[Definitions](index=4&type=section&id=第一节%20释义) This section provides definitions of key terms and abbreviations used throughout the report [Company Profile and Key Financial Indicators](index=4&type=section&id=第二节%20公司简介和主要财务指标) This section provides an overview of the company and its key financial performance indicators for the reporting period [Company Profile](index=4&type=section&id=公司简介) Tongce Medical Co., Ltd. is a Shanghai Stock Exchange-listed company (stock code 600763) with Lu Jianming as its legal representative - Company basic information: Tongce Medical Co., Ltd. (Stock Code: **600763**), Legal Representative: Lu Jianming[9](index=9&type=chunk)[13](index=13&type=chunk) [Key Accounting Data and Financial Indicators](index=5&type=section&id=主要会计数据和财务指标) In H1 2021, the company achieved strong performance with significant growth in revenue and net profit, alongside improved profitability metrics 2021 H1 Key Accounting Data | Key Accounting Data | Current Period (Jan-Jun) | Prior Period | Year-on-Year Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 1,317,500,074.29 Yuan | 753,664,283.89 Yuan | 74.81% | | Net Profit Attributable to Shareholders of Listed Company | 350,772,376.57 Yuan | 145,454,127.46 Yuan | 141.16% | | Net Cash Flow from Operating Activities | 332,513,305.49 Yuan | 144,355,199.03 Yuan | 130.34% | | **Indicator** | **Period-End** | **Prior Year-End** | **Change from Prior Year-End (%)** | | Net Assets Attributable to Shareholders of Listed Company | 2,501,548,262.03 Yuan | 2,150,129,168.45 Yuan | 16.34% | | Total Assets | 3,877,910,061.79 Yuan | 3,064,401,785.36 Yuan | 26.55% | 2021 H1 Key Financial Indicators | Key Financial Indicators | Current Period (Jan-Jun) | Prior Period | Change | | :--- | :--- | :--- | :--- | | Basic Earnings Per Share (Yuan/share) | 1.09 | 0.45 | Increased by 142.22% | | Diluted Earnings Per Share (Yuan/share) | 1.09 | 0.45 | Increased by 142.22% | | Weighted Average Return on Net Assets (%) | 15.08% | 7.78% | Increased by 7.30 percentage points | - During the reporting period, the company's total non-recurring gains and losses amounted to **9.078 million Yuan**, primarily from government subsidies and fund occupation fees collected from non-financial enterprises[16](index=16&type=chunk) [Management Discussion and Analysis](index=7&type=section&id=第三节%20管理层讨论与分析) This section provides a comprehensive discussion and analysis of the company's industry, core competencies, operating performance, and potential risks [Industry and Main Business Overview](index=7&type=section&id=报告期内公司所属行业及主营业务情况说明) The company operates as a large dental medical group with a 'regional general hospital + branch' model, benefiting from favorable policies and consumption upgrades - The company's main business is medical services, aiming to build a large-scale dental medical group integrating clinical, scientific research, and teaching, currently operating over **50** dental medical institutions[19](index=19&type=chunk) - The company's core operating model is 'regional general hospital + branch', establishing leading general hospitals in regions to support branch network expansion, rapidly building brand influence and market share[20](index=20&type=chunk) - The industry benefits from national policy support, including the 'Healthy Oral Action Plan (2019-2025)', encouraging private dental institutions to participate in oral disease prevention and treatment, with specialties like implantology, orthodontics, and pediatrics expected to grow[26](index=26&type=chunk)[27](index=27&type=chunk) [Core Competitiveness Analysis](index=9&type=section&id=报告期内核心竞争力分析) The company's core strengths lie in its talent resources, differentiated technology, unique management model, and patient-centric service approach - Talent Advantage: Relying on collaborations with institutions like the University of Chinese Academy of Sciences and Zhejiang University, forming