Tongce Medical is entering the ophthalmology business? 600 million related-party acquisition draws regulatory attention

A related acquisition with a premium rate exceeding 10 times has pushed Tongce Medical (600763) (SH600763), a leading dental healthcare chain company, into the spotlight. Recently, Tongce Medical disclosed that it plans to acquire, for 600 million yuan in cash, four optometry companies controlled by its controlling shareholder, Lü Jianming. Among the core targets, Hangzhou Cunji Eyeglasses Co., Ltd. (hereinafter referred to as Hangzhou Cunji Eyeglasses) has an appraised premium rate as high as 1,282.14%, triggering heightened attention from the capital market and regulators.

The Shanghai Stock Exchange subsequently sent Tongce Medical a regulatory work letter, requiring the company to explain the reasons why the transaction appraisal 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 Cunji Eyeglasses belongs to a light-asset operating model and that its business performance has been good in recent years. The company distributes profits every year. Because the net asset size as of the benchmark date is not high, the appraisal appreciation rate is relatively high for this deal. The acquisition pricing for the other three companies is also based on appraised values under the asset-based approach, objectively reflecting each target’s actual value, and there is no situation of transferring benefits to related parties.

Reasons for the relatively high premium rate

Tongce Medical is often referred to as the “dental Moutai.” It is a comprehensive modern dental healthcare group integrating clinical diagnosis and treatment, research and innovation, and medical education. As of June 30, 2025, it operates 89 medical institutions under its umbrella and has 4,452 professional medical personnel.

In recent years, due to factors including the procurement of dental implants and the cooling of consumer demand in the dental healthcare market, Tongce Medical’s performance has faced significant pressure. From 2022 to 2024, the company achieved revenue of 2.719 billion yuan, 2.847 billion yuan, and 2.874 billion yuan respectively, with only a slight growth rate. The 2025 third-quarter report shows that in the first three quarters of 2025, the company cumulatively achieved 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 entered 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 Ophthalmology Hospital Investment Management Co., Ltd. Tongce Medical emphasizes that the acquisition of 100% of the equity interests in four optometry companies, including Hangzhou Cunji Eyeglasses, is the implementation and results realization of its 2017 ophthalmology strategic layout.

According to the previously disclosed announcement on the acquisition of equity and related-party transactions, the four target companies Tongce Medical intends to acquire are mainly distributed in the eyeglass retail and optometry services sectors, forming a connection with the diagnosis and treatment business of traditional ophthalmology hospitals. From financial data, there is clear differentiation among the target assets. As the core asset, Hangzhou Cunji Eyeglasses mainly offers products including corneal reshaping lenses, defocus lenses, eyeglass frames, contact lenses, and ophthalmic products. In 2025, Hangzhou Cunji Eyeglasses achieved operating revenue of 153 million yuan and net profit of 55.5848 million yuan, and has already demonstrated relatively stable profitability. By contrast, Ningbo Guangji Optometry Technology Co., Ltd. (hereinafter referred to as the Ningbo company) and Xinchang Guangji Eyeglasses Co., Ltd. (hereinafter referred to as the Xinchang company) are smaller in scale: in 2025 their revenues were only 455.2 thousand yuan and 101.18 thousand yuan respectively, and both are in a loss position. Their net profits were -7.20 million yuan and -7.75 million yuan respectively. Hangzhou Guangji Optometry Technology Co., Ltd. (hereinafter referred to as the Hangzhou Guangji company) has not yet actually carried out business.

High premiums are one of the focus points of this transaction. The Shanghai Stock Exchange’s regulatory work letter questioned that Hangzhou Cunji Eyeglasses has net assets of 50.8779 million yuan, an income approach appraisal value of 703 million yuan, and an appraisal 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 required the listed company to analyze the reasons why its transaction appraisal premium rate is so high.

In response, Tongce Medical replied that Hangzhou Cunji Eyeglasses belongs to a light-asset operating model, and its business 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. Because the net asset size as of the benchmark date is not high, the appraisal appreciation rate for this deal is relatively high. Tongce Medical expects that in recent years, the sales of various types of eyeglasses at Hangzhou Cunji Eyeglasses will continue to rise, and that its main business revenue from 2026 to 2028 will reach 1.65 billion yuan, 1.77 billion yuan, and 1.85 billion yuan respectively.

Regarding the necessity and main considerations for this acquisition, Tongce Medical stated: on the one hand, the optometry services business is the core business of ophthalmology healthcare, and as a supplement to dental healthcare services, it enhances the company’s overall ability to withstand cyclical fluctuations. On the other hand, optometry services and dental healthcare services are highly aligned in terms of business attributes. By setting up optometry zones in existing dental hospital outlets, it enables staggered space utilization and team integration, significantly improving the efficiency of existing premises and human resources.

Strengthening the layout in the optometry services sector

In addition to the core profitable asset Hangzhou Cunji Eyeglasses, 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, apart from Hangzhou Cunji Eyeglasses, the other three companies’ business maturity and financial conditions are not ideal. Why include loss-making assets—even assets that have not been operated—together in the “package”? In its reply to the Shanghai Stock Exchange’s inquiry, Tongce Medical explained that this is mainly to secure regional strategic positioning and fundamentally resolve issues of competition among peers.

In its announcement, Tongce Medical stated that the Ningbo company and the Xinchang company are both controlled by the same actual controller as the listed company. They mainly engage in optometry business, and there is potential peer competition between them and the optometry business the listed company plans to develop. Incorporating them into the listed company’s system is an effective measure to fundamentally resolve peer competition issues, and it aligns with the regulatory guidance and the company governance requirements. Although the Hangzhou Guangji company has not actually operated, its business scope includes optometry-related businesses, and there is a potential peer competition relationship with the listed company; therefore, this acquisition can completely eliminate possible competitive risks in the future.

From the standpoint of regional layout and strategic positioning, the Ningbo company is located in Haishu District, Ningbo, and it is in the same building as the Ningbo ENT 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.

As for appraisal value, the announcement shows that both the Ningbo company and the Xinchang company used the asset-based approach for appraisal. The appraised value of the Ningbo company is 41.74% lower than its net assets; the appraised value of the Xinchang company is consistent with its net assets. Since the Hangzhou Guangji company has not actually carried out business, has registered capital of 0, and therefore its appraised value is 0.

Regarding the regulatory work letter’s question—“whether there is any situation of transferring benefits to the controlling shareholder and its related parties”—Tongce Medical replied that there is no situation of transferring benefits to the controlling shareholder or its related parties in the acquisition of Hangzhou Cunji Eyeglasses, and there is no situation that harms the lawful 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 and efficiently convert book cash into operating assets with stable cash flows. In addition, the acquisition pricing for the other three companies is also based on appraised values under the asset-based approach, objectively reflecting the actual value of each target, and there is no situation of transferring benefits to related parties.

(Editor: Zhang Yang HN080)

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