Financial Performance - For the year ended December 31, 2022, the company's revenue was RMB 1,412.8 million, a decrease from RMB 2,168.6 million for the year ended December 31, 2021, representing a decline of approximately 34.8%[11] - The gross profit for the year ended December 31, 2022, was RMB 872.6 million, down from RMB 1,580.0 million in the previous year, resulting in a gross margin of 61.8%, compared to 72.9% in 2021[11] - The company reported a net loss of RMB 85.9 million for the year ended December 31, 2022, compared to a net profit of RMB 120.2 million for the year ended December 31, 2021[11] - Basic loss per share for the year ended December 31, 2022, was RMB 0.16, compared to basic earnings per share of RMB 0.29 for the previous year[11] - The company's gross profit for 2022 was RMB 872.6 million, a decrease of 44.8%, resulting in a gross margin of 61.8%, down from 72.9% in 2021[111] - The company reported a net loss of RMB 85.9 million for 2022, a decline of 171.4% from a net profit of RMB 120.2 million in 2021, leading to a net profit margin of -6.1%[121] Assets and Liabilities - Total assets as of December 31, 2022, were RMB 2,930.4 million, a decrease from RMB 3,199.3 million as of December 31, 2021[5] - Total liabilities as of December 31, 2022, were RMB 1,345.1 million, down from RMB 1,500.9 million as of December 31, 2021[5] - The company's equity attributable to shareholders was RMB 1,585.3 million as of December 31, 2022, compared to RMB 1,698.3 million as of December 31, 2021[5] - Cash and cash equivalents as of December 31, 2022, were RMB 565.1 million, down from RMB 1,566.2 million in 2021, with no bank borrowings reported[122] - The total cash and cash equivalents at the end of 2022 were RMB 565.1 million, down from RMB 1,566.2 million at the end of 2021[133] - The company had no outstanding bank loans as of December 31, 2022, compared to RMB 74.2 million in 2021[137] - The total lease liabilities as of December 31, 2022, amounted to RMB 1,035.6 million, slightly down from RMB 1,046.9 million in 2021[139] Revenue Breakdown - Revenue from hair transplant medical services was RMB 1,030,454 thousand, down 34.1% from RMB 1,565,434 thousand in 2021[41] - Revenue from medical maintenance services was RMB 362,508 thousand, a decline of 37.7% compared to RMB 582,290 thousand in 2021[41] - The company's revenue from hair transplant services for the year ended December 31, 2022, was RMB 1,030.5 million, accounting for 72.9% of total revenue[62] - Revenue from hair transplant medical services was RMB 1,030.5 million, down 34.2% year-on-year, with a patient count of 39,254, reflecting a 40.0% decrease in foot traffic[106] - Revenue from medical maintenance services was RMB 362.5 million, a decline of 37.7% year-on-year, with an average spending per patient increasing from RMB 5,531 to RMB 5,731[107] Operational Changes - The ongoing COVID-19 pandemic has led to reduced demand for the company's services, impacting operational scale[34] - The number of patients receiving hair transplant services decreased to 39,254 in 2022 from 58,464 in 2021, representing a decline of approximately 32.8%[63] - The number of patients receiving medical hair care services decreased to 63,257 in 2022 from 105,275 in 2021, while the average spending per patient increased to RMB 5,731 from RMB 5,531[83] - The company has expanded to 63 hair transplant medical institutions across 60 cities in China, making it the largest chain in the country[59] - The company established 6 new Yonghe hair transplant clinics and 3 new women's hair transplant clinics in 2022, located in Hangzhou, Beijing, and Chengdu[84] - The company implemented a doctor reception system across all medical institutions in mainland China by June 2022, leading the industry in integrated reception reform[87] Strategic Initiatives - The company continues to focus on its core business and may explore market expansion opportunities in the future[11] - The company plans to expand its hair transplant medical institutions to nearly 85 locations by the end of 2023, focusing on lower-tier cities and increasing coverage in first and new first-tier cities[97] - The company is collaborating with Sun Yat-sen University on innovative research to convert fibroblasts into hair-inducing dermal papilla cells, a breakthrough in hair restoration treatment[90] - The company launched an integrated consultation management system to enhance doctor consultation efficiency and improve patient experience through digital upgrades[93] - The company aims to strengthen its medical hair care