high-level doctor groups, and developing Hangzhou Medical College to ensure talent supply[29](index=29&type=chunk) - Technological Advantage: Implementing a team consultation model, breaking down departmental barriers, and integrating multi-disciplinary experts to serve the same patient, forming a differentiated technological advantage[30](index=30&type=chunk) - Management Advantage: Implementing the 'general hospital + branch' model to reduce marketing costs and ensure service quality, and incentivizing and retaining core talent through the 'doctor group' model[31](index=31&type=chunk) - Service Advantage: Core philosophy is 'customer value-centric', focusing on meeting patients' explicit and implicit physiological and psychological needs, driving organizational innovation[33](index=33&type=chunk) [Discussion and Analysis of Operations](index=11&type=section&id=经营情况的讨论与分析) In H1 2021, the company maintained high growth in revenue and net profit, driven by strong performance in Zhejiang province and key dental specialties [Operating Performance](index=11&type=section&id=经营业绩) The company achieved significant revenue and net profit growth in H1 2021 while maintaining effective cost control 2021 H1 Operating Performance | Indicator | 2021 H1 | Year-on-Year Growth | | :--- | :--- | :--- | | Operating Revenue | 1.3175 Billion Yuan | 74.81% | | Net Profit | 396.66 Million Yuan | 147.30% | - The company maintained reasonable control over operating costs, with selling, general and administrative, and financial expenses remaining at a relatively low overall level[39](index=39&type=chunk) [Business Structure](index=13&type=section&id=业务结构) Zhejiang province remains the primary revenue driver, with strong growth in regional branches and all core dental specialties Medical Service Revenue Composition (Unit: 10,000 Yuan) | Region | Revenue H1 2021 | Proportion | Year-on-Year Growth Rate | | :--- | :--- | :--- | :--- | | Within Zhejiang Province | 112,827.65 | 90.25% | 72.34% | | Outside Zhejiang Province | 12,185.93 | 9.75% | 58.15% | Zhejiang Regional General Hospital vs. Branch Revenue Comparison (Unit: 10,000 Yuan) | Type | Revenue H1 2021 | Year-on-Year Growth Rate | | :--- | :--- | :--- | | Regional General Hospital (Hangzhou Oral) | 35,413.23 | 59.13% | | Regional Branches | 77,414.42 | 79.14% | Main Business Composition and Growth Analysis (Unit: 10,000 Yuan) | Business Type | Revenue H1 2021 | Revenue Proportion | Year-on-Year Growth | | :--- | :--- | :--- | :--- | | Implantology | 20,911.60 | 16.83% | 76.35% | | Orthodontics | 23,181.77 | 18.66% | 75.64% | | Pediatrics | 25,826.36 | 20.79% | 68.13% | | General Dentistry | 54,314.68 | 43.72% | 68.80% | [Business Progress](index=14&type=section&id=业务进展) The company is actively expanding its national footprint through the 'Dandelion Plan' and new large-scale hospital constructions outside Zhejiang - The 'Dandelion Plan' is steadily progressing, with several hospitals in Taizhou, Lin'an, Jiaxing, and Wenzhou already operational[45](index=45&type=chunk) - Regarding out-of-province expansion, large dental hospitals in Wuhan, Chongqing, and Xi'an have commenced operations, and Chengdu Cunji Dental Hospital is expected to begin trial operations in H2 2021[45](index=45&type=chunk) [Key Operating Conditions During the Reporting Period](index=14&type=section&id=报告期内主要经营情况) During the period, the company saw increased expenses aligned with revenue growth, adopted new leasing standards, and made strategic external investments Major Financial Item Changes | Item | Current Period Amount | Prior Period Amount | Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | 1,317,500,074.29 Yuan | 753,664,283.89 Yuan | 74.81% | | Operating Cost | 701,515,393.74 Yuan | 453,828,440.17 Yuan | 54.58% | | Selling Expenses | 11,274,946.63 Yuan | 6,250,290.65 Yuan | 80.39% | | R&D Expenses | 23,843,503.12 Yuan | 10,063,040.30 Yuan | 136.94% | | Net