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1. China’s medical aesthetics market maintains rapid growth, and formal medical aesthetics institutions gradually return?
1.1 With the rise of appearance level economy, China’s medical beauty market has accelerated development
1.1.1 The scale of China’s medical beauty market maintains a high growth rate
Medical hairdressing is with surgery, drugs, medical equipment and other traumatic or invasive medical technology has on a person’s appearance and configuration of each part of the body to repair and remodeling, its derivatives in clinical medicine, but the difference in clinical medicine, medical beauty in aesthetic rather than treatment, for the purpose of consumption properties than therapeutic properties. The demand for modern medical beauty comes from the pursuit of “appearance level spirit” brought about by the improvement of economic level, and things linked to appearance level will be sought after. With the improvement of economic level, combined with the influence of factors such as “web celebrity effect” in recent years, people’s ability and willingness to pay for appearance level are increasing, and the demand of medical beauty industry is developing rapidly. From 2012 to 2019, China’s medical beauty market maintained rapid growth, with an annual compound growth rate of 28.97%, and an annual growth rate of more than 25% from 2012 to 2018. In 2019, the scale of China’s medical beauty market reached 176.9 billion yuan, with a year-on-year growth rate of 22.2%. From the perspective of demand group, women aged 20-25 are the main demand for medical beauty in China. In 2018, women accounted for 89% and men 11% of the total number of plastic surgery patients in China, according to statistics from Xinoxia. Among female consumers, consumers aged between 20 and 25 accounted for the highest proportion, reaching 38.57% in 2019. The post-1995 generation has become a major force of Internet medical beauty consumers. Seen from the motive of seeking beauty, the demanders’ pursuit of medical beauty is mainly self-appreciation and recognition. According to XIN big data, the internal causes of medical beauty demand in 2018 include the pursuit of perfect appearance and the hope to improve self-confidence through appearance, accounting for 61% of self-aesthetic approval, an increase of 6 percentage points compared with 2017. Based on the calculation of the proportion of different age groups and population, the total number of Chinese medical beauty consumers in 2018 was about 18.73 million, and the actual per capita consumption amount of Chinese medical beauty consumers was estimated to be 7,700 yuan. The consumption power of medical beauty products showed a relatively strong level. In recent years, China has gradually become an important market for global medical aesthetics consumption. China’s medical beauty market is relatively late in maturity. It originated in 1929 when modern plastic surgery was launched during the First World War. However, the initial stage of the overall market did not appear until 1997, when the first private medical institutions began to lay out the plastic beauty market. Since China joined the WTO in 2001, its economy and society have been greatly influenced by international trade and international cultural exchanges, and the medical and aesthetic industry has entered a period of rapid development. From 2013 to 2017, under the influence of Internet communication and the economy of appearance level, China’s medical beauty market has entered a period of rapid growth. The public’s pursuit of beauty has been diversified and personalized, and the acceptance of medical beauty has also been continuously improved. Internet medical beauty platforms such as Xinxiang, Gengmei and Yuemei have been rising, and a large number of private medical beauty institutions have been emerging.
1.1.2 The proportion of non-surgical medical beauty projects is relatively large
Types of medical aesthetic items include surgical and non-surgical ones. Common surgical items include blepharoplasty, rhinoplasty, tooth extraction and correction, etc. Non-surgical treatments include injections, lasers, and other energy-based skin treatments. Common treatments include hyaluronic acid injections, photonic skin rejuvenation, and laser hair removal. Surgical plastic surgery items generally have the characteristics of higher price, greater trauma, long recovery cycle, higher risk, obvious effect and permanence, which are suitable for consumers who need to make a large adjustment. Non-surgical items are characterized by low single price, relatively small risk, small trauma, short recovery period and multiple medical and aesthetic adjustments, but they do not have permanent curative effect. For example, the maintenance time of hyaluronic acid and Botox injection is limited, and consumers need to consume again after a period of time to maintain the effect. Therefore, non-surgical medical beauty projects have a relatively high repurchase rate, which is suitable for consumers with low risk tolerance of medical beauty, pursuit of convenience and speed, small adjustment range or frequent demand changes. In recent years, non-surgical items have become more and more popular among consumers, and the market share of non-surgical medical beauty items exceeds that of surgery, and the scale proportion is gradually increasing. In 2018, the market scale of non-surgical medical beauty projects reached 50 billion yuan, accounting for 41.08%, and there is a trend of further improvement. The demand for non-surgical medical beauty projects and their beauty materials is expected to continue to grow.
