Earnings Call: H1 2025

Aug 26, 2025

Summary

H1 revenue rose 28.2% and net profit 35.5%, with record adjusted margin of 13.1%. Sub-health medical led segment growth, while Naturade integration and city expansion remain key growth levers.

Ladies and gentlemen, good evening, everyone. Welcome to the Beauty Farm 2025 Interim Results Conference Call. Please welcome Ms. Vivian Lu, Investor Relations Director of Beauty Farm to host today's conference. Please go ahead. Hello, everyone. Welcome to the Beauty Farm 2025 Interim Results presentation. Joining us today are Mr. Li Yang, Chairman of the Board, Mr. Lian Songyong, Vice Chairman of the Board and CEO, and Ms. Zhou Min, Board Secretary and CFO. Before we begin, please note that today's presentation may contain forward-looking statements. The conference will also discuss non-IFRS financial measures. For definitions, please refer to our results announcement. Unless otherwise stated, all figures mentioned are in CNY. Our agenda today consists of two parts. First, the presentation from management, second, the Q&A session. Now, please join me in welcoming our CEO, Mr. Lian, to deliver his remarks. Hello, everyone. I'm Lian Songyong. Welcome to the Beauty Farm 2025 Interim Results conference call. Beauty Farm has journeyed through 32 years, from our first store in Hainan to becoming a chain brand present in over 100 cities today. We've always believed that time is the fairest witness, and true quality lies in the details of everyday efforts. Over the past 32 years, we've weathered many storms and accumulated strength, ultimately building Beauty Farm into the remarkable brand it is today. With humility and respect, we uphold every commitment we make to our customers, investors, employees, and society. Time will always reveal the truth, and our customers' choices are the best answer of all. We've always been committed to deeply exploring our business model. In 2010, we pioneered in China a unique business model integrating beauty services with medical services, our Dual Beauty model. We evolved this into the Dual Beauty + Dual Wellness comprehensive business model, leveraging over 500 beauty and wellness stores with both customer trust and gained deep insights into their needs, extending services to include aesthetic medical services and sub-health medical care, covering the full life cycle. Our ability to thrive across economic cycles over the past 32 years is a strong testament to the significant advantages of our business model. From the customer experience perspective, we provide comprehensive one-stop services that meet diverse needs across different life stages, from daily skin care to advanced aesthetic medical services, from external beauty to anti-aging for the body. From the business perspective, under the Dual Beauty Dual Wellness model, we've achieved efficient cross-business synergy and rotational growth, mitigating industry volatility. Our three core businesses work in unison to maximize long-term member value, driving sustainable revenue growth while addressing the challenge of high customer acquisition costs. In 2024, our average annual revenue per store exceeded CNY 10 million, with value-added business contributing over 45% of revenue. Meanwhile, our customer acquisition related expenses accounted for less than 2% of total revenue, significantly below the industry average. These figures fully demonstrate the excellence of our business model. I believe China's beauty industry is undergoing fast consolidation. Beauty Farm's organic growth plus external expansion strategy has been proven through our acquisition of Naturade, the second largest brand in the industry. Since the acquisition in July 2024, we have in less than one year achieved a leap from business integration to capability symbiosis. In the first half of 2025, Naturade delivered a good performance, with revenue reaching CNY 277 million. It is not merely a result of scale addition, but rather the one plus one larger than two synergy effect. By optimizing the supply chain, standardizing digital operations, and integrating customer resources, we improved operational efficiency. Naturade's adjusted net profit margin surged from 6.5% pre-acquisition to 10.4%, quickly aligning with the profitability level of a listed company. Due to the remarkable results, we announced in May this year an additional 20% stake acquisition in Naturade, raising our ownership to 90%. This move is not only a vote of confidence in its potential, but also a strategic choice to strengthen control and create greater value for our shareholders. Post acquisition, we have continued to strengthen Naturade's core advantages. This year, our group's first AI-powered digital transformation flagship project, the Intelligent Beauty plus Wellness 2.0 system, will be implemented at Naturade. It integrates the expertise of seven renowned TCM experts and institutions, combining traditional Chinese medicine theory with modern diagnostic technology. Through five dimensions, constitution, tongue characteristics, meridians, internal organs, and skin, AI-generated reports will provide data-driven, visible effect for cycle health management, leading a new trend in intelligent beauty and wellness. Its success validates our end-to-end capabilities in acquire, integrate, and empower. From strategic alignment to culture integration, from business collaboration to centralized platform enablement, we have developed a replicable integration methodology. Looking ahead, we will leverage this model to pursue opportunities to consolidate resources within the industry. Let us return to the industry and look at its new driving forces. With the fast pace of life, increasing pressure, and changes in social interactions, consumer demand is shifting from material pursuit to emotional connection and spiritual resonance. According to a