CMB International has released a research note indicating that GUSHENGTANG (02273) delivered a steady set of first-half 2026 results while pivoting back to a growth-oriented strategy. The firm has maintained its "Buy" rating and a DCF-based target price of HK$42.00.

During the first half of 2026, the company generated revenue of RMB1.65 billion, a year-on-year increase of 10.6%. EBITDA climbed 39.8% to RMB370 million, while net profit surged 44.2% to RMB220 million. The first-half revenue accounted for 44.3% of the bank's full-year forecast, aligning with historical ranges. Offline store revenue grew 12.5% year-on-year, and offline patient visits rose 17.5%, with same-store patient traffic at older locations up 12.9%.

The bank projects revenue growth of 14.5%, 16.9%, and 18.5% for the 2026E, 27E, and 28E fiscal years, respectively, with adjusted net profit growth of 14.7%, 17.6%, and 19.7%. The target price remains at HK$42.00.

Key takeaways from the report:

Record new store openings, with serious medical care average spending recovering growth. In the first half of 2026, GUSHENGTANG added 18 new stores, the most in any half-year period in its history, underscoring its renewed focus on expansion. The physician network continued to broaden, strengthening the company's academic foundation. The platform added 2,657 doctors during the period, with 1,296 joining offline operations, of whom 40.3% are full-time in-house practitioners.

Newly recruited doctors serve as a key growth driver. Revenue generated by doctors who joined in the first half of 2025 surged 103.7% in the first half of 2026, contributing 6.9% of total revenue. The bank expects this contribution to sustain rapid growth through 2027. Notably, average spending on serious medical care rose 2.4% year-on-year, creating a healthy mix of high-value medical services and high-traffic consumer offerings, with both volume and price moving upward.

Accelerated M&A and overseas expansion are central to the growth strategy. Between January and July 2026, the company acquired eight stores (compared to four in the same period last year), with combined revenue of approximately RMB200 million (versus RMB57 million a year earlier). Another 18 stores have been signed and are scheduled for completion in the second half of the year. GUSHENGTANG also plans to establish domestic and international M&A funds with partners.

Overseas revenue has begun to scale, growing roughly 14-fold year-on-year to RMB32 million in the first half of 2026. Its first Singapore store achieves monthly revenue exceeding RMB1.2 million with a store-level profit margin of 30%. Building on this validated overseas model, the company entered Hong Kong in August with four stores and Malaysia through the full acquisition of a 10-store local traditional Chinese medicine chain, Yongsheng Group. The bank believes M&A and overseas markets will be pivotal to achieving the company's RMB10 billion revenue target by 2030.

Dividends and buybacks in tandem. In the first half, the company completed HK$360 million in share repurchases, bringing the trailing twelve-month total to HK$750 million, of which HK$420 million was cancelled. An interim dividend of HK$1.15 per share (approximately RMB210 million, up 178% year-on-year) was declared, with cumulative dividends of RMB350 million paid over the past year. Combined repurchases and cancellations over the last twelve months represent roughly 13% of the current market capitalization, signaling substantial shareholder returns.

The company has committed to annual cash dividends of no less than HK$450 million or 60% of adjusted net profit (whichever is higher) for 2026 through 2028. As of the end of June, cash reserves stood at around RMB1.2 billion. Coupled with forecast operating cash flow and diverse M&A financing tools, the bank believes GUSHENGTANG is well-positioned to balance both expansion and enhanced shareholder returns.