New Stock Outlook | Lianchi Hospital's "Shift" Challenge: Obstetrics Dominant, Orthopedics Weak, New Hospital Hurting Profit

Another regional specialist medical leader knocks on the door of the Hong Kong Stock Exchange. On January 13th, Lianchi Hospital Group Limited (referred to as Lianchi Hospital) submitted its application for listing on the main board of the Hong Kong Stock Exchange, with China Galaxy International as its exclusive sponsor. Driven by the deepening medical insurance payment reform and the upgrade of consumer healthcare, this group, which operates 5 hospitals across provinces with orthopedics and obstetrics and gynecology as its dual core, is attempting to tell a new story of a "high-quality specialist medical platform" to the capital market through its specialized treatment model and steady financial performance. The latest financial data shows that the company achieved a revenue of 359 million yuan in the first three quarters of 2025, with a net profit of 55.51 million yuan, and a stable gross profit margin of 35.6%. Efficiency and cost concerns behind high growth appearances Lianchi Hospital's prospectus demonstrates a typical financial chart of a specialist medical group in an expansion phase: the revenue scale continues to grow, but upon closer examination of its profit structure and operational details, it reveals multiple concerns regarding growth quality and sustainability. On one hand, there is a deviation between the company's revenue growth and profit efficiency. In 2024, Lianchi Hospital's revenue increased by 17.4% year-on-year, and the growth rate also remained above 20% in the first three quarters of 2025 (year-on-year basis), appearing to have a stable growth momentum. However, the pace of improvement in its profitability has become burdened. Although the gross profit margin increased from 32.9% in 2023 to 36.1% in 2024, indicating optimization of the business structure or initial cost control effectiveness, this gain is being rapidly eroded by the sharply rising period expenses. The most alarming financial signal is the uncontrolled growth of period expenses. In 2024, the company's sales expenses surged by 24.0% year-on-year, far exceeding the revenue growth rate; in the first three quarters of 2025, this expense saw a further expansion to 41.2% year-on-year. This clearly indicates that in the increasingly intense competition in the private medical market, the company's patient acquisition costs are increasing significantly, with unprecedented pressure on marketing and brand building. At the same time, general and administrative expenses also maintained a rapid growth of over 20%, reflecting the rigid expenditure pressure brought about by the increasing management complexity accompanying the scale expansion. The growth rate of these two expenses continued to exceed the revenue growth rate, directly causing a deviation between operating profit growth and revenue growth in 2024. On the other hand, there are potential risk points in the company's asset quality and financial structure. Firstly, the continuous recognition of impairment losses on accounts receivable in the profit statement, rather than reversal, implies poor recovery of some receivables, tangible bad debt risks are materializing, which may continue to erode future profits. Secondly, the declining trend in the profit contribution from affiliated enterprises, from 7.46 million yuan in 2023 to 3.52 million yuan in the first three quarters of 2025 (annualized), increases the volatility and uncertainty of investment income. Thirdly, capital expenditure supporting business expansion may have elevated debt levels, with financial expenses in the first three quarters of 2025 soaring by 44.1% year-on-year, increasing interest burden and raising overall financial risks. In summary, Lianchi Hospital's financial performance presents a contradictory picture: while revenue scale is expanding, cost control ability is weakening, operational efficiency is declining, and the financial cost paid for growth is rising. From "dual drive" to "single core leading" Balancing the dilemma of "blood making" and "blood transfusion" According to observations, Lianchi Hospital's long-term revenue is mainly comprised of two main sectors - "obstetric and gynecological medical care" and "orthopedic services", but the growth trends of the two have shown significant differentiation. Firstly, obstetric and gynecological medical care has become an absolute growth engine: the proportion of revenue from this sector increased from 59.5% in 2023 to 65.5% in 2024, and maintained a high position of 61.8% in the first three quarters of 2025. Among them, maternity services are the core driving force, with a sharp 45.8% year-on-year increase in revenue in 2024, becoming the group's largest source of income. This demonstrates the company's brand influence and market share in the field of reproductive services. Secondly, orthopedic services show signs of sluggish growth, but have recently rebounded. The proportion of orthopedic revenue decreased from 28.3% in 2023 to 26.1% in 2024, with a growth rate of 8.2% for the whole year of 2024, which is far lower than the overall revenue growth rate of 17.4%, showing a weak growth trend. However, in the first three quarters of 2025, orthopedic revenue saw a significant year-on-year increase of 42.0%, with its share rising to 30.8%, possibly benefiting from the consolidation contribution of Chongqing Great Wall Orthopedic Hospital and the recovery of the original hospital business. The volatility of the orthopedic business highlights the need to verify its stability as the company's second growth curve. From the perspective of geographical expansion, pressures from the incubation period of new hospitals and growth bottlenecks of old hospitals coexist. In terms of hospital composition, the company is transitioning from a regional group to a cross-regional group, but the performance of new and old hospitals presents a mixed picture. Growth of mature hospitals is slowing down, with a decrease in contribution. Traditional core hospitals like Qingdao Lianchi Obstetrics and Gynecology Hospital and Zibo Lianchi Hospital, whose combined income proportion decreased from 79.4% in 2023 to 74.0% in 2024, and further slipped to 60.0% in the first three quarters of 2025. While this is partly due to a larger base, it also implies that their organic growth may be nearing a temporary ceiling. On the other hand, new acquired/expanded hospitals are in the investment period, dragging down overall profitability. The inclusion of two new hospitals, Hefei Xinhai Maternity Hospital and Chongqing Great Wall Orthopedic Hospital, is one of the key reasons for period expenses (especially sales and management expenses) growing faster than revenue. In conclusion, obstetric and gynecological medical care, especially maternity services, have become the recent growth pillars for the company. However, this business is closely related to population birth rates and local birth policies, with inherent cyclical fluctuations. Over-concentration also reduces the company's ability to withstand policy changes in a single industry. The business development of Lianchi Hospital is at a critical "shifting period". It has successfully transitioned from a local obstetric specialist hospital to a cross-regional group driven by "obstetrics + orthopedics" dual specialties. However, the current growth is more driven by the obstetric business of mature hospitals and the consolidation of newly acquired hospitals, rather than balanced, efficient organic growth across all sectors. For investors, the key to evaluating the value of Lianchi Hospital lies in whether the company can successfully nurture its orthopedic business into the next stable and high-growth pillar while consolidating its obstetric advantage, and prove its ability to replicate and manage across regions, enabling new hospitals to quickly cross the breakeven point and achieve high-quality profits. If new business incubation falls short of expectations, the company may fall into a growth trap of "high expenses, pressure on profits".