Cash Flow from Operating Activities | 332,513,305.49 Yuan | 144,355,199.03 Yuan | 130.34% | - Due to the adoption of new leasing standards, the company's balance sheet newly recognized **536 million Yuan** in 'right-of-use assets' and **437 million Yuan** in 'lease liabilities'[48](index=48&type=chunk) - During the reporting period, the company made external investments totaling **63.6 million Yuan** for expansion and development[49](index=49&type=chunk) [Potential Risks](index=18&type=section&id=可能面对的风险) The company faces various risks including policy changes, medical incidents, talent shortages, challenges in cross-regional expansion, and intensified market competition - The company faces five major risks: policy risk, medical risk, talent shortage risk, cross-regional development risk, and competition risk[52](index=52&type=chunk)[53](index=53&type=chunk)[54](index=54&type=chunk) [Corporate Governance](index=19&type=section&id=第四节%20公司治理) This section outlines the company's corporate governance structure and activities during the reporting period [Overview of Corporate Governance](index=19&type=section&id=公司治理概况) During the reporting period, the company held two shareholder meetings with all proposals approved, and no changes occurred in its board, supervisors, or senior management - A total of **2** shareholder meetings were held during the reporting period, with no proposals rejected[56](index=56&type=chunk) - No changes occurred in the company's directors, supervisors, or senior management[57](index=57&type=chunk) - There were no profit distribution or capital reserve capitalization plans for this half-year period[57](index=57&type=chunk) [Environmental and Social Responsibility](index=20&type=section&id=第五节%20环境与社会责任) This section details the company's environmental protection efforts and social responsibility initiatives [Environmental Information](index=20&type=section&id=环境信息情况) The company adheres to environmental regulations, has robust waste management systems, and reported no violations during the period - The company and its subsidiaries strictly complied with national environmental laws and regulations during the reporting period, with no reported violations of pollutant discharge[59](index=59&type=chunk) - Although subsidiary Huangshi Modern Dental Hospital Co., Ltd. was listed as a key pollutant discharge unit, local environmental authorities confirmed it is a general pollutant discharge unit with complete procedures and no illegal discharge records[59](index=59&type=chunk) - The company has established a comprehensive environmental management system, including 'Wastewater Treatment System' and 'Medical Waste Management System', for classified and compliant pollutant treatment[61](index=61&type=chunk) [Significant Matters](index=22&type=section&id=第六节%20重要事项) This section covers significant commitments, related party transactions, and major contracts impacting the company's operations [Fulfillment of Commitments](index=22&type=section&id=承诺事项履行情况) The company's controlling shareholder, actual controller, and related parties consistently fulfilled commitments regarding competition, related party transactions, and independence - The company's controlling shareholder, Baoqun Industrial, and actual controller, Mr. Lu Jianming, continued to fulfill long-term commitments made since **2006** regarding avoiding horizontal competition, standardizing related party transactions, and ensuring the listed company's independence[64](index=64&type=chunk) - Related party Haijun Technology committed to transferring its equity in Yiya Oral and Cunji Hospital to the listed company or an unrelated third party by **May 22, 2024**, to resolve potential horizontal competition issues[64](index=64&type=chunk)[65](index=65&type=chunk) [Significant Related Party Transactions](index=24&type=section&id=重大关联交易) The company engaged in various related party transactions, including