Kangbaijia's initial public offering on the Shanghai main board has recently been accepted by the Shanghai Stock Exchange, making it the first chain pharmacy company to attempt an IPO in over three years. The prospectus reveals plans to raise 809 million yuan, with nearly 70% of the funds allocated to opening 1,250 new directly-operated stores across Fujian, Zhejiang, and Jiangxi provinces over four years, averaging over 300 new stores annually.

Data shows that Kangbaijia is a regional chain leader in Fujian, ranking tenth nationwide in 2025 with 2,484 directly-operated stores. However, behind this impressive scale, numerous concerns have emerged, including a mismatch between expansion and profitability, pressure from goodwill impairment, compliance management gaps, and shortcomings in corporate governance. As the industry enters a phase of inventory consolidation and tightening regulation, whether Kangbaijia's path of accelerating expansion through IPO financing is a breakthrough strategy or an amplifier of risk remains to be seen by the market.

Aggressive store growth fails to boost profits, regional concentration limits long-term growth

Prospectus data indicates that from 2023 to 2025, Kangbaijia's directly-operated stores grew from 1,934 to 2,484, a net increase of 550 stores, representing a 28.4% rise. The peak expansion occurred in 2024, with directly-operated stores increasing by 26% year-over-year and franchised stores surging from 44 to 124, an 181.8% jump. Correspondingly, the company's revenue grew from 4.748 billion yuan to 5.384 billion yuan, a three-year compound growth rate of approximately 6.5%.

However, this scale expansion did not lead to a proportional increase in profits. In 2024, despite a 7.9% year-over-year revenue increase, Kangbaijia's net profit attributable to shareholders fell 13.2% year-over-year, dropping from 334 million yuan to 290 million yuan. Profitability recovered to 311 million yuan in 2025 but still did not return to 2023 levels.

The decline in profitability is rooted in a drop in per-store efficiency. Calculations show that in 2023, per-store revenue was about 2.455 million yuan, and per-store recurring net profit was about 172,000 yuan. By 2024, per-store revenue had fallen to 2.103 million yuan, and per-store recurring net profit dropped to 119,200 yuan. In 2025, per-store revenue further declined to 1.7669 million yuan, while per-store recurring net profit recovered slightly to 123,400 yuan, still significantly below 2023 levels.

Accompanying the scale expansion is a continuous decline in capital utilization efficiency. From 2023 to 2025, Kangbaijia's weighted average return on equity fell from 24.41% to 17.92% and then to 17.34%, a drop of over 7 percentage points in two years, reflecting that as asset scale expands, capital efficiency is steadily decreasing.

The IPO plans to raise about 809 million yuan, with 549 million yuan designated for 1,250 new directly-operated stores over four years, effectively adding half the current store count. If per-store efficiency does not improve, the substantial investment in new stores could further dilute overall profitability.

Additionally, the high regional concentration amplifies expansion uncertainty. As of the end of 2025, 1,657 of Kangbaijia's stores were in Fujian, accounting for 66.7% of directly-operated stores and contributing about 75% of revenue, serving as the company's performance anchor.

Despite years of effort in Zhejiang and Jiangxi, with 409 and 418 stores respectively, their combined revenue contribution is less than 30%. In 2025, the number of directly-operated stores in Jiangxi actually decreased, with a net reduction of 20 stores for the year. The Zhejiang market added only 4 new stores throughout the year, indicating a significant slowdown in cross-provincial expansion and that regional replication capabilities have not been fully validated.

M&A goodwill pressure and compliance issues, related-party leasing from actual controllers raises governance concerns

Looking back at the company's development history, Kangbaijia has relied heavily on mergers and acquisitions. From 2023 to 2025, it completed multiple equity and asset acquisitions, including seven large transactions each exceeding 10 million yuan. While continuous M&A rapidly increased scale, it also caused a rapid expansion of goodwill on the books.

Data shows that at the end of 2023, Kangbaijia's goodwill book value was 119 million yuan, accounting for 3.26% of total assets. By the end of 2025, goodwill had surged to 322 million yuan, a nearly 1.7-fold increase in three years, rising to 7.33% of total assets and 21.34% of non-current assets.

