Insights from Tongce Medical’s 2021 General Meeting of Shareholders

Thanks for the recording of the shareholders’ meeting shared by golfer @時光之極炊, I listened carefully and recorded some information, and I will add some personal opinions later. The information recorded is as objective as possible.

1. Explain that starting tomorrow and arriving today, the company always thinks about what the future will look like, and then how to do it today, to plan ahead, to be able to think about future changes in advance, to take early actions, and to make choices today based on future possibilities , citing the example of Jack Ma.

2. The idea of ​​acquiring Heren has one more tool. Our vision is to become the largest and best hospital and doctor group. As the first listed company in medical services, we have never used capital market means. The development of the company has always been based on endogenous growth. The company is a top student, and no listed company is as isolated as we are. The development of medical care requires resources, and it is not enough to rely on our own profits. We should not only do stomatology, but also other medical specialties. We must develop into a medical group with multiple specialties. Our reputation and status in the medical field Consolidate well. The development of private medical care is very difficult. In the past, many private medical institutions did not do well, which damaged the reputation of private medical care. Our public medical institutions are too strong, so the development of private medical care is very difficult. The clinical level of our Hangkou is very good. Many public hospitals cannot compare with Hangzhou’s stomatology department, and the stomatology department of city-level public hospitals cannot compare with ours. We are still suspected by many people. If we can make multiple specialties as good as the oral cavity, we can truly be recognized in the medical field. In order to create a reputation and for the future, we need to do multiple specialties, and we need to do advantageous specialties. a certain position. Tongce Medical can’t do it, and many people hope that we don’t change our characteristics. Heren is a very clean shell, with a lot of cash, clear fixed assets, a building in the core area, a top three business, a relatively large number of receivables, and a relatively healthy overall. The development of its own business is not particularly fast, and it is in the second echelon in terms of scale. The development is sustainable. It is difficult for large hospitals such as 301 and Tongji to replace medical information providers. From a shell point of view, is the best. Heren’s variability is also very strong, and it is easy to place it out. It’s also good for the company’s building to be turned into a hospital. Tongce has not distributed dividends, nor has it been distributed to its own hands. Its development outside relies on long-term accumulation, and its stock is pledged to develop in vitro oral and medical treatments. It still has not raised funds in the primary market, and needs a platform to undertake these businesses. The development of Heren can be advanced or retreated, the risk is small, and the future income may be quite large. The company is quite cautious. In the future, Heren Capital will operate more and be more enterprising.

3. The acquisition of Heren is still in the process. It is expected that the overall transaction will be completed by the end of this year or the beginning of next year. It will not be consolidated this year. After the transaction is completed tomorrow, we will see if it will be consolidated.

4. By the end of 2022, 20 branches will be opened. By the end of 2022, there will be about 3,000 doctors in reserve. There are more than 1,000 doctors doing training work. 90% of our doctors are our own, and there is basically no external temporary pull. The doctor who came, we still wanted to find a local partner when we started Dandelion a few years ago. The good doctors we do in the Dandelion branch are all our own, and there are basically no good experts in the local area. Our main ability is to develop the ability of doctors. It can allow a doctor to develop into an expert in 4-5 years, and there is basically no loss. Oral medical institutions do not have the training capacity of our doctors.

5. In the future, the incremental market for the development of oral medical care will far exceed the stock market. Now most industries are oversupplied, and the oral cavity has a great potential market. Our habit is to lag far behind developed countries in Europe and the United States. Because it is an incremental market, there are many small clinics, and there are very few oral medical institutions such as Tongce platform. Platform-type hospitals will develop in a higher direction, with certain ability to train doctors, and integrate education, scientific research, and clinical practice. Institutions are the winners in the long run. Simply relying on dental interlocking is not enough, and there is no future. Relying on a simple chain, it is not meaningful to compete with small clinics.

6. Cunji is our brand, and the University of Chinese Academy of Sciences is the brand of the Academy of Sciences. We will not hang the brand of the University of Chinese Academy of Sciences forever. It is excessive. Hanging this brand is to show our vision of becoming a first-class dental medical institution and educational institution. All our preparations are to do Cunji Medical College by ourselves. It is a matter of time.