operational dealings, acquisition performance commitments, and joint investments Related Party Transactions in Ordinary Operations (Partial) | Related Party | Related Transaction Content | Current Period Amount (Yuan) | | :--- | :--- | :--- | | Hangzhou Yiya Digital Oral Co., Ltd. | Purchase of Materials | 2,221,477.50 | | Zhejiang Tongce Eye Hospital Investment Management Co., Ltd. | Sale of Goods | 20,277,920.34 | | Zhejiang Tongce Eye Hospital Investment Management Co., Ltd. | Fund Occupation Fee | 7,712,611.11 | | Wuhan Cunji Dental Hospital Co., Ltd. | Management Service Fee | 702,442.16 | - Regarding the performance commitment for the acquisition of SanYe Children's Dental business, as of H1 2021, **9.004 million Yuan** in net profit attributable to the listed company has been achieved, with a total committed amount of no less than **40 million Yuan** for the **2021-2023** commitment period[72](index=72&type=chunk) [Significant Contracts and Their Performance](index=26&type=section&id=重大合同及其履行情况) The company managed associated dental hospitals, entered into significant property leases, and provided guarantees for a subsidiary - The company is entrusted with managing several Cunji Dental Hospitals in Wuhan, Chongqing, and Xi'an, invested by related party dental medical funds, collecting a management fee of **2%** of annual total operating revenue, with **1.0447 million Yuan** in custody income recognized this period[75](index=75&type=chunk) - The company and its subsidiaries entered into multiple long-term property lease contracts for the operation of various dental hospitals and offices, ensuring stable business operations[77](index=77&type=chunk)[78](index=78&type=chunk)[79](index=79&type=chunk)[80](index=80&type=chunk) - As of the end of the reporting period, the company's guarantee balance for its subsidiary Hangzhou Oral Hospital Group Co., Ltd. was **121.8 million Yuan**, accounting for **4.87%** of the company's net assets[81](index=81&type=chunk)[82](index=82&type=chunk)[84](index=84&type=chunk) [Share Changes and Shareholder Information](index=32&type=section&id=第七节%20股份变动及股东情况) This section details changes in share capital and provides information on the company's shareholders [Share Capital Changes and Shareholder Information](index=32&type=section&id=股本变动与股东情况) The company's share capital structure remained unchanged, with Hangzhou Baoqun Industrial Group Co., Ltd. as the largest shareholder - During the reporting period, the company's total share capital and share capital structure remained unchanged[86](index=86&type=chunk) Top Five Shareholders' Shareholding | Shareholder Name | Shares Held at Period End | Proportion (%) | | :--- | :--- | :--- | | Hangzhou Baoqun Industrial Group Co., Ltd. | 108,232,000 | 33.75 | | Bao Zhengliang | 14,544,800 | 4.54 | | Hong Kong Securities Clearing Company Limited | 10,448,688 | 3.26 | | Industrial and Commercial Bank of China - CICC Medical & Healthcare Mixed Securities Investment Fund | 9,862,191 | 3.08 | | Zhejiang Cunji Medical Education Foundation | 9,619,200 | 3.00 | [Preferred Shares Information](index=34&type=section&id=第八节%20优先股相关情况) This section confirms the absence of preferred shares for the company [Preferred Shares](index=34&type=section&id=优先股) The company has no preferred shares - Not applicable[90](index=90&type=chunk) [Bonds Information](index=34&type=section&id=第九节%20债券相关情况) This section confirms the absence of bonds for the company [Bonds](index=34&type=section&id=债券) The company has no bonds - Not applicable[90](index=90&type=chunk) [Financial Report](index=35&type=section&id=第十节%20财务报告) This section presents the company's comprehensive financial statements and detailed notes for the reporting period [Financial Statements](index=35&type=section&id=财务报表) This section presents the unaudited consolidated and parent company financial statements for H1 2021, including balance sheets, income