Hair transplant specialist Yonghe Medical expects a net loss of about 240 million yuan in the first half of the year,

The latest: Hair transplant specialist Yonghe Medical Group Co. Ltd. (2279.HK) issued a profit warning last Friday, saying it expects a net loss of about 240 million yuan ($33.6 million) in the first half of the year, far worse than the net profit of 17.6 million yuan recorded in the same period last year.

Looking up: The company newly opened nine hair transplant clinics and five Svenson hair care stores in the first half of the year, due to its positive outlook on the hair medical services market in China.

Take Note: The main reason for the company’s turnaround was a corresponding increase in labor costs as a result of a strategic organizational upgrade, the expected efficiency gains of which are yet to be fully realized.

Digging Deeper: Founded in 2005, Yonghe provides hair-transplant services in China through its Svenson Medical Hair Care Centers and has one of the largest market shares in China. More than 250 million people in China currently experience hair-loss problems, according to data from the country’s National Health Commission. To capture more of that business opportunity, Yonghe started its medical hair-care services in 2019, treating hair loss through non-surgical procedures such as with drugs and medical devices. However, its stores were forced to suspend or restrict operations at various times last year due to the Covid outbreak across the country in 2022 and recorded losses in the second half of the year, marking the company’s first half-year loss since its IPO in December 2021.

Market Reaction: Yonghe’s shares dropped Monday morning and were down 16% to $5.25 by the midday break, hitting a historic low since its IPO.

Translation by A. Au

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