2014 To USD 510 Million (Approximately RMB 3.629 Billion).

The Valuation Surge Coincided With Rising Leverage. For 2022–2024 And January–August This Year, Asset‑Liability Ratios Were 227.65%, 257.45%, 232.75%, And 227.02%. As Of End‑August, Cash And Cash Equivalents Were RMB 158 Million, Down 37.84% Year On Year.

Additionally, As Of End‑August, Convertible Redeemable Preference Shares Totaling RMB 2.325 Billion Were A Key Factor Behind The Elevated Leverage.

The Financing Also Involved A Valuation Adjustment Mechanism. If The Company Fails To List By December 31, 2026, It Must Redeem All Or Part Of The Outstanding Preference Shares Held By Investors. Under A March 2024 Revised Agreement, One Redemption Condition Was Updated: Failure To List Before February 28, 2026 Would Trigger Redemption.

In January 2024, The Company Acquired 23.04% Of Wuhan Shenlong Tianxia From Ningbo Weidu For RMB 60 Million, And 8% From Shenzhen Fenxiang For RMB 30 Million. In June, It Purchased 11.52% Of Zhenjiang Junding For RMB 30 Million, Thereby Holding 62.56% Of Wuhan Shenlong Tianxia. The Transaction Created Goodwill Of RMB 133 Million.

Wuhan Shenlong Tianxia, Founded In 2014, Operates Wuhan Beidouxing Children’s Hospital And Two Clinics In Wuhan. Post‑Acquisition, Zhuozheng Medical Recorded RMB 133 Million In Goodwill.

Lin Xianping, Associate Professor At Zhejiang University City College, Believes That Falling Revenue Shares In Core Cities Suggest Penetration May Have Peaked. Even With Expansion Into New Areas, Replicating The Success Model Is Uncertain; Underperforming New Acquisitions Or Facilities Could Depress Overall Profit.

Alongside Nationwide Clinic And Hospital Deployment, Tianyancha Shows Repeated Administrative Penalties For Compliance Issues.

In August 2024, Guangzhou Zhuorui Outpatient Department Co., Ltd. Was Fined RMB 11,000 By The Tianhe District Health Bureau For Insufficient Pharmacist Remarks And For Using Nurses To Handle Prescription Verification, Dispensing, And Distribution Between June 2 And 4, 2024.

In July The Same Year, Beijing Zhuorui Outpatient Department Co., Ltd. Was Fined RMB 5,000 By The Haidian District Fire And Rescue Brigade After Inspectors Found The Construction Site Lacked A Hot‑Work Management System.

In March 2023, Beijing Zhuokang Clinic Co., Ltd. Was Warned And Fined RMB 15,000 By The Chaoyang District Health Commission For Failing To Properly Complete, Store, Or Supplement Emergency Medical Records.

In 2022, Shenzhen Zhuojian Outpatient Department Was Fined RMB 15,000 By The Futian District Health Bureau For Conducting Diagnosis And Treatment Activities With Physicians Who Held Practice Certificates But Were Not Registered Or Filed, And Was Also Fined RMB 500 For Failing To Verify The Radiology Diagnosis And Treatment License.

Beijing Zhuozheng Clinic Co., Ltd., Deregistered In August This Year, Faced Four Penalties In 2022: RMB 30,000 For Illegally Performing Family Planning Surgery And Confiscation Of RMB 4,600 In Illegal Gains; RMB 3,000 For Conducting Radiology Without A License; RMB 20,000 For Activities Beyond Registration Or Filing And Confiscation Of RMB 5,475 In Illegal Gains; And RMB 3,000 For Failing To Verify The Radiology License Concurrently With The Medical Institution Practice License.

In The Shareholding Structure, The Largest Individual Shareholder Wang Zhiyuan Directly Holds 22.05% And, Together With Agreements Involving Cheuk Sing Ho And Others, Controls 26.48%. Tencent, As The Largest Institutional Investor, Holds 19.39%. (Produced By Harbor Finance)