"Yamao" Tongce Medical is also entering the ophthalmology business? A 600 million yuan related-party acquisition has attracted regulatory attention, which responded that there is no benefit transfer.

Our Daily Reporter | Xu Lipbo | Our Daily Editor | Huang Sheng |

A related acquisition with a premium rate exceeding 10 times has put Tongce Medical (SH600763), a leading chain operator in dental care, in the spotlight. Recently, Tongce Medical disclosed its plan to acquire, for 600 million yuan in cash, four optometry companies controlled by the listed company’s actual controller, Lü Jianming. Among them, the core target, Hangzhou Cunjiyong Glasses Co., Ltd. (hereinafter referred to as Hangzhou Cunjiyong Glasses), has an assessed premium rate as high as 1,282.14%, drawing significant attention from the capital market and regulators.

Subsequently, the Shanghai Stock Exchange sent a regulatory work letter to Tongce Medical, requiring the company to explain the reasons why the transaction’s assessed premium rate is relatively high, and whether there is any situation of transferring benefits to the controlling shareholder and its related parties.

On the evening of April 1, Tongce Medical replied that Hangzhou Cunjiyong Glasses belongs to a light-asset operating model, and its performance has been good in recent years. The company will distribute profits every year. Because the net asset scale as of the benchmark date is not high, the appreciation rate in this assessment is relatively high. The purchase pricing for the other three companies is based on the appraised values under the asset-based approach, which objectively reflects the actual value of each target company, and there is no situation of transferring benefits to related parties.

Why the premium rate is high

Tongce Medical is often called the “tooth-hair” (dental cash cow). It is a comprehensive modern dental healthcare group integrating clinical diagnosis and treatment, research and innovation, and medical education. As of June 30, 2025, the company operates 89 medical institutions and has 4,452 professional medical personnel.

In recent years, due to factors such as the centralized procurement of dental implants and cooling consumption in the dental healthcare market, Tongce Medical’s performance has faced significant pressure. From 2022 to 2024, the company achieved operating revenue of 2.719 billion yuan, 2.847 billion yuan, and 2.874 billion yuan, respectively, with only a slight growth rate. The company’s 2025 third-quarter report shows that in the first three quarters of 2025, it cumulatively achieved operating revenue of 2.290 billion yuan, up 2.56% year over year; attributable net profit was 514 million yuan, up 3.16% year over year.

In fact, Tongce Medical has not suddenly expanded into the ophthalmology healthcare market. In 2017, based on its judgment of the development prospects of the ophthalmology healthcare market, as a strategic investor it took a stake in Zhejiang Tongce Eye Hospital Investment Management Co., Ltd. Tongce Medical emphasized that this acquisition of 100% equity interests in four optometry companies, including Hangzhou Cunjiyong Glasses, is the implementation and realization of the company’s ophthalmology strategic layout in 2017.

According to the previously disclosed announcement on the acquisition of equity interests and related-party transactions, the four target companies Tongce Medical intends to acquire are mainly distributed in the field of eyeglass retail and optometry services, forming a linkage with the diagnosis and treatment business of traditional ophthalmology hospitals. From financial data, the target assets are clearly differentiated: Hangzhou Cunjiyong Glasses, as the core asset, mainly offers products including corneal reshaping contact lenses, defocus lenses, eyeglass frames, contact lenses, ophthalmic supplies, and others. In 2025, Hangzhou Cunjiyong Glasses achieved operating revenue of 153 million yuan and net profit of 55.5848 million yuan, and has already demonstrated a relatively stable profitability capability. Meanwhile, Ningbo Guangji Optometry Technology Co., Ltd. (hereinafter referred to as the Ningbo company) and Xinchang Guangji Glasses Co., Ltd. (hereinafter referred to as the Xinchang company) are smaller in scale. In 2025, their revenues were only 455,200 yuan and 1,011,800 yuan, respectively, and both were in a loss position, with net profits of -720,000 yuan and -775,000 yuan, respectively. Hangzhou Guangji Optometry Technology Co., Ltd. (hereinafter referred to as the Hangzhou Guangji company) has not yet actually carried out business.

