2021.05.14 CoStone Capital Views:
The CoStone Capital portfolio Quanyi Pharmacy Chain, aka PharmPlus (全亿健康) has been merged by Kohlberg Kravis Roberts & Co. on 13th May, 2021. This billion-dollar transaction makes it one of the largest pharmacy M&A deals in recent years.
Quanyi Health was initiated by CoStone Capital with senior pharmacy chain veterans in 2016, and expanded from nothing to 2,000 branches and turnover of CNY6 billion (USD931.8 million) in its first year and a half. The Suzhou-based company has been acquiring pharmaceutical chains, including Jiangsu Hengtai and Wenzhou Yizheng Pharmacy since its inception.
Quanyi Health now has more than 2,500 pharmacies and ranks the top 10 pharmacy chain in China.
Mrs. Chen Shuyan, Director of CoStone Capital and the vice president of Quanyi Health, said the company is in good shape and has plowed into the first tier of the industry. CoStone is optimistic about the prospects of the pharmaceutical distribution industry with the market sizing reached to 2.3 trillion RMB, Mrs. Chen added.
Mr. Lin Ling, vice chairman of CoStone Capital and chairman of Quanyi Health remarks that the trend of increasing industry concentration in the next decade will not change. CoStone Capital saw this trend in 2016 and started to integrate the pharmacy chain industry based on "concentrated investment and focused services" concept.
“At that time, the trend of industry consolidation was not as clear as it is now, and there were no investors that dared to spend capital on large transactions in this industry, CoStone was the first one to take the lead.”
Now, the "Quanyi model" created by CoStone has been fully validated - after the acquisition and took over the operation, the turnover and profitability have been significantly improved, and achieved the goal of a double growth in three years. In addition to the acquisitions, Quanyi Health has also accelerated the speed of opening new stores in the past two years, which has formed a great self-loop.
Rewriting by Sun Junyang; Editing by Li Yunzhen.
Over the past year, the bull market returned, with technology leading the way.
As I said back in October 2024, the rally that began on September 24 was not merely a rebound, but a reversal. Since then, China's capital markets have undergone a broad revaluation, moving from undervaluation toward fair value.
The Shanghai Composite Index reached its highest level in a decade. The "Yi-Zhong-Tian" trio—Eoptolink, Zhongji Innolight and TFC Communication, three prominent Chinese optical communications stocks—saw their share prices multiply severalfold in a single year. Cambricon's market capitalization briefly exceeded RMB 600 billion. Elsewhere in the technology sector, triple-digit price-to-earnings ratios and valuations exceeding RMB 10 billion became commonplace.
Some investors were greedy; others, fearful. Still others asked me: Are technology stocks in a valuation bubble?
My answer is that what we are witnessing is the hunger and anxiety of an era, reflected in the capital markets. Once you understand this, the current fervor for technology investing is no longer difficult to explain.
Investment has nothing to do with macroeconomics, but everything to do with geopolitics.
China-US relations will shape the investment landscape for decades to come. Geopolitics has played a major role in shaping the hunger and anxiety of our times, fundamentally reshaping the way we invest.
What, then, lies at the heart of China's hunger and anxiety?
The Fourth Industrial Revolution is already underway, yet China has not fully overcome the technological shortcomings left by the Third. There is no time to lose.
This is why some people wonder: Why do Chinese computing chip companies command such high valuations when their technologies still lag so far behind NVIDIA's? Why does NVIDIA trade at just 50 times earnings, while a company hailed as "China's answer to NVIDIA" commands a multiple of 300?
To me, this gets the logic exactly backward.
It is precisely because these companies cannot catch up with NVIDIA in the near term that they command a higher strategic premium. The wider the technological gap, the greater the strategic value.
The further something lies beyond our reach, the stronger our hunger. The harder it is to catch up, the deeper our anxiety. If China were to achieve a complete breakthrough in computing chips one day, valuations might actually come down.
Where can one find China's most spectacular natural landscapes?
Much of the answer, I believe, lies in and around the Hengduan Mountains: the Meili Snow Mountains, Jade Dragon Snow Mountain, Mount Gongga, Mount Siguniang, Jiuzhaigou, and many others. Vast differences in elevation and deep fault lines have given rise to landscapes of extraordinary grandeur.
Hard-tech investing follows a similar logic.
Technological gaps, discontinuities in capabilities, and missing links in industrial systems: a leap in difficulty brings a leap in valuation, and a successful breakthrough can, in turn, bring a leap in returns.
This logic extends well beyond computing chips. It is equally evident in memory semiconductors, commercial spaceflight, and other sectors where China still faces substantial technological gaps with other countries.
It was precisely this conviction that led CoStone Capital, starting in 2016, to decisively focus its investments on three areas: hard tech, emerging industries, and life sciences and healthcare. In this context, "hard tech" refers specifically to important industries in which China faces a technological gap with the United States.
Thanks to this forward-looking strategy, CoStone Capital established an early presence across the full value chains of key sectors, including semiconductors, artificial intelligence, and robotics.
Looking ahead, the frontiers of technological progress and industrial upgrading are boundless. Nor can the gaps in hard technology be closed overnight. The twin windows of opportunity presented by technological innovation and the development of homegrown alternatives to foreign technologies have only just begun to open.
The road ahead is long, but the future holds immense promise.
As an investment firm, CoStone Capital will continue to invest where the hunger and anxiety of each era run deepest, move forward with the tensions that shape our times, and extend our reach toward the most challenging—and most important—frontiers.
Spring 2026