Zebra consumption Shen Tuo
The submission to the Hong Kong Stock Exchange for the third time exposes the capital ambition of Zhang Wanneng, the founder of Healthway, and also shows the difficulty of listing Internet medical companies today.
In the context of the general operation of the industry is not very optimistic, this domestic platform specializing in digital health medical services is inevitably a little embarrassed to sprint to the market. In the past 3 years and 1 period, the company's continuous loss has not stopped. On an adjusted basis, the profit is still slim.
Health Road is the earliest gold digger in the domestic Internet medical industry, earlier than Dr. Chunyu, Good Doctor and Ping An Health, and with the support of powerful investors, the company is still facing many tests.
From 2021 to the first half of this year, the company's monthly active users dropped from 10 million to 3.5 million, paid individual users decreased from 800,000 to 200,000, and the number of medical consultations on the platform decreased from 10 million to 1.8 million.
Three-punch Hong Kong stocks
In the Internet medical track, Healthway Co., Ltd. (hereinafter referred to as Healthway) is one of the largest digital health medical service platforms in China, and one of the star enterprises participating in the digital transformation of the healthcare industry in the past 20 years. The company has attracted four rounds of investment with the participation of Baidu and Shangrao State-owned Assets, among which Baidu (Hong Kong) is the second largest shareholder of the company.
With the help of investors, the company's impact on the capital market has accelerated. Following the disclosure of the prospectus on June 13 and December 29 last year, the prospectus was disclosed again on September 13 this year, continuing to sprint to the main board of Hong Kong stocks.
The predecessor of Health Road was Fuzhou Renren Health, which was established in 2001, as part of the project of local public convenience services in Fujian, with the launch of the medical network as the operating platform, and the initial service was online registration. Later, it gradually evolved and upgraded to a medical platform covering individuals, enterprises and even doctors.
Now, in the Health Road software (mini programs, etc.), it is no longer limited to registration, but also integrates a variety of special services such as online consultation, interactive community, medical escort, medical guidance, and chronic disease management.
This kind of full-cycle, full-course service has attracted many audiences. As of the end of July this year, there were 196 million registered individual users and 879,000 registered doctor users, linking 11,731 hospitals across the country.
In the first half of 2024, there will be 1.8 million medical consultations and 2.9 million online appointments on the platform, and 6.4 million paying individual users of health care services in the same period.
Leveraging its massive user base, the company has two main business categories: health care services, corporate services and digital marketing services.
According to the prospectus, from 2021 to the first half of 2024, the revenue of health care services will be 128 million yuan, 183 million yuan, 297 million yuan and 123 million yuan respectively, accounting for 29.7%, 32.2%, 23.9% and 20.1% of the company's total revenue, respectively.
During the same period, the revenue of enterprise services and digital marketing services reached 301 million yuan, 385 million yuan, 946 million yuan and 489 million yuan respectively, accounting for 69.8%, 67.6%, 76.0% and 79.9% of the company's total revenue, respectively.
The losses are not stopped
In recent years, the operating income of Healthway has ushered in rapid growth. From 2021 to the first half of 2024, they will be 431 million yuan, 569 million yuan, 1.244 billion yuan and 611 million yuan, respectively.
While revenues are growing steadily, losses continue to occur. During the same period, the losses for the year were approximately $155 million, $256 million, $314 million and $57 million respectively.
In the prospectus, the company truthfully disclosed the reasons for the loss, mainly due to the change in the book value of the redemption liabilities. From 2021 to the first half of 2024, the losses arising from changes in the book value of the company's redemption liabilities were 84.4 million yuan, 268 million yuan, 325 million yuan, and 63 million yuan respectively.
Changes in the carrying amount of the Company's redemption liabilities are non-cash items. During the same period, the redemption carrying amounts were $1.1 billion, $1.4 billion, $1.7 billion and $1.8 billion, respectively, and the Company expects that the redemption liabilities will be reclassified from liabilities to equity as the preference of all convertible redeemable preference shares will be terminated after (codification) and the related redemption liabilities will be reclassified as equity.
During the reporting period, the company's adjusted net profit (non-IFRS measurement) was about 486,000 yuan, 23.919 million yuan, 39.411 million yuan and 14.842 million yuan respectively.
During the same period, the Company's profitability also showed a downward trend, with overall gross margins of 40.2%, 43.2%, 32.0% and 30.0%, respectively, and adjusted net profit margins of 0.1%, 4.2%, 3.2% and 2.4%, respectively.
The company's debt remains high. From 2021 to the first half of 2024, its net liabilities will be approximately $1.199 billion, $1.441 billion, $1.652 billion and $1.709 billion, respectively.
Business empire
The growth of the road to health is related to the personal experience of the founder Zhang Wanneng.
In 1991, Zhang Wanneng graduated from Zhejiang University with a major in biological and medical instruments, and later worked in Fujian Shida Computer Group Co., Ltd., mainly engaged in mobile intelligent terminal business and Internet of Things perimeter security business. Involvement in the Internet medical and health business comes from the difficulty of seeing a doctor and queuing up to touch oneself.
In 1999, Zhang Wanneng accompanied his relatives to the hospital in Fuzhou to see a doctor, and the lengthy queue process made him think about whether he could use the Internet to solve the problem of queuing. Not only that, but when you go to the hospital to see a doctor, you also face a variety of pain points such as information asymmetry, uneven distribution of resources, and inefficiency.
In 2001, Zhang Wanneng founded Fuzhou Renren Health, launched a medical care network, and took the lead in launching appointment and registration services nationwide, which became one of the convenience projects in Fujian at that time, and received rave reviews in the industry.
In 2003, Zhang Wanneng focused on future business development and established Fuzhou Health Road Information Technology Co., Ltd. to launch the "Health Road" brand on the basis of the medical care network, and to be involved in the Internet medical business at a deeper level.
Ten years ago, it was a relatively rare thing to use the Internet to solve problems such as medical consultation, but capital sees future development prospects. In 2015, Baidu (Hong Kong) invested US$60 million in strategic investment to help the road to health gradually cover from high-level hospitals to grassroots medical institutions, and the whole process of medical services to hierarchical diagnosis and treatment. And in Yichang, Hubei Province, the hierarchical diagnosis and treatment model was piloted, and then it was promoted in the vast areas of the country.
This business model has attracted the participation of a lot of capital, such as Shanghai Jiejia and Shangrao State-owned Assets.
Over the course of more than 20 years, Zhang Wanneng has created a medical and health business empire, but his ambitions do not stop there. In the next three years, the company will use the IPO to raise funds to develop the health care service business, including expanding the network of specialty pharmacies near tertiary hospitals, expanding the on-site health support team, supporting corporate services and digital marketing services, as well as strategic investments or acquisitions.
As of the Latest Practicable Date, Zhang Wanneng held approximately 34.70% of the total issued share capital of Healthway through its wholly-owned company, Fengji, and Baidu (Hong Kong) held 12.46% of the shares.