The current global digital economy is developing rapidly, and all industries are experiencing profound digitalization changes. As a unique national industry in China, the traditional Chinese medicine industry faces many challenges in the modernization process, such as low production efficiency, difficulty in quality control, and fierce market competition. This study uses factor analysis to construct a profitability evaluation system for the traditional Chinese medicine industry, and analyzes the current situation and development potential of the industry’s profitability by establishing a digital twin technology-driven profitability improvement strategy model. The study selected 10 key financial indicators, used KMO and Bartlett’s test to determine the applicability of the sample, and extracted three principal factors for analysis. The results showed that the KMO statistic was 0.613, the Bartlett value was 668.651, the cumulative variance contribution rate amounted to 75.903%, and the first common factor variance contribution rate was 35.99%. The analysis found that the profitability factor of traditional Chinese medicine industry experienced significant fluctuations during 2018-2023, decreasing from the highest value of 32.8 to the lowest value of 5.8.The study shows that digital twin technology can effectively improve the profitability of traditional Chinese medicine industry through the three dimensions of Internet of everything, data integration and cloud platform construction, which provides a scientific theoretical guidance and practical path for the digital transformation of the industry.
