Yonghe Medical’s subsidiary repeatedly becomes a party subject to enforcement; core doctors sharply decrease; heavy marketing and downplay R&D

On April 1, 2025, the first hair transplant public company, Yonghe Medical (02279), newly added information about the company as a judgment debtor involving its wholly owned subsidiary, Beijing Yonghe Medical Technology Group Co., Ltd. (hereinafter referred to as “Beijing Yonghe”). The executing court is the People’s Court of Chaoyang District, Beijing, the filing date is March 25, and the amount of the enforcement is RMB 34,134.

A few days earlier, on March 29, Beijing Yonghe completed an office address change, relocating from No. 1, Ganluyuan South, Chaoyang District, Beijing to Chaowai Avenue. According to Qichacha data, the company is currently involved in 38 judicial cases.

Becoming a judgment debtor has drawn attention to safety and compliance issues in “hair transplant” services

In fact, this is not the first time Beijing Yonghe has been listed as a judgment debtor.

In December 2025, Beijing Yonghe was previously subject to enforcement of RMB 160k; earlier, in August, a property management company filed a lawsuit against Beijing Yonghe for “dispute over a house lease contract” and applied for enforcement of RMB 140k.

Compared with disputes involving property management, more attention has been paid to compliance issues in medical service delivery.

In January 2026, a document posted on the website for judicial rulings shows that the court held that Beijing Yonghe committed fraud against the plaintiff consumers. When the plaintiff went to the Yonghe Medical hair transplant outlet to undergo an autologous hair transplantation surgery, the clinic arranged for a physician who did not meet the requirements of a medical cosmetology chief attending physician to perform the surgery, resulting in the plaintiff being dissatisfied with the shape of the hairline after the transplant. The implanted eyebrows developed a break in continuity, and also grew excessively fast, requiring constant trimming, among other issues.

Ultimately, the court ordered Beijing Yonghe to refund the plaintiff hair transplant fees of RMB 45,955 and to compensate three times the damages, totaling RMB 140k.

Apart from judicial rulings, clinics in multiple locations of the company have also been subject to administrative penalties due to issues with medical operations and management.

In July 2022, Wenzhou Yonghe Medical Beauty Outpatient Department Co., Ltd. was warned and fined RMB 21,000 for failing to fill in medical record materials as required and failing to implement an infectious disease pre-examination and triage system as required.

In June 2023, Jinhua Yonghe Medical Beauty Clinic Co., Ltd. was warned and fined RMB 12,000 for using expired and other unqualified medicines.

In February 2024, Shanghai Yonghe Hospital was administratively penalized because two nurses independently performed follicle implantation on patients, involving conduct of using non-sanitary technical personnel to carry out medical and health technical work. In 2025, a Shenzhen Yonghe outlet was also administratively penalized due to nurses operating a 308nm ultraviolet excimer therapy device (beyond the scope of nursing practice).

In terms of the types of violations, the problems are concentrated in core areas such as qualification for medical operations, medication compliance, and internal management.

As a medical service provider, safety and compliance should be the bottom line for operations. The frequent occurrence of disputes and penalties has further increased market attention on the company’s ability to control medical quality and its internal management system.

“Reduce costs and increase efficiency” to fatten profits?

Since listing on the Hong Kong Stock Exchange in 2021, Yonghe Medical has long been stuck in a loss-making predicament.

From 2022 to 2024, the company’s revenue was RMB 1.41 billion, RMB 1.78 billion, and RMB 1.8 billion, respectively, maintaining growth; however, the net profit attributable to shareholders has been losses for three consecutive years, with cumulative losses reaching RMB 860 million.

It was not until 2025 that the company achieved a turnaround in performance and returned to profitability, with full-year net profit of RMB 73.71 million. However, in terms of the profit structure, this turnaround in losses is not only due to improvements in the quality of revenue, but more so due to a contraction on the cost side.

The company disclosed that its improvement in profitability in 2025 mainly came from two aspects: first, by optimizing operating and technical efficiency, its gross margin increased by about 5.5%–6.5% compared with 2024; second, by cutting marketing and management expenses, its sales expense ratio and administrative expense ratio decreased by about 5–6 percentage points and 2–3 percentage points, respectively.

At the organizational level, the company also advanced a “leaner” strategy in parallel. The number of outlets clearly shrank—hair transplant medical institutions decreased from 66 the previous year to 63, Shiyunxun Jianfa institutions decreased from 8 to 7, and inefficient outlets were accelerated to be cleared out.

The headcount also decreased for two consecutive years. In 2023, Yonghe Medical’s professional medical team reached a historical peak of 1,612 people. That year, the size of its team of physicians was 350, and its nursing team had 1,149. In 2024, the medical team decreased to 1,401 people, including 242 physicians. Compared with the prior year, it was down by more than one hundred in a single year, a year-on-year shrink of over 30%. The nursing team was reduced to 1,069, cutting 80 people. In 2025, the medical team was further optimized to 1,341 people, including physicians further reduced to 221, continuing a year-on-year decline of nearly 10%.

Compared with 2023, the number of physicians in Yonghe Medical’s physician team has already decreased by about 130 people, with a drop of more than 35%.

While the number of physicians fell sharply, Yonghe Medical’s hair transplant customers increased year-on-year. In 2025, the number of consumers receiving hair transplant surgeries at the company was 71,380, up 19.7% from the previous year.

Perhaps because the source of patients expanded and there were not enough practicing physicians, some outlets mentioned above received regulatory penalties because nurses participated in operations beyond their scope of practice.

Synchronized with the cost-side contraction, there has been continued pressure on the quality of revenue.

The hair transplant industry has typical low-frequency consumption attributes, with one-time purchases dominating and limited repurchase rates. This makes companies highly dependent on continuously acquiring customers. For a long time, Yonghe Medical’s sales expense ratio has stayed around 50%. In 2023, sales expenses were RMB 1.04 billion, and in 2025 they declined to RMB 810 million, with the sales expense ratio returning below 50% again. Among the company’s sales expenses, the most important spending is for market promotion and traffic acquisition, which has also become the most important factor consuming profits.

In sharp contrast to the high sales expenses is the fact that Yonghe Medical’s R&D expenses have long accounted for less than 2%, and still are not even a small fraction of its sales expenses. Over the three years from 2023 to 2025, the company’s R&D expenses decreased year by year: R&D expenses were RMB 29.28 million in 2023, and fell to RMB 19.26 million by 2025, declining by more than RMB 10 million over the three years. In its IPO in 2021, Yonghe Medical previously planned to use proceeds from the global offering for R&D expenditures. Of that, HKD 88.60 million was allocated for innovation in product and service projects, and RMB 38.20 million was allocated for investments in R&D and improvements to frontier technology service systems. However, this R&D-related investment has already been postponed to December 2028.

Against the backdrop of intensifying competition, the marginal returns of Yonghe Medical’s marketing investment are declining.

Data show that in 2020, the average amount spent per hair transplant patient was about RMB 27,868, but by 2025 it had fallen to RMB 19,265, with the average customer value clearly declining. Although the number of hair transplant consumers during the reporting period increased year-on-year by 19.7%, the decreased value generated per customer means the company needs to rely on acquiring customers on a larger scale to maintain its revenue size.

From an industry perspective, as hair transplant awareness improves and channels diversify, the cost for consumers to obtain information is expected to fall, which could improve industry penetration. But at the same time, price competition and rising traffic costs are also compressing companies’ profit margins.

For Yonghe Medical, under the dual pressures of “declining spending per capita and high marketing costs,” the sustainability of its business model is being tested.

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