business by expanding the product range and enhancing customer service through customized follow-up services[98] Marketing and Branding - The company introduced a refined marketing strategy focusing on enhancing brand value, resulting in an increased patient referral rate during the reporting period[89] - The company is developing a digital marketing platform to optimize customer acquisition and reduce marketing costs through data analysis[101] - The company plans to allocate approximately HKD 96.0 million for additional costs to enhance brand awareness and increase advertising and sponsorship activities[194] - The company is focused on market share expansion and accelerating the growth of its "Shiwunson" brand[194] Awards and Recognition - The company received multiple industry awards, including the Best Annual Report Award from the Hong Kong Investor Relations Association, reflecting its strong reputation and commitment to innovation[94] Future Outlook - The company has not provided specific guidance for future performance or new product developments in the conference call[11] - The company anticipates that new accounting standards will not have a significant impact on its financial statements in the foreseeable future[19] - The group continues to provide competitive compensation packages and training opportunities for employees, adhering to industry practices[168] - The group has no plans for significant future investments or acquisitions of capital assets as of December 31, 2022[165]

Business Overview - Yonghe Medical Group is a leading medical group in China specializing in hair-related healthcare services, offering a one-stop service model that includes hair transplant and medical hair care [16]. - The company has successfully established Svenson Medical Hair Care Centers in mainland China under a "shop-in-shop" model after acquiring Svenson's mainland business [19]. - Yonghe Medical Group expanded its footprint by acquiring the Hong Kong business of Nu/Hart Hair, a renowned hair transplant service provider from the U.S. [19]. - The company collaborates with prestigious universities like Sun Yat-sen University to enhance its research and development capabilities in the hair-related healthcare sector [20]. - Yonghe Medical Group has achieved industry-leading operational capabilities, enabling effective cost control and improved profitability through a standardized and scalable business model [20]. - The company is actively promoting the adoption of new technologies, including data usage and analysis, intelligent services, and online services to enhance patient care and operational efficiency [20]. - The Group's strategic initiatives are expected to reinforce its industry-leading position and sustain growth momentum in the future [20]. - The company has built a comprehensive one-stop medical hair care service system to meet diverse patient needs [17]. - Yonghe Medical Group's commitment to innovation and collaboration is aimed at driving advancements in the hair-related healthcare industry [19]. - The company continues to focus on improving its diagnostic and therapeutic capabilities through partnerships with experts from Class IIIA hospitals [20]. Financial Performance - For the six months ended June 30, 2022, Yonghe Medical Group recorded revenue of RMB 748.1 million, a decrease from RMB 1,053.4 million in the same period of 2021, representing a decline of approximately 29% [32]. - The gross profit for the same period was RMB 480.5 million, with a gross profit margin of 64.2%, down from 73.6% in 2021 [32][41]. - Net profit for the six months ended June 30, 2022, was RMB 17.6 million, compared to RMB 40.4 million in 2021, indicating a decline of approximately 56.5% [32]. - The revenue from hair transplant services amounted to RMB 553.1 million, accounting for 73.9% of total revenue, with 21,021 patients undergoing hair transplant surgery during the period [48][49]. - Medical hair care services generated revenue of RMB 187.6 million, representing 25.1% of total revenue, with a gross profit margin of 25.1% [45]. - Total assets as of June 30, 2022, were RMB 3,132.6 million, a slight decrease from RMB 3,199.3 million as of December 31, 2021 [32]. - Total equity increased to RMB 1,807.6 million from RMB 1,698.3 million in the previous year, reflecting a growth of approximately 6.4% [32]. - Cash and cash equivalents decreased to RMB 1,398.2 million from RMB 1,566.2 million, indicating a decline of about 10.7% [32]. - The Group's total revenue for the six months ended June 30, 2022, was RMB 748.1 million, a decrease of 