1.2. The market share of formal medical and aesthetic institutions needs to return
The medical beauty industry has a huge industrial chain. From the perspective of the types of participants in each link of the industrial chain, the overall structure is “jujube shaped”. Upstream mainly include drugs, instrument production supplier and the agent distributor, middle reaches for medical cosmetology organization, including plastic, large public hospital hospital chain, small and medium-sized private plastic hospital, a variety of types such as small private clinics, constitute a relatively large and scattered, the downstream end market mainly for medical beauty consumers, upstream and downstream participants types relatively concentrated. “Black medical beauty” prevails, and legal medical beauty institutions are badly in short supply. According to iResearch’s Insight White Paper on China’s Medical Cosmetic Industry in 2020, there are about 13,000 institutions with medical cosmetic qualification in China in 2019, of which hospitals, outpatient departments and clinics account for 29.1%, 32.9% and 38% respectively. From 2011 to 2019, the annual compound growth rate of the number of formal medical and aesthetic institutions was 12.69%, showing a certain rapid growth. However, compared with the annual compound growth rate of the medical and aesthetic market as high as 28.97% from 2012 to 2019, the growth rate of medical and aesthetic institutions was less than half of the overall medical and aesthetic market demand in the same period, which was far from meeting the rapidly growing market demand. Regular institutions to provide medical beauty “seat” large shortage, for the “black medical beauty” left a survival gap. According to iResearch, there are more than 80,000 medical and aesthetic institutions operating illegally in China, and legal medical and aesthetic institutions account for only 14 percent of the total. New Oxygen’s big data shows that in 2017, the size of China’s formal medical beauty market accounted for only about 35%. “Black medical beauty” comes from the existence of legal medical beauty market demand, the contradiction of the main reason is the huge medical beauty needs and formal institutions and the doctor cultivation and growth of the number does not match, legal beauty medical institutions to the doctor, medicines and equipment, operating norms, such as high degree and strict, established with approval will take a long time and high cost, brings the serious shortage of supply, As a result, the waiting time for demand is longer and it is difficult to meet in time, and part of the demand turns to “black medical beauty” with faster response and lower cost. In the short term, most of the existing market shares occupied by informal medical beauty institutions need to be transferred to formal medical beauty institutions. In the long run, informal medical beauty institutions will continue to be banned, formal medical beauty institutions will break out of the tight encirclement, the future market growth space can be expected. With the increasingly stricter regulation of the industry and the rise of third-party platforms, the liquidation of the medical beauty industry is accelerating, and the formal medical beauty institutions are expected to accelerate their exit. Since 2016, the State Council general office, development planning commission, the China association for plastic industry and other competent authorities have released the medical cosmetology organization carries out detailed evaluation standards (2017 edition), the China association of cosmetic surgery medical cosmetology organization evaluation measures for the administration of such policies, clear medical institutions, medical doctors and medical beauty project entry requirements management, Guide consumers to identify legal and formal institutions to prevent the wild growth of non-compliant medical beauty institutions. Medical beauty market more developed regions such as Beijing, Shanghai, also have issued “on further strengthening comprehensive medical hairdressing regulatory enforcement notice, clear to crack down on medical hairdressing illegal behavior, strengthen the rightness of medicines and chemical reagents, equipment production and medical cosmetic advertising supervision, fundamentally eliminate the market, guide consumption. The emerging Internet medical beauty platform also fills the regulatory gap through the platform institution review, consumer evaluation and other ways, enhancing the transparency of industry information and helping high-quality formal medical beauty institutions establish their brands.
