After a cumulative share price drop of over 80%, compounded by the challenge of lock-up expiry, can TONGSHIFU (00664)'s "heavy-asset" direct-operation gamble turn around?

Title context: After a cumulative share price drop of over 80%, compounded by the challenge of lock-up expiry, can TONGSHIFU (00664)'s "heavy-asset" direct-operation gamble turn around? Text: After delivering a shocking interim resultits first since listingwith net profit plunging 95.8%, TONGSHIFU (00664), dubbed the "POP MART for middle-aged people," saw its share price plummet rapidly, with cumulative losses exceeding 80%, staging a breathtaking "ankle-level slash." But even with such dismal performance since listing, TONGSHIFU's negative news has not ceased. It has been observed that on October 1, TONGSHIFU will officially usher in the expiry of its lock-up shares. As a cornerstone investor, CCB International spent HK$30 million to subscribe to 500,000 shares of TONGSHIFU. Although the current market value of these shares has shrunk to HK$6 million, if CCB International "ruthlessly cuts losses," it will inevitably deal a significant blow to TONGSHIFU's share price. TONGSHIFU's current daily turnover is only tens of thousands to a few hundred thousand. On the two trading days of August 31 and September 1, when the share price fell 7.36% and 5.48% respectively, the corresponding turnover was only HK$480,000 and HK$100,000, which is enough to show the fragility of its share price's carrying capacity. Once the HK$6 million worth of stock begins to be sold off, liquidity risk could erupt at any moment. Inflated Pricing Suffers Market's "Vote with Their Feet," Some Early Shareholders Already Deep in Unrealized Losses The most core reason for TONGSHIFU's dismal share price performance since listing is that the company's excessively high pricing led to a severe mismatch between fundamentals and IPO valuation. Data shows that from 2022 to 2024, TONGSHIFU's revenue was RMB 503 million, RMB 506 million, and RMB 571 million, respectively, steadily progressing; but the adjusted net profit for the same periods was RMB 56.938 million, RMB 44.131 million, and RMB 78.982 million, respectively. Although the overall trend was upward, the fluctuations were obvious. In 2025, TONGSHIFU's revenue was RMB 617 million, a year-on-year increase of 8.06%, and net profit was RMB 47.838 million. Even after adding back the RMB 20.22 million in listing expenses during the reporting period, the adjusted net profit was only RMB 68.058 million, a year-on-year decline of 13.83%. But it is precisely this performance, with obvious fluctuations on the profit side, that was given an absurd valuation at the time of listing. Based on the issue price of HK$60 per share, TONGSHIFU's IPO valuation was approximately HK$3.864 billion. Even based on the adjusted net profit of HK$68.058 million in 2025, the static PE corresponding to this IPO valuation is as high as nearly 50 times. For comparison, well-known consumer stocks in the Hong Kong stock market with fundamental support generally have valuations of 10-20 times PE, while TONGSHIFU's pricing is 2.5-5 times this valuation benchmark, and the fundamentals with fluctuations on the profit side once again highlight the inflated nature of this valuation level. In fact, such an inflated valuation is not favored by institutions, which is confirmed in multiple dimensions. First is the sluggishness of the international placement. Data shows that TONGSHIFU's international placement was only about 1.56 times oversubscribed, at a relatively low level of institutional subscription willingness amid the hot new stock market conditions in that quarter. Moreover, among the 43 placees in the international placement, the top five placees accounted for 47.07% of the shares, with the largest placee accounting for 20.84%, indicating that the chips were somewhat concentrated in the hands of a few placees. Second, TONGSHIFU only introduced one cornerstone investor, CCB International, with a subscription amount of only HK$30 million, accounting for only about 6.33% of the issuance scale. This ratio is also at the bottom among new stock companies that introduced cornerstone investors, indicating weak willingness on the institutional side to "backstop." From the perspective of chip distribution, TONGSHIFU's public offering shares accounted for only 15%, while international placement shares accounted for as high as 85%. Most of the chips were not in the hands of retail investors. Such a chip distribution should in theory help stabilize the share price and avoid disorderly selling. However, due to the inflated pricing and the relatively concentrated international placement