JPMorgan on Gushengtang: 1H26 Results Show Operational Resilience; Next Tests Are Consumer Healthcare Scale-Up and Overseas Integration

Gushengtang (2273.HK) posted 1H26 revenue of RMB1,653 million, up 10.6% year-on-year and slightly below JPMorgan's expectations, yet demonstrating resilience amid soft consumption. The blended average ticket fell 3.9% to RMB523, but the dilution is structural rather than demand-driven: low-ticket consumer healthcare revenue grew over 20% and lifted its share of outpatient volume by 5.1 percentage points, while serious-medicine tickets still rose 2.2-2.4%. Adjusted net profit grew 9.2% and adjusted EBITDA 19.1%, despite gross margin slipping 0.2ppt and the selling expense ratio rising from 11.8% to 12.5%. Offline patient visits climbed 17.5%, with 12.9ppt from mature stores. Looking ahead, the company will integrate 18 stores with signed acquisition agreements in 2H26, supporting management's ~15% FY26 revenue growth target, backed by roughly RMB1.2 billion cash, an RMB1 billion M&A fund and a ~2% 10-year acquisition loan. Overseas expansion accelerates: Singapore's 26 stores grew revenue 14-fold to RMB32 million; four Hong Kong stores opened on August 12; and Malaysia's largest 10-store chain was acquired. Guidance sees RMB100 million overseas revenue in FY26 versus a RMB2 billion total-revenue goal for 2030, with the US, Europe and Japan targeted from 2027. Shareholder returns include a HK$1.15 interim dividend and 2H26 buybacks of at least ~HK$360 million; JPMorgan's HK$38 target price runs to December 2027.