statements, cash flow statements, and statements of changes in owners' equity [Consolidated Balance Sheet](index=35&type=section&id=合并资产负债表) As of June 30, 2021, the company's total assets increased by **26.55%** to **3.88 billion Yuan**, with a corresponding rise in total liabilities and owners' equity Consolidated Balance Sheet Key Items (As of June 30, 2021) | Item | Period-End Balance (Yuan) | Period-Beginning Balance (Yuan) | | :--- | :--- | :--- | | Total Assets | 3,877,910,061.79 | 3,064,401,785.36 | | Total Liabilities | 1,133,725,427.19 | 716,016,706.49 | | Total Owners' Equity Attributable to Parent Company | 2,501,548,262.03 | 2,150,129,168.45 | [Consolidated Income Statement](index=39&type=section&id=合并利润表) In H1 2021, the company achieved a **74.81%** increase in total operating revenue and a **141.16%** increase in net profit attributable to parent company shareholders Consolidated Income Statement Key Items (H1 2021) | Item | Current Period Amount (Yuan) | Prior Period Amount (Yuan) | | :--- | :--- | :--- | | Total Operating Revenue | 1,317,500,074.29 | 753,664,283.89 | | Total Operating Cost | 874,682,769.37 | 576,214,538.36 | | Total Profit | 466,063,358.71 | 198,002,890.01 | | Net Profit Attributable to Parent Company Shareholders | 350,772,376.57 | 145,454,127.46 | | Basic Earnings Per Share (Yuan/share) | 1.09 | 0.45 | [Consolidated Cash Flow Statement](index=41&type=section&id=合并现金流量表) Operating cash flow significantly increased by **130.34%** in H1 2021, primarily due to higher cash receipts from sales and services Consolidated Cash Flow Statement Key Items (H1 2021) | Item | Current Period Amount (Yuan) | Prior Period Amount (Yuan) | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 332,513,305.49 | 144,355,199.03 | | Net Cash Flow from Investing Activities | -35,484,140.55 | -35,653,920.73 | | Net Cash Flow from Financing Activities | -128,217,379.65 | -67,504,891.39 | [Notes to Financial Statements](index=51&type=section&id=财务报表附注) The notes detail the company's background, accounting policies, and significant financial statement items, including the impact of new leasing standards and changes in consolidation scope - The company adopted new leasing standards for the first time on **January 1, 2021**, adjusting relevant financial statement items at the beginning of the first year of adoption, primarily impacting accounts such as prepayments, right-of-use assets, long-term deferred expenses, non-current liabilities due within one year, and lease liabilities[192](index=192&type=chunk)[193](index=193&type=chunk) - During the reporting period, the company's consolidation scope increased by **8** subsidiaries, primarily local dental clinics or hospitals, through new establishments and other means[113](index=113&type=chunk)[311](index=311&type=chunk) Segment Information - Operating Revenue and Cost (H1 2021) | Item | Medical Service Revenue | Product Sales Revenue | Management Service Revenue | Inter-segment Elimination | Total | | :--- | :--- | :--- | :--- | :--- | :--- | | Operating Revenue | 1,271,979,302.47 Yuan | 115,398,669.45 Yuan | 6,298,437.57 Yuan | 80,335,036.93 Yuan | 1,313,341,372.56 Yuan | | Operating Cost | 674,335,270.00 Yuan | 94,422,836.02 Yuan | 4,293,870.06 Yuan | 71,834,393.98 Yuan | 701,217,582.10 Yuan |

[Important Notice](index=3&type=section&id=Item%20I.%20Important%20Notice) [Board of Directors' Statement](index=3&type=section&id=1.1%20Board%20of%20Directors%2C%20Supervisory%20Board%2C%20Directors%2C%20Supervisors%2C%20and%20Senior%20Management%20Guarantee%20the%20Truthfulness%2C%20Accuracy%2C%20and%20Completeness%20of%20the%20Quarterly%20Report) The Board of Directors, Supervisory Board, and senior management guarantee the truthfulness, accuracy, and completeness of this unaudited first-quarter report - All directors, supervisors, and senior management guarantee the report's truthfulness, accuracy, and completeness[3](index=3&type=chunk) - This company's first-quarter report is unaudited[3](index=3&type=chunk) [Company Basic Information](index=3&type=section&id=Item%20II.