Core summary:
Dentist is a person standing at the top of the industrial chain. Although Riel provides high-end oral medical services to customers, he has to spend a lot of money to keep the dentist because he needs to spend a lot of money and does not make money while lying down as people think. Instead, he has suffered losses for many years, with a loss of 1.228 billion yuan in three years.
Rel's gross profit margin was relatively low, with 15.2%, 10.1% and 24.1% respectively in the 2019-2021 fiscal years.
Rel's revenue growth rate in fiscal year 2021 reached 37.7%, far exceeding the performance growth rate of Tongce Medical in the same industry. Judging from the financial report, the revenue growth rate is significantly higher than the growth rate of raw materials and sales expenses.Rel did not explain the detailed reasons for the surge in revenue in the prospectus. The daughter holding company, the actual controller of
, is not only the company's largest customer and one of the top five suppliers. Whether the products sold or purchased from Riel are all dental products, the relationship behind it is thought-provoking.
Text:
On March 15, an A4 paper document was circulated in the market. Supervision requires the Institute of Information of the Chinese Academy of Medical Sciences and the Private Hospital Branch of the China Hospital Association to feedback before March 15 whether the listing financing of for-profit medical institutions is in line with the policy orientation of the development of the health industry, whether the listing financing of for-profit medical institutions will have a bad demonstration effect in the medical industry, and whether the listing financing of for-profit medical institutions will lead to the risk of disorderly expansion of social capital in the medical field. As soon as the news came out, A shares Aier Eye Hospital, Tongce Medical, Haijiya and Jinxin reproductive crashes.
The bad thing is that there are currently many for-profit medical institutions in A-share and Hong Kong stocks queuing to go public. If the rumors are true, the road to listing of these institutions may change. , which has been queuing for more than a year, is one of the members waiting to go public. From the background, behind Riel Dental, there are many star institutions such as Goldman Sachs , Hillhouse, and Temasek.
Regulatory suspicion
On the afternoon of March 15, an A4 paper made the already unlucky A-shares worse. Rumors are required to investigate the listing financing of for-profit medical institutions, to understand whether the listing financing of for-profit institutions will have a bad demonstration effect in the industry and whether it will lead to disorderly expansion of social capital in the medical field. Although
is a simple document that requires assistance in providing research materials, its profound meaning has brought huge panic to the market, and investors are worried that this may be a signal that regulators have begun to rectify for-profit medical institutions. Therefore, in the afternoon, opened , Tongce Medical directly hit the limit , Aier Eye Hospital once fell by more than 16%, and finally closed down 11.41%. Haijiya Medical, the Hong Kong stock market, plummeted by 30%, and its market value directly evaporated by nearly 30%. The medical ETF dropped sharply since the afternoon and finally closed down 4.8%, with a net value of 0.516. What’s worse than being listed is that there are still many for-profit medical institutions queuing up for listing, and Ruier Dental’s Hong Kong Stock IPO is coming soon.
It is reported that Riel Group will be listed on the Hong Kong Stock Exchange on March 22, with an issue price of approximately HK$14.62 per share, and a financing amount of approximately US$86 million.
In the trading software discussion area, new players have already pessimistic about this stock.
data shows that Ruier Dental established its first dental clinic in Beijing in 1999, and then expanded to major cities across the country. Currently, Ruier has two major brands: Ruier Dental, which is positioned as high-end oral medical services and Ruitai Dental, which is positioned as mass-market oral medical services.
According to the prospectus, Riel has currently completed multiple rounds of financing, with investment institutions star-studded, including KPCB China, GL Capital, New Tianyu Capital , Goldman Sachs, Hillhouse, Temasek, etc.
Investors have high expectations for Riel, but judging from the current financial data, high-end oral medical services are not "making money while lying down" as the public imagines. Dental hospital is very dependent on doctors, and it is necessary to make continuous concessions to retain well-known doctors so as to retain and attract new customers.In addition, Riel's revenue in fiscal year 2021 increased significantly, and the corresponding costs did not maintain a similar growth rate. The company's accounts receivable also fluctuated abnormally. All signs seem to reflect that the company's revenue in fiscal year 2021 is very strange. Phoenix Finance's "IPO Observation Post" called Riel to inquire about relevant matters, but no response was received as of press time.
High-end oral does not make money. The profits to dentists lead to low gross profit margins
In the prospectus, Riel mentioned that the brand of Riel Dental is mainly aimed at wealthy patients with high purchasing power and great lifelong value in first-tier cities. Most clinics are located in golden commercial areas and Grade A office buildings.