7. The company is called “Yamao”. Our financial performance is good. In 2014 and 2015, we bought the Pinghai Road General Hospital and bought the building. Although the performance in those two years had an impact and the profit growth was historically low, it soon became apparent. The growth curve of 30%, 40%, and 50% is invested. Such investment makes doctors more cohesive and has a stronger ability to obtain doctor resources, which makes competitors afraid. In 90% of Zhejiang Province, we will open basic services. are first. To maintain continuous investment, investment will have an impact on profits. On the one hand, it is the cause of the epidemic. The epidemic has covered our investment, and the reckoning is due to the epidemic. The number of dental chairs doubled from before the epidemic to the end of this year, and the number of people increased by 1,000 from last year to this year. The salary of 100,000 people is 100 million yuan a year. These are included in the epidemic, and the real reason has not been analyzed. Without today’s investment, there will be no growth next year and the year after, especially the 30% and 50% growth in the year after, and there will definitely be a certain rapid growth in the future, returning to a period of high growth. It is a market in which the increment is greater than the stock, and there must be such an outcome. The process is very difficult. The epidemic has given us a window period, which can cover the cost of investment.

August, April and May had a great impact on us. Especially in April, many doctors did not work, and the number of passengers was very small. Various districts were dispatched to do nucleic acid testing. We returned to Shanghai on May 30, and the recovery has been relatively fast recently. Quickly fill in the previous customers, and basically fill in the lost revenue in terms of revenue.

9. Investor question: Zhejiang has a ceiling, Mr. Lv said that Zhejiang can develop for a long time. In the past, 20%-30% growth can be met in Zhejiang Province. The resident population of Zhejiang is 60 million, plus 80-90 million people in other places. The development problem is not big, and the performance release cannot be mechanical. increase. In the second half of last year, there was some impact from the epidemic, and there was also an impact on investment. In previous years, profit growth exceeded revenue growth. In the last two quarters of last year, profit growth was lower than revenue growth, because in order to open 20 Dandelion stores this year, the cost of personnel was reduced. Salary goes in. The balance sheet has only visible real estate, equipment, and cash, but invisible assets of doctors and intangible assets for the long-term development of the hospital. This is more important to the hospital.

10. After the deep cultivation in the province, planning ahead, the challenge of the second stage of development? Outside the province, we can rent houses, decorate and buy equipment. It is very easy to recruit people, but unlike in the province where there are intangible assets and doctors’ assets, some things cannot be done in a short period of time, so outside the province must go through a very long period of time. Training, it takes a very long time for a public medical institution to build a good hospital, and it takes a lot of time to cross regions. Mayo’s example of the world’s No. 1, the establishment of three central hospitals, is a characteristic of medical care, and we are not capable To break through medical barriers, the more important moat is that there are natural barriers. It is not something that can be done with money. It is not that money can compete with Wuhan University Stomatological Hospital in a short period of time. It takes time outside the body, and it is medical. specific. Our advantage in Zhejiang is to form a national advantage, not to convince the market or competitors, but to convince experts in the field of oral cavity, first of all, we must be recognized by people in the Stomatological Association. The goal of our work must be to become one of the best oral medical institutions in China. At this time, the development of other places will form a dimensionality reduction attack, not just by capital investment. Zijingang Hospital can rapidly expand the strategic assets in our balance sheet. We will be the leading dental medical institution, and let the dentists in China think that the general strategy is the best. Only then can we achieve our strategic goals. When the time is up, you can’t take the plunge. Learn from Zeng Guofan’s “build a strong fortress and fight a dull war”. To admit that you have shortcomings. We cannot give up expansion at this time. We have done Xi’an, Chongqing, Chengdu, and Wuhan. Next, we will not give up in Shanghai. We are doing what we can see on the balance sheet. We want to build multiple dental hospital groups. These places will gradually take root, penetrate, form platforms, and form human resource centers. When the Zhejiang base has reached a very high platform, these places will form real advantages. . After the completion of Wuhan, there may be three central hospitals with 50 branches to form such a group. When can Wuhan come in? Wuhan Cunji has formed a group and will enter a listed company only if it will not drag down its profits. If you can’t do a good job, just buy a problem that has horizontal competition. Because of these reasons, it is good to look at Zhejiang Province at present, but entering the listed company is a dental medical group one by one, which is different from Aier. Everyone needs to understand this strategy.