report by the China Consumers Association, emotional value has become a key factor influencing consumption decisions among younger generations. iiMedia Research forecasts that China's emotional economy market will reach CNY 2.3 trillion in 2025 and surpass CNY 4.5 trillion by 2029, creating vast opportunities for the industry. Our core users are professional women in China's top-tier cities. They play crucial roles in both the workplace and their families. Yet they are also the group most in need of care and support. As women's self-care consciousness awakens, enhancing happiness and quality of life has become a new customer service scenario. Our mission is not only to provide professional and comfortable services, but also to create a sanctuary for women's hearts, a place where they can temporarily set aside their social roles and labels, enjoy relaxation and emotional fulfillment, and reconnect with their true selves. Through our dual value proposition of technology-driven functional skincare plus immersive urban healing retreats, we are reshaping the premium consumption landscape. Every treatment becomes both a scientific renewal for the skin and a poetic retreat for the mind and soul. As China's number one and a globally leading beauty and wellness service brand group, we focus on serving high-end female customers in top-tier cities across China, building a full lifecycle service network with a customer-centric approach. Back to our financial performance. In the first half of this year, our revenue and profits grew countercyclically, reaching new highs. Total revenue reached RMB 1.46 billion, up 28% year-on-year. As revenue steadily increased, scale effects became more pronounced, driving gross margin up by 2.3 percentage points to 49.3% YoY. Net profit rose to RMB 170 million, representing a significant 35.5% YoY increase. Notably, adjusted net margin reached 13.1%, a record high, demonstrating our company's strong profitability even under macroeconomic stress test conditions. Behind this result lies the unwavering choice of our customers. In the first half of this year, foot traffic at our directly operated stores reached 920,000 visits, up 48% year-on-year. The number of active direct store members rose to 120K, a 47% increase. Leveraging the dual beauty plus dual wellness business model, 20% of beauty and wellness members purchased value-added services such as aesthetic medical services or sub-health medical care. Our cash generating capability has become increasingly robust. In the first half of 2025, net cash flow from operating activities reached CNY 410 million, up 84% year-on-year. As of June 30th this year, cash and cash equivalents totaled CNY 2 billion, a net increase of 28% YoY. These ample reserves not only support our long-term development, but are also used for shareholder returns. Since listing, we've announced cumulative dividends exceeding CNY 297 million, with a clear plan to allocate 50% of net profit attributable to shareholders for dividends over the next three years, sharing long-term value with our shareholders. China's first-tier cities are both world hubs and core concentrations of high-net-worth households. We continue to deepen our presence in 20 core cities with high-net-worth clients. As of June 30th, the total number of directly operated stores reached 176, of which 157 were in Beijing, Shanghai, Guangzhou, and Shenzhen, accounting for 58% of the total. Leveraging the strong high-end consumption power in these top-tier cities, revenue in the four cities grew 52% YoY in the first half of 2025, contributing 65% of the group's total revenue. Going forward, we will continue to strengthen operations in core cities and further build competitive barriers. Next, I will provide a detailed overview of the development of our three core businesses. Beauty and wellness services are the core traffic entry point of our dual beauty, dual wellness model, serving a key role in connecting with consumers. To capture long-term growth opportunities, we implement a multi-brand strategy in our foundational beauty and wellness business, using our differentiated brand matrix to address the needs of segmented customer groups. Currently, we've established three brand matrix: Beauty Farm high-end flagship beauty services, Color Spa premium professional beauty chain, and Naturade TCM-based intelligent beauty and wellness services. Looking ahead, we'll continue to expand the boundaries of these brand matrix to offer a richer brand portfolio that meets diversified needs. In the first half of this year, our market share grew countercyclically, demonstrating the resilience of an industry leader across the cycles. Revenue from beauty and wellness services reached CNY 810 million, up 30% year-on-year, with gross margins improving to 42%, a 2 percentage point increase. Foot traffic at directly operated stores reached 850,000 visits, up 49% YoY, while active direct store members rose to 112,000, up 46%. On the product front, Beauty Farm continues to select professional-grade products with a global perspective. 