Recently, Yonghe Medical, which is mainly engaged in hair transplant and other business in China, submitted an IPO prospectus for listing on the Hong Kong Stock Exchange, which successfully attracted market attention. Interestingly, Yonghe Medical disclosed the company's offline marketing strategy in its prospectus: let medical professionals as well as sales and marketing personnel visit large enterprises in the region from time to time, such as byte jump and large Internet companies such as iQIYI, Inc., as well as large enterprises in the financial industry.

It turns out that hair transplants have long targeted the wallets of people from large Internet companies and financial institutions. After Yonghe Medical is listed, can investors earn back the money from hair transplant by becoming "shareholders"?

Serve nearly 90,000 customers a year, targeting Internet companies and financial institutions

Yonghe Medical said in its prospectus that the company is the largest medical group in China specializing in providing one-stop hair medical services.

From the perspective of data, since its establishment, Yonghe hair transplant has established medical institutions in first-tier cities with large demand, large population and high income, as well as important provinces such as Guangdong, Zhejiang, Jiangsu and Shandong, and then gradually infiltrated into second-tier and other cities. By 2021, the company has set up 51 hair transplant operators in 50 cities in China, including 4 first-tier cities, 15 new first-tier cities, 25 second-tier cities and 6 lower-tier cities, and plans to open nearly 100 hair transplant medical institutions nationwide in the next few years.

Yonghe Medical said in its prospectus that Yonghe Medical had established a professional medical team of about 1200 people, including 229 registered doctors and 930 nurses, more than the second and third places in the industry combined.

In the past two years, Yonghe hair transplant business has grown rapidly. In 2018, the company's total revenue was only 934 million yuan, an increase of 31.1% in 2019, and a further 33.8% increase in operating income to 1.64 billion yuan in 2020.

Yonghe Medical's income mainly comes from the provision of hair transplant medical services, while the income from medical care services has also achieved rapid growth in the same period.

Yonghe Medical recorded net profits of 53.5 million yuan, 35.6 million yuan and 163.3 million yuan in 2018, 2019 and 2020, respectively.

The total number of patients receiving Yonghe Medical treatment increased by 41.7% from 35177 in 2018 to 49851 in 2019, and further increased by 82.7% to 91069 in 2020.

Interestingly, Yonghe Medical also disclosed the secret of marketing in its prospectus.

The prospectus reveals that the company has designed a comprehensive marketing strategy and adopted a combination of online and offline channels, using various forms of advertising to promote the company's products and services.

In terms of brand advertising, the company cooperates with large Chinese online channels such as Tencent and byte jump to launch display advertisements. The company also seeks to meet the latest trends in social marketing by sponsoring live broadcasts of popular sports games and numerous TV shows.

In terms of performance-based advertising, the company cooperated with Baidu, Inc. to launch a search engine-based promotion. The company also works with large social networking sites and online communities such as Weibo Corp, Bilibili Inc. and Douyin to design more targeted and clear marketing strategies to effectively reach and attract potential customers from these sites.

Online advertising is still widely publicized, and Yonghe's offline marketing is more targeted.

According to the prospectus, the company's medical professionals as well as sales and marketing personnel will visit large enterprises in the region from time to time, such as byte jump and large Internet companies such as iQIYI, Inc., as well as large enterprises in the financial industry. They will organise seminars to share knowledge on hair care, introduce the benefits of services and answer questions from employees of these large enterprises.

The "hair loss" track is rising quietly.

From the perspective of industry data, Yonghe Medical does occupy a better track.

According to Frost Sullivan, the number of alopecia patients in China was about 250 million in 2020. Among them, there are about 163.5 million males and 88.6 million females, accounting for about 65 per cent of the total.

In recent years, driven by many factors, such as the increase in per capita disposable income of Chinese residents, the improvement of appearance awareness and the progress of hair transplant technology, China's hair transplant medical service market has grown rapidly from 5.8 billion yuan in 2016 to 13.4 billion yuan in 2020, with a compound annual growth rate of 23.4%.

