Looking at the new logic of Youquhui (02177) from the perspective of major acquisitions: ecological capacity will rise to the second growth curve or accelerate its formation

An announcement on the evening of January 5 revealed that Youquhui Holdings (02177), a leading brand e-commerce operation service provider in the industry, is building its second growth curve at an accelerated pace.

According to the relevant announcement disclosed by Youkuhui, the company has officially completed a transaction to acquire 90% of the interests of One Two Co., Ltd. from two independent third parties at a cost of 2,701 billion yen (about HK$135 million). According to reports, One Two Co., Ltd. mainly operates the Japanese consulting pharmacy chain “Akahige Pharmacy”. After the acquisition is completed, Akahige Pharmacy will retain its brand name and core team to ensure continuity of service philosophy and professional standards; at the same time, as an indirect non-wholly-owned subsidiary, its financial results will also be incorporated into the group's financial statements.

According to Zhitong Finance, the strategic significance of Youkuhui's acquisition of a Japanese vertical specialty pharmacy is very interesting. Previously, Youquhui had long-term and in-depth cooperation with many Japanese century-old pharmaceutical companies. Through this epitaxial merger and acquisition, the company has further strengthened its influence on the high-potential professional health consumer circuit; more importantly, Youquhui also gained scarce overseas localized brands in one fell swoop. Subsequently, with the mature retail network and vertical expertise of Akahige Pharmacies, Youqu will quickly leapfrog and upgrade the brand retail ecosystem from online proxy operations to “online+offline” integration. Looking ahead, this strategy of obtaining key resources and capabilities through precise mergers and acquisitions is expected to not only significantly shorten Youkuhui's cycle of incubating and cultivating its own brands, but also provide key support for the company to “accelerate” growth in the fierce market competition.

Explain in detail the ecological upgrade logic behind strategic acquisitions

As an “time-honored brand” with a history of over 33 years in the Japanese market, Youkuhui's “Aikahige” pharmacy now has nearly 10 pharmacies, and its operating network spans the Hokkaido, Honshu, and Kyushu regions, and has a high level of brand recognition in the country. Unlike common comprehensive pharmacies in China, Akahige Pharmacy focuses on the field of sexual health and health care. With health management for middle-aged and elderly men as its core business, it provides personalized medicine and health solutions for middle-aged and elderly men through a “one-on-one consultation with pharmacists” model, and serves more than one million people per year. In addition to selling non-prescription drugs, Akahige Pharmacy has also developed a variety of patented branded health products, including “Aphrodisiac King” and “Powerful Missile.”

Looking back at Youquhui's long-term investment in the Japanese market, I'm probably not surprised that Youquhui is now strategically acquiring Akahige Pharmacy. Check out Youkuhui's list of partner brands. Among them are many Japanese century-old pharmaceutical companies such as Kobayashi Pharmaceutical, Taisho Pharmaceutical, Daiichi Sankyo, and Ota Gisan. Looking at it in connection, the author believes that this latest acquisition can be viewed as a strategic extension and natural choice after Youkuhui's long-term capabilities have settled down.

In the process of serving Japan's leading pharmaceutical companies for many years, Youkuhui not only has a deep insight into the consumption characteristics and operational logic of the Big Health Circuit, but has also built a professional operation system and compliance management capabilities for medical and health products. This deep network of industry expertise and resources provided a critical cognitive foundation and practical guarantee for its subsequent integration and personal management of the offline specialty brand Akahige Pharmacy, making collaboration and empowerment after the acquisition a high degree of certainty.

After joining Akahige Pharmacy, Youquhui was able to deeply integrate its long-term digital and cross-border capabilities with proven and effective methodologies mastered by the target company in terms of professional pharmaceutical services, product development, and privacy protection procedures in vertical fields. According to Youkuhui, in the next phase, the two sides will work together in the three directions of “service model innovation, regional market expansion, and technological empowerment and upgrading” to take the lead in building a closed loop ecosystem of “professional pharmaceutical services+intelligent health management” within Asia that can cover online and offline and penetrate multiple markets. In particular, considering that the degree of aging is currently rapidly increasing in many countries in Asia, it can be expected that under Youquhui's management, Akahige Pharmacy's sexual health supplements for middle-aged and elderly people will accelerate from Japan to various Asian markets to meet the urgent and still growing consumer demand in this field with high-quality products.

All in all, this strong alliance between the two sides will not only empower Youkuhui's systematic capabilities to “time-honored” pharmacies in Japan, but will also accelerate the construction of a strong second growth curve outside of its traditional dominant business. And this kind of Youkuhui will surely be more in line with the expectations of investors in the secondary market.

The second growth curve has surfaced, and the revaluation arrow is on the line

Looking back at Youkuhui's series of actions in the past two years, the company can be described as “fully engaged” in constructing a second growth curve. Prior to this acquisition of Akahige Pharmacy, Youkuhui launched the Canadian anti-aging health food brand Vanpearl in the second half of last year; after that, Youkuhui also invested heavily in international expert Professor Barry Halliwell to enhance its own talent reserves and technical reserves. Professor Barry Halliwell is known in the industry as the father of ergot thione research. It was he who discovered ergot sulfur, a star ingredient in anti-aging.

Although there is a gap of more than a year between the launch of its own brand Vanpearl and the acquisition of Akahige Pharmacy, looking at these two strategic actions, it has actually clearly outlined the core path of Youquhui's construction of a second growth curve. Through the acquisition of Vanpearl, Youkuhui successfully entered the anti-aging nutrition circuit with its own brand and established a high point of upstream R&D and brand dominance; by holding Akahige Pharmacy this time, the company gained a vertical professional service network and high loyalty customer assets in the mature market of Japan. Based on this series of useful explorations, Youkuhuizheng “transformed” into a healthy consumption ecosystem builder that simultaneously masters R&D capabilities, brand management and service capabilities, and omni-channel construction and operation capabilities. The company's second growth curve is accelerating from blueprint to reality.

As you can see, there are jewels ahead, and you might as well imagine that Youkuhui is likely to start a round of systematic acquisitions and integration in the health consumption sector, thus speeding up the improvement of its entire chain of capabilities from R&D, brands to multiple channels. At the same time, personally manipulating Vanpearl and integrating the core experience accumulated by Akahige Pharmacy, from product positioning and compliance operations to in-depth user services, will inevitably become a valuable “methodological asset” for the company to incubate more of its own brands in the future.

And Youkuhui, whose growth expectations have been completely reshaped in this way, is unquestionably also very much in line with the aesthetic preferences of investors in the current market. After all, in the context of “upgrading and decelerating” the overall economic environment, Youquhui has cultivated a promising new growth engine outside of the basic market. The growth momentum is sufficient, and the company's long-term allocation value has changed qualitatively.