%20Company%20Basic%20Information) [Key Financial Data and Operating Analysis](index=3&type=section&id=2.1%20Key%20Financial%20Data) The company achieved strong recovery in Q1 2021, with revenue and net profit significantly increasing compared to 2020 and sustained growth over 2019, maintaining stable profitability | Indicator | Q1 2021 | Q1 2020 (Adjusted) | YoY Change (%) | | :--- | :--- | :--- | :--- | | Operating Revenue | **631.05 million yuan** | **196.23 million yuan** | 221.59% | | Net Profit Attributable to Shareholders of Listed Company | **164.44 million yuan** | **-19.06 million yuan** | 962.95% | | Net Cash Flow from Operating Activities | **128.19 million yuan** | **-70.35 million yuan** | 282.21% | | Basic Earnings Per Share (yuan/share) | **0.51 yuan** | **-0.06 yuan** | 950.00% | | Weighted Average Return on Net Assets (%) | **7.37%** | **-1.07%** | increase by **8.44 percentage points** | - To objectively reflect growth, the company compared Q1 2021 with the same period in 2019, showing operating revenue growth of **57.23%** and net profit attributable to shareholders growth of **69.58%**, maintaining a continuous high-growth trend[5](index=5&type=chunk) - In Q1 2021, the single-quarter gross margin was **47.5%** and net margin was **29.7%**, remaining stable compared to the same periods in previous years[7](index=7&type=chunk) [Medical Service Revenue Analysis](index=4&type=section&id=2.1.1%20Medical%20Service%20Revenue%20Analysis) Total medical service revenue reached **605.08 million yuan**, with Zhejiang province contributing **89.93%** (544.13 million yuan), growing **57.41%** from 2019, while branch hospitals' revenue grew **76.63%**, significantly outpacing the main hospital and becoming a core growth driver Medical Service Revenue by Region | Region | Q1 2021 Revenue (Million Yuan) | Revenue Share | Growth vs Q1 2019 | | :--- | :--- | :--- | :--- | | Zhejiang Province | **544.13** | 89.93% | 57.41% | | Outside Zhejiang Province | **60.95** | 10.07% | 44.37% | | **Total** | **605.08** | **100.00%** | **55.99%** | Medical Service Revenue by Zhejiang Hospital Type | Zhejiang Region Hospital Type | Q1 2021 Revenue (Million Yuan) | Revenue Share | Growth vs Q1 2019 | | :--- | :--- | :--- | :--- | | Regional Main Hospital (Hangzhou) | **172.33** | 31.67% | 27.48% | | Regional Branch Hospitals | **371.80** | 68.33% | 76.63% | | **Total** | **544.13** | **100.00%** | **57.41%** | [Outpatient Volume Analysis](index=5&type=section&id=2.1.2%20Outpatient%20Volume%20Analysis) Total outpatient volume reached **0.67 million visits**, a **34.63%** increase from 2019, with Zhejiang province accounting for **86.51%**; branch hospitals' outpatient visits grew **46.76%**, significantly contributing to overall business growth Outpatient Visits by Region | Region | Q1 2021 Outpatient Visits (Million) | Share | Growth vs Q1 2019 | | :--- | :--- | :--- | :--- | | Zhejiang Province | **0.58** | 86.51% | 35.26% | | Outside Zhejiang Province | **0.09** | 13.49% | 30.72% | | **Total** | **0.67** | **100.00%** | **34.63%** | Outpatient Visits by Zhejiang Hospital Type | Zhejiang Region Hospital Type | Q1 2021 Outpatient Visits (Million) | Share | Growth vs Q1 2019 | | :--- | :--- | :--- | :--- | | Regional Main Hospital (Hangzhou) | **0.18** | 30.34% | 14.63% | | Regional Branch Hospitals | **0.40** | 69.66% | 46.76% | | **Total** | **0.58** | **100.00%** | **35.26%** | [Key Dental Treatment Business Analysis](index=5&type=section&id=2.1.3%20Key%20Dental%20Treatment%20Business%20Analysis) Core dental businesses experienced high growth compared to 2019, with pediatric services revenue surging **92.36%** to **126.11 million yuan**, becoming the largest segment, while implant and orthodontics also showed strong growth