11. The general hospital has been doing the empowerment of Dandelion Hospital all the time. More than 90% of the doctors are our own doctors. It takes time from the construction of Dandelion Hospital to maturity. The newly built Dandelion is not as strong as the old one. , the new construction has delayed our development, and the contribution to our current is relatively small. The new construction has a loss period of half a year, a year or even two years. At the same time, it is necessary to pull the excellent medical resources to a place worse than the general hospital, which is actually reduced. In order to make Dandelion Hospital do this, it is necessary to control the intensity of this cultivation. The benefits of dandelion for us are that it puts the competitive position on the forefront, and our partner system makes doctors more dynamic, and it can also resolve some conflicts in the general hospital. Generally speaking, the branch will bring benefits in the long run. In 3-5 years, the profitability of each dandelion is strong, and the overall profitability will still be in the general hospital. The marginal cost of the general hospital keeps decreasing. The income structure of the general hospital will undergo great changes. Our outpatient clinic volume of more than 3 million is about 100,000, and the real contribution to profit is about 100,000. 10,000 is 1 billion for one person, and 20,000 is 2 billion. There are more than 2 million outpatient clinics. Without making money, implantation, orthodontics, high-end restoration, and general anesthesia treatment are our value points. If we expand the high-end treatment by 10%, it can increase by 2-3 billion. You can grow by developing lifetime customers. There are billions of missing teeth in China, our awareness of oral health care is not strong enough, and the common people are willing to spend less for the oral cavity. On the one hand, it is a problem of expansion, and on the other hand, it is a problem of structure, which can ensure the growth of 20 to 30 years. Our structure is still being optimized, and high-end implants and orthodontics are still increasing. There have been some changes in the calculation method, previously all integrated in one project, now split into two, and restoration treatment was newly added last year.

12. The problem of Ningbo’s growth is that Ningbo has no shortage of patients, doctors, and the most important asset at the beginning of medical treatment. The number of newly diagnosed patients in Ningbo is twice that of Hangzhou, so the growth rate is very high. Ningbo is a place with the poorest medical resources in the whole province, which is not multiplied by its socio-economic status. Ningbo’s hospitals are all short of good doctors, and there is no good medical school to support. You must do well in Ningbo. There are many good doctors in Xi’an. Send the good doctors from Xi’an to Ningbo to form a pair. There is no good doctor in Ningbo. This is the main problem. There is no shortage of patients, no shortage of market, and no shortage of doctors. Hangzhou has a strong absorption capacity. Currently, this issue is being resolved. Ningbo centralized procurement, the number is bleak. On the one hand, the doctor does not want to do it, and on the other hand, the patient does not want it. It is worse than the 3,4,000 implants of the Putian system. The 2,3,000 implants are still relatively mature implants such as Dengteng. Implants that no one has ever seen, patients do not want. Some investors in Ningbo asked, they have experienced Ningkou, the doctors are all right, but there is a problem with the site selection. Orthodontics and pediatrics have to follow the wealthy people. The site selection is outside Yuehu Lake. Area. Investors suggested that Ningbo’s young people and the place with many children is the Eastern New City, and there is no branch in Ningkou. The business of Ningbo Dental Hospital is very good, the explicit fees are relatively low, and the overall performance is good. We will definitely do it in the Eastern New Town, and if we do it, we must make it bigger. Our academic level should be the highest in Ningbo, and we must make Ningbo a household name. The doctor resources we have prepared for Ningbo are the top priority, and the doctor resources are not enough. Most of the Ningbo dental graduate students are imported by us, and the willingness of doctors to go is low. President Guo has introduced many doctors, but it is still not enough. Compared with the speed of expansion, it is not enough. Eastern New Town even wanted to give us a plot of land to do it. We will definitely have a big one in East New Town. Yuehu Lake is a market for the elderly. The place of Future Science and Technology City was not seen before, but now the number of initial diagnoses is larger than that in the west of the city, and the population of the old place on Pinghai Road is declining. The benefits of investing one dollar in Zhejiang Province cost at least five yuan outside the province.

