Kanghua Health (03689) has announced that on March 23, 2026, the company, acting as the seller, entered into a share transfer agreement with Beijing Fazheng Industrial Group Co., Ltd., the buyer, for the sale of its remaining 45% equity interest in Kangxin Hospital. The estimated consideration for the transaction is RMB 14.201 million.

The decision follows the hospital's persistent underperformance relative to management's expectations and the increasingly competitive healthcare market in the Chongqing region. After careful deliberation, the board concluded that continued capital injections by existing shareholders alone would not serve as the optimal long-term solution for Kangxin Hospital's development, nor would it align with the best interests of the company and its shareholders as a whole.

To optimize internal resource allocation within the group and ensure its sustainable long-term growth, Kanghua Health has decided to adjust its strategic focus by introducing new investors to Kangxin Hospital and exiting its investment through the disposal. The board believes the divestment is in the best interests of the company and its shareholders.

The transaction will enable the group to exit a persistently loss-making investment, recover funds for core business operations and general working capital, and improve the group's overall resource allocation. This will allow the board and management to concentrate on enhancing operational efficiency and long-term value in the group's core healthcare businesses.

In assessing the fairness and reasonableness of the consideration, the directors considered several factors, including: (i) the valuation in the previous disposal, which was based on approximately 1.5 times Kangxin Hospital's annual revenue for the year ended December 31, 2021; (ii) the hospital's continued underperformance since the prior transaction; and (iii) management's expectation that, given intensifying competition in Chongqing's healthcare market, the hospital's financial performance is unlikely to improve significantly in the near to medium term.

After evaluating these factors, the directors deemed it fair and reasonable to value Kangxin Hospital at approximately 1.0 times its annual revenue for the year ended December 31, 2025, concluding that the terms are in the overall interests of the company and its shareholders.