According to recent reports, Haitong International has published research indicating that BEAUTYFARM MED (02373) has announced the acquisition of 100% equity in Shanghai Siyuanli Industrial for a total consideration of RMB 1.25 billion. This move marks a crucial step in its "organic growth + external acquisitions" strategy. Established in 2009, Siyuanli is projected to generate approximately RMB 850 million in revenue and around RMB 81 million in net profit in 2024, with an operating cash flow of about RMB 240 million and cash and cash equivalents of approximately RMB 360 million.
Haitong International's key insights from the acquisition reveal that it will be structured through a diversified financing approach consisting of "cash + acquisition loans + new shares", with the cash component amounting to around RMB 840 million—comprising RMB 330 million from internal funds and RMB 510 million from bank financing. The share component will contribute about RMB 410 million, with approximately 15.798 million shares issued to the seller at an issue price of HKD 28.71 per share. Following the completion of the transaction, Siyuanli will become a fully owned subsidiary of BEAUTYFARM and its financial results will be consolidated into the group’s financial statements. The issuance of new shares will lead to a dilution of existing shareholders' stakes, specifically reducing the holding percentages of the controlling shareholder group (which includes Li Yang, Li Fangyu, and other concerted actors) and other public shareholders by an estimated 3.07% and 3.21% to 45.70% and 48.02% post-transaction. The counterparty, SYL Holding, is expected to hold about 6.28% of the company’s shares post-transaction, becoming a significant shareholder.
The "cash + acquisition loans + share issuance" model accounts for Siyuanli’s cash flow generation capability—by the valuation benchmark date, the company had roughly RMB 360 million in cash and cash equivalents, sufficient to cover the initial payment of RMB 330 million. Additionally, Siyuanli's average annual operating cash flow of approximately RMB 240 million can effectively support annual repayments of RMB 70 million for the acquisition loan. Notably, the seller, MBK Partners, has demonstrated a commitment to long-term collaboration, as the shares obtained through the swap will be subject to a lock-up period exceeding six months, with release occurring in three phases on different dates (June 30, September 30, and December 31, 2026).
This acquisition significantly consolidates BEAUTYFARM's market share, with the number of stores in core cities expected to leap from 552 to 734. Currently, the top three brands in China's beauty service market are BEAUTYFARM, Naire, and Siyuanli. Post-acquisition, BEAUTYFARM will unify these three leading industry brands. The move not only enhances its store network but also solidifies its leadership in China's high-end beauty services market, which is characterized by a massive scale, with the top 20 core cities accounting for approximately 40% of the market.
Within these 20 core cities, Beijing, Shanghai, Guangzhou, and Shenzhen together represent about half of the market size (around 20% of the national market). The group believes that its business layout aligns closely with Siyuanli's, as both companies derive over 90% of their revenue from the top 20 core city stores, with more than 60% from the four major cities. Following the acquisition, the store count in these 20 core cities will rise from 360 to 491 (an increase of 131), while the number in Beijing, Shanghai, Guangzhou, and Shenzhen will increase from 206 to 266 (an increase of 60).
The deal will facilitate the integration of the three major brands under BEAUTYFARM, substantially enhancing its competitive advantage in the high-end beauty market. In terms of channel strategy, the high-end beauty sector and high-end commercial properties have emerged as the "golden battleground" for beauty brands vying for high-quality customer segments. Post-merger, the group will achieve over 42% coverage of high-end commercial properties in the 20 core cities (with BEAUTYFARM and Naire present in 147 high-end commercial projects and Siyuanli covering 46), ensuring near-complete coverage of key upscale markets.
Furthermore, the integration will result in a significant increase in overall membership size—Siyuanli's 60,000 high-quality members will contribute to a 44% growth in the total member base, exceeding 200,000, thus laying the groundwork for cross-selling opportunities. The consolidation of medical beauty resources from both parties will elevate the level of medical services, with Siyuanli's 27 medical beauty clinics and its existing 19 clinics combining efforts to enhance service levels through regional resource integration.
On the business front, BEAUTYFARM and Siyuanli have penetration rates of 28.7% and 18.8% respectively, and the merger is expected to significantly improve overall operational synergies and increase value-added service revenues. The attractiveness of Siyuanli’s valuation is underscored by its 14.8x LTM P/E ratio (based on unaudited 2024 data), which is lower than BEAUTYFARM’s 29.5x and the industry average of 23.3x, providing a margin of safety for investors.
The group views Siyuanli as a high-quality candidate with a 20-year operating history and 60,000 high-value clients, achieving RMB 850 million in revenue over the past twelve months with a net profit margin of 9.6%, indicating solid profitability. Financially, the company holds RMB 350 million in cash, sufficient for the acquisition’s down payment, and an annual operating cash flow of RMB 240 million that provides ample support for loan repayments. The acquisition is anticipated to replicate the successful integration path of Naire. Data suggests that Siyuanli's current average store revenue of approximately RMB 6.3 million has significant room for improvement compared to BEAUTYFARM's over RMB 10 million.
After Naire was acquired, its service profit margins rose from 6.5% to 10.4%, validating the group's effective integration approach. The group plans to empower Siyuanli through refined operations, digital transformation, and supply chain collaboration to optimize cost structures. This acquisition is expected to directly enhance the group's profitability, and based on previous successful integration experiences, the synergies realized are likely to promote EPS growth even after accounting for dilution, achieving a win-win scenario for performance growth and shareholder returns. The company anticipates completing all transaction prerequisites by December this year, with final settlement planned for January 2026.