(Yicai Global) Dec. 1 -- Yonghe Medical Group, which runs China’s largest chain of hair transplant clinics, is seeking to raise about HKD1.49 billion (USD191 million) from an initial public offering in Hong Kong.

Yonghe priced the offering at HKD15.80 (USD2.03) a share, according to the prospectus the Beijing-based firm published today. It has 10 cornerstone investors, including Kai Cheng Capital, E Fund Management, and IDG Capital. The will offering will close on Dec. 6 and the stock will begin trading on Dec. 13.

With a market share of 11 percent, Yonghe ranked first among all medical institutions in China last year by revenue from hair transplant services, according to Frost & Sullivan, while its medical hair-care services had a 5 percent share.

Revenue at the firm, which has 51 clinics in 50 cities across China, rose 34 percent to CNY1.64 billion (USD257.42 million) in 2020 thanks to rapid growth in the hair transplant and medical hair care business and higher prices. It jumped 75 percent to CNY1.05 billion in the first half of this year.

The company’s gross profit margin was 75.2 percent in 2018, 72.6 percent in 2019, and 74.6 percent last year. Its net profits during the period were CNY54 million (USD8.48 million), CNY36 million and CNY160 million, respectively, on margins of 5.7 percent, 2.9 percent and 10 percent.

Yonghe Medical will use around 42.1 percent of the money raised in the IPO to expand and upgrade its hair transplant clinics in China, the prospectus showed.

Innovation

About 17.5 percent will be used to innovate products, 9.7 percent to develop new products and upgrade service systems, and 23.4 percent to integrate resources in the industry and improve the firm’s prestige. The remaining will be set aside to pay debt, make acquisitions, and for general corporate purposes.

Zhang Yu, Yonghe Hair Transplant president and chief executive, will hold a 34.91 percent stake in Yonghe Medical after it goes public, Yonghe Hair Service and CYH, or Cosmetic Medical Holdings, will jointly hold and execute 35.34 percent of the voting rights.

Hair transplants are the most effective way to solve hair loss, which mainly involves selecting normal hair follicle tissue for transplant into the balding area, and keeping it alive. At present, professional clinics in the Chinese market include Yonghe Hair Transplant and Xinsheng Hair Transplant.

In May, Yonghe acquired the Hong Kong business of Nu/Hart Hair, a renowned hair transplant services provider which originated in the United States. In 2017, it bought the China business of Svenson, a London-based brand that has had more than six decades of experience in offering hair restoration products and services.

Morgan Stanley and China International Capital Corporation are the IPO’s co-sponsors.

Editor: Peter Thomas