Industry barriers are high and the track is narrow, and Huayi Network went public in Hong Kong to survive?

Reporter Xu Jie, trainee reporter Zhang An

On the evening of January 25, Huayi.com Technology Co., Ltd. (hereinafter referred to as Huayi.com) submitted a prospectus to the Hong Kong Stock Exchange, with BofA SECURITIES and Haitong International as its co-sponsors.

Founded in May 2008, huayi's early main business was to provide digital medical education solutions to medical and health personnel. It launched a digital health service solution for patients and the public in 2015 and a digital health marketing solution for pharmaceutical and medical device companies in 2017. At present, its business layout is mainly in the above three areas.

The ability to cover the size of the doctor is large and the premium is weak

According to the "2020 Statistical Bulletin on the Development of Mainland Health and Health Undertakings" issued by the National Health commission, in 2020, among the health technicians in the mainland, there were 4.086 million practicing (assistant) physicians, 4.709 million registered nurses, 497,000 pharmacists and 561,000 technicians.

As for China Medical Network, according to the prospectus, as of December 31, 2020, its registered medical professional users reached 10 million, of which 3.3 million were practicing physician users. According to statistics, the registered medical professional users and practicing physician users of China Medical Network account for more than 60% of the total number of medical and health personnel in China and more than 70% of the total number of practicing physicians in China, respectively.

On the whole, the user coverage of Huayi Network in the field of practicing physicians is very high.

An attending physician of the orthopedic department of a top three hospital told the Securities Daily reporter that the Chinese medical network is a very important platform for doctors and nurses. Doctors can get credits when they study on the China Medical Network platform, and this credit is directly linked to the promotion of rank. At the same time, doctors are an industry that requires lifelong learning, so there is a strong stickiness to this type of platform.

Under the situation that the coverage of practicing doctors is large and recognized by doctors, it seems that the revenue performance of Huayi Network is not satisfactory.

From the perspective of financial data, in 2019, 2020 and the nine months ended September 30, 2021, the total revenue of Huayi Network was 276 million yuan, 397 million yuan and 232 million yuan, respectively. According to the business category, the digital medical education business revenue of Huayi Network during the reporting period was 210 million yuan, 299 million yuan and 143 million yuan respectively, accounting for 76.1%, 75.4% and 61.6% of the annual revenue, respectively, and the education business contributed the bulk of its revenue, which was its most important business.

However, when split into a single user, it will be found that the charging ability of medical education users of Huayi Network is very low. In 2019, 2020 and the nine months ended 30 September 2021, the average annual expenditure per paying user was $115, $119 and $125, respectively.

An investor in the field of vocational education told the "Securities Daily" reporter that medical vocational education is a high barrier and a narrow audience track. The relevant teaching content has a high degree of professionalism, and if you want to enter this track, you must spend a lot of effort on teaching and research in the early stage.

On the other hand, the doctor group is generally higher educated, and the judgment ability of the content is much higher than that of ordinary users, and it is also necessary for the company to do a lot of teaching and research and marketing work if it wants to get the recognition of the doctor group. In terms of input-output ratio, it is not necessarily a positive distribution.

Therefore, there are not many players in the medical education track, and the competition is not strong. However, on the other hand, the number of doctors in the group is relatively limited. If you only seek development in a specific group, the company's future growth space will also be limited.

There is not enough ammunition in hand to develop new businesses

In this context, Huayi Network began to develop new business segments. According to the data, China Medical Network expanded its digital health service solutions and digital medical marketing solutions in 2015 and 2017 respectively.

The market size of the above two businesses is huge. According to the data, the size of China's digital medical service market will reach 258.3 billion yuan in 2020 and is expected to reach 1,372.4 billion yuan by 2025. China's medical marketing market will reach 679.7 billion yuan in 2020 and is expected to reach 991.5 billion yuan by 2025.

Although the market volume is vast, from the data of the prospectus, the "ammunition" in the hands of Huayi Network is not sufficient.

As of September 30, 2021, the cash and cash equivalents in its hands were 24.212 million yuan, down 78.58% from the same period last year. In the same period, Huayi Network still has 127 million yuan of contract liabilities in its hands. For this part of the liability, the company said, mainly due to the increase in the purchase of courses or study cards under the digital medical education solution.

The cash and cash equivalents in the hands of the company can no longer cover the contract liabilities, in other words, the company has used the user's prepaid accounts in advance, and there is a certain risk. And as of September 30, 2021, the total liabilities of Huayi Network were 363 million yuan, and the asset-liability ratio was as high as 86.52%.

At the same time, the prospectus also clearly states that some of the newly launched businesses of Huayi Network are in the early stages and the business model is taking shape. Compared to some competitors, there may not be enough resources to develop solutions quickly to gain a favorable market position.

At the same time as its own hematopoietic capacity is insufficient, the ability of Huayi Network to obtain financing from the primary market is not strong. According to Tianyancha data, the latest round of financing of Huayi Network was obtained in August 2019, and before that, it had not received any financing for 7 consecutive years.

In addition, under the double reduction policy in 2021, the capital market is sluggish about the education track. Most capitals have a wait-and-see attitude towards the education field, and in this context, choosing to land in the secondary market may also be a choice that Huayi Network has to make.

For future development, the prospectus pointed out that the funds raised by the IPO will be used for business expansion and upgrading; to consolidate digital platforms and upgrade AI applications; to expand digital health marketing solutions and upgrade digital health service solutions; and to explore strategic cooperation, investment and acquisitions.

In this regard, the above-mentioned investors also said that at present, how to link the existing resources with other businesses and increase the company's competitiveness may be a problem that the company should focus on.

(Edited by Tseshandan)