Dental Treatment Business Revenue | Business Type | Q1 2021 Revenue (Million Yuan) | Revenue Share | Growth vs Q1 2019 | | :--- | :--- | :--- | :--- | | Implant | **90.26** | 14.98% | 54.77% | | Orthodontics | **119.34** | 19.81% | 59.93% | | Pediatrics | **126.11** | 20.93% | 92.36% | | General | **266.71** | 44.28% | 43.09% | [Shareholder Information](index=7&type=section&id=2.2%20Total%20Number%20of%20Shareholders%2C%20Top%20Ten%20Shareholders%2C%20and%20Top%20Ten%20Circulating%20Shareholders%20(or%20Unrestricted%20Shareholders)%20at%20the%20End%20of%20the%20Reporting%20Period) As of the reporting period end, the company had **43,823** shareholders, with Hangzhou Baoqun Industrial Group Co., Ltd. as the largest shareholder at **33.75%**, and top ten shareholders including prominent public funds, indicating strong institutional interest - As of the end of the reporting period, the total number of shareholders was **43,823** accounts[15](index=15&type=chunk) Top Five Shareholders | Shareholder Name | Number of Shares Held (Shares) | Shareholding Percentage (%) | | :--- | :--- | :--- | | Hangzhou Baoqun Industrial Group Co., Ltd. | **108,232,000** | 33.75 | | Bao Zhengliang | **14,544,800** | 4.54 | | Zhejiang Cunji Medical Education Foundation | **9,619,200** | 3.00 | | Zhong Ou Medical and Health Mixed Securities Investment Fund | **9,010,281** | 2.81 | | Hong Kong Securities Clearing Company Limited | **8,634,570** | 2.69 | [Significant Matters](index=8&type=section&id=Item%20III.%20Significant%20Matters) [Analysis of Significant Changes in Major Accounting Statement Items and Financial Indicators](index=8&type=section&id=3.1%20Significant%20Changes%20and%20Reasons%20for%20Major%20Accounting%20Statement%20Items%20and%20Financial%20Indicators) Several accounting items significantly changed due to business expansion and new lease standard adoption, including a **70.8%** rise in accounts receivable, recognition of **492 million yuan** in right-of-use assets and **468 million yuan** in lease liabilities, a **182.6%** increase in R&D expenses, and operating cash flow turning positive to **128 million yuan** [Balance Sheet Item Change Analysis](index=8&type=section&id=3.1.1%20Balance%20Sheet%20Item%20Change%20Analysis) Balance sheet changes reflect business growth and new lease standards, with accounts receivable up **70.8%**, new recognition of **492 million yuan** in right-of-use assets and **468 million yuan** in lease liabilities, and a **57.39%** decrease in employee compensation payable due to prior year bonus payments Balance Sheet Item Changes | Item | Change Percentage (%) | Reason for Change | | :--- | :--- | :--- | | Accounts Receivable | 70.80% | Increase in medical service revenue, accounts receivable from medical insurance and customers | | Prepayments | -37.26% | Adjustment of prepaid rent due to adoption of new lease standards | | Right-of-Use Assets | Not Applicable | Adjustment due to adoption of new lease standards | | Lease Liabilities | Not Applicable | Adjustment due to adoption of new lease standards | | Employee Compensation Payable | -57.39% | Payment of prior year's bonuses during the current period | [Income Statement Item Change Analysis](index=8&type=section&id=3.1.2%20Income%20Statement%20Item%20Change%20Analysis) Income statement changes reflect business recovery and expansion, with operating revenue up **221.59%**, R&D expenses up **182.6%**, sales expenses up **142.5%** for new clinics and promotions, and income tax expense increasing **1107.73%** due to higher profits Income Statement Item Changes | Item | Change Percentage (%) | Reason for Change | | :--- | :--- | :--- | | Operating Revenue | 221.59% | Growth in medical service revenue and impact of prior period's epidemic | | Operating Cost | 90.66% | Costs increased in line with revenue growth | | Selling Expenses | 142.50% | Increased investment in new clinic openings and existing