32 years ago, we partnered with Germany's Bob Hartmann to establish Dedica, introducing German origin skincare, German training systems, and enduring treatment philosophies to China. This 32-year partnership reached a new milestone in May this year with a comprehensive upgrade of the classic LOI series, embodying the slow care philosophy with full formulations and evoking emotional resonance with members spanning 32 years. Meanwhile, the Pen Yin collagen family has been upgraded, extending from facial care to neck to scalp anti-aging, directly supplying collagen to meet the efficacy-focused needs of the younger generation. In terms of traffic expansion, thanks to the group's strong brand influence, digital marketing capabilities, and omni-channel operations, customer acquisition efficiency continues to improve. Private domain refined operations have advanced through customer-tiered marketing and referral programs. Over 46% of new members came from private channels, reducing acquisition costs. In public channels, we piloted an employee brand ambassador strategy, bringing staff to the forefront. In the first half, we developed 51 professional skincare expert KOL personnel, creating a complete loop from content seeding to sales conversion. In the second half, we will invite members to the spotlight, introducing 88 real members as insight officers, sharing authentic experiences to amplify brand voice. By listening to genuine member needs and feedback and fostering deep interaction and collaboration, we co-create brand value with our members. Regarding aesthetic medical services, China's medical beauty industry is undergoing profound transformation. Market education has made the leap from zero to one. Social acceptance has increased as well. The consumer base continues to expand. Meanwhile, with frequent approvals of new upstream products, product iteration has accelerated. Against this backdrop, supply-side innovation and traffic competition among institutions combine, restoring consumer choice. Specifically, customer trust has become the core competitiveness of medical aesthetic institutions. They must earn long-term trust through professional services. In the first half, revenue from medical aesthetic services reached CNY 500 million, up 13%, with gross margin at 56.9%, up 1.8 percentage points. We continue to attract cornerstone business customers to our clinics. In the first half, direct store visits totaled 50,000, up 28% year-over-year, and active members increased to 24,000, also up 28%. Regarding clinic network layout, we continue to deepen our presence in core cities. As of June 30th, we operate 27 medical aesthetic clinics. In March, the CellCare Changsha clinic was upgraded, and in August, the grand opening of the Guangzhou Beauty Farm Medical comprehensive flagship clinic took place. This is currently the largest and most fully featured medical aesthetic and sub-health flagship clinic in China, filling the gap in Guangzhou while further strengthening our Beijing, Shanghai, Guangzhou, Shenzhen strategic layout. Why do we earn customer trust? CellCare aesthetic medical services as a high-end Chinese brand adheres to fully direct-operated clinics and upholds the medical essence with top-tier professionals, advanced technology, superior standards, and exceptional service quality. We provide a professional, safe, and comfortable medical aesthetic experience. In building our expertise, we continue to strengthen our talent advantage. During the ninth anniversary of the CellCare Topology Aesthetics, we launched the CellCare Art Pioneer Master team, refining master-level aesthetic abilities and technical essence to standardize and replicate our medical capabilities. On the industry accreditation front, our medical team has accumulated over 700 professional certifications, solidifying the foundation of our medical expertise with strong and tangible capabilities. In terms of aesthetics, the CellCare Topology Aesthetic System, guided by the concept of Innate Beauty, Shine Freely, was upgraded again this year, encouraging women to express themselves confidently regardless of age or time. This upgrade emphasizes more detailed needs, highlighting three-dimensionality, dynamism, and smoothness, shifting the standards from static plug-style flat beauty to more vibrant and storytelling vlog-ready beauty, creating a livelier aesthetic standard. The sub-health medical business continues to maintain strong growth momentum. Neology Medical focuses on functional medicine and female gynecological anti-aging services, delivering an outstanding overall performance in the first half of the year. Foot traffic at sub-health medical direct-operated stores reached 19,000 visits, up 76% year-over-year, while active members rose to 7,014, up 93%. As a result, revenue in the first half of 2025 reached CNY 154 million, an increase of 108% year-over-year, with its contribution to total revenue surpassing 10% for the first time, becoming a key revenue driver. Gross margin rose to 63.1%, up 8.7 percentage points year-over-year. The rapid rise of Neology stems from our precise capture of market opportunities and long-term business accumulation. For high-net-worth clients, functional medicine and gynecological anti-aging represent latent essential needs. In the first half, revenue from the functional medicine segment grew 122%. The Energy Drops product series sold strongly, with liver metabolism detox and NAD+ Elite Energy products highly popular among clients due to their strong alignment with sub-health characteristics. Additionally, the new biological age management customized solution improves the gut microecology and the metabolic function, further enhancing our portfolio. The Women's Special Care Centers are medical institutions dedicated to professional anti-aging and wellness. In the first half of 2025, revenue from these centers grew 173%, making them one of the most important businesses within the sub-health segment. In terms of capacity building, we continue to deepen integration of industry, academia, and research, establishing partnerships with medical partners. In August, we established the designated clinical training and exchange center for gynecology and a benchmark training base for research participation with upstream partners, promoting the sustainable development of the female anti-aging industry. In March this year, Beauty Farm officially launched the capital market value enhancement plan, advancing growth through three key initiatives. First, establishing a long-term shareholder return mechanism by committing to distribute no less than 50% of annual net profit attributable to