29.0% compared to RMB 1,053.4 million for the same period in 2021 [97]. - Revenue from hair transplant services was RMB 553.1 million for the six months ended June 30, 2022, down from RMB 789.5 million in the same period of 2021 [103]. - Revenue from medical hair care services was RMB 187.6 million for the six months ended June 30, 2022, compared to RMB 254.2 million in the same period of 2021 [104]. Operational Metrics - As of June 30, 2022, Yonghe Medical Group operated 57 clinics across 56 cities in China, an increase from 52 clinics in the previous year [38][40]. - The number of patients who received hair transplant services decreased to 21,021 in the six months ended June 30, 2022, down from 29,480 in the same period of 2021, representing a decline of approximately 28.5% [51]. - Average spending per hair transplant patient was RMB 26,314 in 2022, slightly down from RMB 26,782 in 2021, indicating a decrease of about 1.7% [51]. - Revenue from medical hair care services amounted to RMB 187.6 million, accounting for 25.1% of total revenue, with a total of 38,440 patients receiving these services, down from 52,633 in 2021, a decline of approximately 27% [52][53]. - The average spending per medical hair care patient increased to RMB 4,886, compared to RMB 4,829 in 2021, reflecting a growth of about 1.2% [55]. - The repurchase rate for medical hair care services improved to 25.5% from 22.2% in the previous year, indicating enhanced customer loyalty [55]. - The company opened three new Yonghe Hair Transplant clinics and two Svenson clinics during the reporting period, contributing to a total of 57 clinics, up from 52 in 2021 [57][61]. - The number of mature-stage clinics increased to 34 in 2022, up from 24 in 2021, while newly-established clinics decreased to 6 from 11 [61]. - The professional medical team expanded to 1,198 members as of June 30, 2022, enhancing the company's service capabilities [66]. - The company implemented a physician consultation system across all clinics, aiming to improve service quality and patient trust [62][64]. - A new hierarchical diagnosis and treatment system for hair transplant physicians was introduced, focusing on evaluating physicians based on academic skills and clinical experience [65]. Market Trends and Future Plans - The hair-related healthcare service market in China was valued at RMB 18.4 billion in 2020 and is projected to grow to RMB 138.1 billion by 2030, with a CAGR of 22.3% [72][76]. - The total number of patients receiving treatments in the first half of 2022 reached 58,988, indicating a growing demand for alopecia treatment and medical hair care services [72][76]. - The company plans to have nearly 70 hair transplant clinics in China by the end of 2022, expanding its geographical coverage and presence in tier-one and new tier-one cities [77][79]. - Nine stand-alone Svenson medical hair care centers were completed in the first half of 2022, with two already in operation and four more under construction, aimed at increasing market share [78][80]. - The company has developed an integrated consultation management system to enhance physician efficiency and digital diagnosis capabilities [70][73]. - The first phase of smart hair loss area measuring software was completed, improving patient consultation experience through photo-based measurements [70][73]. - The patient referral rate has continued to increase, reflecting enhanced brand reputation and customer satisfaction [71]. - The company is focusing on a marketing strategy targeting the rapidly growing female customer base and younger demographics suffering from hair loss [71]. - COVID-19 pandemic measures led to temporary suspensions or limitations in operations for over 30 clinics, impacting revenue during the first half of 2022 [74][75]. - The company aims to leverage its market-leading position and established brand recognition to capture opportunities in the fast-growing hair-related healthcare market [72][76]. Corporate Governance and Compliance - The Audit Committee consists of two independent non-executive Directors and one non-executive Director, with Mr. Chan Peng Kuan as the chairman [159][160]. - The Audit Committee's main duties include reviewing financial information, risk management, internal control systems, and the effectiveness of the internal audit function [160]. - The Company has confirmed compliance with the Model Code for securities transactions during the six months ended June 30, 2022 [156]. - The Company has applied all applicable principles and code provisions of the CG Code except for the deviation from