When it comes to consultation and registration appointments, I believe many people are familiar with the "Health 160" mini program.
In terms of the number of registered on the platform, the number of cooperative hospitals, and the number of medical staff accessed, Health 160 International (hereinafter referred to as "Health 160") is the largest digital medical and health service platform in the digital medical and health comprehensive service industry in mainland China.
Now, the largest appointment registration platform has also started its IPO journey for Hong Kong stocks.
After nearly 20 years of development since 2005, Health 160's business not only includes appointment registration, but also covers diversified medical and health services such as online marketing solutions, digital hospital solutions, online health services, and sales of medical and health supplies. And as such a platform with rich business types and a huge user base, does Health160 make money?
The cost of inventory is high, with a loss of 327 million in three and a half years
Zhitong Financial APP learned that according to the prospectus, Health 160 chose Shenwan Hongyuan Hong Kong and Qingke Capital as its joint sponsors. As early as 2015, the company completed the shareholding reform and was listed on the New Third Board, and the listing was terminated in June 2018.
Earlier, the predecessor of Health 160 was also named Shenzhen Ningyuan, and then in June 2017, that is, during the listing of the New Third Board, it was officially renamed "Health 160". As for the delisting from the New Third Board, the company has said that it is preparing for the launch of Hong Kong stocks or GEM listing.
And perhaps even the company did not expect that the preparation for the transfer of listing after the delisting from the New Third Board would take 5 years.
So far, according to Frost & Sullivan data, whether it is calculated by the number of registered through the platform in 2022, the number of hospitals cooperated as of December 31, 2022, and the number of medical staff connected to the platform, Health 160 is the largest digital medical and health service platform in China's digital medical and health comprehensive service industry in 2022.
With the continuous expansion of business scale, the revenue scale of Health 160 has also achieved continuous growth. For the year 2020-2022 and the six months ended June 30, 2023, Health 160's revenue was RMB279 million, RMB423 million, RMB526 million and RMB269 million, respectively.
However, Health 160 also has a pain point faced by many Internet medical companies, that is, it is difficult to make profits. According to the company's prospectus, from 2020 to 2022 and for the six months ended June 30, 2023, Health 160 suffered losses of 29.876 million yuan, 152 million yuan, 120 million yuan and 24.776 million yuan respectively, with a cumulative loss of 327 million yuan in the past three and a half years.
If dismantled, the cost of inventory is the core of the company's loss. Zhitong Financial APP learned that in 2020-2022 and the six months ended June 30, 2023, the inventory cost of Health 160 was 140 million yuan, 250 million yuan, 365 million yuan and 182 million yuan respectively, accounting for 79.5%, 86.3%, 89.5% and 90.2% of the total sales and service costs in the same period.
Among them, inventory cost mainly refers to the cost of purchasing products from third-party suppliers, including medicines, medical and health supplies, and medical supplies and equipment.
At present, Health 160 is mainly divided into two main lines: digital medical and health solutions and sales of pharmaceutical and health products. The above-mentioned procurement of drugs and medical supplies mainly occurs in the sales line of medical and health supplies.
In the sales process of pharmaceutical and health products, Health 160 mainly plays the role of "sales intermediary", and mainly focuses on wholesale sales. For the six months ended June 30, 2023, 91.2% of sales were made on a wholesale basis. However, compared with the retail model, the gross profit margin of the wholesale model is lower, which greatly reduces the overall gross profit margin of the sales of pharmaceutical and health products.
However, even so, Health 160 has not been able to get rid of its dependence on the sales of pharmaceutical and health products in terms of revenue, and the proportion of the company's sales revenue of pharmaceutical and health products has remained at about 70% during the past performance period.
Behind this, to a certain extent, is the manifestation of the sluggish growth of Health 160 in the digital medical and health solution business. As the country's largest digital medical and health service platform, even though the number of registered users of Health 160 continues to grow, the monthly active users are showing a downward trend.
Zhitong Financial APP learned that in 2021, the average monthly active users of Health 160 were 3.9 million, which dropped to 3.3 million in 2022 and further decreased to 3 million in the first half of 2023. The decline in average monthly active users has also led to a downward trend in the company's digital healthcare solution revenue.
As a result, for Health 160, the company is facing a bottleneck in the growth of its high-gross margin business, and has to rely on its low-gross margin business to drive revenue growth. However, the company's current main reliance on the sales of medical and health products business is not high, and the company's inventory costs are high, which further exacerbates the risk of loss.
The bargaining power of the sales of medical and health products is weak, and the liquidity is under pressure
After a long period of not turning a profit, Health 160 is also facing some pressure in terms of liquidity.
In 2020-2022 and the six months ended June 30, 2023, the net cash from operating activities of Health 160 reached 19.686 million yuan, -3.509 million yuan, -42.391 million yuan and -36.412 million yuan, respectively. To do this, the company had to supplement the company's cash flow by making financing. As of mid-2023, the cash and cash equivalents at the end of the Health 160 period reached 57.437 million yuan, of which 52.241 million yuan came from financing.
For Health 160, if the company cannot complete the listing and obtain financing as soon as possible, the company may face the risk of cash flow disruption.
On the other hand, according to Zhitong Financial APP, due to the focus on the expansion of drug sales business, Health 160 also has a certain risk of accounts receivable. For the six months ended June 30, 2023, the Company's net trade receivables amounted to $148 million, representing approximately 56.8% of total assets.
In 2020, 2021 and 2022, the company's trade receivables recovery days were 48 days, 52 days and 52 days, respectively. In the first half of 2023, the number of days for the recovery of trade accounts receivable has reached 71 days, and the bargaining power is at a disadvantage in the industry chain.
In terms of funds, the health 160 subsidiary has also been restricted in its bank account because of a lawsuit. Among them, in a sales transaction in July 2020, the company was unable to deliver masks to the customer due to supplier problems, so the customer filed a judicial lawsuit against the health 160 subsidiary. As a litigation preservation measure, the bank accounts of Health 160's subsidiaries were restricted in November 2022.
In addition, most of the amounts receivable from related parties of Health 160 are also related to Luo Ningzheng, the company's single largest shareholder, chairman and chief executive officer. From 2019 to 2023, Health160 provided certain term loans to Luo Luo Ningzheng. In 2020, 2021 and 2022, the company's outstanding receivables from Luo Ningzheng were 35 million yuan, 9.5 million yuan and 1.2 million yuan, respectively. In the first half of 2023, the outstanding amount receivable from Luo Ningzheng is still 1.2 million.
For Health 160, choosing to go to Hong Kong can only alleviate the company's short-term predicament. Only by finding a suitable business model and building hematopoietic capacity to reverse the current situation of continuous losses can we achieve long-term development. Health 160 also mentioned in the prospectus that the company has implemented a comprehensive monetization mechanism. In the future, whether Health 160 can find a real growth profit point and break through the current predicament is a question it needs to consider.