13. The level of digital orthodontics is very good, surpassing the angels of the times, and the gap with Invisalign lies in the materials. The competition of ToC lies in the customer, and the capability in this area is not enough.

After listening to the whole, there is still a lot of gains. Regarding several key issues, I will discuss opinions one by one.

1. The problem of expansion outside the province is to open the ceiling for expansion outside the province, and long-term investors are very concerned about it. The company gave a good answer to the in vitro integration. There are policy requirements and financial reasons for not being able to incorporate in the short term. The company has explained it very clearly here. In the future, when the medical group matures, it will be gradually merged.

2. Whether the out-of-province model can be successful? At present, the company is also deploying outside the province. It is still too early to talk about success or failure. Many investors criticize the slow development outside the province and the inability to go national. From a rational point of view, the nationalization of medical care itself is a very difficult matter. If it is easy to succeed, then dentistry will not be the current situation. Dentistry is not a simple chain model. The company has a clear strategic direction and layout. After making adequate preparations, it takes a long time to cultivate medical treatment. Is this one of the reasons why informal medical services have a wide moat? If capital intervention can succeed, then we have to think about whether this model is good enough. Although this process is very difficult and requires a lot of effort, once it is completed, the barriers will be unbreakable, just like the company’s position in Zhejiang, there is a long way to go.

3. Performance issues. If you follow the company’s development for a long time, you should be able to understand that the company is in a training period in the past two years. Whether it is the progress of doctors or the general hospital, it is unrealistic to expect the company’s performance to grow mechanically every year. Other means rely solely on endogenous growth. I think investors who have run companies should understand it very well. This year and next two years, with the gradual release of Dandelion, Chengxi New General Hospital, Zijingang, and Ningbo New General Hospital, there should be little pressure on performance growth, and it is very possible to maintain a compound growth rate of about 25% in 3-5 years. , Personal opinion In this development period, the big year of performance release is likely to have two years of rapid growth.

4. One of the core advantages, Mr. Lv talked about the ability to train doctors. The ability to continuously and stably train doctors is a very important core competitiveness of medical services. For the service industry, the more people there are, the more difficult it is to manage, and the larger the scale, the worse the reputation. At present, Tongce is likely to break through this bottleneck. The reputation of the hospital is established by the doctors and academic ability. The scale expansion and the inability to keep up with the level of the expanded doctors often reduces the reputation of the hospital. The continuous and stable training of good doctors can maintain the overall level of the hospital at a relatively good level. The level is long, and it has established a good reputation in the long run.

5. The acquisition of Heren has been discussed a lot. On the whole, it is good. It can be advanced or retreated. I can understand that Mr. Lu wants to use the capital market to accelerate the development of other specialties. There may also be synergistic effects.

6. The development of Ningbo will definitely not be smooth sailing. At present, there is a shortage of doctor resources. The company is already trying to find a way to adjust the doctors from Xi’an. For the location selection, it will definitely be a better hospital in the east. Ningbo is the second best hospital. In the big market of Hangzhou, the company attaches great importance to this market.

On the whole, due to the impact of the epidemic, the performance of the short-term April and May will be greatly affected, and it is gradually recovering. The missing medical treatment volume will be filled up, and the problems in Ningbo will be gradually solved. In the long run, there is still a lot of room for the company’s development. Medical service is a slow business, and it can’t be achieved by capital assistance. The company can continue to learn from overseas experience and blaze a path of self-development in China. , as a friend of time, I believe that in the near future, we will be able to achieve our ideal goals!

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