1.3 Private medical beauty institutions become the main supply force
Medical cosmetology institutions can be divided into public hospitals and private hospitals according to the nature of hospitals. Public hospitals include plastic surgery departments and plastic surgery specialized hospitals in public hospitals, while private institutions include large chain plastic surgery hospitals, small and medium-sized medical and aesthetic institutions and private clinics. For the technical strength of the public hospitals, the cosmetic surgery is the main technique on families, beauty is complementary, the service object mostly because of congenital factors or disease, trauma, burns and other external factors have obvious physical defects or dysfunction of the “patient”, is not within the scope of coverage of consumer medical beauty project only helping to run, There are few optional projects and basically no marketing promotion. Compared with private hospitals, their brand effect and service quality are relatively weak and their market share is relatively low. Due to its profitable nature, private plastic surgery hospitals have higher requirements on brand strength, customer acquisition strength and service strength than non-profit public hospitals. The market pricing model also generates a higher price level to further improve the “three forces” level. Therefore, the rapid development of private orthopedic hospital in the market, brand awareness and recognition of cultivation and increase rapidly, development speed is obviously faster than the public medical institutions, medical beauty market in China has formed the industry pattern of dominated by private institutions, including large chain institutions to serve the good quality, high medical technology level, marketing big and known by consumers, Become the fastest growing organization type. According to Frost Sullivan’s data, in 2018, the income scale of private institutions accounted for 81.5% of the total income scale of China’s medical beauty industry. In the past decade, the registration number of medical beauty and plastic surgery related enterprises has been increasing year by year, with an average annual increase of about 2,500. In 2018, the year-on-year growth rate of new enterprises was as high as 29.6%.
2. Comparison with mature markets: China Medical Beauty is in the early stage of growth, and the profit space of the institution is expected to gradually open
2.1 Comparison between the United States and South Korea: China’s medical beauty industry is in urgent need of increased supply
Medical cosmetology is highly related to the degree of economic development, and the medical cosmetology industry in the United States and South Korea is mature. The US is the first country in the world with a market size of over 100 billion yuan (RMB). In 2016, the market size of the US has reached 102 billion yuan (RMB). In the 1930s, the American economy began to continue to boom, and the medical aesthetics entered a period of rapid growth. At the same time, the American Society of Plastic Surgery (ASAPS) was established, and the medical aesthetics market began to develop in a standardized way. In 1992, the birth of medical beauty Botox, the United States entered the era of micro-plastic, light medical beauty, then laser hair removal, hyaluronic acid and other two epoch-making micro-cosmetic technology came out one after another, the American medical beauty industry entered the outbreak stage. From 2004 to 2011, the medical beauty industry in the United States also experienced a period of chaotic competition and adjustment due to insufficient supervision and frequent occurrence of “black medical beauty”, resulting in a sharp decline in the scale of the medical beauty market. With the emergence of the third-party medical beauty platform led by RealSelf in the United States, the industry information transparency has increased, and the growth rate of the medical beauty market has gradually recovered. At present, the United States has become the world’s most standardized medical and aesthetic laws, plastic surgery programs are the most abundant, the most mature development of the country. In South Korea, the medical beauty industry is one of the important pillars of the country’s economic development, with a market size of $8.36 billion (about 56.7 billion yuan) in 2018. The medical beauty industry in South Korea started during the Korean War, which was later than that in the United States. In the 1980s, with the rapid improvement of the economy and residents’ spending power of the “Four Asian Tigers”, the medical beauty industry in South Korea ushered in a rapid development. Under the strategic positioning of “export-oriented” economy, the South Korean government introduced a series of policies and capital investment around 2000 to support the further prosperity of the medical beauty industry. In 2009, medical tourism was legalized in South Korea. In 2015, the South Korean government again supported the development of the medical beauty industry with heavy funds, and planned to attract 1 million foreign medical tourists to South Korea for medical beauty consumption by 2020, making the medical beauty economic export strategy increasingly obvious. Comprehensive policy support and vigorous promotion by the government are the core driving forces for South Korea to become the country with the highest penetration rate of medical beauty in the world. Compared with the United States and South Korea, China’s medical aesthetics market started late and is still in the early stage of growth. In the early 21st century, with the gradual awakening of beauty concept, and the introduction of advanced American and Korean medical beauty technologies and micro-plastic surgery projects such as Botox and hyaluronic acid into China, the Chinese medical beauty industry started to develop. In 2013, it started to step into the growth period, which is only about 7 years ago. China’s medical beauty industry is gradually growing into a sunrise industry. From the perspective of economic development, China’s economy has been developing rapidly for 40 years since the reform and opening up. From the reform and opening up to 2011, China’s GDP maintained an average annual growth rate of more than 10%, and reached a record high of 14.23% in 2007. The household consumption level accumulated by years of economic growth is yet to be released. China’s medical beauty industry grew up in 2013 and is enjoying the accumulation and improvement of residents’ consumption level brought by the economic growth dividend since the reform and opening up. China has a population of 1.4 billion, four times that of the United States and 27 times that of the Republic of Korea. The huge population base also provides a solid consumption base for China’s medical and aesthetic market. On the supply side, the number of medical and aesthetic institutions and plastic surgeons per 100,000 people in China is far from that of mature countries. According to ZeroTech research data, there are more than 2,500 plastic surgery hospitals in South Korea, and more than 10,000 medical and beauty institutions of all kinds. It is estimated that every 100,000 population has at least 23.9 medical and beauty institutions. However, the number of medical and aesthetic institutions (including informal institutions) per 100,000 population in China is only 6.6, and the number of formal medical and aesthetic institutions in China is only 0.9. The supply of institutional resources is tight. According to 2017 figures, China had just 0.3 plastic surgeons per 100,000 people, compared with 2.1 in the US and 9.3 in South Korea.