shareholders as dividends over the next three to four fiscal years. Second, optimizing the shareholder structure by introducing long-term strategic investors to build a healthy shareholder ecosystem. Third, strengthening the alignment of management and shareholder interests through equity incentive programs to drive value co-creation and sustainable development. The plan has delivered interim results. On August 18th, the company announced that CPE had completed the transfer of 51.329 million shares, formally exiting as a major shareholder. Meanwhile, the two major health care industry investors and strategic partners introduced have appointed directors, further upgrading the shareholder structure towards greater professionalism and diversification. Market response to our strategy has been positive, with the company's market capitalization rising 15% from the beginning of this year to the end of August, a clear testament to the capital market's strong recognition of our value enhancement trajectory. Finally, back to the essence of demand. Maslow taught us that the highest human need is self-actualization. Today's women have long transcended superficial pursuits of beauty and health. They seek growth, meaning, and becoming the best version of themselves. For 32 years, we've embedded the mission of supporting self-actualization into our brand's DNA, standing as a companion in every journey of women's self-discovery and empowerment. Organically, we will strengthen the advantages of our Dual Beauty + Dual Wellness business model, expand our core business brand matrix horizontally, and deepen medical business penetration vertically to drive steady revenue growth. In terms of geographic expansion, we will continue to capture market share in tier cities and solidify our presence in core urban centers. Externally, we will replicate our acquisition and integration experience of Naturade to further pursue industry consolidation. On the digital front, we will leverage our data capabilities to focus on AI-driven innovation in the beauty and health sectors. With these initiatives, coupled with the capital market value enhancement plan, I am confident that we will continue to unlock long-term value, create a sustainable winning future for customers, shareholders, and partners alike. This concludes my presentation. Now, please welcome Ms. Zhou Min, our Chief Financial Officer, to present our financial performance. Dear investors and analysts, I am Zhou Min, CFO of Beauty Farm. I am pleased to present our financial performance for the first half of 2025. Despite macroeconomic pressures, we delivered record-high revenue and profit. This achievement reflects our unwavering execution of the dual engine strategy of organic growth plus external acquisitions, combined with initiatives to enhance efficiency and quality, driving profitability to new heights. In the first half, we recorded revenue of CNY 1.459 billion, up 28.2% YoY, significantly outperforming industry averages and demonstrating the vitality of our business model. Breaking down our revenue structure, all three business segments displayed distinctive yet robust growth trajectories. First, beauty and wellness services generated revenue of CNY 807 million, up 29.6% YoY. Of this, direct store revenue reached CNY 739 million, up 31%, driven by same-store sales growth and the positive integration of the Naturade brand. Franchise and other revenue was CNY 67 million, up 16.2%, primarily due to the inclusion of Naturade franchise stores post-acquisition. Second, medical aesthetic services contributed CNY 499 million in revenue, up 13% YoY, supported by rapid growth in customer volume and membership driven by our dual engine organic plus acquisition strategy. Third, sub-health medical services delivered revenue of CNY 154 million, a remarkable 107.8% increase, making it our fastest-growing segment. It was fueled by member base expansion, both organic and acquisitive, as well as an enriched product portfolio that increased the cross-selling from beauty and wellness into sub-health medical services, boosting penetration and per-customer spending. While achieving faster growth, we also maintained a strong focus on profitability. In the first half, we generated a gross profit of CNY 720 million, up 34.7% YoY, with gross margin improving by 2.3 percentage points to 49.3%. This was primarily driven by, first, direct beauty and wellness services achieving a gross margin of 40.7%, up 1.9 percentage points, supported by procurement scale benefits for revenue expansion and a higher margin contribution of Naturade. Second, medical aesthetic services gross margin rising to 56.9% from 55.1% in the first half of 2024, up 1.7 percentage points as business expansion enhanced our procurement bargaining power. Third, sub-health medical services revenue surged to 107.8%, and fixed costs were diluted by scale effects, resulting in gross margin jumping from 54.4% in the first half of 2024 to 63.1% in 2025, an increase of 8.7 percentage points. At the bottom line, the group delivered a net profit of CNY 171 million, a record high, representing a 35.5% YoY increase. Adjusted net profit reached CNY 191 million, up 37.8%, while adjusted net margin climbed to 13.1%, marking an all-time high. Our efficiency initiatives, the operational efficiency initiatives we implemented at the beginning of the year have yielded great results. First, the supply chain enhanced the procurement bargaining power, driven by revenue expansion and improved inventory turnover enabled by digital capabilities. Second, improved employee productivity, supported by the full rollout of our skin analyzers earlier this year, enabling precise beauty treatment planning for clients. Third, we leveraged stronger brand recognition to gain support from strategic property partners, reducing rental costs and improving