Core Viewpoint - The Chinese milk powder market is entering a phase of segmented competition, with goat milk powder and special medical purpose formula foods becoming new focal points for capital attention. Yipin Nutrition Technology (Qingdao) Group Co., Ltd. has submitted its prospectus for an IPO on the Hong Kong Stock Exchange, attracting significant market interest. However, underlying issues such as profit volatility, underutilized production capacity, and high inventory levels pose multiple risks for the company [1]. Financial Performance - Yipin Nutrition's revenue has shown steady growth over the past three years, with figures of 1.402 billion yuan, 1.614 billion yuan, and 1.762 billion yuan from 2022 to 2024. However, net profit has experienced significant fluctuations, with net profits of 227 million yuan, 168 million yuan, and 172 million yuan during the same period, showing a notable decline in 2023. In the first half of 2025, revenue was 806 million yuan, down over 10% year-on-year, and net profit was only 57 million yuan, a decrease of over 40% [2]. - Despite a high gross margin of nearly 50% in 2023 and 2024, the company has struggled to convert this into stable profits due to rising production costs, increased sales and distribution expenses, expanded administrative costs, and asset impairment losses [2]. Sales and Expenses - Sales expenses have outpaced revenue growth, with figures of 240 million yuan, 371 million yuan, and 432 million yuan from 2022 to 2024, and growth rates of 54.58% and 16.44% in 2023 and 2024, respectively. In the first half of 2025, sales expenses continued to grow by 5.9% to 233 million yuan, despite a 10.36% decline in revenue [3]. - The increase in sales expenses is particularly driven by e-commerce platform service fees, which have become the company's largest supplier since 2023, surpassing the procurement of raw materials like fresh cow and goat milk [3]. Business Structure and Market Challenges - Yipin Nutrition's business structure is highly concentrated, with infant formula goat milk powder contributing 58.6% of revenue in 2024. The company faces challenges from declining birth rates affecting market demand for infant formula and increasing competition from established brands like Yili, Feihe, Mengniu, and Junlebao [4]. - The special medical purpose formula food segment has shown growth, with revenues of 23.76 million yuan, 130 million yuan, and 219 million yuan from 2022 to the first half of 2025, increasing its share of total revenue from 1.7% in 2022 to 16.1% in the first half of 2025. However, as a latecomer in this market dominated by international brands, Yipin Nutrition faces significant challenges in brand building and market education [4]. Operational Efficiency - The company has experienced a decline in production capacity utilization and an increase in inventory turnover days, with inventory turnover days rising from 276 days in 2022 to 361 days in the first half of 2025. Inventory value increased from 600 million yuan at the end of 2022 to 800 million yuan in mid-2025, indicating decreased inventory turnover efficiency [5]. - The net cash flow from operating activities in the first half of 2025 was 44 million yuan, a decline of approximately 61.7% compared to the same period in 2024, primarily due to increased inventory funding. The company also recognized inventory impairment losses of 12 million yuan, a 50% increase from 2024 [6]. Governance and Dividend Policy - Concerns regarding corporate governance have arisen due to the ownership structure, with the founder and associated entities holding approximately 75.11% of the shares. The company has also made several large dividend payouts prior to the IPO, including 211 million yuan in February 2023, which exceeded net profit for that period, raising questions about cash flow management and the motivations behind the IPO [7].