2.2 Comparison of Hong Kong, China: marketing cost control is the key to profit of medical beauty institutions (omitted)
3. China’s medical beauty market has trillions of dollars in potential
3.1 The growth space of per capita consumption and population penetration rate of medical aesthetics in China should be at least 4 times
According to the estimate of the total size of China’s medical beauty market divided by China’s total population, China’s national per capita medical beauty expenditure increased from 35 yuan to 126 yuan from 2014 to 2019, with a compound annual growth rate of 29%. In 2018, the per capita consumption of the formal medical beauty market and the total medical beauty market were 41 yuan and 104 yuan respectively. Compared with the national per capita consumption of the formal medical beauty market of the United States of 166 yuan and the national per capita consumption of the South Korean medical beauty market of 1110 yuan, it has at least 4 times the formal market and 10 times the overall market consumption growth space. Compared with the United States and South Korea, the penetration rate of medical treatment per thousand patients in China has more than four times the growth space. According to Xinoxy’s “White Paper on Medical Beauty Industry 2019”, China’s consumption of medical beauty treatment courses ranked first in the world in 2018, surpassing that of the United States and other big countries in medical beauty industry. However, in terms of the number of medical treatments per thousand people, China’s consumption of medical beauty treatment courses still has a huge room for increase. In 2018, the number of diagnoses and treatments per 1,000 people in China was 14.8, compared with 51.9 in the United States and 86.2 in the Republic of Korea. Compared with the United States and the Republic of Korea, the penetration rate has nearly four times and six times the growth space, respectively. Among women aged between 18 and 40, the penetration rate of medical beauty users in China is 7.4%, and that in South Korea is 42%. The market of women of the right age in China has nearly six-fold room for growth.
3.2 It is predicted that the market scale of Chinese medical aesthetics will exceed RMB 360 billion in the next 3 years and be close to RMB 2 trillion in the long term
Medical cosmetology belongs to optional consumption, and the growth of disposable income is the basic driving force for the growth of medical cosmetology market. China’s economy is in a relatively stable growth stage. From 2014 to 2019, the annual compound growth rate of per capita disposable income of urban and rural residents was as high as 9%, and the annual compound growth rate of per capita consumption expenditure reached 8.5% and 14.76% respectively. The continuous upgrading of consumption has provided a solid guarantee for the national consumption capacity of medical aesthetics. The younger demographic and increasing penetration are key drivers of the medical beauty market. With the consumption upgrading into the 4.0 era, the age range affected by medical aesthetics consumption is expanding, and the medical aesthetics consumption demand of the new generation of young consumers is growing. In 2019, consumers under the age of 25 account for 54.10%. The new generation of medical beauty consumers born after 1995 and 2000 have benefited from the emergence of new channels of the Internet medical beauty platform, and together with the post-1980s consumers constitute the main force of the Internet medical beauty consumption. In 2018, the penetration rate of medical aesthetics in China ranks first among consumers aged 20-25, whose penetration rate is 7.18%, followed by that of consumers aged 26-30, whose market penetration rate is 4.45%. According to calculation, young consumers account for about 1% of the total population. From the perspective of population penetration rate, the population penetration rate of medical beauty in China is less than 2%, which is still a niche consumption in terms of data and there are a large number of potential consumers. According to the data of Xinoxia, in 2018, the population holding a positive attitude towards medical aesthetics in China accounted for 66%, of which 37% can accept micro-adjustment, 24% have an appreciation attitude, and nearly 5% have accepted adjustment of surgical items. The cognitive acceptance of medical aesthetics consumption is gradually improving. With the gradual maturity of non-surgical light medical beauty technology and Internet medical beauty platform, factors such as safety, convenience and price transparency will also effectively improve consumers’ confidence in medical beauty, and medical beauty services are expected to gradually penetrate into people’s life and basic consumption. From the perspective of regional penetration, economically developed regions have stronger consumption