Years of losses, thin profit margins leave 160 Health feeling down

After two earlier failures, the online healthcare platform’s IPO has been approved by the Hong Kong Stock Exchange

Key Takeaways:

• 160 Health has been approved to list in Hong Kong, despite bleeding red ink for the last three years, including a 15 million yuan loss in the first quarter of this year
• The company’s core medical product sales operated on razor-thin gross profit margins of only 1.4% last year and in the first quarter of 2025

By Lau Chi Hang

As Charles Dickens famously wrote in “A Tale of Two Cities,” “It was the best of times, it was the worst of times.” For Hong Kong’s IPO market, it’s most certainly the best of times right now, as companies riding a recent wave of market enthusiasm scramble to float shares in hopes of becoming the latest investor darlings – even if their financials look far from impressive.

One such company that fits that description is online healthcare platform operator 160 Health International Ltd. (2656.HK), whose story could demonstrate the rewards that await those who persevere. The company stumbled twice before with its Hong Kong listing application, before its latest attempt in June struck gold by passing its listing hearing this month.

Its latest listing document shows 160 Health plans to sell 33.6 million shares for up to HK$14.86 each, raising a total of about HK$500 million ($64 million). The public offering, consisting of 10% of the shares on offer, was oversubscribed by more than 500 times, according to local media reports, attesting to the listing’s popularity among retail investors.

160 Health has two main revenue streams. Its wholesale unit distributes healthcare products to institutional buyers such as regional drug distributors, medical providers and third-party pharmacy platforms; while it also operates a retail arm that sells directly to consumers. Its second major stream is its digitalized healthcare solutions, which integrates online and offline medical services to bridge healthcare users with providers and practitioners.

The company’s platform had 55.2 million registered users at the end of March, including 3.3 million monthly active users, and boasted more than 44,600 affiliated medical institutions covering more than 900,000 practitioners.

But several persistent fundamental issues lie beneath its impressive scale. A closer examination of the company’s prospectus exposes weaknesses across both its business model and also its financial health.

Ongoing losses

The company’s performance has been lackluster at best. Its revenue rose from 526 million yuan ($74 million) in 2022 to 629 million yuan in 2023, only to fall to 620 million yuan last year, suggesting plateauing growth. Its revenue was only 100 million yuan for the first three months of 2025, up slightly from 94 million yuan in the year-ago period.

The company posted a steady stream of red ink throughout the three-year period in the prospectus, with losses between 100 million and 110 million each year. Its net loss for this year’s first quarter narrowed by 59% year-on-year to 15.5 million yuan. That puts its cumulative losses for the period covered in the report at about 340 million yuan.

Adding to concerns, the company’s gross profit margins look problematic. While its overall gross margin has climbed from 22.5% in 2022 to 27% in the first quarter of 2025, a closer look reveals a significant imbalance. The company’s digital healthcare segment boasted an enviable 80.9% gross margin in the first quarter of this year, but contributed only 33% of overall revenue. Conversely, pharmaceutical and health product sales — representing the other 64.3% — saw their gross margin fall steadily from 4.1% in 2022 to just 1.4% in 2024, remaining at that same low level in the first quarter of this year.

The company’s debt has also been trending upward lately. After improving dramatically from 380 million yuan in 2022 to 37.75 million yuan in 2023, its net debt grew to 85.14 million yuan last year, and climbed further to 97.82 million yuan in the first quarter of this year. It attributed the increase mostly to borrowing to fund growth in its solutions business, as well as higher wages and benefit expenses stemming from increased headcount.

Persistent cash outflows

Operating cash flow is another major headache for 160 Health. The company has consistently bled cash over the last three years, reporting a cumulative cash outflow of about 176 million yuan over the period covered in the prospectus. Management explained that the outflow was the result of higher operating costs as it made significant investments to improve and expand its operational capabilities, technology and market penetration.

While acknowledging such financial metrics may not be ideal, the company emphasized it has a clear long-term development strategy and solid business foundation to achieve that. That includes its diversified revenue streams and expanded geographical presence covering 260 cities across China.

Management believes its metrics will improve as its investments lead to growing revenue and greater cost efficiency. To that end, it is focused on customer acquisition and retention, deepening user engagement and improving its technology and monetization capabilities. Concurrently, the company aims to bolster its operational efficiencies through workflow standardization, automation, leveraging data analytics for higher marketing cost-effectiveness, concentrating R&D on high-impact projects and streamlining administrative functions.

Near-term investors

While its goals are explicitly stated, a pivotal question remains in whether the company can realistically achieve such objectives. Left unsaid are things like projected timelines for reaching breakeven and when the company might finally become profitable.

For investors seeking exposure to the sector, other leading players arguably present less risky propositions. Some of those include JD Health (6618.HK), which trades at a price-to-earnings (P/E) ratio of 38 times, YSB (9885.HK) at 67 times, and Ping An Good Doctor (1833.HK) at an even higher 250 times. A key advantage for such highly valued companies lies in their profitability, established market positions, and extensive operational scale.

With so many negatives working against it, the apparent excitement around 160 Health could be coming from short-term tactical investors simply looking for new companies to trade in the recent IPO wave. But longer-term investors will probably hold back, at least for now, to wait for some better financials before buying into this company.

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