The prospectus discloses that the goodwill original value of a pharmaceutical commercial asset group in Jiangxi was 11.7 million yuan. This asset group showed signs of impairment in both 2023 and 2024, prompting the company to record impairment provisions of 3.7919 million yuan and 7.9081 million yuan respectively, fully impairing the goodwill by the end of 2024.

The current 322 million yuan in goodwill is mainly concentrated in two asset groups in Fujian and Zhejiang. The Fujian pharmaceutical commercial asset group holds goodwill of about 185 million yuan (57.64% of the total), while the Zhejiang group holds about 136 million yuan (42.36%). The pharmaceutical retail industry is currently in a deep adjustment phase, with 39,000 retail pharmacies closing nationwide in 2024, a closure rate of 5.7%, and declining store-level efficiency is a common trend. Against this backdrop, the risk of goodwill impairment at Kangbaijia remains a concern.

On governance and compliance, Kangbaijia has faced multiple penalties during the reporting period for medical insurance violations and improper prescription drug management, exposing gaps where compliance management failed to keep pace with rapid expansion.

The prospectus reveals that from 2023 to 2025, Kangbaijia and its subsidiaries incurred 10 administrative penalties with individual amounts of 30,000 yuan or more. The reasons include failing to sell prescription drugs with valid prescriptions, exceeding medical insurance payment scopes, improper prescription management, and non-compliant drug storage.

The largest single penalty occurred in 2025, when the Shangrao Wusanyi store of Jiangxi Kangbaijia Pharmacy was fined 472,100 yuan by the local medical insurance bureau for improper use of medical insurance funds beyond the policy scope. This was not an isolated incident. In 2024, the Linchuan Wutang Road store of Jiangxi Kangbaijia Pharmacy was fined 61,100 yuan for similar violations. The same year, multiple stores in Ningde, Zhangzhou, and other areas were penalized for prescription review violations and selling prescription drugs without prescriptions. Entering 2025, medical insurance regulatory pressure intensified, with stores in Putian, Jiangxi Dongxiang, and elsewhere found to have discrepancies in social security card drug purchases, excessive prescription quantities, and sales without licensed pharmacists, leading to some stores having their medical insurance service agreements suspended.

Furthermore, gaps in prescription drug management are also prominent. The Ruian Anyang branch of Wenzhou Kangbaijia was penalized for selling prescription drugs online through a food delivery platform without review by a licensed pharmacist. The Taihe Zhongshan Road store in Jiangxi was fined for mixing prescription and non-prescription drugs and failing to rectify the issue after a deadline. These scattered and varied compliance cases across different regions reflect numerous loopholes in Kangbaijia's standardized compliance control system.

The loose terminal control and frequent compliance failures are fundamentally linked to the company's governance structure and control capabilities. In terms of equity structure, actual controllers Wang Hui and Wang Yong, along with their concert parties, collectively hold 58.98% of voting rights, giving them absolute control.

This highly concentrated equity structure, while enhancing decision-making efficiency, also raises corporate governance questions regarding the protection of minority shareholder interests and the fairness of related-party transactions. For example, the prospectus shows that actual controllers Wang Hui, Wang Yong, and their children have leased their own commercial properties to Kangbaijia stores, collecting rent.

From 2023 to 2025, Wang Hui received a cumulative rent of 4.2039 million yuan, and Wang Yong received 6.4215 million yuan, totaling over 10.62 million yuan in three years. In comparison, the combined compensation paid to Wang Hui and Wang Yong by the company in 2025 was less than 1.5 million yuan, meaning their rental income from the company far exceeded their managerial compensation. The fairness and necessity of the pricing for these asset leases, where the actual controllers continuously derive substantial income from the pre-IPO company, warrant scrutiny.

Overall, as the pharmaceutical retail industry transitions from rapid expansion to meticulous operation, an IPO listing is merely the starting point. If Kangbaijia cannot maintain profitability while expanding and address its compliance and governance shortcomings, accelerated growth fueled by capital may instead accumulate more risks.