The medical beauty platform So-Young is actively expanding its &#34;light medical beauty&#34; physical clinics. Although revenue continues to grow, its traditional platform business is rapidly shrinking, dragging down overall profitability.
<h4>Key Points:</h4>
<ul>
<li>Just two years after opening its first &#34;light medical beauty center,&#34; nearly half of So-Young's revenue in the third quarter came from its rapidly expanding chain clinic business.</li>
<li>Even though clinic revenue recorded a threefold increase this quarter, the company's other half of core business saw a significant decline, ultimately leading to a net loss for the quarter.</li>
</ul>
Tan Ying
In China's rapidly changing beauty market, just a few years can feel like a generation. Recently, So-Young (SY.US) has undergone such a transformation, shifting from a platform focused on beauty social networking and e-commerce to operating the largest chain of &#34;light medical beauty&#34; clinics in the country. However, the latest quarterly results released last week show that this transformation has led to ongoing losses for the company, and external parties are beginning to question the sustainability of its &#34;dual-track business model.&#34;
So-Young opened its first self-operated clinic at its headquarters in Beijing in August 2023 and has since rapidly expanded its footprint. According to founder and chairman Jin Xing, as of this month, the company has 42 light medical beauty centers, one of which is a franchise store.
Jin Xing stated that this has made So-Young the largest light medical beauty chain brand in China, and the company aims to reach 50 stores by the end of the year. He also proposed a long-term plan to open 1,000 stores nationwide within the next 8 to 10 years.
He said, &#34;In the future, we will continue to expand our medical beauty center network under a rigorous strategy and promote healthy and sustainable growth through higher operational standards and deeper brand value.&#34; He added that So-Young's new clinics had served approximately 600,000 people by the end of September.
This transformation is clearly advancing at a rapid pace, but it is not without cost. As So-Young's offline clinics begin to contribute revenue, the company's former core business—providing online community and content platforms for medical beauty consumers—continues to lose momentum.
Investors seem to agree with the overall direction of this transformation but have not fully committed. Although So-Young's stock price has more than doubled since the beginning of this year, it fell 23% within four days after the company announced its latest results, evaporating about half of its market value since reaching a multi-year high in mid-July.
The company's future direction will determine investors' attitudes toward its valuation. In the third quarter, revenue from its offline clinics' medical beauty services reached 184 million yuan, a year-on-year increase of 305%. However, revenue from its old online community's information and booking services declined by 34.5% to 117 million yuan; additionally, revenue from medical products and maintenance services also fell by 25% to 67 million yuan.
After aggregating all business segments, So-Young recorded total revenue of 387 million yuan this quarter, a 4% increase from 372 million yuan in the same period last year.
As the pace of new clinic openings accelerates, the company shifted from a net profit of 20.3 million yuan in the same quarter last year to a loss of 64.3 million yuan this quarter. Cash reserves also decreased by about a quarter, dropping from 1.25 billion yuan at the end of 2024 to 943 million yuan at the end of the third quarter
However, given the current pace of chain expansion, such cash consumption is within expectations.
<h4>Online Origins</h4>
To understand the current transformation trajectory of So-Young Technology, it is necessary to review its development history. When it went public in 2019, So-Young Technology was still an e-commerce platform where users could search for and book medical beauty services, connecting approximately 6,000 medical beauty service institutions across 300 cities in China, with over 1 million active users.
Founded in 2013, So-Young Technology was essentially an online community related to cosmetic surgery. In 2014, the company began collaborating with medical beauty hospitals and clinics, officially entering the e-commerce field. Medical beauty institutions became one of the company's main sources of income, as they placed advertisements on the platform and gained booking traffic, from which So-Young also took a commission.
The company started selling &#34;injectable&#34; medical beauty products such as Botox and hyaluronic acid early on. Chairman Jin Xing's mother is a plastic surgeon, and Jin Xing himself has shared his experiences of receiving facial slimming injections, hair transplants, and hyaluronic acid injections on the So-Young app.
Jin Xing founded So-Young Technology with the intention of making it easier for people to find information about medical beauty surgeries and related products, especially during a time when China's economy was growing rapidly and consumer acceptance of medical beauty services was increasing quickly. In 2021, So-Young acquired Wuhan Qizhi, a manufacturer of medical products for hospitals. Since 2023, third-party injectable products and Wuhan Qizhi's medical products have become an independent and substantial source of income for the company.
However, there is a certain contradiction in the company's current business structure—independent physicians and clinics that originally relied on the So-Young platform for traffic and paid for it are now in direct competition with So-Young's self-operated clinics. In the long run, this is undoubtedly a negative factor, as these independent practitioners may hesitate to cooperate with a platform that is also a &#34;competitor.&#34;
Nevertheless, self-operated clinics have clear advantages over third-party collaborations—So-Young Technology can control service quality to a higher standard. In recent years, a large number of small clinics have emerged in China's medical beauty industry, many of which have inconsistent service quality, making them the main targets of regulatory scrutiny.
Jin Xing recently stated in an interview with Bloomberg: &#34;As we increase the density of our stores and align prices with the Korean market, I believe more and more consumers will choose to receive these medical beauty treatments domestically.&#34; He pointed out that So-Young Technology can maintain low prices mainly through large-scale procurement strategies and effective marketing cost reduction due to its high brand recognition.
The Chinese medical beauty market is vast and growing rapidly, with its penetration rate still lower than that of South Korea, the United States, Brazil, and Japan. A recent report by KPMG predicts that the market size will grow from 311.5 billion yuan in 2023 to 1.3 trillion yuan in 2030, nearly tripling. About 38% of this belongs to non-surgical medical beauty, which is So-Young Technology's core market segment. Among consumers who entered the medical beauty market last year, 56.9% were aged 21 to 30, and another 22% were between 25 and 31 years old
As the business focus shifts from online services to offline clinics, So-Young no longer needs to compete with Chinese internet giants for order flow and booking services. However, the company is also facing new competitors, such as Langzi Co., Ltd. (002612.SZ), which recently acquired the well-known Lido Hospital in Beijing and collaborated with the medical beauty company Pumen to develop new products. Even though the stock price has risen significantly this year, So-Young's price-to-sales ratio (P/S) is about 1.45, still slightly lower than Langzi's 1.59

So-Young Technology has transformed into a "light medical beauty" clinic chain. Despite the growth in clinic revenue, the decline in traditional platform business has led to losses. The company's rapid expansion has raised questions about the sustainability of its "dual-track business model."

The more stores opened, the heavier the investment; So-Young Technology is currently struggling to rely on "light medical beauty" for a turnaround