store efficiency. Now let's look at our robust cash flow. Driven by the strong cash-generating ability of our model, operating cash flow in the first half this year surged to CNY 210 million, up 84%, demonstrating the strength of our model. As of June 30th this year, even after settling the consideration for the Naturade acquisition, our cash reserves remained at a strong CNY 2.0 billion, up 27% year-over-year. This solid cash position and robust cash generation provides a strong buffer for both organic and external growth and also enables us to deliver tangible returns to shareholders. In March, we formally announced the establishment of a long-term shareholder return mechanism, committing to distribute no less than 50% of annual net profit attributable to shareholders as cash dividends over the next three full fiscal years. For the first half, we declared a dividend of HKD 0.52 per share for fiscal year 2024 to be distributed to shareholders in September. Dear investors, in the first half of 2025, with revenue growth of 28%, profit growth of 38%, and an 84% increase in cash flow, we've once again proven the resilience of our business model and effectiveness of our organic growth, plus external acquisition dual engine growth strategy. Looking ahead, we will remain firmly committed to executing our growth strategy, focusing on driving both scale and profitability while seizing industry opportunities to ensure the group's long-term sustainable development. This concludes my presentation. Thank you again for your attention. We will now move to the Q&A session. I look forward to engaging with you further. Thank you very much. Thank you for your remarks. Now we move on to the Q&A session. Feel free to raise your questions. Dear participants, if you would like to ask a question, please press the star button and then press 1. And for online audience, you can type your question in the chat box, or you can raise your hand for video question. Now I give the floor to 9282. Please mention your name and your institution. Dear management team, I'm Huang Mengxi from CICC. Thank you for giving me the opportunity. Congratulations on your great performance. In the first half of this year, we understand that against the industry backdrop, as a leader, you can achieve this remarkable performance. It's no mean feat. I'd like to ask you from an industry perspective, how do you view this beauty and wellness sector? Do you believe there is still growth potential? The second question is about the membership. We can see in the first half of this year, our membership growth and engagement were particularly impressive. For example, the active member count, purchase frequency, et cetera. Could you break down the key drivers behind this performance for these two questions? Thank you very much. Thank you for your question. You asked two questions. One is about the industry, and the other is about our membership growth. I will try to answer these two questions separately. First, for Beauty Farm, the first half of this year, for beauty and wellness sector, we achieved a faster growth with great resilience. We are already number one of its kind in China. For the whole industry, we can look at it this way. Actually, the beauty and wellness sector is a very large sector, over CNY 1 trillion value in total. In China, Chinese market is also leading the whole world in terms of the beauty and wellness sector. Also, we witnessed some changes in the sector in China as there are more and more population in the urban cities, especially the concentration in the large cities, in these mega cities. As a result, there is a cluster of cities, and there is the concentration of wealth accordingly as well. For many families with over CNY 10 million family wealth, 30% to 40% of these families are concentrated in Beijing, Shanghai, Guangzhou, and Shenzhen, these four first-tier cities. There is a very clear trend of the population concentration. For the beauty and wellness sector, they echo the population trajectory as a result. There is also the concentration of the leading companies as well. For these industries, we can see the structural changes. As there is more and more population in the top-tier cities, the growth of the beauty and wellness sector in these cities is also going to be faster. Also for leading companies, there is the scale effect, there is the scale economy, and also there are more digital strengths, and there are more professional medical services and professional medical capabilities. Their growth is usually higher than the market average. There are structural changes and also structural advantages, as I mentioned. That is what we have observed from the industry perspective and also from our own performance. To answer your second question about our membership growth. While we keep our growth, our active member count is growing 46% accordingly. Also the purchase is very strong. We can see the membership number. Our membership number is increasing steadily. To give you some figures. In the first half, our active members spent, although they visited our stores 5.7 times, and their average spending is CNY 6,200. We have a very steady loyalty, and their per time purchase is around CNY 1,086. It has shown their deep loyalty in our service and our brand. Also you can see the Palaispa average spend has increased to CNY 1,600, and the CellCare average spending is around CNY 800. They all showed the strong spending power and the purchase power of our users. Let's look at their top-up money. This is an important indicator to value the loyalty. In total, the top-up money reached CNY 1.5 billion, up 36%. It's faster than our revenue growth as well. Despite the macroeconomic stress and pressure, we've delivered very resilient growth. It has shown the long-term trust in our brand and the confidence in our brand services. Now let's look