On April 6, the chain stores of Dr. Ya medical Holding Group Co., Ltd. (hereinafter referred to as “Dr. Ya”) were punished by the market supervision and administration department for illegal advertising and marketing. At this time, it is the critical period for Dr. ya to rush to the market.
Public materials show that Dr. Ya was founded in 2010. At present, his main business is to provide complete oral service solutions to customers of all ages, including implant services, orthodontic services and comprehensive oral services. He is headquartered in Suzhou and mainly cultivated in East China. According to the scale of revenue, Dr. Ya is the second largest private dental medical service provider in East China, and the gross profit margin of the company has also remained at a high level, surpassing Topchoice Medical Co.Inc(600763) , known as “dental grass” in a shares. However, the reporter of Huaxia Times noted that although the gross profit margin is high, the net profit margin is poor due to the heavy drag of marketing strategy.
Recently, Dr. Ya submitted a prospectus to the Hong Kong stock exchange for listing on the main board of Hong Kong stocks, with China International Capital Corporation Limited(601995) and China Securities Co.Ltd(601066) international as co sponsors. It is understood that this is the second sprint for the IPO of the HKEx after Dr. Ya submitted his form for the first time in September 2021. For the listing of Dr. Ya’s Hong Kong shares, the reporter of Huaxia times called Dr. Ya on relevant issues, but as of press time, he had not received a response.
revenue depends on Jiangsu
Oral medicine has become one of the most popular courses in recent years. More than 3 enterprises have sought to be listed on the market. Dr. Ya submitted a prospectus to the Hong Kong stock exchange this year after failing to submit a form to the Hong Kong Stock Exchange last year.
“Dr. Ya will submit the form again in a short time. He is anxious to go public in order to alleviate the financial pressure of operation scale and expansion.” Bai Wenxi, chief economist of IPG China, said in an interview with Huaxia times.
At present, China’s oral medical service market is in a period of rapid development. Chain industry experts who have been paying attention to the oral chain industry Wen Zhihong, general manager of Hehong consulting, said in an interview with Huaxia times: “At present, the annual revenue of China’s Stomatological service market is about 120 billion to 150 billion. It is expected that around 2030, China’s Stomatological service market will grow to about 500 billion. Such a growth rate is relatively fast. In such a fast-growing industry, the chain mode is an important way for private stomatological hospitals to realize scale.”
In 2012, Dr. Ya established his first outpatient department in Suzhou. So far, he has 31 oral service institutions in East China, but 19 of them are in Suzhou, which also leads to the company’s overall revenue relying on the Jiangsu market. According to the data disclosed by the company, from 2019 to 2021, the revenue of Jiangsu province accounted for 78.3%, 77.5% and 75.6% respectively.
Dr. Ya’s listing in Hong Kong this time plans to set up 41 new oral institutions in three years from 2022 to the end of 2021, covering Jiangsu, Zhejiang, Anhui and Shanghai in East China. According to the plan, from 2022 to 2024, Zhejiang will set up two flagship clinics and 12 standard clinics; Jiangsu will set up 4 flagship clinics, 9 standard clinics and 3 boutique clinics; Anhui will set up two flagship clinics and five standard clinics; Four new standard clinics will be set up in Shanghai.
high gross profit margin, low net profit margin
Expansion is imminent, but Dr. Ya with high gross profit margin doesn’t make money as expected.
According to the consulting report, in terms of total revenue in 2020, Dr. Ya is the largest medium and high-end private chain oral service provider and the second largest private oral service provider in East China, with market shares of 12% and 2.4% respectively, accounting for 5.9% and 0.9% of the national market share respectively.
From 2019 to 2021, Dr. Ya’s income was 870 million yuan, 840 million yuan and 1.07 billion yuan respectively; The net profits were 16.11 million yuan, 27.684 million yuan and 120 million yuan respectively, and the adjusted net profits were 23.644 million yuan, 85.307 million yuan and 125 million yuan respectively. It is understood that Dr. dental’s oral services mainly include three parts: implant services, orthodontic services and comprehensive oral services. From 2019 to 2021, the total income generated by implant services and orthodontic services accounted for 66.5%, 67.5% and 67.5%.
