'Beauty clothes' or 'medical beauty', which one is more beautiful?

"Investors Net" Cai Jun

On the track of medical beauty, Lancy Co.,Ltd. (002612.SZ, hereinafter referred to as the 'company') is still striving forward.

This company, mainly engaged in women's outfits, has crossed over to the medical beauty sector in recent years. In just a few years, the medical beauty sector has surpassed the women's outfits sector, becoming the largest source of revenue. Furthermore, the company continues to increase its investment in medical beauty, building its own medical beauty empire through cultivation and acquisitions.

However, a new consumer climate has emerged, and whether the company can adapt to the new environment is still uncertain due to factors such as finance and strategy.

'Beauty clothes' crosses over to 'medical beauty'.

From 'beauty clothes' to 'medical beauty', Lancy Co.,Ltd. is crafting its new story.

Recently, the company announced the acquisition of Beijing Lidu and Hunan Yamei, two medical beauty institutions, through its private equity fund, at a total amount of 0.582 billion yuan. The counterpart is the related platforms Bochen No. 5 and Bochen No. 9.

The company refers to this capital operation as 'extracorporeal cultivation + post-maturation acquisition'. Specifically, industry funds are first established by related parties, then potential targets are screened and incubated. After the targets have standardized management and sustainable profitability, they are acquired by the listed company. This model has long been mature in consumer medical fields such as ophthalmology and dentistry. The advantage is to reduce the uncertainty of investment, but the drawback is that there have been many cases of overvaluation in acquisitions from related parties in the market, leading to investor doubts about 'interest transfer'.

In 2023, Beijing Lido and Hunan Yamei's revenue were 0.243 billion yuan and 0.177 billion yuan respectively, but their net assets were -0.072 billion yuan and -0.033 billion yuan respectively. The company disclosed that the highest proportion of liabilities is customer untreated fees, which will gradually convert into income as treatment progresses. At the same time, the transferor made performance commitments. From 2024 to 2026, Beijing Lido's non-recurring net profit shall not be less than 0.019 billion yuan, 0.021 billion yuan, 0.025 billion yuan, while Hunan Yamei shall be 0.017 billion yuan, 0.024 billion yuan, 0.031 billion yuan.

Drawing on the experience of consumer medical care, Lancy Co., Ltd. has carried out a careful medical beauty attempt for several consecutive years, producing both results and exploring a path.

As of the first half of this year, the company owns 38 medical beauty institutions, forming brands such as Milan Baiyu, Hanchen Medical Beauty, and Jingfu Medical Beauty. Among them, there are 9 comprehensive hospitals, and 29 outpatient clinics located in Chengdu, Xi'an, Kunming, Chongqing, Shenzhen, Wuhan, Changsha, and Zhengzhou, among other first and second-tier cities.

However, to make the medical beauty industry a long-term success, solidifying the capital base is an essential step. This is where the test for Lancy Co., Ltd. has just begun.

In July, the company announced that the placement plan had expired. The company originally planned to raise a maximum of 1.668 billion yuan, intended for the construction projects of Milan Baiyu Medical Beauty Hospital in Chengdu, Chongqing, Zhengzhou, Qingdao, and Kunming, as well as to supplement working capital. However, the related proposal expired without further progress.

As of the first half of this year, the company had a balance of cash funds of 0.59 billion yuan and had previously approved the application for a maximum comprehensive credit of 3 billion yuan from financial institutions. In August, the company disclosed that the controlling shareholder, Shen Dongri, had pledged 21.03 million shares, accounting for 18.13% of the shares he held, and 8.67% of the total share capital of the company.

Timely cross-border

"Yimei" and "medical beauty", while similar, are also different. The similarity is that both industries have borrowed from foreign products; the difference is that the clothing industry has been severely impacted.

In 2014, the Korean wave was booming in the country, and Lancy Co., Ltd. acquired the Korean children's clothing listed company Agabang, thus starting to connect with the fashion industry in Korea such as clothing, maternity, and beauty. In 2016, the company extended its reach to the medical beauty industry, first strategically investing in the Korean Dream Medical Plastic Surgery Group, and later acquiring and controlling two major domestic medical beauty brands "Milan Baiyu" and "Jingfu Medical Beauty".

