Report on the Trend of Chinese Private Hospital Groups Going Public in Hong Kong and the Investment Value Analysis of Lianchi Hospital

The Chinese private medical services industry is undergoing profound structural adjustments. According to the latest industry data, the total annual loss of 23,500 non-public medical institutions nationwide reaches RMB 130 billion, with an average loss of RMB 5.53 million per institution [1]. This data profoundly reveals the systemic challenges currently facing the private hospital industry.

From the policy perspective, the DRG (Diagnosis Related Groups) payment reform introduced in 2019 has had a fundamental impact on the profit model of private hospitals. Instead of fully reimbursing actual expenses, the medical insurance fund pays a pre-set standard amount, directly compressing the profit margin of hospitals. Taking BenQ Hospital as an example, the average hospitalization expense per patient at Nanjing BenQ Hospital dropped from RMB 18,500 in 2022 to RMB 16,400 in the first half of 2025, while that at Suzhou BenQ Hospital dropped from RMB 17,100 to RMB 14,200 [1]. At the same time, rigid operating costs of hospitals (such as labor, pharmaceuticals, consumables, and equipment maintenance) continue to rise, forming an expanding ‘reverse scissors gap’ that continuously erodes core profits.

The continuous reform and enhanced competitiveness of public hospitals have further intensified market pressure on private hospitals. Public hospitals usually enjoy obvious policy advantages in terms of medical resources, designated medical insurance qualification, and talent attraction. Although some private hospitals position themselves in high-end medical services, they often struggle to form a differentiated competitive advantage matching their high fees in terms of service experience.

The valuation logic of the Hong Kong stock market for medical service enterprises is undergoing profound changes. Judging from recent listing cases, the market clearly favors specialty hospitals with replicable business models over general hospitals. The reason is that the gross profit margin of specialty hospitals can usually reach over 30%, while that of general hospitals is often below 18% [1].

• Listing Date: December 22, 2025 (successfully listed after the fourth attempt to submit an application to the Hong Kong Stock Exchange)
• Issue Price: HK$9.34
• First-Day Performance: Plunged nearly 50% at the close, setting the worst first-day performance for Hong Kong new stocks in the year
• Current Stock Price (as of December 23, 2025): HK$4.76, a cumulative drop of 49% from the issue price
• PE Valuation: The median PE during the IPO prospectus phase was as high as 29.8 times, far higher than the average 16.72 times of the Hong Kong private hospital sector
• Financial Performance: 2024 revenue was RMB 2.659 billion, a year-on-year decrease of 1.07%; net profit was RMB 109 million, a year-on-year plunge of 34.73%; gross profit margin was only 18.1%, at the lower end of the industry

The listing setback of BenQ Hospital reflects the collective dilemma of the capitalization path for private medical institutions. The pricing logic of the Hong Kong stock market for private hospitals focuses more on actual profitability, replicability, and growth potential, rather than purely on scale ranking [1].

1. Questionable Sustainability of Profit Model
   : DRG/DIP payment reforms have compressed profit margins, and rigid costs continue to rise. ‘Increased revenue without increased profit’ or even ‘double decline in revenue and profit’ have become common phenomena

2. Risk of Deviation Between Valuation and Value
   : Some enterprises attempt to list on the capital market with high valuations, but the market will ‘vote with its feet’. Pricing that deviates from intrinsic value will lead to severe price breaks

3. Compliance and Governance Risks
   : Incidents such as medical disputes, patient complaints, and illegal charges occur frequently, affecting brand credibility and investor confidence

4. Intensified Industry Competition
   : Public hospital reforms continue to advance with obvious policy advantages; private hospitals need to establish real competitive barriers in terms of service quality and differentiation

Lianchi Hospital Group Co., Ltd. (hereinafter referred to as ‘Lianchi Hospital’) submitted an application to the main board of the Hong Kong Stock Exchange on January 13, 2026, with China Galaxy International as the joint sponsor. It is expected to become the ‘first share of private hospitals in Shandong’ [2].

Lianchi Hospital is a boutique specialty medical group with Chinese characteristics, adhering to the cultural philosophy of ‘Excellence Through Professionalism, Eternity Through Love’ and the people-centered philosophy, placing the safety, treatment efficacy, and experience of each patient and client at the core of the company’s work [2]. The company actively responds to the national strategy of ‘Healthy China’, focuses on the high-potential tracks of ‘the elderly and the young’, and implements the ‘people-centered medical care’ management model.

