In recent years, with the gradual improvement of living standards, oral problems are gradually getting people's attention.

At the same time, the race track of oral health care is also hot in the capital market. Only since 2023, there have been IPO actions in various links of the oral industry chain, such as Zhengya Dentistry, Suimai Medicine, Dengkang Stomatology and so on. Now, the Hong Kong stock market has added a dental "general" who has impacted the listing of IPO.

On August 22, Ma Taki Medical Management (Zhejiang) Co., Ltd. (hereinafter referred to as "Horse Dentistry") submitted a prospectus to the Hong Kong Stock Exchange for listing on the Hong Kong main board, with Haitong International as the exclusive sponsor.

It is reported that Horse Dentistry is a high-end private dental service provider, which mainly provides oral medical services to individuals, covering three major areas of oral health care, including general dentistry, orthodontics and implants. In terms of 2022 income, Ma Fu Dentistry ranks ninth among all private dental service providers in China, and ranks second among all high-end private oral health service providers in China, with a market share of 14.3%.

Or because it is located in the Chaoyang track and located in the "middle and upper reaches" circle, Ma Fu Dentistry has been favored by capital since its inception. Since its establishment, it has been invested by Honghui Fund, Yuanxing Capital, Greenland Group, Gefei assets, CICC, Huaxi Securities and other well-known institutions.

However, a deep investigation found that such a deep cultivation of the high-end oral health care market, but for a long time in the "profit difficult" state, this is why? From another point of view, is it worth the long-term expectation of investors that the profit key has not been found yet?

Focus on the high-end oral medical track, the cost of getting customers is also high.

With the upgrading of consumption and the promotion of oral health awareness, the domestic oral health track is developing rapidly.

According to the Frost Sullivan report, the private oral health service market is expected to grow from 85.9 billion yuan in 2022 to 174 billion yuan in 2027, with a compound annual growth rate of 15.2%. At the same time, due to the shortage of dentists, China's oral medical service market has great potential for growth. In 2022, there are only 248 dentists per million people in China, compared with 885 in Japan, 658 in South Korea and 607 in the United States.

Refined to the high-end oral health care market, the track also shows high growth potential. According to the data, China's high-end private oral medical service market has increased from 2.7 billion yuan in 2018 to 2.9 billion yuan in 2022, with a compound annual growth rate of 1.6 percent. It is expected to reach 5.9 billion yuan in 2027 and a compound annual growth rate of 15.6% from 2022 to 2027.

However, it should be noted that although the high-end oral care market is a promising track, there are also obvious development challenges.

On the one hand, the target group of patients is limited. High-end private dental service providers mainly cater to middle and high-end market consumers with high purchasing power. Despite the steady growth of consumers in China's middle and high-end market, the expansion of the high-end private oral health care market may still be limited by the limited target population of patients across the country.

On the other hand, high-quality dental resources are relatively scarce. In its prospectus, Marty Dentistry warned of the risk that there was fierce competition for qualified dental candidates for the industry as a whole. The company's future success depends largely on its ability to retain, attract and motivate a sufficient number of qualified and qualified dentists who are crucial in supporting the company's expanding outpatient network and providing excellent oral medical services and patient experience.

The superposition of the above two factors also leads to the oral health care enterprises in this track need a lot of capital resources to maintain.

According to the prospectus, the quality of high-end private oral medical services is different from that of economical oral medical services, resulting in higher operating and administrative costs to maintain higher service standards. this requires a lot of capital resources to support its business expansion and maintain the consistency of service quality.

In short, this is a track with a relatively high cost of getting passengers, which can also be seen from the stubbornly high sales fees of horse teeth. According to the prospectus, from 2020 to the first 44 months of 2023, the company's sales and marketing expenses were 46.669 million yuan, 83.692 million yuan, 87.173 million yuan and 24.413 million yuan respectively, accounting for 14.73%, 21.05%, 17.98% and 16.33% of the total revenue in the current period. higher than the level of enterprises in the same period.