High premium is one of the key focuses of this transaction. The regulatory work letter from the Shanghai Stock Exchange questioned that Hangzhou Cunjiyong Glasses has net assets of 50.8779 million yuan, an appraised value under the income approach of 703 million yuan, and an assessed premium rate of 1,282.14%. Based on the 600 million yuan transaction price for this deal, the overall premium rate still stands at 1,066.30%. In response, the regulatory work letter requires the listed company to analyze the reasons why the transaction’s assessed premium rate is relatively high.

In response, Tongce Medical stated that Hangzhou Cunjiyong Glasses operates under a light-asset model, and its performance has been good in recent years. The company distributes profits every year. From 2021 to 2024, it paid dividends of 39.38 million yuan, 51.95 million yuan, 61.56 million yuan, and 54.09 million yuan, respectively. Since the net asset scale as of the benchmark date is not high, the appreciation rate in this assessment is relatively high. Tongce Medical expects that in recent years, various types of eyeglasses sales at Hangzhou Cunjiyong Glasses will continue to rise, and that its main business revenue from 2026 to 2028 will reach 165 million yuan, 177 million yuan, and 185 million yuan, respectively.

Regarding the necessity of the acquisition and the main considerations, Tongce Medical said: on the one hand, optometry services are a core business of ophthalmology healthcare; as a supplement to dental healthcare services, they enhance the company’s ability to withstand cyclical fluctuations. On the other hand, optometry and dental healthcare services are highly aligned in terms of business attributes. By setting up optometry专区 (optometry sections) in existing dental hospital outlets, the company can reuse resources in time-divided manner and integrate teams, significantly improving the utilization efficiency of existing premises and human resources.

Strengthening the layout in the optometry services sector

In addition to the core profitable asset, Hangzhou Cunjiyong Glasses, this 600 million yuan acquisition package also includes three other companies: the Ningbo company, the Xinchang company, and the Hangzhou Guangji company. As mentioned above, aside from Hangzhou Cunjiyong Glasses, the other three companies do not have ideal levels of business maturity and financial condition. Why bring the loss-making, or even non-operating, assets into the deal as well? Tongce Medical explained in its reply to the Shanghai Stock Exchange’s inquiry that this is mainly to secure a strategic position in the region, and fundamentally resolve the issue of competition with peers.

In its announcement, Tongce Medical stated that the Ningbo company and the Xinchang company are both under the control of the actual controller of the listed company. They mainly engage in optometry services, and there is potential peer competition between them and the optometry business the listed company intends to develop. Incorporating them into the listed company’s system through this acquisition is an effective measure to fundamentally resolve the peer competition issue, and it aligns with the regulatory direction and the requirements of corporate governance. Although the Hangzhou Guangji company has not actually operated, its business scope includes optometry-related services, and there is a potential peer competition relationship with the listed company. This acquisition can completely eliminate future possible competition risks.

From the perspective of regional layout and strategic positioning, the Ningbo company is located in Haishu District, Ningbo, and is in the same building as Ningbo Ear, Nose and Throat Hospital, which gives it inherent regional synergy value. The Xinchang company is in the same building as the Xinchang Guangji Ophthalmology Hospital, providing regional supporting value.

In terms of assessed value, the announcement shows that both the Ningbo company and the Xinchang company are appraised using the asset-based approach. The assessed value of the Ningbo company decreases by 41.74% compared with its net assets; the assessed value of the Xinchang company is consistent with its net assets. Since the Hangzhou Guangji company has not actually carried out business and its registered capital is 0, its assessed value is 0.

Regarding the regulatory work letter’s question about whether there is any situation of transferring benefits to the controlling shareholder and its related parties, Tongce Medical replied that there is no such situation in the acquisition of Hangzhou Cunjiyong Glasses, and there is also no situation that harms the legitimate rights and interests of the listed company and its minority shareholders. On the contrary, through this acquisition, the listed company will further strengthen its layout in the optometry services sector, efficiently converting book cash into operating assets with stable cash flows. In addition, the purchase pricing for the other three companies is also based on asset-based approach appraisal values, which objectively reflect the actual value of each target company, and there is no situation of transferring benefits to related parties.

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