• Medical Service Model
  : Features medical service models such as pain management, enhanced recovery after surgery (ERAS), integrated care of doctors, nurses, rehabilitation therapists, and anesthetists, and unaccompanied nursing care
• Brand Characteristics
  : Has established the well-known medical brand ‘Lianchi Medical’, focusing on in-depth development in specialty fields
• Strategic Positioning
  : Differentiated competition strategy, focusing on two specialty tracks: maternal-infant and orthopedics

As of September 30, 2025, Lianchi Hospital operates 5 hospitals and 1 elderly care institution under a group management structure [2]:

Institution Name	Positioning	Features
Zibo Lianchi Hospital	Grade II Class A Hospital	Recognized as a Shandong Provincial Health Education Base, Zibo City Guidance Center for Eugenics and Excellent Childcare
Qingdao Lianchi Maternal and Infant Hospital	Specialty Hospital	Passed international JCI accreditation in 2017, the first private hospital in Qingdao to receive international JCI accreditation
Hefei Xinhai Obstetrics and Gynecology Hospital	Specialty Hospital	Medical consortium unit of Anhui Provincial Children’s Hospital
Zibo Lianchi Orthopedic Hospital	Academic Headquarters and Specialty Institution	Standardized Center Unit of the Knee Preservation Alliance Co-established with Beijing Jishuitan Hospital (National Orthopedic Medical Center), Spine Surgery Alliance Unit of Shandong Provincial Hospital
Chongqing Great Wall Orthopedic Hospital	Grade III Specialty Hospital	Acquired in August 2025, located in Southwest China, recognized as a National High-Tech Enterprise
Lianci Medical and Elderly Care	Elderly Care Institution	Launched operations in August 2025

• Total Floor Area: Approximately 117,893.06 square meters
• Total Registered Beds: 786
• Licensed Physicians and Assistant Physicians: 341

Lianchi Hospital’s business mainly focuses on two sectors: maternal-infant related services and orthopedic services [2]:

Indicator	2023	2024	First Three Quarters of 2025
Outpatient Visits (10,000 visits)	35.59	40.32	32.13
Inpatient Admissions	9,904	13,282	11,445
Orthopedic Surgical Procedures (cases)	3,655	4,189	4,180
Deliveries (cases)	3,304	5,055	3,758

• According to Frost & Sullivan data, based on the number of knee preservation surgeries performed by private hospitals in 2024, Zibo Lianchi Orthopedic Hospital ranks first in Shandong Province and third in China [2]
• Based on 2024 revenue, Chongqing Great Wall Orthopedic Hospital ranks first among private orthopedic specialty hospitals in Southwest China

• 2023 Annual Revenue: RMB 356 million (in RMB, the same below)
• 2024 Annual Revenue: RMB 418 million, a year-on-year increase of 17.4%
• First Three Quarters of 2024 Revenue: RMB 298 million
• First Three Quarters of 2025 Revenue: RMB 359 million, a year-on-year increase of 20.3%

• Gross Profit Margin: 32.9% in 2023 → 36.1% in 2024 → 35.6% in the first three quarters of 2025
• Net Profit: RMB 56.7 million in 2023 → RMB 67.6 million in 2024, a year-on-year increase of 19.2%
• Net Profit Margin: Approximately 15.4%-16.2%

1. Steady Revenue Growth
   : A year-on-year increase of 17.4% from 2023 to 2024, and a year-on-year increase of 20.3% in the first three quarters of 2025, showing strong growth
2. Gross Profit Margin Significantly Higher Than Industry Average
   : The 35.6% gross profit margin is much higher than the 18% level of general hospitals such as BenQ Hospital, reflecting the advantages of specialty hospitals
3. Sustained Net Profit Growth
   : Net profit increased from RMB 56.7 million to RMB 67.6 million, with a growth rate of 19.2%, showing steady improvement in profitability

The company’s revenue mainly comes from providing medical services, including [2]:

• Maternal-Infant Related Services
  : Obstetric services and other related services, gynecological and reproductive services, pediatric and child health services
• Orthopedic Services
  : Complex spinal, joint replacement, and minimally invasive orthopedic surgeries
• Other Medical Services
  : Services complementary to core maternal-infant related medical services and orthopedic services
• Non-Medical Services
  : Sales of health care products, provision of elderly care services, and provision of management consulting services

According to the prospectus, the proceeds from Lianchi Hospital’s Hong Kong IPO are intended to be used for the following purposes [2]:

1. Upgrade and Expand Existing Hospital Service Capabilities
   : Consolidate the company’s benchmark position in specialty fields
2. Business Expansion
   : Expand business through mergers, acquisitions or investments, and deepen the strategic layout of ‘the elderly and the young’
3. R&D and Technological Innovation
   : Establish a group research center, introduce advanced medical technologies and intelligent medical systems, and achieve dual improvement in treatment efficacy and operational efficiency
4. Working Capital and General Corporate Purposes

Lianchi Hospital focuses on the high-potential tracks of ‘the elderly and the young’ (maternal-infant and orthopedics), and has the following advantages compared with general hospitals:

• Higher gross profit margin (35.6% vs. approximately 18% for general hospitals)
• Stronger professional barriers and brand recognition
• Easier to achieve standardized replication and large-scale expansion

