IPO Observation | Masik Medical Lists on Hong Kong Exchange, High-End Oral Healthcare Company Faces Revenue Decline

Masik Dental has chosen to focus on the high-end oral healthcare service segment, offering customized oral healthcare services at a price premium of at least 25% compared to that of third-class hospitals. This strategy has resulted in average revenue per treatment chair of RMB150 million and an average income per dentist of RMB240 million, ranking among the top three in the industry.

Masik Dental's revenue is primarily generated from its main businesses: Masik services, Masik products, and DSO. The company provides oral healthcare services to individuals, covering general dentistry, orthodontics, and implants, which accounts for a significant proportion of its total revenue.

In terms of specific services, ordinary dental care services account for 42.4%, 36.6%, and 36.8% of the company's total revenue in 2020-2022 respectively; orthodontic services account for 32.9%, 30.7%, and 36.7%; and implant services account for 13.1%, 13.6%, and 10.4%

In addition, Masik Dental has been providing dental prosthetics and related consumables to third-party oral healthcare service providers since 2015, with revenue of RMB3.12 billion, RMB5.9 billion, and RMB5.76 billion in 2020-2022 respectively.

Masik Dental has also been operating DSO services since 2019, providing services to third-party oral healthcare clinics, although the income proportion is relatively low at 0.8%, 1.4%, and 1.3%

According to Frost & Sullivan's report, as of 2022, Masik Dental ranked ninth among all private oral healthcare service providers in China and second among high-end private oral healthcare service providers.

Masik Dental's revenue has been declining due to its focus on the high-end market. In 2020-2023, the company reported net losses of RMB59.36 billion, RMB161.73 billion, and RMB3.793 billion respectively, totaling over RMB2.6 billion in cumulative losses.

The high-end market also brings higher operating costs. The company's sales expenses accounted for more than 70% of its total revenue from 2020 to 2022, with employee costs increasing from RMB1.42 billion to RMB2.29 billion and then decreasing to RMB2.07 billion.

For Masik Dental, the high-end market may lead to continued losses despite its premium pricing strategy.

Dentist Resources Are Scarce, Customer Acquisition Costs Are High

As China's population ages and health awareness increases, the Chinese oral healthcare service market has become a major sub-market and driving force in the country's overall health care industry. Private oral healthcare services in China are expected to grow from RMB859 billion in 2022 to RMB1.74 trillion in 2027 at a compound annual growth rate of 15.2%

The high-end oral healthcare service market is also expected to grow, with revenue increasing from RMB27 billion in 2018 to RMB29 billion in 2022 and reaching RMB59 billion by 2027 at a compound annual growth rate of 15.6%

However, the entire industry faces challenges.

The first challenge is the shortage of dentist resources. According to Frost & Sullivan's report, as of 2022, China had only 248 dentists per million people, compared to 885 in Japan, 658 in South Korea, and 607 in the United States. The country has over 20,000 oral healthcare professionals, but the ratio of dentists to the population is only 1:7,000.

For a high-end dental clinic like Masik Dental, securing qualified and experienced dentist resources becomes even more challenging. Attracting enough qualified dentists will be crucial for the company's future expansion and service quality guarantees. The competition for talent between private companies and public institutions is intense.

As of April 30, 2023, Masik Dental had established 29 oral healthcare clinics in 13 cities across China, with only 145 dentists on staff.

In its prospectus, Masik Dental plans to establish 30 oral healthcare clinics in China over the next four years, with each clinic equipped with around eight to ten treatment chairs. Nineteen of these clinics will be located in first-tier cities, while the remaining 11 will be located in second-tier cities. This will further increase the demand for dentist resources and may impact the company's expansion pace.

The second challenge is customer acquisition difficulty, with high marketing costs across the industry. Due to the fragmented market share and severe homogenization of services, companies must invest more in advertising and promotions to attract customers.