Core Viewpoint - Sichuan Xinhehua Traditional Chinese Medicine Co., Ltd. is restarting its IPO process to list on the Hong Kong Stock Exchange after previously unsuccessful attempts to go public in the A-share market, indicating a strategic shift in its funding approach [1][3]. Company Overview - Xinhehua has been in the traditional Chinese medicine sector for 24 years, focusing on the production of traditional Chinese medicine pieces, with products distributed nationwide [3]. - The company ranks second in the Chinese market for traditional Chinese medicine pieces, holding a market share of 0.4% as of 2024, with the top five market participants collectively holding 2.7% [3]. Financial Performance - Revenue figures for Xinhehua are as follows: - 2022: RMB 780 million - 2023: RMB 1.145 billion - 2024: RMB 1.249 billion [4] - Gross profit for the same years was: - 2022: RMB 165 million (21.1% gross margin) - 2023: RMB 212 million (18.5% gross margin) - 2024: RMB 213 million (17.1% gross margin) [4] - Net profit peaked in 2023 at RMB 104 million but is projected to decline to RMB 89 million in 2024, with net profit margins decreasing from 9.9% in 2022 to 7.1% in 2024 [4][5]. Recent Developments - In the first half of 2025, Xinhehua reported revenue of RMB 633 million and a profit of RMB 51 million, reflecting a 17% year-on-year increase in profit [5]. - The company produces 10 types of toxic traditional Chinese medicine pieces and offers approximately 760 types of ordinary traditional Chinese medicine pieces, with ordinary pieces accounting for 89.6% of revenue [5]. Shareholding Structure - Prior to the IPO, the shareholding structure is highly concentrated, with founder Jiang Yun's family controlling 65.29% of the shares [6]. - Jiang Yun directly holds 31.54% and through Guojia Investment holds an additional 15.60% [6]. Cash Flow and Dividend Concerns - Xinhehua has faced deteriorating operating cash flow, with a net outflow of RMB 46,700 in 2024, contrasting with previous inflows [6]. - The company declared dividends of RMB 14.51 million in 2022 and executed a significant capital reduction of RMB 93.74 million in 2024, raising questions about the rationale behind these financial decisions amid cash flow challenges [6][7].