at our repurchase rate. We can see based on our accumulated customer base, our old customers contribute 31% to our revenue. The members, especially the active members, are the support of our revenue. In terms of the total revenue, profit, the top-up money, and the repurchase rate, you can see the faster growth of our membership and their strong power. Now we can break down the users. The users who spent over CNY 100K and for the medium customer base around CNY 10,000-CNY 100,000 and those below CNY 10,000. We can see from the structure that we are improving our portfolio, and we provide new customer services, and we have been increasing our purchase times and also their loyalty. For the mid-level, their spending increased by 2.5%. This customer base increased by 4%. For the dual beauty services, we provide them with some packages. Targetedly, it has increased the loyalty of this mid-level customer. For the low-level, their consumption increased by 12%. That shows the expansion of our customer base. With our online marketing, it has shown the online marketing capabilities of Beauty Farm. The net increase reached 11%, which shows that we are increasing our customer base. From the total to the breakdown, you can see the purchasing power has been very strong and solid, and there are several drivers behind. First, our acquisition capabilities are leading in the sector. We have strong digital capabilities and a four-channel acquisition capacity. In terms of these indicators, we are at a leading role. It has guaranteed that we have a very stable customer increase and increasing our total members. We have around 40% in all these indicators. What is more, to satisfy the needs of customers, we really pay attention to the exploration of the channels and our services. For the facial products, we focus on the technologies and the functional technologies. We provide some leading solutions. Also we make full use of our advantages, the dual beauty strategy, the basic beauty services, and the aesthetic medical services, so that we provide them with a more comprehensive solution. In addition, for technology wellness and for the health care services, we have been making steady progress. For example, we understand the body characteristics of our customers, so we can provide them with more targeted recommendations, sleep, pressure, and the gynecological features, so on and so forth. We can better optimize our product portfolio. We can enrich our portfolio. We are increasing our development in this regard as well. We have been making some innovative breakthroughs in this regard as well to satisfy their needs and increase the loyalty of our customers. That is my answer to your questions. Thank you. Thank you. Congratulations. We wish Beauty Farm can grow further and enjoy the bright future. Now, the second question, please mention your name and your institution. Dear management team from Beauty Farm, I am Wang Changlong from Guosen. Again, congratulations on your remarkable performance. I have a question. Mr. Lian just mentioned that revenue in Tier 1 cities grew by 50% in the first half of this year, which is very encouraging. Could you share our specific plans for city-level expansion going forward? For example, will our strategies differ across Tier 1, new Tier 1, and other cities? What will be the main focus areas? Thank you. Just now I mentioned, we have noticed this important change in this industry, the industry structural change. There is a shift and concentration to the first tier cities. We try to align with the market trends. We focus on the Tier 1 cities, and then we strengthen our advantages in these core cities. That is the strategy of our layout. We strengthen our internal growth. Internal growth and external integration. This is the dual goal strategy. In these Tier 1 and new Tier 1 cities, we use these methods to improve our market penetration rate, to capture a larger market share, and to enjoy a higher profitability. Specifically for the ultra Tier 1 cities, Beijing, Shanghai, Guangzhou, and Shenzhen. These are our core cities. These are our strategic cities. We can see clearly that the number of the directly operated stores in these cities are 157, around 57% of the total directly operated stores. They contribute CNY 890 million to our revenue, up 50%, 62% of our total revenue. From these figures, it is clearly shown that in these cities, we have dense stores, and we have high efficiency with our mature business models. These cities are key drivers to our growth. In these cities, we can open more stores in a dense way. We can satisfy and we can acquire more high-net-worth customers. Our sub-health and the aesthetic medical service customers might be more concentrated. The profitability in these first-tier cities is actually leading our company and also in the whole industry, Beijing, Guangzhou, Shenzhen, so they can reach 25% in our net profitability. Our business models have shown strong profitability in these Tier 1 cities, in Beijing, Guangzhou, Shenzhen, Shanghai. We have been adjusting our strategies for Beijing. It is a very mature city. In Beijing, we adjusted our operational strategies with a more refined way. We have been changing our structure as well. Our revenue increased to 9.8% in the first half, has demonstrated that there is room for the increase in our efficiency in the management and operation. It has been a model for us to further increase our efficiency. Also, with acquisition and investment of Naturade, our stores have been increasing as well. We increased our market share in a very fast way. It has increased our medical services, sub-health services, and sales. In these core cities, we have been strengthening our advantages. We have 8 cities that have a revenue over CNY 100 million. We are further going to increase them from CNY 100 million to CNY 200 million, or to