Yonghe Medical Announces 2022 Annual Results

Steady growth of stores and layout; Revolutionary academic achievements promote industry progress

Financial Highlight?

• Revenue amounted to RMB1,412.8 million?
• Revenue from hair transplant services amounted to RMB1,030.5 million, accounting for 72.9% of our total revenue. Revenue from medical hair care services amounted to RMB362.5 million, accounting for 25.7%
• Gross profit was RMB872.6 million; gross profit margin was 61.8%?
• Net loss amounted to RMB85.9 million?
• Basic loss per Share was RMB0.16;
• Not to declare any dividend.

HONG KONG SAR – Media OutReach – 31 March 2023 – Yonghe Medical Group Co., Ltd. (“Yonghe Medical”, together with its subsidiaries, the “Group”, is pleased to announce the audited consolidated annual results of the Company for the year ended December 31 2022 (the “Reporting Period”).

During the reporting period, the COVID-19 pandemic in mainland China had a significant impact on the Group’s business, resulting in a drop by approximately 40.0% in customer flow which led to an overall decline in revenue. The Group’s had a revenue of RMB1,412.8 million. Gross profit was RMB 872.6 million, with a gross profit margin of 61.8%. The Group recorded a net loss of RMB 85.9 million, with a basic loss per share of RMB 0.16.

Adhering to the original intention of medical care; the number of people served continues to increase

As a leading medical group in China specializing in providing hair transplant services, Yonghe Medical has always maintained the largest and most extensive chain of hair transplant clinics in the country. At the same time, Yonghe Medical also adheres to the dual main business development of hair transplant services and medical hair care service.

For the year ended December 31, 2022, our revenue from hair transplant service amounted to RMB1,030.5 million, accounting for 72.9% of our total revenue. Guided by the initial intention of “More integrity, Less sugarcoating”, and our philosophy of “outstanding hair transplant depends on professional physicians”. Yonghe Medical launched the physicians’ value-based pricing mechanism to further boost patients’ confidence in our “Yonghe Hair Transplant” brand.

During the Year, revenue from medical hair care service amounted to RMB362.5 million, accounting for 25.7% of our total revenue. As a pioneer in China’s medical hair care industry, Yonghe have provided professional and customised diagnosis and treatment services to our patients through Svenson Medical Hair Care Centers in our hair transplant clinics under the “shop-in-shop” model. To further boost a broader development of our medical hair care service, Yonghe have provided our medical-grade hair health management services to our patients in a more convenient and professional way through our “Svenson Medical Hair Care Centers” that have been opened as stand-alone stores since 2022. For the year ended December 31, 2022, the number of patients who received our medical hair care service was 63,257, and the repurchase rate of our medical hair care service packages was 28.2%.

Expanding during the pandemic; Market outlook is still optimistic

Despite the pandemic, Yonghe Medical did not stop its expansion. During the Reporting Period, Yonghe focused our efforts on expanding the presence of Yonghe Hair Transplant clinics into tier-two and tier-three cities, and started to open stand-alone Fa Zhi Chu Female Hair Transplant clinics, and extended the store network for stand-alone Svenson Medical Hair Care Centers in the Guangzhou-Shenzhen region. During the Reporting Period, Yonghe opened 6 Yonghe Hair Transplant clinics; 3 Fa Zhi Chu Female Hair Transplant clinics in Hangzhou, Beijing and Chengdu, respectively; 6 Svenson centers in Shenzhen and Guangzhou, respectively. As at December 31, 2022, our 63 hair transplant clinics covered 60 cities in 28 provinces, autonomous regions, municipalities and special administrative regions across China.

At the same time, Yonghe Medical had a team of 1,341 medical professionals, 294 of them were physicians, continuing to be the largest professional medical team in the industry. Yonghe Medical has laid a solid foundation for future revenue growth by achieving a comprehensive national store layout and maintaining a strong and professional medical team.

Revolutionary breakthrough academic achievements in the hair industry; Refined marketing strategies to enhance brand value

In 2022, the research result of the cooperation between the Group and Sun Yat-sen University on inducing the transformation of fibroblasts into dermal papilla cells was officially published in the International Journal of Molecular Sciences, an authoritative Scientific Citation Index (SCI) Journal in international molecular medicine. The paper provides a simple and effective solution for subsequent in vitro culture of dermal papilla cells and treatment of hair loss by using small molecule drugs that transform fibroblasts into hair-inducing dermal papilla cells. This is a revolutionary breakthrough academic achievement in the hair industry that brings hopes of hair follicle regrowth to patients with thin hair.

Meanwhile, the Group recruited a number of high-caliber senior executives who have experience in successful chain brand operation. Yonghe thus managed to solidify our brand reputation by formulating a multi-pronged marketing strategy and enhancing customers’ awareness and stickiness to our brand. Yonghe also formulated our brand connotation marketing strategy focusing on our female business and medical hair care business that improves the brand influence of our “Fa Zhi Chu” female brand and our “Svenson” medical hair care brand in market segments in accordance with the industry developments, taking into account the growth of female customer base, the demand of a group of younger-age customers suffering from alopecia and the rising concerns over hair health among customers. The Group believes that brand reputation is founded on high standards of service quality and the most effective channel of marketing is the word-of-mouth referrals from customers. During the Reporting Period, the Group recorded a continued increase in the patient referral rate, which represented the achievements of our refined marketing and brand value enhancement efforts.

