CICC has issued a research report maintaining its outperform rating on TONGRENTANGCM (03613), considering the company's expense investments in the second half of the year. Given the company's active expansion of online and offline sales channels and continuous enrichment of its sales network layout, the firm maintains its target price of HK$10.50, corresponding to 16.4x/14.9x P/E for 2025/2026, representing 10.3% upside potential from the current share price.

The company reported its first half 2025 results: revenue of HK$762 million, up 14.6% year-on-year, and net profit attributable to shareholders of HK$235 million, corresponding to earnings per share of HK$0.28, up 6.9% year-on-year, in line with expectations.

**Hong Kong Market Shows Strong Recovery Growth, Actively Expanding Sales Channels**

According to the company announcement, in H1 2025, the company's Hong Kong market revenue reached HK$430 million, up 30.3% year-on-year, mainly due to increased product category sales at Hong Kong stores. The company actively renovated its Hong Kong offline stores, comprehensively refreshing the retail terminal appearance. In H1 2025, the company's mainland China market revenue was HK$120 million, up 1.4% year-on-year, while overseas market revenue was HK$210 million.

According to the announcement, the company actively expanded offline and online sales channels, signing a strategic cooperation agreement with China Duty Free International to explore international market development. Additionally, the company actively updated product packaging, such as Rhodiola capsules and Blueberry Rhodiola capsules, to enhance product market appeal.

**Sales Expense Ratio Declined Simultaneously in H1 2025**

According to the company announcement, in H1 2025, the company's gross margin was 60.8%, down 7.2 percentage points year-on-year. The sales expense ratio was 13.5%, down 5.9 percentage points year-on-year, mainly due to reduced expenses related to retail terminals and marketing promotional activities. The administrative expense ratio was 11.6%, up 0.4 percentage points year-on-year.

**Other Developments**

According to the company announcement, in H1 2025, the company's accounts payable turnover days decreased by 37 days year-on-year to 35 days. The company actively promotes TONGRENTANGCM's traditional Chinese medicine products and culture, actively participating in various traditional Chinese medicine cultural promotion activities.

The firm believes the company is positioned to drive toward a new stage of high-quality development by deepening its research and development innovation strategy, continuously enriching its product line layout, actively expanding its proprietary product matrix, and building new growth engines.