2025 Earnings Call Transcript I | Management Responds to These Five Core Questions About the 'One-Stop Health Service Center Upgrade'

Editor's note:At Zhen Healthcare,$DISTINCT HEALTH (02677.HK)$During the 2025 annual earnings presentation and subsequent Q&A session, investors showed strong interest in the company’s strategy to upgrade to a 'one-stop health service center.' Amid the current macro environment, why open larger centers? What is the growth model for these large centers?

We have compiled the key points from the earnings call transcript, using five core Q&As to outline the management team’s fundamental business reasoning behind the 'center upgrade' strategy.

Q1: In the current consumer environment, how does Zhen define its business boundaries?

D:2025 is a year of active exploration and transformation for Zhen. In response to external environmental changes, we first clarified our business positioning as:focused on health service consumption.Based on this positioning, we have clear guidelines on what we will and will not pursue:

FocusHousehold multi-specialty services commonly used (such as dental, dermatology and aesthetic medicine, ophthalmology, health management, physical exams and preventive care, sports rehabilitation, mental health, allergy treatment, growth and development, etc.), primarily driven by consumer-level health service demands.

Not based onMainly addressing common acute conditions,Not doing itSevere or critical illnesses.

Core valueIt is about improving quality of life, achieving better health and beauty, emphasizing high-quality service, care with warmth, and emotional value. At the same time, we stress cost-effectiveness. While we are not the lowest-priced option in the market, it will be hard to find a better price than ours for the same level of service quality.

Q2: Why is the core action plan for the next three years to expand outlets to around 5,000 square meters?

D:Over the next three years, the company's network expansion and revenue growth will be primarily driven by upgrading existing outlets to 'one-stop health service centers'.

Internally, we compare these outlets to the 'Costco' membership store model in the healthcare services industry. Similar to high-end retail scenarios, excellent membership stores build extremely high levels of trust, encouraging users to become accustomed topurchasing carefully selected products in one go, all at once, and on a 'family' basis,thereby reducing decision-making costs and achieving an excellent consumer experience; the core logic of our one-stop outlets is the same.

Relying on long-term accumulated medical trust, we integrate multiple specialties within a single physical space,transforming medical visits from sporadic, single-department actions into centralized 'one-stop' solutions that address multi-member, multi-dimensional, full-lifecycle healthcare needs for individual families.This not only reduces decision-making and travel costs for users but also brings higher operational efficiency to the company. In terms of growth expectations, our goals are very clear: we expect each outlet to reach a revenue scale of hundreds of millions, with profit margins exceeding 30%. By the end of 2025, three out of our 18 multi-specialty outlets in mainland China will adopt this model, and over the next two years, we plan to expand this to at least 12 outlets.

Q3: Comparing your one-stop health service center outlets to 'Costco/Sam's Club,' what is the core business logic behind this analogy?

D:In 2025, we are thinking more seriously about TruElite from the perspective of business models and customer needs. We found that the Costco or Sam's Club model has greatly inspired us in several aspects:

First, SKU selection is crucial. TruElite offers a wide range of services, but not everything under the sun. Just like at Costco, every product you buy has been carefully curated, so customers can trust the quality. TruElite’s services should be the same. We provide high cost-effectiveness with premium quality, ensuring customers feel secure about pricing.

Second, it’s about creating appealing 'products.' When people think of Costco/Sam's Club, they might think of signature items like kiwifruit and Berkshire pork. TruElite is also considering what its 'hit products' could be. In the past, 'pediatric healthcare' was one of TruElite’s standout offerings. Last year, we redesigned our 'adult teeth cleaning' service, which more than doubled membership growth in adult dentistry. Over the next two to three years, we aim to develop over 10 highly reputable 'products' for our clients, diversifying new customer sources.

At the same time, health management will be our top priority in the service line for the next three years. For children, we will strengthen capabilities in areas such as allergy response, growth and development, developmental behavior, and pediatric psychology. For adults, we will focus on physical exams and chronic disease management, mental health and sleep, anti-aging and perimenopausal management, nutrition and weight control, and exercise and rehabilitation, building a strong reputation in both child and adult health management services.

We can also refer to membership stores for SKU management, with dedicated business analysts and strategy implementation managers overseeing different product lines. This online-to-offline integrated membership retail model has excellent reference value for TruElite.

Q4: Has the growth potential of this one-stop health service center model been empirically validated?

D:The Shenzhen Bay branch serves as a benchmark case for the company’s one-stop health service center model. This branch was upgraded from an initial standard outlet in Q4 2023 and now spans approximately 5,000 square meters, featuring a full range of commonly used multi-specialty configurations focused on families. From its upgrade completion in 2023 through 2025, this branch maintained steady mid-to-high-speed growth in revenue and patient visits.

In 2025, the Shenzhen Bay branch delivered impressive results:

- Revenue per single store149 million yuan, a year-on-year increase of 28.8%

- Foot traffic102,000 people, a year-on-year increase of 25.4%

- Per storeProfit marginAbove the average level of outlets

The growth in revenue and foot traffic at the outlets comes from two overlapping factors: First, the multi-specialty service capabilities are more complete, increasing the likelihood of long-term cross-departmental user flow and higher visit frequency; second, the one-stop health service center can address more complex user needs that require strong medical trust, effectively driving up per-customer spending and gross margins.

Q5: Based on the one-stop health service center, what is the pace of Zhirong's national expansion plan for the future?

D:We maintain a clear pace and strategy for expansion.

In the future, the main driver of our revenue growth will come from the upgrade of existing outlets within our current network system, transforming initial standard outlets into one-stop health service center outlets. We will continue to rapidly advance the upgrade of existing initial standard outlets to one-stop health service center outlets, with a key focus in 2026 on implementing upgrades in Suzhou, Changsha, Shenzhen, Wuhan, and Beijing.

The development of new initial standard outlets is mainly divided into exploring new cities and increasing density in mature cities. In 2026, we plan to establish new outlets in Xi'an. By 2027 and beyond, we will expand into cities with potential such as Nanjing and Ningbo. At the same time, in cities where we already have a presence, such as Beijing and Shanghai, we will continue to increase the density of service outlets to provide users with a more convenient service experience.

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This is the first part of the earnings call transcript. Regarding discussions on the other two core businesses, we will release the content sequentially:

- Transcript Two: Business planning for 'O2O Subscription Services'

- Transcript Three: Investment returns and implementation progress for 'AI Health Assistant'

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