All along, dental clinics have given people the feeling of making money while lying down. After all, dental implants and orthodontics often cost tens of thousands or even hundreds of thousands, and ordinary tooth extraction, dental cleaning and root canal treatments are much more expensive in private dental clinics than in public hospitals. But after reading Riel's prospectus, Phoenix Finance's "IPO Observation Side" found that high-end oral medical care is not as profitable as people think.
Financial data shows that in the 2019-2021 fiscal years, Riel's operating income was RMB 1.08 billion, RMB 1.1 billion and RMB 1.515 billion, RMB 164 million, RMB 111 million and RMB 364 million, respectively, and operating profits were RMB -840 million, RMB -133 million and RMB 124 million, respectively, and the losses within the year were RMB 304 million, RMB 326 million and RMB 598 million, respectively, with a total loss of RMB 1.228 billion in three years.
thought it was a high-end service that was not short of money, but it ended up losing money for years. It was not until the 2021 fiscal year that the experience profit barely turned a profit.
Why is Riel losing money? Where are the high fees spent?
The answer is that dental clinics like Riel need a lot of concessions to the dentist.
In other words, a good stomatologist is the person who stands at the top of the food chain in this industry.
Related data shows that the recommended value of WHO for dentists: population ratio is 1:5000, which has risen to 1:2000 in developed countries. Among European countries, the proportion of Netherlands is 1:2564, while the current proportion of dentists in China's dentist population is less than 1:8000, far lower than the recommended value of developed countries and WHO.
In 2020, the number of dentists per million people in China was 175, far lower than the level of in other developed countries or middle-developed countries in . For example, the number of dentists per million people in developed or middle-developed European countries is 810, the number of dentists in the United States is about 608, and the number of dentists per million people in developing countries is 1,200.
The number of dentists in China is obviously insufficient, and there is a large talent gap.
Currently, capital's intervention in dentistry is mainly in downstream hospitals and dental products and consumables, and there is no obvious support for talent training. Moreover, as a branch of medicine, a mature dentist has a longer training cycle, and as an industry that looks at qualifications, the longer the dentist's professional time and the higher the professional level, the higher the corresponding salary level.
Riel As a private high-end stomatological hospital, compared with public and specialized hospitals, the greatest competitiveness of attracting talents is salary and salary. In other additional conditions, it is difficult to compete with competitors. Therefore, the company can only continue to spend huge amounts of money to retain doctors at the top of the pyramid to maintain the healthy operation of the stomatological hospital.
prospectus shows that from 2019 to 2021, Riel's sales costs were 917 million yuan, 988 million yuan and 1.151 billion yuan, respectively, accounting for 84.8%, 89.9%, and 75.9% of the total revenue, respectively. It is precisely because of the high sales costs that the company's gross profit margin is relatively low, at 15.2%, 10.1%, and 24.1%, respectively.
From the perspective of details, the most important part of sales costs is employee welfare expenses, accounting for more than 50%, including RMB 463 million, RMB 502 million and RMB 585 million, respectively.
Riel admitted in his prospectus that due to the current shortage of dentists, the company has and is expected to continue to provide more competitive rewards for dentists, and it does not necessarily guarantee victory in the competition for dentists. If it fails, it may have a certain impact on daily experience.
In addition, the company mentioned that the average monthly income of each dentist who joined Riel from 2016 to 2018 grew at a compound annual growth rate of 43%, 54%, and 30% during the five-year, four-year and three-year period.
Strange revenue growth curve
After figuring out why Riel made a lot but lost many years, Phoenix Finance's "IPO Observation" found that Riel's interesting financial data -
mentioned above that in the fiscal years 2019 to 2021, Riel's gross profit margin was 15.2%, 10.1%, and 24.1%, respectively. The new crown epidemic broke out in early 2020, and the performance of dental clinics in the first half of the year will inevitably have a certain impact. This part of the performance mainly affects the end of fiscal year 2020 and the beginning of fiscal year 2021. Even if people experience retaliatory consumption after the epidemic, why did Riel's gross profit margin rise by a full 14 percentage points in fiscal year 2021? The increase reached 138%?
According to relevant financial data, in the 2020-2021 fiscal year, Riel's revenue rose from 1.1 billion yuan to 1.515 billion yuan, an increase of about 37.7%, and sales cost increased from 988 million yuan to 1.151 billion yuan, an increase of 16.5%. The increase in revenue and cost is quite different, which has caused a rapid growth in gross profit margin.
