The "Aesthetic Medicine Concept Stock" Lancy Received a Letter of Concern Again

On September 13, Lancy received a letter of concern from the Shenzhen Stock Exchange and was asked to explain its 158 million yuan acquisition of a 75% stake in Kunming Hanjin Medical Beauty Hospital Co.

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Public information shows that Lancy has three major sections: women's apparel, medical aesthetic services, and baby business, and it entered the medical aesthetic services business in 2016. Through a series of mergers and acquisitions, as of June 30, 2022, it had 29 medical beauty institutions, including 5 general hospitals and 24 outpatient clinics or clinics. They are mainly located in Chengdu, Xi'an, Chongqing, Shenzhen, Changsha, Baoji, Xianyang, etc. Currently, it has three major medical aesthetic brands in operation, namely "Bravo", "Jingfu Medical Cosmetology", and "Gao Sheng Sheng". The company is currently operating three domestic medical aesthetic brands: "Milan Parkview", "Crystal Skin Medical Beauty" and "Gonice".

Moreover, its baby business includes, except baby daily wear, Putto, a baby washing&care brand, which is divided into a secret series for 0-3-year olds, a forest series for 3-6-year olds, and a family wash series for baby families. 

In the first half of 2022, Lancy's overall operating revenue of 1.809 billion yuan ($260 million), which was affected by the women's apparel and baby business sections, with a year-on-year growth of only 1.10%. However, the medical aesthetics business segment achieved operating revenue of 629 million yuan ($90 million), an increase of 18.45% over the same period of the previous year.

On September 10, Lancy released the Announcement on Cash Acquisition of Controlling Interest in Kunming Hanjin and Related Transactions, stating that its wholly-owned subsidiary, Beijing Lancy Medical Management Co., Ltd. intends to acquire 75% of the equity interest in Kunming Hanjin held by a related party, Wuhu Bochen No.5 Equity Investment Limited Partnership, for a transfer price of 158.1 million yuan ($22.7028 million) in cash. 

The Shenzhen Stock Exchange requested Lancy to further explain the reasons, necessity, and reasonableness of further funding for the transfer of the controlling interest in Kunming Hanjin from a related party, Bochen No. 5, after acquiring 65% and 10% of the equity interests in Kunming Hanjin in June 2021.

According to the previous announcement, Kunming Hanjin's net profit for 2021 and the first half of 2022 was -18.66 million yuan (-$2,679,500) and 6.95 million yuan ($998,000) respectively. The Shenzhen Stock Exchange requested Lancy to explain whether the profitability is stable and sustainable regarding Kunming Hanjin's operating data in the past 3 years, in addition, analyze whether its gross profit margin and net profit are at a reasonable level and illustrate the reasonableness and possibility of performance commitment. 

In fact, in December last year, Lancy announced that it had received a letter of regulatory concern, which required it to explain the details of the development of the medical aesthetic business, business growth rate, profit model, main products, core competitiveness, as well as the operating income and share of the first three quarters of 2020.