chips, institutions rushed to stop losses, leading to a stampede in the share price. TONGSHIFU closed down 30% in the dark pool, and on the first day of listing, the final decline was close to 50%. The absurd trend of being "halved" upon listing made TONGSHIFU particularly out of place in the hot new stock market. This obvious contrast between the cold share price trend and the hot market sentiment caused funds to accelerate their flight from TONGSHIFU, which had poor fundamentals, leading to a continuous slow decline in the share price. The excessively high IPO pricing to some extent reflected TONGSHIFU's dual demands at the time: it wanted to raise more funds against the backdrop of fundamental pressure, and it also tried to reserve ample "safety cushion" for the subsequent exit of early shareholders. However, things went contrary to expectations. The inflated valuation was voted down by the market, and it was halved on the first day of listing. The emotional release of funds continued to push the share price downward, which instead blocked the exit channel for most early shareholders. As of the close on September 17, TONGSHIFU's share price was only HK$12.49. Looking back at its pre-IPO equity structure, there were as many as 15 professional investor shareholders, including well-known capital and state-owned assets such as Shunwei, Tianjin Jinmi, and Beijing Guangxin. Now, apart from a very few shareholders such as Shunwei and Tianjin Jinmi, which entered at a low cost of RMB 6.93 in 2017 and still have unrealized gains, the cost prices of the remaining shareholders (such as Guozhong Fund and CCTV Fund, whose capital increase cost in 2021 reached RMB 45.86) are generally far higher than the current market price. These capitals spent years, only to end up deep in the quagmire of unrealized losses. Offline Directly Operated Stores Increased by 55, Dragging Down Profit Release; Single-Store Model Success Becomes Key to Winning the Risky Move The interim result for the first half of 2026, with net profit plunging 95.8%, undoubtedly smashed TONGSHIFU's share price to a historical low and became the direct driver pushing the cumulative decline past the 80% mark. But beneath this "shocking" performance, it is not all despairthe new variables bred within are becoming the hope for the company's share price to survive at freezing point. For the early shareholders deeply trapped, this faint light of "hope" is even more of a "life-saving straw" determining whether they can exit with dignity. According to the financial report, TONGSHIFU achieved revenue of approximately RMB 342 million in the first half of 2026, a year-on-year increase of 10.79%, continuing double-digit steady growth on the revenue side. But breaking down the product matrix, the growth engine is almost entirely driven by copper cultural and creative products alonerevenue from this category increased 12.31% year-on-year to RMB 328 million, and its share of total revenue further climbed to 96.2%, making the trend of business structure tilting toward a single category increasingly obvious. In comparison, revenue from plastic figures and trendy toys and silver cultural and creative products both declined. Although gold cultural and creative products remained stable, their volume is still small, and the company's diversification layout has not yet formed a scale effect. From the channel side, the continued expansion of revenue mainly benefited from the rapid rollout of the offline directly operated network and the volume growth of the agency sales business. As of June 30, 2026, the company had a total of 65 directly operated stores, a net increase of 55 compared with 10 in the same period last year, driving revenue from offline retail stores to surge 246.64% year-on-year to RMB 50.506 million. At the same time, TONGSHIFU is actively building a diversified sales ecosystem: on the one hand, it has partnered with high-end supermarkets such as OLE, Sam's, and Pang Dong Lai; on the other hand, it has developed co-branded products with cultural tourism IPs such as Wudang Mountain, and reached sales cooperation with platforms such as Bilibili, Wanwei Cat Animation, and CHINA LIT. These multi-pronged efforts pushed agency sales revenue up 55.79% year-on-year to RMB 22.425 million. While revenue grew by double digits, the key reason TONGSHIFU's net profit plunged 95.8% is that the company's rapid expansion of offline directly operated stores (a net increase of 55 year-on-year during the reporting period) led to a substantial increase in fixed costs such as rent and labor. Revenue during the cultivation period of new stores has not yet been fully released, continuously