power and higher consumption penetration, and medical and aesthetic institutions develop more rapidly and on a larger scale. At present, Chinese medical and aesthetic institutions are mainly distributed in first-tier cities and new first-tier cities, including Beijing, Shanghai, Guangzhou and Shenzhen, Chengdu, Nanjing, Hangzhou, Chongqing and other places. In 2018, the penetration rate of new oxygen medical beauty users among consumers aged 18-40 in first-tier cities was 21.16%. With the continuous integration and expansion of legal medical beauty institutions and the addition of mature consumption concepts, the penetration rate of medical beauty consumption in first-tier cities is likely to grow further. However, non-first-tier cities account for about 95% of the population, and their penetration rate is less than 9% in the 18-40 age group, which has a large space for improvement compared with first-tier cities. At the same time, 2.8% of Chinese cities occupy 53.7% of the medical beauty resources, and the market layout of non-first-tier cities, even the third and fourth tier cities is huge. According to Frost&Sullivan data, the consumption of medical and aesthetic treatment in China was 16.29 million times in 2017, a year-on-year increase of 26.4%. In 2018, the number of medical visits per 1,000 people in China was 14.8. Based on the population size of 1.395 billion, the number of medical visits nationwide was 20.65 million, an increase of 26.8 percent over 2017. Based on the total market size of 176.9 billion yuan in 2019, the consumption of medical and aesthetic treatment courses in China is estimated to be 24.5 million times, and the total number of medical and aesthetic treatment courses in China has reached 23.87% annual compound growth rate from 2016 to 2019. We estimate the size of China’s medical aesthetics market in the next three years based on the price of a single medical treatment course and the estimated number of medical treatments in China. According to calculation, the price of a single medical treatment course in 2018 is about RMB 7,012. Based on the annual compound growth rate of 23.87% of total treatment course consumption in China from 2016 to 2019, the growth rate of single treatment cost is based on the average CPI growth rate of 2.99% in the medical care and service industry in the past five years. It is estimated that the scale of China’s medical beauty industry will exceed RMB 360 billion in 2022. According to the above mentioned national per capita medical and aesthetic consumption, we will increase it to the current level by 10 times (i.e., 10 times of 126 yuan in 2019, 1260 yuan/person, 10 times of which means the overall per capita medical and aesthetic consumption gap between China and South Korea will be calculated based on 2018 data) and calculated by the annual natural growth rate of 0.2% of the national population (1.4 billion people). In the long term, after 20 years of long-term development, the overall scale of China’s medical beauty market is expected to grow to nearly 2 trillion yuan.
4. Focus on individual stocks
Lanzi (002612.SZ) : Medical beauty business has become the sector with the most stable performance and the highest growth potential of the company. During the epidemic period, online channel marketing has been strengthened and steadily expanded. It is estimated that 36 million yuan will be invested in the construction of medical beauty flagship store, and the business competitiveness may be further improved in the future. Hong Kong Yesi Medical Group (02138.HK) : Yesi Medical Group has outstanding core business of medical beauty and health management and strong customer stickiness. Since 2017, Yesi has successively acquired related institutions of medical beauty in mainland China. In the future, Yesi will continue to accelerate the expansion of its business in China, and it is expected that the business performance in China will continue to grow at a considerable rate. Huahan Plastic Surgery (430335.OC) : Its medical and aesthetic institutions operate well, and it has a 5A hospital rated by Chinese medical and aesthetic institutions. It has strengthened efforts to expand customers through multiple channels, and the revenue scale has continued to grow. The marketing cost is expected to be reduced, and the overall business continues to improve. Limeikang (832533.OC) : the only private tertiary specialized hospital in Guizhou Province, mainly focusing on dentistry and orthopedic departments. In the first half of 2020, it will transform into a new mode of all-staff marketing and all-staff management to control marketing expenses through multiple channels. Rong En Group (835387.OC) : It mainly has six wholly-owned subsidiaries engaged in medical cosmetic and plastic surgery services, mainly cosmetic and plastic surgery projects.
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