Losses exceed 1 billion! Tongxin Medical races for IPO: The commercialization dilemma of domestic artificial hearts

Over eight years, Guoquan grew from a small community shop in Zhengzhou into a Hong Kong-listed giant with tens of thousands of stores, once a legend in community ingredient retail. But now, the capital market has voted with its feet, and the myth faces severe tests.

In less than four months, Guoquan's stock price fell from a high of 4.75 HKD to a low of 1.65 HKD, with its market value shrinking from 13 billion HKD to around 5.5 billion HKD, nearly halving. Strikingly, this crash occurred while performance metrics continued to rise. In 2025, the company's revenue and net profit surged significantly, and Q1 2026 saw continued high growth in both revenue and profit. Despite bright financials, the stock price kept collapsing, hiding deep-seated risks accumulated during rapid expansion.

The trigger for this downturn was major shareholder 减持 (reduction of holdings). In April this year, affiliated entities sold large blocks of shares through block trades, cashing out nearly 473 million HKD in one go. Upon news release, the stock price plummeted for two consecutive days, entering a long downward channel. The market speculates that the controlling shareholder used the cash-out funds to invest in other sectors such as liquor, food parks, and cold chain logistics. The share reduction is just the beginning; hidden cash flow risks in the financial reports are the core reason for capital flight.

Data shows that while Guoquan's profits grew significantly in 2025, its book cash shrank drastically. Accounts receivable surged, and the collection period nearly doubled. For an ingredient retail enterprise relying on high turnover, slowing collections is a dangerous signal, indirectly reflecting the brand pushing inventory onto franchisees, causing a disconnect between book profits and actual cash flow. Additionally, operating cash flow turned negative in the first half of last year, yet the company still made large dividend payouts, further exacerbating financial pressure.

Meanwhile, food safety issues arising from the scale of tens of thousands of stores continue to ferment. Most complaints focus on food quality problems, and when disputes arise, Guoquan often shifts responsibility to franchise stores. This exposes a core flaw in the model: nearly all stores are franchises, with only 12 self-operated ones. The company mainly makes money by selling ingredients to franchisees, with only about 20% of products self-produced. Most goods are externally sourced, making comprehensive quality control difficult to implement. The company's annual report even proactively lists quality control failure as a major risk.

Guoquan continues to push aggressive store expansion plans, launching various new store formats, aiming for 14,500 stores, and even suggesting potential expansion to 20,000 in the future. However, as new stores open continuously, closure rates remain high. Many new stores divert customer traffic, leaving many franchisee stores with meager revenues that barely cover rent and labor costs. Losses from low-price traffic-driving strategies are borne by the stores, putting continuous pressure on franchisee profitability.

In summary, Guoquan's current predicament is the concentrated outbreak of long-term side effects from scale expansion. Relying on the franchise model to rapidly expand to tens of thousands of stores and capture market share, it failed to simultaneously solve key issues such as cash flow quality, quality control management, and balancing franchisee returns.

The capital market looks not at past performance, but at long-term sustainable profit expectations. The question Guoquan truly needs to answer is simple: expansion cannot just pursue store numbers. Will it become a stable and sustainable community retail platform in the future, or merely a supply chain intermediary relying on franchisee blood transfusions? This answer will determine whether it can emerge from this crisis.