The ancients “only change comes out of it; nothing changes.” This means that the only way to development is change.

Although the epidemic has been normalized, the road to recovery in the film and television industry is full of unknowns. How to get through the winter in the entertainment industry has become the most realistic problem facing enterprises in the industry today. Huayi Tencent Entertainment, the leader in the film and television industry, chose to enter the Internet medical circuit as the direction of transformation.

So why did the company choose a cross-border strategic layout at this time? What's the underlying logic? Can Nirvana Rebirth be staged? 

 01

Accelerate the pace of transformation and target the $4 trillion gold race

First, the external environment is uncertain, and the company urgently needs strategic transformation and development.

Yuan Haibo, CEO of Huayi Tencent Entertainment, pointed out, “Although some film and television streaming platforms have brought new ways to the industry, film production is still very difficult due to the impact of the pandemic. The prospects for the development of the company's main entertainment media business are also unclear, so seeking continuous development of the business has become a top priority for management.”

Second, the Internet medical circuit is highly certain, and the $4 trillion gold race is taking off.

Compared to other fields, Internet healthcare benefits from the policy dividend period.For example, the “14th Five-Year Plan” issued by the State Council proposed,”Accelerate the development of digital health services.Accelerate the improvement of databases such as electronic health files and electronic prescriptions, and promote the joint construction and sharing of medical data. Promote the digital and intelligent transformation of medical institutions, accelerate the construction of smart hospitals, and promote telemedicine. Precisely connect with and meet the needs of many levels, diversified, and personalized medical and health services of the group, and develop new forms of remote, customized, and intelligent digital health services,Improve the level of Internet+ healthcare services.”

Judging from the size of the industry, China's Internet healthcare market is entering a period of gold explosion.According to Frost&Sullivan data, using the size of the digital health market as a statistical perspective, it is expected to grow from RMB 314 billion in 2020 to RMB 4223 billion in 2030, accounting for 4.30% of total healthcare expenditure in 2020 to 24% in 2030.

In response, Yuan Haibo, CEO of Huayi Tencent Entertainment, said, “The government has promoted a series of medical and pharmaceutical reforms combined with the outbreak of the epidemic. More and more behaviors and scenarios in the entire medical industry ecosystem have rapidly moved from offline to online. Internet healthcare has now entered the rapid path of digital development of the industry. Thanks to the huge development potential of the industry and the support of national policies, the company actively carried out a strategic layout, officially launched the Internet healthcare business in 2021, and tapped the huge development potential of China's Internet medicine and healthcare services.”

Figure 1: The size of China's Internet Healthcare Market 

02

Strategic goal: Internet medical business becomes the main business

It is worth noting that when Huayi Tencent Entertainment entered the Internet medical circuit in its first year, it already produced a good report card. This is really rare in the industry. 

According to the company's 2021 financial report, the company's total revenue was 328 million yuan, an increase of 195% over the previous year. Among them, the Internet medical business contributed HK$58,644 million in revenue, accounting for 17.89% of total revenue.

Specifically, in April 2021, the new retail platform for online drug prescriptions, distribution and marketing, acquired by the company, revenue reached HK$36.15 million in that year. The Yizinuo platform amplifies B-side value through a private traffic model, and closely connects doctors, patients, physical pharmacies, and pharmaceutical companies through different interfaces to provide exclusive digital operation solutions for different users in the medical industry. With its forward-looking strategic layout and unique advantages of the privatization model, Yinuo is expected to usher in a period of rapid growth in performance. 

Figure 2: The Yizinuo Platform Ecosystem

In addition, the Internet health management platform ZigeHealth, which was jointly established by the company in October 2021, focuses on the health management industry and effectively combines the industrial Internet with the consumer Internet, covering products and services such as pharmaceutical supply chain distribution platforms, healthcare user service platforms, and medical digital product systems. For example, its core product, the Galaxy Medical Digital Product System, has been launched at the medical examination centers of the top three hospitals. By the end of 2021, the revenue from the two months of online services on the Ge Ge Health Platform had reached HK$22.494 million. As Bingo Health products and services continue to be implemented, it is expected that there will be a period of performance explosion.

Figure 3: Brother Health Intelligent Management Portal System

However, this is only the first step in Huayi Tencent Entertainment's strategic transformation; the company's goals are not limited to that.

Yuan Haibo, CEO of Huayi Tencent Entertainment, said, “China's Internet medicine and healthcare services sector is developing rapidly, and market development potential cannot be underestimated. At present, the company's initial layout of online healthcare is progressing smoothly.

The company's two major Internet healthcare platform businesses are currently in a rapid growth stage. It is expected that the share of revenue from Internet health-related businesses will further increase in 2022, becoming the Group's main source of revenue.

In the next step, the company will continue to promote the development of the two major smart health platforms and other promising Internet health projects, create a series of diversified smart medical services, and further develop the new blue ocean market for smart medical care.”

03

Summarize

From the perspective of the capital market, there is a market perception bias in Huayi Tencent Entertainment's valuation against Internet medical sector companies in the market, and the intrinsic value has not yet been discovered.

According to WIND data, the overall average market value of the three Internet healthcare enterprise segments was HK$98.567 billion, with an average revenue of $17.899 billion in 2021. On the other hand, Huayi Tencent Entertainment's market value is 2.6 billion yuan after including the two new Internet medical services (Yizinuo+ZigeHealth), which has great potential for growth.

In the future, as Yuan Haibo, CEO of Huayi Tencent Entertainment, said, “Integrating the Internet healthcare business into the company's business segment will help expand the diversified development of the company's business, distribute the company's operating risks, and promote the company's sustainability into rectification. As more Internet health projects are gradually implemented, the company will have more healthy and sustainable explosive revenue growth results.”

The author believes that transformation is just the beginning. As the company's revenue from the Internet medical sector rises, its real value will be discovered, waiting for the moment of transformation to arrive.