suppressing profit performance in the short term. Judging from past channel revenue performance, TONGSHIFU's revenue mainly came from online. In the first half of 2025, online channel revenue accounted for as much as 80.42% of the company's total revenue. After raising funds from listing, it accelerated the aggressive expansion of offline directly operated stores, increasing from 10 in the same period to 65 in just the first half of the year. This aggressive approach of "killing profit in exchange for scale" is essentially a high-stakes bet using short-term financial performance to buy long-term channel barriers. From the perspective of strategic intent, management is clearly trying to use offline experience to solve the conversion problem of "low-frequency, high-ticket" products such as copper ornamentsrelying purely on online images and text makes it very difficult for consumers to pay for a copper statue costing over a thousand yuan, while the physical touch, craftsmanship display, and immersive atmosphere provided by offline stores can indeed effectively build brand trust and improve conversion rates. At the same time, under the passive situation of a continuously sluggish share price, TONGSHIFU's rapid rollout of an offline network is also telling the capital market a new story of a "new retail cultural and creative group," attempting to use store opening speed to maintain market attention. However, the financial cost of this expansion is extremely brutal. Rent, decoration, staff wages, and sample display for newly opened stores are all upfront costs, while new store sales require months or even longer to ramp up. This has caused selling expenses to surge by more than 70% year-on-year, directly "blowing up" the income statement. Although offline retail revenue on the surface surged 246.64% to RMB 50.506 million, spread across the 55 new stores, the average monthly revenue per store is only about RMB 128,000. After bearing the high rents of core business districts in first- and second-tier cities, this sales efficiency per square meter is almost impossible to cover costs. The mismatch between upfront expenses and lagging revenue is precisely the underlying logic of this "shocking" interim report. But the real risk of this short-term explosive rollout of offline stores lies in pushing the company onto an extremely dangerous balance beamwithin the next one to two years, the risk of store closures hitting profits is far greater than the certainty of accelerated performance release. First, the total market for the copper cultural and creative track in which TONGSHIFU operates is only RMB 1.6 billion, and the company's market share has already reached 35%. This means the room for densifying offline stores is very limited. If the 65 stores are distributed in core business districts of first- and second-tier cities, they are basically close to the upper limit of effective customer group coverage. Continued expansion will only lead to internal friction of "fighting itself." Second, unlike POP MART's model of attracting traffic through blind boxes, which are high-frequency, low-ticket, and strongly repeat-purchase products, TONGSHIFU relies on copper ornaments for 96.2% of its revenue, a typical "one-shot deal." Stores lacking support from high-frequency products will find it difficult to achieve high natural traffic and repurchase rates. Once the consumption environment fluctuates, such non-essential consumption will be the first to bear the brunt. More critically, managing the leap from 10 stores to 65 stores is a qualitative change in management dimensions. Loss of control in any linksite selection, inventory, training, or after-saleswill lead to single-store losses, and the current state of "revenue growth without profit growth" precisely shows that the management team has not yet made this model work. Once some stores fail to achieve break-even within 6 to 12 months, the company will inevitably close inefficient stores to stop the bleeding, and the decoration impairment, penalties, and severance costs brought by closures will create a second profit shock. At that time, the "pain of store closures" will once again severely damage the already fragile share price. Therefore, the only hope for TONGSHIFU's aggressive offline expansion strategy lies in whether the single-store model can quickly be made to work, and whether gold cultural and creative products or plastic trendy toys can truly take off and break the single dependence on copper. But from the current perspective, both prerequisites are far off, and the time left for TONGSHIFU is already limited. Whether early shareholders can exit with dignity depends on this risky move.