provision C.2.1, where the roles of Chairman and CEO are held by the same individual [157]. - The Board comprises three executive Directors, one non-executive Director, and three independent non-executive Directors, ensuring a strong independent element in its composition [157]. - The Company regularly reviews its corporate governance practices to ensure compliance with the CG Code [157]. - The unaudited consolidated financial statements for the six months ended June 30, 2022, have been reviewed and agreed upon by the independent auditors [161]. - The Company is committed to achieving high standards of corporate governance to safeguard shareholder interests and enhance corporate value [157]. Shareholder Information - As of June 30, 2022, Mr. Zhang Yu holds 161,531,916 shares, representing approximately 30.65% of the issued share capital [179]. - Mr. Zhang Hui has an interest in 24,000,000 shares, accounting for approximately 4.55% of the issued share capital [179]. - Ms. Han Zhimei is deemed to be interested in 12,000,000 shares, which is approximately 2.28% of the issued share capital [179]. - The total number of shares issued as of June 30, 2022, is 527,080,416 [180]. - Ms. Han's shareholding percentage in Shanghai Zhizhen decreased to 28.57% as of September 1, 2022, resulting in her no longer being deemed to have an interest in shares held by Zhirui [181]. - As of June 30, 2022, ZY Investment Capital Ltd holds 161,531,916 shares, representing approximately 30.65% of the issued share capital [184]. - Yonghe Hair Service Holdings Limited owns 91,866,668 shares, accounting for about 17.43% of the issued share capital [184]. - Panmao (Shanghai) Investment Centre holds 183,733,336 shares, which is approximately 34.86% of the issued share capital [184]. - CPEChina Fund II, L.P. and CPEChina Fund IIA, L.P. jointly control CYH Cosmetic Medical Investment Limited, which is approximately 86.3% and 13.7% owned respectively [196]. - CITIC Securities Company Limited owns 35% of CITIC Private Equity Funds Management Co., Ltd., which is the general partner of Panmao Shanghai [195]. - The total number of issued shares as of June 30, 2022, is 527,080,416 [188]. - Frandor Limited is a nominee shareholder for The ZY Trust and The ZH Trust, holding 185,531,916 shares [197]. - The shareholding percentages are calculated based on the total issued shares as of June 30, 2022 [188]. - The interests of substantial shareholders include both beneficial ownership and interests in controlled corporations [190]. - The company has a complex ownership structure involving multiple layers of partnerships and trusts [196]. Capital Expenditure and Utilization - Total proceeds utilization amounts to HK$1,526.2 million, with 101.6 million utilized as of June 30, 2022, and 1,424.6 million remaining unutilized [167]. - HK$642.6 million (42.1%) of the proceeds is allocated to expand and upgrade existing hair transplant clinics in China, expected to be completed by December 2025 [167]. - HK$267.1 million (17.5%) is designated for innovations in product and service offerings, also targeted for completion by December 2025 [167]. - Investment in research and development is set at HK$148.0 million (9.7%), with a completion timeline by December 2025 [167]. - HK$357.1 million (23.4%) is allocated for integrating industry resources to enhance brand awareness in China, with no specific timeline [167]. - The outstanding balance of the acquisition consideration for Nu/Hart Hair has been fully settled, with HK$24.4 million (1.6%) previously allocated for this purpose [168]. - HK$87.0 million (5.7%) is reserved for working capital and general corporate purposes, with HK$50.4 million utilized and HK$36.6 million remaining [167]. - The Group incurred capital expenditures of RMB101.2 million for the six months ended June 30, 2022, an increase from RMB93.5 million for the same period in 2021, driven by business expansion [140]. Compliance with Contractual Arrangements - The Group has adopted measures to ensure effective operation and compliance with the Contractual Arrangements, including annual reviews by the Board [198]. - The Company will disclose the overall performance and compliance with the Contractual Arrangements in its annual and interim reports [198]. - The Group entered into contractual arrangements with Beijing Xunyi and Registered Shareholders to gain effective control over the businesses operated by VIE Entities [198]. - The Board confirmed that there is no unwinding of the Contractual Arrangements or failure to unwind when the restrictions are removed [200].

