AIH: New growth is on the way after the outbreak of COVID-19

Published on: 14 Jul, 2020

On June 26, Aesthetic Medical International Holdings Group (ticker: AIH), a leading provider of aesthetic medical services in China, released its unaudited financial results for FY2020 Q1. Total revenue went down 49.7% year-on-year to RMB91.0 million (US$12.9 million). Loss for the period was RMB83.1 million (US$11.7 million), compared with a profit of RMB22.7 million in the first quarter of 2019. All aesthetic medical treatment centers were forced to stay closed amid the coronavirus pandemic in China. There was no income but rent, labor and other expenses still needed to be paid, and the whole aesthetic medical service industry was pessimistic in the first quarter. In some ways, the poor Q1 performance of AIH was to be expected when set against such a background. However, since March 2020, the share price of AIH has fallen nearly 40%. Will AIH still be in such a difficult situation after the epidemic calms down in China?

The aesthetic medical services industry shows possible “V-shaped recovery” after the epidemic

In recent years, the “Beauty Economy” is thriving in China. In constant pursuit of good looks, aesthetic medical treatment is gradually becoming accepted as a societal norm; to have an injection of hyaluronic acid after work is common these days. The outbreak of coronavirus just shortly squashed the demand. According to "2020 618 beauty restarts consumption report" released by Meituan (the biggest life service e-commerce platform in China), the aesthetic medical market has recovered gradually since March and returned to pre-epidemic level in early April, from the perspective of online traffic. During the Chinese shopping carnival 618, the online traffic increased by 242% compared with the same period in February. The online transaction amount of Meituan aesthetic medical service exceeded 2.17 billion, with a yoy growth of 133%.

A large market with rapid growth

Not surprisingly, in China, the aesthetic medical industry is a large and growing market, yet with a very low penetration rate. According to iResearch, the market scale of China's aesthetic medical market in 2019 was 176.9 billion yuan, with a CAGR of 29.8% over the last five years. Though the industry is negatively affected by the outbreak of COVID-19 in the short term, its growth is expected to continue soon because of the low penetration rate. According to Frost & Sullivan, every 1,000 people in China had undergone an average of 11.7 medical aesthetic treatments, whereas the penetration per thousand people rates in South Korea, the U.S., Brazil, and Japan were 80.4, 50.1, 43.6, and 27.0, respectively. However, the industry concentration is so low that the total market share of the top five private aesthetic medical service provider is only 7.4%.

Big shortage of plastic surgeons, legitimate aesthetic medical service providers are few


The early stage of a rapidly growing industry is always chaotic. The same is in the aesthetic medical industry. IResearch indicates that more than 80000 aesthetic medical service providers operated unlawfully in China. Plastic surgeons are so scarce that every million people in China has an average of 3 plastic surgeons. And the average time to train someone to be an excellent plastic surgeon is 10 years. Therefore, aesthetic medical industry has its own barriers. While there are lots of providers in this industry, only a few of them are legitimate providers. Large Institutes with needed licenses and professional doctors, such as AIH, are more less. According to the 2019 annual report, AIH has 25 treatment centers with 493 qualified medical staffs, spreading across 15 cities in mainland China, Hong Kong and Singapore. Members in the board such as founder Mr. Zhou Pengwu, co-founder Ms. Ding Wenting, directors Ms. Hu Qing and Mr. Zhou Yitao have more than 15 years of experience in the aesthetic medical industry.

Large qualified providers are more favored as consumers pay more attention to the safety and overall effect of treatment

According to iResearch's latest survey, in 2020, consumers in the aesthetic medical industry most concern safety and overall performance of treatment. To choose providers and doctors to perform treatments, qualifications and reputation are two most important considerations. As a result, large qualified providers with good reputation are increasingly favored by consumers. This trend is obviously showed in the operational data of AIH. Active customer base of AIH was 128,892, 178,657 and 255,395, respectively, in 2017, 2018 and 2019, representing a CAGR of 40.8%. While the rate of growth is amazing, the proportion of repeat customers remains slightly above 50%, indicating its excellent customer experience. Moreover, the cost to acquire a customer, calculated by sales expense divides number of customers in the same period, decreased year by year from 2330 yuan in 2017 to 1617 yuan in 2019.

New growth after the break of coronavirus

While large providers with good reputation are increasingly favored by consumers, small providers become more and more difficult to make profit. Mr. Jin Xing, founder of So-Young (the largest social community in the China aesthetic medical industry), once said in public that a lots of aesthetic medical service providers in China lose money, and only 30% of providers in the market is profitable. More than 2600 providers failed in the past year. The outbreak of epidemic in 2020 accelerates the closure of these unprofitable providers and the market share gradually concentrates on the top providers. As the third largest private aesthetic medical providers in China, first-tier provider in the industry, AIH is expected to gain market share in the industry reshuffle.

In addition, more cost effective mergers and acquisitions opportunities emerge for the top providers after the epidemic. As the first public company focusing on aesthetic medical service in China, AIH may be more competitive to take advantage. After acquiring 80% equity interest in Shanghai Mingyue Aesthetic Medical Co. Ltd in March and obtaining 70% equity interest in Xi'an New Pengai Yueji Aesthetic Medical Clinic Co., Ltd in April, on June 30, AIH announced its agreement to acquire 80% equity interest in Liangyan Hospital Management Co., Ltd. This is already the third provider acquired by AIH after the epidemic. Obviously, AIH is speeding up its countryside layout through the current trend of industry reshuffle.

The aesthetic medical industry is a large market with amazing growth but low concentration. The outbreak of coronavirus accelerates its restructuring and the market share gradually concentrates on the top providers. For AIH, a leading aesthetic medical service provider in China, the epidemic just negatively affected its Q1 performance shortly. The industry has already showed “v-shaped recovery”. And the epidemic brings it more excellent mergers and acquisitions opportunities. In fact, the company is speeding up its countrywide layout. Rapid growth of its revenue can be expected in the future while the current stock price has fully reflected the short-term negative impact of epidemic. Perhaps it is the right time to step in.


Meituan "2020 618 restart of beauty consumption report"

IResearch “Insight into China aesthetic medical industry, white paper in 2020”

IResearch “Research report on the trends of China aesthetic medical industry”

MobData "2018 aesthetic medical industry research report"


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