Kaiyuan Securities released a research report initiating coverage on Beauty Farm Medical Health (02373) with a "Buy" rating. The firm is a leading domestic high-end beauty and wellness service group that has established a "Dual Beauty + Dual Wellness" business system. With a high-quality member base, the company is poised to advance its "organic growth + acquisitions" strategic layout by leveraging efficient digitalization and integrated management capabilities, which is expected to further enhance its revenue scale and profitability. Key viewpoints from Kaiyuan Securities are as follows:
The lifestyle beauty segment builds trust assets, while the "Dual Beauty + Dual Wellness" business achieves value upgrade. (1) Customer Assets: The company's lifestyle beauty business continues to deeply cultivate high-end clients. Through premium service experiences and meticulous customer relationship management, it transforms one-time consumption into long-term relationships, achieving high-quality customer acquisition and retention. (2) Conversion Logic: High-end clients build trust through the lifestyle beauty services, which facilitates conversion to higher-value medical aesthetics and wellness services via one-stop offerings. This also provides post-procedure care, enhancing customer stickiness. The shift to medical aesthetics results in an average annual customer spending increase of threefold, enabling the company to leverage high-margin businesses with relatively low marginal costs. The synergistic effect of the "Dual Beauty + Dual Wellness" operations resulted in an overall customer acquisition cost of just 2% in H1 2025, showing a continuous downward trend. Converting lifestyle beauty clientele to medical aesthetics forms a significant competitive barrier in customer acquisition.
Strong integration capabilities pave the way for "organic growth + acquisitions" development. (1) Organic Growth: The company steadily expands its store network through a dual-track model of "directly operated + franchised" stores. As of H1 2025, directly operated stores increased to 273, while franchised and managed stores reached 279, with same-store revenue and customer traffic growth momentum steadily being released. (2) Acquisitions: The company possesses extensive integration experience and has developed a mature M&A methodology, enabling it to achieve cost reductions and efficiency gains quickly while releasing synergistic effects. This robust integration capability has been validated through cases such as Nairui'er (whose adjusted net profit margin improved from 6.5% pre-acquisition to 10.4% in H1 2025). In October 2025, the company announced the acquisition of Siyanli, achieving a "triple-power aggregation" to consolidate its leading market position. The bank believes that acquisitions not only provide quality member entry points and incremental growth for value-added services like medical aesthetics but also bring scale effects, enhancing upstream bargaining power for cost advantages. Therefore, the company's mature methodology in external integration and digital management system is replicable, promising to continuously drive scale expansion and profit improvement in the future.
Risk warnings include potential underperformance in store integration, slower-than-expected store expansion, and risks associated with medical incidents.
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