Promoting a technological management system and enhance the corporate image

Both innovation and application of digital technology are Yonghe important means to increase operating efficiency and enhance patients’ experience. Yonghe have always adopted industry-leading technology to enlarge our customer base, enhance patients’ experience, increase our operating efficiency and reduce costs. During the Reporting Period, Yonghe developed and launched an integrated consultation management system for the purpose of further improving physicians’ efficiency in consultation and strengthening our delivery of digital diagnosis and treatment services. Yonghe upgraded the information technology of our business operation system which allows appointment for consultation, smart photogrammetry for hair loss area measurement, upgrade of integrated diagnosis and treatment process and upgrade of our capabilities in areas such as operational data dashboard. With these technological applications, patients’ experience is considerably enhanced as our diagnosis and treatment process becomes more efficient, patients’ waiting time is effectively shortened and the cumbersome procedures in the course of operation are reduced.

During the Reporting Period, Yonghe Medical was recognized with numerous important awards from different areas, including the Best Annual Report Award by Hong Kong Investor Relations Association, the Rising Star of Listed Company Awards of Excellence 2022 by Hong Kong Economic Journal, the Best Information Disclosure Award of the 6th China IR Annual Awards, the Best CEO Award of the 7th Zhitong Caijing Listed Companies Awards, the Listed Company with Potential 2022 by Snowball Finance, the Best Growth Value of Listed Companies Award of Guruclub Greater China Best Listed Company Awards 2022 and the Annual Listed Companies with Excellent Value of the Golden Sail Award. These awards represent rewards for our restless efforts and recognition of our unwavering dedication to innovation and continuous development over the years. Yonghe will continue to endeavor to deliver greater value and returns for our shareholders, customers, staff members and people from all walks of the society.

Prospects

The management believes that the hair medical service market is in a period of rapid development, with significant unmet market demand and enormous growth potential. Leveraging the favorable industry prospects, the Group’s market leadership position, and established brand recognition, Yonghe Medical believes it is well-positioned to capture great opportunities in this fast-growing market.

Yonghe will continue to open new clinics as planned. To this end, we will pursue our strategy of penetrating into lower-tier cities for broader geographical coverage of our clinic network to further increase our coverage in cities of all tiers, and densifying our presence in tier-one and new tier-one cities for a deeper layout by adopting a business model of “multiple clinics in one city” to further increase our density of coverage in all cities. Yonghe will also improve our presence by opening Fa Zhi Chu female hair transplant clinics in selected regions to provide customised aesthetic hair transplant service to our female aesthetic hair transplant consumers. We expect to have nearly 85 hair transplant clinics in China by the end of 2023.

Yonghe will continue to put great efforts in strategically developing our medical hair care business, and seek continuous enrichment of its application scenarios, products and services. Yonghe will further diversify the design and application of Svenson products by launching a wider range of more effective hair health management products with the certificate for medical devices (???) and certificate for special cosmetics (???) on the basis of our existing Svenson products with the certificate for cosmetics (???). Meanwhile, Yonghe strive to gradually expand the scale of our customer coverage on top of our established Svenson customer base. With the launch of upgraded customised tracking services and the establishment of medical diagnosis and treatment system, Yonghe will provide our customers with more comprehensive and professional hair health management services. We will also work further on the business expansion of our stand-alone Svenson stores by increasing the presence of Svenson Medical Hair Care Centers in a wider geographic area, so as to achieve an enhanced brand awareness and market share.

In addition, transforming our hair transplant clinics to comprehensive hair hospitals is another move Yonghe make to achieve business expansion from hair transplant market to hair-related healthcare service market. Qualified as class I general hospitals, the newly-opened comprehensive hair hospital in Shanghai has multiple hair-related specialty departments in addition to the hair transplant department. Our comprehensive hair hospital in Shanghai has commenced operation and our comprehensive hair hospital in Beijing is under construction and expected to commence operation upon completion by the middle of 2023.

In the future, Yonghe Medical will continue to operate with a technology-oriented approach and promote digital and smart services. We will create a Yonghe digital marketing platform, a Yonghe digital service platform, and a Yonghe digital collaborative operation platform to continuously improve our digital and smart business operations system from three aspects and significantly enhance the operational efficiency of our functional system. Yonghe will adhere to the principles of integrity and transparency in medical services, strive to create greater value for patients, and ultimately reward our shareholders with outstanding performance.

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The issuer is solely responsible for the content of this announcement.

About Yonghe Medical Group Co., Ltd.

Founded in 2005 and listed on the Hong Kong Stock Exchange in December 2021, Yonghe Medical Group is the hair-related healthcare services medical group in China with a standardized and scalable business operation system. Since its establishment, the company has gone through three stages of initial exploration, nationwide development and accelerated expansion, and has built a multi-brand service system including Yonghe Hair Transplant, Svenson Medical Hair Care, female aesthetic hair transplant “Yonghe Fa Zhi Chu” and Hafada Hair Growth, etc. Currently, Yonghe operated 63 clinics under the brands of Yonghe Hair Transplant/Fa Zhi Chu Female Hair Transplant in 60 cities nationwide, and has developed into the largest one-stop hair-medical healthcare service group in China.