clinic dental care promotions | | Research and Development Expenses | 182.60% | Increased R&D investment | | Financial Expenses | 74.39% | Due to adoption of new lease standards | | Income Tax Expense | 1107.73% | Increased provision for income tax due to significant profit growth | [Cash Flow Statement Item Change Analysis](index=9&type=section&id=3.1.3%20Cash%20Flow%20Statement%20Item%20Change%20Analysis) Net cash flow from operating activities significantly improved from **-70 million yuan** to **128 million yuan**, a **282.21%** increase, driven by higher cash receipts from sales and services, while financing cash outflow increased **175.55%** due to reclassification of lease payments under new standards Cash Flow Statement Item Changes | Item | Change Percentage (%) | Reason for Change | | :--- | :--- | :--- | | Net Cash Flow from Operating Activities | 282.21% | Increase in cash received from sales of goods and provision of services | | Net Cash Flow from Investing Activities | -58.71% | Increased expenditures for new clinic construction | | Net Cash Flow from Financing Activities | -175.55% | Payment of rent adjusted to financing cash flow due to adoption of new lease standards | [Appendix](index=10&type=section&id=Item%20IV.%20Appendix) [Financial Statements](index=10&type=section&id=4.1%20Financial%20Statements) This appendix contains the company's unaudited Q1 2021 financial statements, forming the basis for all financial data and analysis in this report, including consolidated and parent company balance sheets, income statements, and cash flow statements [Consolidated Balance Sheet](index=10&type=section&id=Consolidated%20Balance%20Sheet) Presents the consolidated assets, liabilities, and owner's equity as of March 31, 2021 [Parent Company Balance Sheet](index=12&type=section&id=Parent%20Company%20Balance%20Sheet) Presents the parent company's assets, liabilities, and owner's equity as of March 31, 2021 [Consolidated Income Statement](index=14&type=section&id=Consolidated%20Income%20Statement) Details the consolidated income, costs, expenses, and profit for the first quarter of 2021 [Parent Company Income Statement](index=17&type=section&id=Parent%20Company%20Income%20Statement) Details the parent company's income, costs, expenses, and profit for the first quarter of 2021 [Consolidated Cash Flow Statement](index=18&type=section&id=Consolidated%20Cash%20Flow%20Statement) Reports the consolidated cash inflows and outflows from operating, investing, and financing activities for the first quarter of 2021 [Parent Company Cash Flow Statement](index=20&type=section&id=Parent%20Company%20Cash%20Flow%20Statement) Reports the parent company's cash inflows and outflows from operating, investing, and financing activities for the first quarter of 2021 [Explanation of Adjustments for First-Time Adoption of New Lease Standards](index=21&type=section&id=4.2%20Adjustments%20to%20Financial%20Statements%20at%20the%20Beginning%20of%20the%20First%20Year%20of%20Adoption%20of%20New%20Lease%20Standards%20Starting%20from%202021) The company adopted new lease standards from January 1, 2021, adjusting opening financial statements without restating 2020 comparable data, significantly impacting the consolidated balance sheet by recognizing **506.33 million yuan** in right-of-use assets and **480.40 million yuan** in lease liabilities - The company adopted the newly revised "Accounting Standard for Business Enterprises No. 21 – Leases" from January 1, 2021, without retrospective adjustment of comparable data for 2020[39](index=39&type=chunk) Consolidated Balance Sheet Adjustments for New Lease Standards | Consolidated Balance Sheet Adjustment Item | Adjustment Amount as of January 1, 2021 (Yuan) | | :--- | :--- | | Right-of-Use Assets | **+506,333,868.79** | | Lease Liabilities | **+480,396,759.99** | | Prepayments | **-24,148,384.39** | | Long-term Deferred Expenses | **-1,788,724.41** |