increase the revenue of other cities to CNY 100 million soon. We have had this replicable model in Xi'an. Around 2020, the revenue was around CNY 10 million, but now it has been increased to CNY 100 million. The growth of the cities cannot be achieved without our internal growth and external expansion. We do some acquisition of good assets in Xi'an. Some franchised stores and the local brand, White Lotus. By acquisition, we have increased our stores and membership numbers. Also for the landmark SEG, SKP, and Mixc, these shopping malls, we have entered these major shopping malls in Xi'an, in these landmark shopping malls. In 2022, we also laid out the medical services there as well. Medical services, wellness services, and aesthetic services have been combined and further improved. As a result, in 5 years, we increased our revenue from CNY 10 million to CNY 100 million, and our profitability before tax reached 31%. The high profitability has boosted our confidence. For Chengdu, we have also achieved the acquisition. For the first half, Chengdu delivered a 35% YoY increase, over CNY 50 million for the first half of the year. It is very close to the CNY 100 million sales for the whole year. It has been increasing its scale even further. For Chengdu, we achieved our acquisition. In 2024, we achieved the acquisition of Ulan, expanding our stores there. We also acquired a clinic there in Chengdu. It is a very large comprehensive aesthetic service and wellness center. Also in the best stores, shopping malls like IFS, are a big cavernous city. These large shopping malls in Chengdu, we have leveraged the acquisition and investment in building our business models, increasing our business reputation. We need to further seize the opportunities of the concentration of the population in these large cities. That is my answer. Thank you for your question. Thank you, Mr. Lian Songyong, for a detailed introduction. We look forward to even better news for the second half of the year. The third question. Please mention your name and the institution that you represent. Dear management team, I am Du Yifan from CITIC Securities. Thank you for giving me the opportunity. In your letter to shareholders on the company's second listing anniversary, you mentioned a CNY 10 billion market cap goal. As we are approaching this target, could you break down the path to achieving it? What are the company's long-term plans beyond this CNY 10 billion milestone? To answer your question this way, at the time we mentioned the CNY 10 billion market cap goal, we tried our best to reach this goal. With our Dual Beauty + Dual Wellness business model, internal growth plus external expansion, dual well strategy, we work on this goal very seriously. In the short period of time, it is going to be our goal for the years to come. It is going to be an important goal for our company. We are trying to achieve this goal. For the first half of the year, our price was lower than CNY 10, but this year it has been increased to CNY 230. It has been increasing by 230% this year. We will continue to serve as a pilot and a leader in the industry. We are going to be the pacesetter of the industry continuously. As a whole, we have two long-term plans. First, for the first-tier cities and core cities, Beijing, Shanghai, Shenzhen, Guangzhou, and Hangzhou. For these top-tier cities, we will need to deepen our strengths. For these markets, we can further increase our market share and penetration rate. We mentioned the whole industry market cap can be over CNY 1 trillion. Right now, there are some structural changes. We need to seize these opportunities and make full use of our accumulated business bases and commercial capabilities as well as profitability capabilities. We are going to further increase our market share, so there is great room for improvement. We believe we can increase our revenue while increasing our profitability in these cities. What is more, in China, there are some other new tier 1 cities. Like we mentioned, Xi'an, Chengdu, Wuhan, and Chongqing, and a lot of other important cities. We already have our directly operated stores there. But for these cities, our penetration rate is not that high in the top-tier cities. We need to double up our services and investment as well. In these cities, we hope we can replicate the successful experience of Xi'an and Chengdu. With our business model, we want to further increase the number of our stores, making it denser, and we are going to target the customer base more accurately to improve our internal growth and external expansion. We can further increase the city's revenue from CNY 100 million to CNY 200 million, or from less than CNY 100 million to CNY 100 million. We think with these two plans combined, our penetration rate will show a very clear growth. As you mentioned, HKD 10 billion market cap, it is a goal that we must achieve. We have a step-by-step development plan accordingly as well. In addition to the market share and the penetration rate, we think we have another important goal that is the increase in our efficiency while improving our revenue. How can we further make our operation more efficient? That is an important topic, an important direction for management in the near future. In the first half this year, we have achieved this goal. We improved our revenue, and we make our operation even more efficient. It is thanks in part to our business model. We focus on our customer base, and we form the coordinated effect of our resources. In the future, we are going to have a faster efficiency, and we are going to have better digital capabilities. For our brand, we are going to increase our operational efficiency in every city across all cities. While improving our revenue, we want to deliver a better customer value. We want to further improve our operational efficiency, increasing our value