Riel explained in the prospectus that the rapid growth of revenue was due to the government lifting restrictions and related quarantine measures in China, so the business rebounded strongly. However, compared with Tongce Medical on the same track, Tongce Medical's operating income increased by 8.12% in 2020, lower than the growth rate of 22.52% in 2019, and the lowest growth rate in five years. At the same time, Tongce Medical's gross profit margins in 2019 and 2020 were 46.08% and 45.17% respectively, and the gross profit margin fell slightly under the influence of the epidemic.
In addition, the growth of revenue is generally accompanied by the growth of raw materials and consumables in costs. The growth rate of the two should not be too big. In the fiscal years of 2021 to 2021, Riel's revenue growth rate was 37.7%, and the growth rate of raw materials and consumables was 28.06%. The growth rate of raw materials and consumables obviously could not keep up with the growth rate of revenue.
Did Narier add more stores in fiscal year 2021? It is not mentioned in the prospectus.
So, where does the strange revenue growth come from?
Judging from the prospectus, the significant increase in revenue corresponds to the significant growth in accounts receivable of Riel.
Among them, accounts receivable for no more than 3 months increased from 17.54 million yuan in fiscal year 2020 to 48.01 million yuan in 2021, and accounts receivable for more than 2 years increased from 5.34 million yuan to 11 million yuan in 2021. Similarly, Riel still briefly explained in the prospectus that the growth of accounts receivable is due to the recovery of performance after the epidemic.
In addition, the prospectus mentioned that in 2019, 2020 and 2021, Riel's annual visits were 1.063 million, 1.076 million and 1.371 million respectively. Simply calculate, the company's average customer price was 1,015.7 yuan/time, 1,022.1 yuan/time, and 1,105.1 yuan/time respectively. The company's price increase was not large. Judging from the company's disclosed revenue contributed by the general dentistry, orthodontics, and implantology department, the rise in orthodontics business may also drive the increase in customer order price, so the price increase cannot fully explain the significant increase in revenue. What is more likely to be the increase in annual visits. If Riel has increased its marketing efforts after the epidemic, thus attracting more customer flow and causing a surge in revenue, it is also a possibility. However, according to the disclosed financial data, Riel's sales expenses in fiscal 2021 have significantly decreased, and its share has also dropped from the previous 7.7% to 5.2%. It can be seen that the company has not put much effort in marketing, so it can attract traffic through this means.
Regarding the specific reasons for the significant increase in revenue, Phoenix Finance called Ruier's headquarters to inquire about relevant matters. Ruier said that the person in charge would call back later, but no response was received as of press time.
The daughter of the actual controller is both the largest customer and the supplier. The transaction products are all dental products
In addition, in 2021, Hangzhou Shengchao Medical Technology Co., Ltd. became Ruier's largest customer, with a transaction amount of 10.33 million yuan. The products provided are dental products. In the 2019 and 2020 fiscal years, Shengchao Medical has never appeared among the top five customers.
Day Eye Check shows that Shengchao Medical was established on March 14, 2019. It mainly engages in the business of third-class medical devices and is a related party of Ruier. Ruier's chairman and CEO is Zou Qifang . Zou Qifang's daughter Zou Jin holds 65% of the shares of Hangzhou Jiaworth and its subsidiary Hangzhou Shengchao Medical Technology, so the transactions between the two constitute related transactions.
In addition to airborne the largest customer, Hangzhou Shengchao Medical also has one of the company's main suppliers. In the 2021 fiscal year, Ruier purchased 16.61 million yuan of dental products from Hangzhou Shengchao Medical, ranking the fourth largest supplier, with procurement accounting for 4%. The daughter of the actual controller of
. All companies are both the largest customers and one of the top five suppliers. The relationship behind it is thought-provoking. Interestingly, whether the products sold or purchased are dental products. Except for Hangzhou Shengchao, the services provided by Ruier to most customers are oral care services.
Postscript:
High-end oral medical services have always been considered to make money like flowing water, but Riel's prospectus breaks this perception. Recently, A-shares and Hong Kong stocks have been falling continuously, and the overall environment of the capital market is not optimistic. The rumors on the afternoon of March 15 pushed the medical sector to the forefront.
Can Ruier Group go public as scheduled? In today's special environment, what kind of valuation the market will give it, Phoenix Finance's "IPO Observation" will continue to pay attention to.