Business Overview - Yonghe Medical Group is a leading medical group in China specializing in hair-related healthcare services, offering a one-stop service model that includes hair transplant and medical hair care [4]. - The company has successfully established Svenson Medical Hair Care Centers in mainland China under a "shop-in-shop" model after acquiring Svenson's mainland business, further expanding its footprint by acquiring Nu/Hart Hair's Hong Kong operations [7]. - The Group has built a scalable business model that enhances operational efficiency and profitability, allowing effective cost control [8]. - The Group's comprehensive service system is designed to meet the diverse medical needs of a wide range of patients [5]. - Yonghe Medical has established a comprehensive brand matrix centered on "Yonghe Medical," including "Yonghe Hair Transplant," "Svenson," "Yonghe Fa Zhi Chu," and "Harvard" for various hair-related services [36][37]. Financial Performance - For the year ended December 31, 2021, Yonghe Medical achieved operating revenue of RMB2,168.6 million, representing a year-over-year increase of 32.4% [27]. - The gross profit for the same period was RMB1,580.0 million, reflecting a year-over-year growth of 29.3% [27]. - Adjusted net profit reached RMB181.2 million, marking a year-over-year increase of 32.8% [27]. - The gross profit margin for 2021 was 72.9%, while the net profit margin was 5.5% [19]. - Total assets increased to RMB3,199.3 million in 2021, up from RMB1,594.4 million in 2020 [19]. - The Group's net profit decreased by 26.4% from RMB163.3 million in 2020 to RMB120.2 million in 2021, with a net profit margin dropping from 10.0% to 5.5% [139]. - Adjusted net profit increased by 32.8% from RMB136.4 million in 2020 to RMB181.2 million in 2021, with the adjusted net profit margin slightly improving from 8.33% to 8.35% [140]. Market Growth and Expansion - The hair-related healthcare service market in China was valued at RMB18.4 billion in 2020 and is projected to grow to RMB138.1 billion by 2030, with a compound annual growth rate of 22.3% [35]. - Yonghe Medical plans to accelerate the expansion of its clinic network by establishing new hair transplant clinics and comprehensive hair hospitals to capture market growth [35]. - The company aims to open 12 to 15 standalone Svenson Medical Hair Care Centers by 2022, transitioning from a "shop-in-shop" model to independent clinics [91][95]. - The company plans to expand its network of hair transplant clinics to nearly 70 locations in China by 2022 [90][94]. - The Chinese hair transplant service market is projected to reach RMB75.6 billion by 2030, driven by an expanding customer base seeking aesthetic improvements [103]. Patient Services and Experience - The total number of patients served increased by 64.5% from 91,100 in 2020 to 149,900 in 2021 [29]. - Revenue from hair transplant services was RMB1,565.4 million, an increase of 10.8% year-over-year, with 58,464 patients receiving services, up 15.3% from the previous year [60]. - Revenue from medical hair care services reached RMB582.3 million, a significant increase of 173.1%, with 105,275 patients served, representing a 78.1% increase [64]. - The average spending per medical hair care patient rose to RMB 5,531 in 2021 from RMB 3,606 in 2020, an increase of about 53% [69]. - The number of patients receiving medical hair care services increased to 105,275 in 2021 from 59,122 in 2020, representing a growth of approximately 78% [69]. - The conversion rate for hair transplant patients who continued to choose medical hair care services post-surgery was 44.6%, while the rate for those opting for hair transplant surgery after medical hair care was 4.4% [100]. Technological Advancements - The Group is actively adopting new technologies such as data analysis, intelligent services, and online services to enhance patient care and drive business development [8]. - The Group's technological advancements focus on data usage and analysis, intelligent services, and online services to improve operational efficiency and reduce costs [80]. - Innovative medical technology services offered include hair transplant without shaving, painless surgery, and intraoperative comfort care to enhance patient experience [80]. - Yonghe Medical introduced FUE technology in 2008, becoming one of the first entities to apply this advanced hair transplant technique in China [43]. Strategic Partnerships and Collaborations - Collaborations with Class IIIA hospitals and renowned academic institutions have improved the Group's diagnostic, therapeutic, and research capabilities [8]. - The ongoing commitment to research and development through academic partnerships is paving the way for future advancements in the hair-related healthcare service industry [7]. - The Group is collaborating with Sun Yatsen University on follicular regeneration technology and with West China Hospital of Sichuan University on novel targets for androgenic alopecia treatment [80]. Management and Leadership - The Group has accumulated over 10 years of experience in the medical haircare service industry, contributing to its steady expansion and leading position in China [176]. - The management team includes individuals with extensive backgrounds in both procurement and strategic development, ensuring informed decision-making [179]. - The Group's leadership is focused on fortifying its industry position and expanding its market presence in China [176]. - The board is committed to providing independent judgment and strategic insights to guide the company's future direction [187]. Challenges and Responses - The COVID-19 pandemic has led to temporary closures or limitations on customer flow in 11 clinics, impacting total revenue for 2021 [82][85]. - Despite uncertainties in the economic environment, Yonghe Medical remains committed to providing professional, high-quality, and honest services to meet patient needs [46]. - The company will continue to monitor the impacts of COVID-19 and take appropriate measures as necessary [88][92].