Being able to navigate between the Chinese and Korean industries is thanks to the Korean background of the controlling shareholder family of the company. Language advantage can bridge communication gaps, while business acumen can transcend cycles.

After 2017, domestic clothing brands entered a cold winter. Foreign capital vigorously attacked the domestic market, strong competitors continued to emerge in the market, with many like New Balance, MLB, North Face coming from overseas, many of which are Western brands that successfully localized in South Korea before entering China, greatly avoiding cultural barriers. There is also the Korean women's wear brand Chuu, directly impacting young trendy brands like Me & City, Semir, etc.

Realizing the market changes, Lancy Co., Ltd. intensified its cross-border medical beauty business. In 2017, the company piloted the promotion of a partnership system; in 2018, the company acquired Shaanxi Gao Yisheng Medical Beauty Hospital Co., Ltd.; in 2020, the company completed the acquisition of the remaining minority stakes of the initial six medical beauty institutions. In the same period's annual report, the company claimed to have initially achieved the goal of establishing a leading medical beauty brand in some regions and took steps towards developing a nationwide strategic layout.

In the following years, the company merged with medical beauty institutions in wuhan, zhengzhou, and other places, along with the acquisitions in Beijing, hunan in this round, the company's national expansion map is slowly taking shape. Based on the model of "cultivation outside + acquisition after maturity," a new world is gradually unfolding. In the first half of this year, the company's revenue from medical beauty business was 1.194 billion yuan, a year-on-year increase of 6.02%, accounting for 44.42% of the revenue, making it the largest source of income.

"Light" medical beauty is more profitable.

Coming from the clothing industry, in the eyes of Lancy Co., Ltd., there is not a big gap between "Yimei" (outfits beauty) and "medical beauty".

When just entering the medical beauty sector, the company implanted the mindset and tactics of clothing marketing, guiding female clothing business users into the medical beauty customer base. At the same time, when constructing and selecting locations for the medical beauty service network, the company also took into account the concentrated distribution of female clothing customers.

However, there are risks in cross-border operations, and the company has also paid "tuition" in terms of refined management and membership operations. According to QCC, Beijing Lido was once fined by the local health commission for failing to inform patients of their condition, medical measures/risks, alternative medical solutions, etc.

(From QCC)

Moreover, in the new consumer cycle, how to create stronger appeal to consumers and adapt to the new trend is also a focus of management thinking. In the semi-annual report, the company cited McKinsey's view that "consumer category spending intentions are differentiated, with consumption upgrading and downgrading being common", including future market shifts to lower-tier cities, a relatively pessimistic outlook for the first and second-tier new middle-class, and a more optimistic view for affluent seniors in first-tier cities.

One obvious change is that "light" medical beauty is more profitable. In the first half of this year, Wuhan Wuzhou under consolidation achieved revenues of 10.9 million yuan, a year-on-year decrease of 3.5%. This medical beauty institution is a specialist hospital with a business area of nearly 10 thousand square meters. During the same period, Jinfu Medical Beauty focusing on light medical beauty achieved revenues of 22 million yuan, an 11.1% year-on-year increase. This institution mainly operates outpatient clinics and clinics with a relatively small business area.

Another case almost concurrently with the company's layout in medical beauty is Suning Universal, where the relevant sector achieved revenues of 8.8 million yuan in the first half of the year, a decrease of 6.36% year-on-year. The enterprise's layout is in the Yangtze River Delta region, with the construction of the Nanjing flagship medical beauty hospital, one of its characteristics being a large area.

In the capital markets, the valuation of medical beauty institutions remains unclear. In a research report, Kaiyuan Securities pointed out that ophthalmology and dentistry chain institutions, also under consumer medical care, have high valuations, with slight differences compared to medical beauty institutions. Ophthalmology and dentistry rely more on doctors, while non-surgical medical beauty institutions focus more on equipment. How the market anchors value is subject to time verification. (produced by Thinking Finance) ■