It is noteworthy that planting and orthodontics are high profit projects, with gross profit margins of 60.9% and 51.3% respectively in 2021, higher than 48.3% of comprehensive services. Driven by the high profit projects, the corresponding gross profit margin of each period reported by Dr. Ya’s prospectus is far higher than the industry average. According to the burning knowledge consulting report, the average level of private oral chain institutions is about 31%, while the gross profit margin of each period from 2019 to 2021 is as high as 53.8%, 55.5% and 54.6%.
Although the gross profit margin of the company is high, the net profit margin performs poorly. Topchoice Medical Co.Inc(600763) , known as “Maotai in dentistry”, the gross profit margin from 2019 to 2020 was only 46.08% and 45.17%, and the net profit margin was 26.81% and 26.1% respectively. The net interest rates of Dr. Ya during the reporting period were 1.8%, 3.3% and 11.2% respectively. Although they increased significantly, they are still far lower than Topchoice Medical Co.Inc(600763) . This is mainly due to the large sales expenses incurred under the company’s “heavy marketing”.
Wen Zhihong told our reporter: “oral medical institutions usually come from three aspects to obtain customers. One is to rely on the brand effect of their own medical institutions, such as Topchoice Medical Co.Inc(600763) ; the other is to rely on the personal brand of doctors, but this is not suitable for chain institutions, because doctors can not be copied; the third is to rely on marketing investment and a lot of advertising and marketing to open popularity and obtain customers.”
According to the prospectus, the sales and distribution expenses of Dr. Ya from 2019 to 2021 were 299.86 million yuan, 242.92 million yuan and 29267 trillion yuan respectively, accounting for 34.4%, 29.1% and 27.3% of the total revenue in the same period respectively. Among them, marketing, promotion and advertising expenses account for the majority.
In the opinion of Dr. Wen Zhiya, he has accumulated some experience in marketing. This is a very rare point as a medical institution with enterprise attribute. Of course, as an oral medical institution, the most fundamental thing is to grasp the bottom line of this medical treatment.
frequent violations under heavy marketing
In fact, while marketing squeezes the profit space, it does bring many regulatory risks to the company.
According to the prospectus, from the track record period to the last practicable date, Dr. Ya received three administrative penalties for the three clinics, and the total amount of the three administrative fines did not exceed $155000. Two of the fines were for Dr. ya to publish medical advertisements without obtaining the examination certificate of medical advertisements. Dr. Ya said that it was due to the lack of understanding of the approval procedures under the laws and regulations related to advertising by the marketing staff. Another fine is for Dr. ya to use the marketing language of the Advertising Spokesperson, which is considered to be in violation of applicable laws and regulations.
It is noteworthy that this case was included in the 12 typical illegal advertising cases published by Taizhou Market Supervision Bureau of Zhejiang Province this year. The reporter’s access to data shows that in this case, Dr. Ya’s Jiangyin Dr. Ya oral clinic Co., Ltd. released photos of Olympic Games champions, artists and related orthodontic products at its business premises, with “praise for Dr. Ya’s dental implant art” and other contents, which was recommended by the advertising spokesperson And the medical advertisement issued by the party concerned has not been examined by the administrative department of health, which violates the provisions of Articles 16 and 46 of the advertising law. The market supervision department shall impose a fine of 100000 yuan on the party concerned according to law.
As for the punishment of its clinics for advertising, Dr. Ya said that the measures for the standardized management of advertising in the brand management center of Dr. Ya group had been formulated according to the suggestions of the internal control consultant to prevent non-compliance.
However, on April 6, Jiangyin dental clinic Co., Ltd. was administratively punished by Jiangyin Market Supervision Bureau for publishing false advertisements, with a total fine of 300000 yuan. This is not the first time the clinic has been fined. In 2017, it was fined 160000 for violating the advertising law.
It is noteworthy that, in addition to being punished for violating the advertising law, Dr. Ya was also punished for not holding the qualification of radioactive medical services, and involved in a number of medical disputes.
