The Hong Kong Stock Exchange (HKEx) recently disclosed that the Ruier Group submitted the form to the main board of the HKEx, with Morgan Stanley and UBS as co-sponsors.

According to public data, the Ruier Group established its first oral clinic in Beijing in 1999. At present, it has Ruier Dentistry, which locates high-end oral medical services, and Ruitai Dentistry, which locates public oral medical services. According to the prospectus, the company has served about 7.4 million patients in the past 10 years. The dental services provided include general dentistry, orthodontics and implants.

Frost Sullivan data show that according to the statistics of total income in 2020, riel Group is the largest service provider in China's high-end private oral medical service market, accounting for 24.1% of the high-end private oral medical service market share. And it is the third largest oral medical service provider in China's private oral medical service market.

According to the prospectus, Reel Group's revenue from fiscal year 2019 to fiscal year 2021 and the six months ended September 30, 2021 was about 1.08 billion yuan, 1.1 billion yuan, 1.515 billion yuan and 841 million yuan, respectively. Over the same period, the losses during the period were about $304 million, $326 million, $597 million and $464 million respectively.
The explanation for the continuing loss is that the cost of sales remains high.

From fiscal year 2019 to fiscal year 2021 and the six months ended September 30, 2021, the cost of sales of Ruier Group was 917 million yuan, 988 million yuan, 1.151 billion yuan and 654 million yuan respectively, accounting for 84.8%, 89.9%, 75.9% and 77.7% of total revenue, respectively. According to the breakdown, the most important part of the cost of sales is the expenditure on employee benefits, which accounts for more than 50%, which is 463 million yuan, 502 million yuan, 585 million yuan and 352 million yuan respectively.

As a private dental hospital, compared with public hospitals, the biggest competitive advantage of Ruier Group in recruiting professional doctors is the high salary. This part of the cost cannot be offset by the expansion or refinement of the business, so the real group also made it clear in its prospectus that due to the shortage of dentists, the company has been and is expected to continue to provide more competitive remuneration to dentists.

In order to maintain the doctor community, the riel group costs a lot of money, and the company's gross profit margin has been low. In fiscal year 2019, fiscal year 2020 and fiscal year 2021, the gross profit margin of the riel group was 15.2%, 10.1% and 24.1%, respectively. For the six months ended September 30, 2021, the gross profit margin was 22.3%.

Judging from the financing experience of Riel Group, the capital market is very optimistic about it. Its investors include QiMing Venture Partners, KPCB Kleiner Perkins Caufield & Byers China, Perth Capital, Goldman Sachs Group Group, Hillhouse Capital, Temasek and other star investment institutions.

As of September 30, 2021, Reel Group operates 111 hospitals and clinics in 15 major first-and second-tier cities in China, providing medium-and high-end oral care services, and has 882 experienced dentists, according to the prospectus.

From the perspective of market volume, according to Frost Sullivan report, the market size of private oral medical services is expected to reach 241.4 billion yuan in 2025. By 2020, the market size of the high-end private oral medical service market is only 2.62 billion yuan, and it is expected to reach 7.49 billion yuan by 2025, with an annual compound growth rate of 19.7%.

For future development, real Group said in its prospectus that the net funds raised by IPO will mainly be used for business expansion, the opening of new real and Ruitai hospitals and clinics in existing cities, the construction and optimization of information technology infrastructure, and strategic mergers and acquisitions that will have a synergistic effect with the platform to expand to new areas with large populations, relatively high demand for oral care services and relatively low penetration of other participants.

It is worth noting that in 2021, three companies submitted prospectuses on the Hong Kong Stock Exchange, namely, Reel Group, Dental Medical Group and China Dental Medical Group.

Compared with developed countries, the penetration rate of oral medical service market in China is still relatively low and scattered. With the continuous expansion of the oral medical service market, oral medical service providers continue to compete for market share. Listing financing will help private dental care to obtain funds and gain advantages in the fierce market competition.