Tongce Medical's high-premium acquisition faces regulatory inquiry: Is Huachuang Securities' aggressive push at high levels suspicious?

Ask AI · When Huachuang Securities strongly recommends a rating, has it fully assessed potential risks?

Recently, Tongce Medical received a regulatory inquiry letter from the Shanghai Stock Exchange due to an announcement regarding a related-party acquisition with a high premium. Meanwhile, the company’s share price has continued to fall, with the stock dropping more than 18% since March.

Of particular note is that when the company’s share price was at a relatively high level, Huachuang Securities not only upgraded its rating, but also significantly raised its target price. Now that the share price has fallen and risks have become more exposed, whether the relevant research reports are objective and prudent, and whether risks have been sufficiently disclosed, have sparked widespread doubts in the market.

High-premium related-party acquisition draws regulatory inquiries; share price remains under pressure

Tongce Medical’s main business is dental healthcare services, and it is a leading company in China’s dental healthcare sector. On March 24, the company unveiled a related-party acquisition plan, proposing to acquire 4 optometry-related companies controlled by its actual controller, Lü Jianming, for a price of 600 million yuan, with the core target, Hangzhou Cunjing Eyeglasses, having an appraised premium rate as high as 1282.14%.

That same day, the Shanghai Stock Exchange promptly issued a regulatory inquiry letter, asking the company to explain the fairness of the transaction pricing, whether there is any situation of transferring benefits to related parties, the target assets’ ability to generate sustained profits, and risks related to customer dependence, among other core issues.

At the same time, Tongce Medical’s share price performance in recent times has not been satisfactory. Data shows that on February 25, the company’s closing price was 51.96 yuan. After that, the stock price showed a stepwise decline, with the cumulative drop for the month of March exceeding 16%. As of the close on April 3, the company’s share price closed at 40.99 yuan per share, representing a decline of 18.07% from the peak at the end of February.

Huachuang Securities gave a “Strong Buy” rating at a high level

Mao Bao Finance reviewed publicly available materials and found that Huachuang Securities issued a comprehensive in-depth research report on Tongce Medical on the evening of March 2. Huachuang Securities stated that, considering Tongce Medical’s brand strength has continued to strengthen in recent years and that it is in a critical stage of strategic transformation, its future earnings have a clear and relatively fast growth outlook. It upgraded its rating from “Recommended” in November 2025 to “Strong Buy,” with a target price of 67 yuan.

In addition, Huachuang Securities forecast Tongce Medical’s attributable net profit for 2025–2027 to be 5.27, 6.70, and 7.53 billion yuan, respectively. Year-on-year growth would be 5.1%, 27.1%, and 12.4%, respectively. Based on the current share price, the corresponding PE for 2025–2027 is 43, 34, and 30 times, respectively.

The CSRC’s 《Interim Provisions on the Issuance of Securities Research Reports》 clearly states that when securities companies and securities investment advisory institutions issue securities research reports, they shall comply with laws, administrative regulations, and these provisions; follow the principles of independence, objectivity, fairness, and prudence; effectively prevent conflicts of interest; treat the parties that are the subject of the reports fairly; prohibit the dissemination of false, untrue, or misleading information; and prohibit engaging in or participating in insider trading or activities to manipulate the securities market.

When giving a “Strong Buy” rating while the stock price is at a high level, is Huachuang Securities’ related research report compliant? Is there anything questionable?

Public information shows that the director of the research institute at Huachuang Securities is Dong Guangyang. In 2018, he joined Huachuang Securities from CITIC Securities and served as director of the research institute. In 2024, he was promoted to deputy general manager of Huachuang Securities, while still concurrently serving as director of the research institute.

（Article sequence number: 2040005241281318912/JW）

Disclaimer: This article does not constitute any investment advice to any person.
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