• Zibo Lianchi Orthopedic Hospital ranks first in Shandong Province and third in China in terms of knee preservation surgery volume among private hospitals
• Chongqing Great Wall Orthopedic Hospital ranks first in revenue among private orthopedic specialty hospitals in Southwest China
• Qingdao Lianchi Maternal and Infant Hospital is the first private hospital in Qingdao to receive international JCI accreditation

• Hefei Xinhai Obstetrics and Gynecology Hospital is a medical consortium unit of Anhui Provincial Children’s Hospital
• Zibo Lianchi Orthopedic Hospital is a standardized center unit of the Knee Preservation Alliance co-established with Beijing Jishuitan Hospital, and a spine surgery alliance unit of Shandong Provincial Hospital
• Cooperation with top public hospitals helps improve medical quality and brand influence

• Shandong Province and Chongqing Municipality rank among the top in China in terms of population aging, and demand for orthopedic diagnosis and treatment services continues to expand
• Acquired Chongqing Great Wall Orthopedic Hospital in 2025 to expand into the Southwest market
• Launched the elderly care institution Lianci Medical and Elderly Care in August 2025 to lay out the elderly care service track

• DRG/DIP payment reforms may further compress profit margins
• Changes in medical insurance policies may affect revenue structure and profitability
• Private hospitals may face policy uncertainties in terms of designated medical insurance, tax incentives, etc.

• The competitiveness of public hospitals in specialty fields continues to enhance
• Other private specialty hospitals may accelerate expansion, intensifying market competition
• Competition for medical talent may push up labor costs

• As a medical service enterprise, risks of medical disputes and patient complaints objectively exist
• Continuous attention to medical quality management and risk control is required

• Hospitals acquired in 2024-2025 (Xinhai Obstetrics and Gynecology Hospital, Chongqing Great Wall Orthopedic Hospital) require time for integration
• Cross-regional expansion may face management challenges

• The raised funds are used for expansion, upgrading and acquisitions, which may face the risk of lower-than-expected investment returns

Based on comparable company analysis, the valuation of Lianchi Hospital should consider the following factors:

Indicator	Lianchi Hospital	BenQ Hospital (Hong Kong Stock Exchange)	Industry Average
Business Model	Specialty Hospital	General Hospital	Mixed
Gross Profit Margin	35.6%	18.1%	Approximately 25%
PE (Expected)	To be determined	29.8 times (actual issue)	16.72 times
Growth	20%+	Negative Growth	Moderate

Considering Lianchi Hospital’s specialty focus strategy, high gross profit margin, and strong growth momentum, if estimated at a PE of 20-25 times, referring to the net profit of RMB 55.5 million in the first three quarters of 2025 (expected to be approximately RMB 74 million for the full year), the company’s valuation may be in the range of RMB 1.48-1.85 billion.

• Specialty Hospital Model Premium (Approximately 15-20%)
• Regional Leading Position Premium (Approximately 10%)
• Medical Consortium Resource Advantage Premium (Approximately 5-10%)
• Growth Premium (Approximately 10-15%)

• Integration Risk of Newly Acquired Hospitals (Approximately 5-10%)
• Policy Uncertainty (Approximately 10%)
• Market Scale Limitation (Approximately 5%)

1. Precise Track Selection
   : Focuses on high-potential specialty tracks of maternal-infant and orthopedics, which aligns with the specialty hospital model favored by the Hong Kong stock market
2. Steady Financial Performance
   : Both revenue and profit maintain double-digit growth, with gross profit margin significantly higher than the industry average
3. Regional Leading Position
   : Has established clear competitive advantages in Shandong and Southwest China
4. Clear Strategic Layout
   : Expands territory through acquisitions, and extends the ‘the elderly and the young’ strategy to the elderly care service track

1. DRG/DIP payment reforms may continue to affect profit margins
2. Integration of newly acquired hospitals has uncertainties
3. Competitive pressure from public hospitals persists
4. Medical dispute risks require continuous attention

As a specialty medical group expected to become the ‘first share of private hospitals in Shandong’, Lianchi Hospital has shown certain investment value in terms of business positioning, financial performance, and strategic layout. Compared with general hospitals such as BenQ Hospital, Lianchi Hospital’s specialty focus strategy is more in line with the current valuation logic of the Hong Kong stock market, with obvious advantages in gross profit margin. However, investors still need to pay attention to policy risks, integration risks, and competition risks, and evaluate investment decisions prudently.

It is recommended that investors focus on the following indicators:

• Detailed financial data and use of fundraising proceeds disclosed in the prospectus
• Subscription status of international placement and cornerstone investors
• Matching degree between final issue pricing and valuation
• Post-listing market performance and changes in investor sentiment

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[1] Four Attempts to List in Hong Kong, Plunged Nearly 50% on First Day: Why Did the High-Valuation Myth of BenQ Hospital Collapse?

[2] Lianchi Hospital Pursues Hong Kong IPO, Recording RMB 359 Million in Revenue in the First Three Quarters of 2025