Based on the above, it seems to be one step closer to unraveling the veil of "difficult to make a profit" in horseback dentistry.

The average income of each dentist is 2.4 million yuan. ≠ makes a good profit.

Focusing on the fundamentals of Maxi dentistry, it is not difficult to find that "steady income growth and poor profitability" is a shadow in the hearts of many investors.

According to the prospectus, from 2020 to 2022, the income of Ma Fu dentistry was 319 million yuan, 399 million yuan and 484 million yuan respectively, increasing year by year. As of the first April of 2023, the company's revenue continued to grow, achieving revenue of about 147 million yuan.

Despite steady growth in revenue, Maxi Dentistry has been losing money: the company's net losses from 2020 to April 2023 were 59.363 million yuan, 162 million yuan, 37.936 million yuan and 7.793 million yuan, respectively. From 2020 to 2022, the company's adjusted net loss (measured by non-IFRS) was 59.363 million yuan, 122 million yuan and 35.287 million yuan, respectively.

At the same time, the gross profit margin of the company is also relatively low-during the reporting period, the gross profit margin of the department of dentistry was 15.8%, 14.7%, 26.7% and 28.6% respectively, although it showed a fluctuating upward trend, but the overall gross profit margin was still relatively low.

At this point, the outside world can not help but wonder: why the horse dental department has been in a state of poor profit, is it difficult to make money on the high-end oral medical track?

The answer is no.

From the perspective of the split business structure, the horse's dental business includes the provision of dentures and related consumables and services to third-party oral health care providers; the sale of joint oral care products that meet the daily needs of consumers; the development of own-brand oral care products; in addition, DSO services are also provided to enable third-party dental clinic owners to operate their oral clinics more efficiently.

As of April 30, 2023, Marsh Dentistry operates 29 dental clinics in 13 cities across the country, with 145 dentists and 271 dental chairs. As of the last practical date, Ma Taki DSO service has provided services to nearly 121 dental service suppliers in China.

According to the prospectus, the company's average income per dental chair in 2020, 2021, 2022 and the four months ending 30 April 2023 was 1.4 million yuan, 1.4 million yuan, 1.5 million yuan and 500000 yuan respectively. At the same time, the company recorded more than 260000, 377000, 372000 and 123000 attendances respectively during the period. the average income from patients during these periods was about $1100, $900,1100 and $1000 respectively.

According to the data, in 2022, horse dentistry ranked among the top 10 participants in the industry in terms of the average income per dental chair and the average income per dentist.

As can be seen from the above data, it is not so difficult for Ma Dental to make money, and the reason for its poor profitability may be the large amount of capital resources mentioned above to maintain the consistency of business expansion and service quality.

According to the prospectus, the average income of each dentist of the company from 2020 to April 2023 was 2.2 million yuan, 2.1 million yuan, 2.4 million yuan and 0.9 million yuan, respectively. You know, an annual salary of more than 2 million yuan is rare in China, and it is conceivable that in order to retain medical resources, horse dentistry still spends a lot of "financial resources."

In addition, according to the outpatient development stage, the company divides the outpatient clinic into two stages, including the climbing stage, that is, the outpatient clinic that has been operating for less than three years, and the mature stage, that is, the outpatient clinic that has been operating for more than three years. On the other hand, the income of the new oral clinic is generally low and the operating cost is high at the initial stage of operation, and the gross profit is usually negative at this stage, which also lowers the overall gross profit margin of Ma Taki Medical.

Or due to the poor profit situation, the cash flow of Maxi Dentistry is also relatively fluctuating. From 2020 to April 30, 2023, the net cash generated by its operating activities was 66.338 million yuan, 29.168 million yuan, 31.391 million yuan and 21.513 million yuan respectively.

To sum up, it is not difficult to see that despite the poor profitability of the oral health track with high gross margins, it is obvious that the main reason for the decline in investors' willingness to invest in horseback dentistry.