On the other hand, China's hair transplant market is still in the development stage, and the penetration rate of hair transplant in China (calculated by the number of people undergoing hair transplant surgery divided by the number of patients with alopecia) was only about 0.2% in 2020.

In addition, with the rise of aesthetic hair transplants, the expansion of hair transplant programs and the innovation of services, the customer base of China's hair transplant market is expected to expand from hair loss patients to a wider range of consumers who want to improve their appearance through medical means. this will push China's hair transplant medical service market to 75.6 billion yuan in 2030.

In fact, hair loss is no longer synonymous with the middle-aged and elderly, which is different from the traditional concept. The post-80s and post-90s have become the main force of hair loss. The study shows that people under the age of 30 account for 69.8% of Prida's total hair loss population, while those aged 31-40 account for 25.4%, while those over 40 account for only 4.8% of the total hair loss population. The youngest age of hair loss in China is only 16 years old, with an average age of 30.1 years, 20 years earlier than that of the previous generation.

Although it has not been officially listed, Yonghe hair transplant has caused widespread concern in the financial market, and a large number of analysts have recommended the company's stock.

Liu Zhangming, an analyst at Tianfeng Securities, pointed out that with high-quality services and industry-leading operating capacity, the company has achieved faster growth than China's overall hair transplant medical service market between 2018 and 2020. the company's hair transplant business income grew at a compound annual rate of 24.1%, while China's hair transplant medical service market grew at a compound annual growth rate of only 16.7% over the same period.

Liu Zhangming believes that the advantages of doctors + urban network are difficult to surpass, digitalization + R & D enabling services and marketing. The company has a strong medical team and urban coverage network, the leading position is difficult to surpass. In 2020, the company has 189 registered doctors and 48 business organizations, ranking first in the industry. As of June 8, 2001, the company has 229 doctors, and the number of business organizations has increased to 51, covering 50 cities across the country. The company's medical practitioners have an average of five years of industry experience, have accumulated high popularity in many cities across the country, and have achieved cross-regional sharing and deployment of medical resources through the establishment of comprehensive hair hospitals. The leading position is stable and difficult to surpass.

Over-reliance on marketing

From the perspective of the industry pattern, the hair transplant industry is still in a relatively early state, with the absence of market supervision and low barriers to entry, which promotes the continuous increase in the number of competitive enterprises and fierce competition in the industry.

According to research by Gaohe Investment, there were fewer than 100 hair transplants before 2013 and more than 1000 in China by 2018. Among them, large chain hair transplant institutions occupy an important position in the hair transplant industry by virtue of high-quality service, professional technology, rich experience, coverage and other advantages. Among hair transplant institutions, the market share of private institutions is 90%, while that of hair transplant departments in public hospitals is only 10%.

At present, the first echelon of the industry is mainly Chinese chain hair transplant institutions, specializing in hair transplant business, covering a wide range of areas in China. Representative enterprises are Yonghe hair transplant, Biliansheng, Kefa source, new hair transplant, which is the first choice for consumers with the intention of hair transplant.

The industry has not yet become the Red Sea, but it is not easy to make money such as Yonghe hair transplant. Even Yonghe hair transplant, which is the number one in the industry, its financial data are not very good. According to the prospectus, the company's gross profit margins in 2018, 2019 and 2020 are 75.1%, 72.6% and 74.6%, respectively.

But correspondingly, due to the high marketing expenses, the company's net interest rate is very low. For example, in 2020, the company's income is 1.638 billion yuan, the net profit is only 163 million yuan, and the net interest rate is about 10%.

According to the prospectus, the overall expense rate of the company is relatively high, in which the sales expense rate is 49.6%, 53.1% and 47.6% respectively, accounting for a relatively high proportion, in which marketing and promotion expenses account for 70.8%, 70.5% and 65.1% of the total sales expenses, respectively.

Yonghe hair transplant is not an isolated case. Some studies have pointed out that there are differences in marketing investment among all kinds of hair transplant institutions, resulting in different overall profit levels. The hair transplant department of Chinese chain hair transplant institutions and plastic surgery institutions has a high investment in marketing, accounting for about 30% and 40% of the marketing cost.