Looking back at the first half of the year, the performance of companies in related sectors has become more widespread due to weak consumer demand. However, it is pleasantly surprising to see that Yonghe Medical, in the field of hair transplantation, has returned to a stable and robust track against the trend.

Behind this, Yonghe Medical has implemented a series of strategic adjustments to improve operational efficiency, strengthen cost control mechanisms, and unleash the potential of both revenue and profit. This also conveys a deeper signal, possibly indicating that its business model has stronger adaptability and competitiveness, and is expected to enter a new stage of value creation.

Meanwhile, both the P/S ratio and the P/B ratio of Yonghe Medical are in a state of undervaluation. According to data from Futu Securities, as of the close of August 22, 2024, the P/S ratio of Yonghe Medical was only 0.20, and the P/B ratio was 0.39, both well below the industry average.

Source: Futu

This contrast further reveals the value potential of Yonghe Medical. Let's further analyze the positive changes in its fundamentals.

Comprehensive improvement in performance opens up new room for reducing costs and increasing efficiency.

According to the financial report, Yonghe Medical achieved a revenue of 0.9 billion yuan (RMB) in the first half of the year, a year-on-year increase of 8.7%; gross profit was 0.53 billion yuan, a year-on-year increase of 13.2%, corresponding to a gross margin of 58.8%. At the same time, the net loss was significantly reduced to 0.14 billion yuan, a shrinkage of 38.7% compared to the same period last year.

From the perspective of the breakdown of income composition, both major businesses have made progress. The revenue from the hair transplant business is 0.67 billion yuan, a year-on-year increase of 5.0%, and the role of the "ballast stone" continues to be prominent. The revenue from the medical care and maintenance business is 0.22 billion yuan, a year-on-year increase of 25.3%, and the contribution to performance continues to increase.

User operation data has also improved accordingly. As of the first half of the year, the number of hair transplant surgery patients at Yonghe Medical reached 0.0293 million, a year-on-year increase of 3.4%; among them, the number of patients receiving "Yongxiang" services increased by 31.1% year-on-year, and the feedback from the mid-to-high-end market was enthusiastic. At the same time, the number of patients receiving medical care and maintenance services reached 0.0497 million, a year-on-year increase of 21.9%, and the repurchase rate reached 29.0%, an increase of 2.6 percentage points year-on-year.

Source: Company Announcement

From the perspective of stores, as of the first half of the year, Yonghe Medical has optimized the store structure and reduced a net of 7 stores, but the revenue has steadily increased and the operational efficiency of individual stores has improved.

In terms of expenses, Yonghe Medical has reduced the sales expense ratio by about 8.0% to 9.0% and the management expense ratio by about 5.0% to 6.0% through the implementation of refined marketing strategies and the strengthening of the management team's effectiveness.

These data also comprehensively demonstrate that Yonghe Medical better meets the diversified market demands, leverages the synergistic effects of its business sectors, and significantly improves the input-output ratio of marketing expenses. Considering that the customer acquisition cost is generally high in the hair transplant industry, it further reflects the improvement in the business quality of Yonghe Medical and lays a solid foundation for long-term profitability and market competition in the future.

High quality + high efficiency, precise matching with market demand

Behind this, it is inseparable from a series of strategic adjustments made by Yonghe Medical. Its adjustment ideas present a clear theme: to precisely match market demand with higher service quality and resource allocation efficiency.

In the first half of the year, Yonghe Medical carried out a brand strategic upgrade of 'good doctors + good system', using the good doctor strategy as a solid foundation to promote the systematic upgrading of diagnosis, planting, aesthetics, fixed maintenance, and comfort dimensions, providing patients with more comprehensive and personalized solutions, leading the industry into the era of hair transplantation 3.0.

Yonghe medical also dares to innovate service models, such as launching the 'national tour of famous doctors in Beijing, Shanghai, and Guangzhou' project, and promoting value-added services such as 'cross-hospital and cross-city surgical support' to promote the balanced distribution of high-quality medical resources, making it more convenient for patients to connect with doctors who are highly compatible; deepening the implementation of the 'one-price' pricing strategy, using the industry-leading pricing model to clarify the overall cost structure of hair transplant services, reflecting the commitment to precise control of the entire process of hair transplant surgery.

Yonghe Medical accurately matches patients with personalized solutions that meet their individual needs and matching doctors, and reduces information asymmetry and lowers user decision-making difficulty through the 'one-price' approach. Naturally, this also reduces customer acquisition costs and boosts profitability.

At the same time, Yonghe Medical also promoted the store structure upgrade, technological innovation, and other measures to further support the satisfaction of patients' personalized needs and its own cost reduction and efficiency improvement, enhancing the sustainability of its development.

In the first half of the year, Yonghe Medical opened two Yonghe hair transplant medical institutions and two Siasun hospital branches, while closing five Yonghe hair transplant medical institutions and six Siasun hospital branches, optimizing the allocation of medical resources, controlling costs, and improving operational efficiency, achieving a more efficient and precise medical service operation mechanism.

In terms of technological innovation, Yonghe Medical fully launched the independently developed 'Hefan' operation management system; cleverly integrated AI robot tools into the online consulting service process; relied on image model algorithms to generate real-time reports on patients' scalp environment and hair health, achieving cost reduction and efficiency improvement through enhanced productivity and customer experience. Additionally, it is also planning to launch projects such as '3D simulated hair transplant design plan' and 'Intelligent quality inspection system', with the potential to further open up space for cost reduction and efficiency improvement.

Moreover, in terms of business sectors, Yonghe Medical is accelerating its layout in the fixed maintenance direction to further match the demand for pre-treatment, namely, hair loss prevention and treatment needs.

For example, this year Yonghe Medical launched a brand new medical-grade fixed maintenance system, centered around good doctors, with a focus on '5+4+3+2+1', which includes 5 treatments, 4 treatment stages, 3 product systems, 2 scenarios, and 1V1 exclusive service.

In May, Yonghe Medical and Luxang Freda signed a strategic cooperation agreement (Luxang Freda's subsidiary, Minodil and hair anesthesia drugs like Lidocaine are about to be approved for listing), to explore the integrated "research, production, sales, and use" model, and launch innovative hair medical products.

With such development expectations, Yonghe Medical is further accumulating energy for the second growth curve, improving refined operation capabilities, and expected to activate more internal growth drivers.

Conclusion

Overall, the Yonghe Medical industry is going deeper and more stable on the road of innovation. Its innovation always aims at the essence of consumer demand, achieves win-win cooperation with consumers, and also makes the era of Hair Transplantation 3.0 more anticipated, perhaps accelerating the market penetration rate.

In today's uncertain market, stability has become an important value criterion. Yonghe Medical, with both new value and undervaluation, may be worth reevaluating.