for the long term. Thank you. We look forward to it as well. Next. Please mention your name and the institution that you represent. Thank you. Thank you for giving me the opportunity. I am Sundan Yang from Huatai. Distinguished management team, distinguished members. After hearing your presentation, I would like to ask about acquisition. I would like to ask Mr. Lian Songyong, could you share an update on the Naturade acquisition progress, particularly in terms of the business synergies, resource allocation, and the results achieved so far after this period of time? Additionally, we are curious, and we would like to know what are our future plans regarding M&A strategy. I think this is a question concerning many investors. Thank you. Thank you for your question. For Naturade project, as you see for the first half this year, it has delivered a great result beyond our expectation. Its revenue reached RMB 277 million, and its profitability increased from 6% before acquisition to around 10% post-acquisition. The acquisition and the integration confidence of our group has been further increased. The per store revenue for Naturade increased from 5.8 million before to 7.2 million post-acquisition. Operational efficiency, revenue, profitability have all been increasing. We are doing some review as well. We are trying to reflect on our performance. I think there are several drivers behind. First, we continue to make use of the core advantages of Naturade, that is, its intelligent wellness. Naturade has its unique characteristics. It focuses on wellness services. Intelligent Beauty plus Wellness 2.0, it is its key business. In May this year, Frost & Sullivan once again mentioned that Naturade is the number 1 intelligent wellness brand in China. It uses modern equipment with the traditional medical philosophies of China. It uses examination first, and then treatment, health care, wellness care, and then examination. This is a form of intelligent wellness. For traditional wellness institutions, it is usually based on human experience. Usually, it is based on the subjective feeling of the customers, but we have changed it. With digital technologies, we have changed the way that we deliver the wellness services. That is the core strategy of Naturade. We are going to increase our R&D in this regard. in May, we launched the Neology product, and it has delivered really great results. It accounted for 10% of our revenue. This intelligent wellness new project was sold strongly after its launch, and it has demonstrated its great room for improvement and its great potential. What is more, we have been redesigning and upgrading the stores for intelligent wellness. The new stores have separate and independent examination rooms. We have their body physique test and the X-ray test, and also the infrared test. We can combine the examination results with the experience of the experts. We can form this intelligent examination advantage. Also, we are developing our AI detection capabilities as well. With accumulated data, we can further offer solutions suitable to our customers, and we can follow up, provide real-time support. For intelligent wellness, we have full confidence. We believe that it is going to promote faster growth of our stores. In addition, we have our own medical services. In the first half, it achieved CNY 105 million. We can see our Naturade customers pay great attention to the subhealth services. The subhealth services accounted for 13.6% of Naturade. It is higher than the share of the total group. Also, the Naturade subhealth group spent CNY 19,000, also higher than the group's average. Naturade focused on the wellness and the medical services. In addition to their clinic adjustment, we have been expanding the stores as well. On August 1st in Guangzhou, we launched a comprehensive medical service store. It is over 5,000 sq m. It is the largest store that we have so far, and it has been warmly welcomed by our customers. Within just a few days, we increased our revenue to CNY 20 million. Also, we have new Naturade stores that are to be launched very soon. That is the business side. Then for our operational side, we have been working hard. Our profitability increased from 6.5% to 10.4%. Our net profitability has been closer to our whole group. It is thanks in part to our organizational changes. What is more, our per store consumption has been increased as well from CNY 5.8 million per store to CNY 7.2 million for Naturade. Of course, there is optimization of the rent of the stores. In the shopping malls, our advantage has been even more clear. Our rent has been going down in proportion of our total revenue. We are increasing our digital capabilities and our O&M efficiency, so we can replicate many functions while reducing our cost and improving our operational efficiency. All of these strengths have improved the performance of Naturade. Naturade is our first large-scale acquisition project. So far, for this way, we can see that we have delivered a very great performance. It has improved our confidence and we have accumulated great experience. We are going to continue our path to promote our internal growth and external expansion. We are going to integrate good quality assets in this sector and then to find the upstream integration opportunities. These are our thoughts on the acquisition and investment for the future. In this way, we can rapidly increase our market share and efficiency, achieving growth in both revenue and profitability to deliver a better commercial value to work on these goal and mission. That is all. Thank you. Thank you. We look forward to more acquisition and integration projects. Thank you very much for sharing. Due to time limits, this ends our Q&A session. Thank you very much for attending the meeting. This is the end of the meeting. Wish you a good day. Thank you. Bye-bye.