Hong Kong IPO disclosure precedents · 324 companies, 337 items
sales through distributors: share of revenue, number and movement of distributors, relationship (sell-in / consignment), measures against channel stuffing and inventory build-up
During the Track Record Period and up to the Latest Practicable Date, all of our distributors were Independent Third Parties.
Business · p. 145
Our distributors generally do not keep inventories for our products.
Business · p. 146
During the Track Record Period, we did not require our distributors to maintain a minimum inventory level and thus we had no visibility into the volume of unsold inventories held by our distributors.
Our revenue derived from distributors decreased from RMB66.0 million in 2024 to RMB20.2 million in 2025, and decreased from RMB10.2 million in the four months ended April 30, 2025 to RMB2.3 million in the four months ended April 30, 2026, primarily due to our proactive channel strategy adjustment to optimize our customer structure, reduce reliance on distributors and enhance supply chain resilience.
Business · p. 172
During the Track Record Period, we worked with one, two, three and two distributors in 2023, 2024, 2025 and the four months ended April 30, 2026, respectively, and we did not rely on any single or a few distributors for our sales.
Business · p. 174
Furthermore, to mitigate the risk of channel stuffing, we have implemented a flexible ordering arrangement and an inventory monitoring mechanism:
Revenue from sales through our sales agents amounted to US$1.8 million, US$1.8 million, US$1.6 million, US$0.9 million and US$1.0 million in 2023, 2024 and 2025 and the six months ended June 30, 2025 and 2026, respectively, representing 0.5%, 0.5%, 0.4%, 0.5% and 0.5% of our total revenue for the respective periods.
Business · p. 147
We believe the risk of channel stuffing in relation to our sales agents is low because (i) we generally require prepayment from our sales agents before shipping our products to them; (ii) we generally do not allow returns or replacements of products sold to our sales agents, unless there are product quality issues caused by us; and (iii) we do not set minimum purchase requirements or sales targets for our sales agents, which are therefore not incentivized or obliged to purchase products exceeding their actual demand.
In 2023, 2024, 2025 and the five months ended May 31, 2025 and 2026, revenue from our distributors amounted to RMB275.6 million, RMB356.7 million, RMB465.9 million, RMB189.5 million and RMB264.9 million, representing 46.4%, 50.7%, 55.1%, 53.8% and 63.3% of the total revenue for the same periods, respectively.
Business · p. 163
We believe the risk of channel stuffing within our distribution network is low, considering that (i) we maintained a contractual buy-seller relationship with distributors; (ii) as aforementioned, we typically do not allow distributors to return products to us unless there are product quality issues; and (iii) we do not set minimum purchase requirements, nor sales targets, and therefore distributors are not incentivized or obliged to purchase any products exceeding their actual demands.
Business · p. 163
Number of distributors a the end of the period | 39 | 44 | 46 | 46
In 2023, 2024, 2025 and for the three months ended March 31, 2025 and 2026, our distribution channels accounted for 8.8%, 8.4%, 11.0%, 11.0% and 19.6%, respectively, of our total revenue.
Business · p. 163
Accordingly, we recognize revenue when our products are delivered to and accepted by the distributors.
Business · p. 164
To prevent channel stuffing and avoid excessive inventory buildup at the distributor level, we allow our distributors to purchase based on real-time demand with no minimal purchase level requirement.
We primarily sold products through distributors during the Track Record Period, who in turn resold our products to their sub-distributors and their retail channels, including national and regional retail chains, cellular network carriers, retail stores, e-commerce platforms, and others.
Business · p. 126
We terminated collaborations with certain distributors, primarily because (i) we had arranged some distributors whose purchase amount was relatively small, particularly those in India, to purchase our products from our other distributors instead of purchasing directly from us, so as to focus our resources on managing distributors who purchased larger amount of products; (ii) we terminated collaboration with distributors who failed to meet our evaluation standards, including sales performance, reputation, and general working relationship with us, or violation of our contractual arrangements; and (iii) some of our distributors had ceased operation or changed their business.
Business · p. 128
In order to prevent channel stuffing and cross-region sales, and to mitigate cannibalization risk within our distribution channels, we implemented the following measures to oversee and manage our distributors:
In 2023, 2024, 2025 and the six months ended June 30, 2026, revenue contributed by our five largest distributors in each period during the Track Record Period amounted to RMB210.0 million, RMB268.9 million, RMB266.1 million and RMB107.2 million, respectively, accounting for approximately 56.1%, 51.1%, 48.7% and 45.0% of our total sales to distributors for the respective periods.
Business · p. 150
The Directors are of the view that the Group has a low exposure to channel stuffing risk.
Business · p. 152
Accordingly, the discontinuation of relationships with certain distributors was not due to active termination initiated by us, but rather a result of a natural cessation of business.
We sell mineral products to trading partners to serve certain downstream end-customers that may face capital constraints.
Business · p. 124
We believe the risks associated with channel stuffing or trade loading are limited: (i) we do not impose sales targets or minimum purchase obligations on trading partners, and orders are placed on demand reflecting specific end-customer requirements; (ii) there are no product returns in mineral product sales, and we do not engage in consignment or speculative sales arrangements; and (iii) we operate a payment-before-delivery system, which generally does not generate trade receivables.
In 2023, 2024 and 2025, our sales generated from sales to trading partners amounted to RMB484.2 million, RMB575.2 million and RMB563.0 million, respectively, accounting for 4.5%, 4.5% and 3.7% of our total revenue for these periods.
Business · p. 138
The number of our trading partners decreased from 70 in 2023 to 58 in 2024, 32 in 2025 and 27 in the four months ended April 30, 2026, mainly due to our strategic adjustment to focus on cooperation with outstanding trading partners and eliminate underperforming ones.
Business · p. 136
We do not impose sales targets or minimum purchase obligations on trading partners. Orders are placed on an as-needed basis and reflect specific end customer requirements with different product specifications. Trading partners are generally not permitted to return unsold inventory, and we do not engage in consignment or speculative sales arrangements.
As of December 31, 2023, 2024, 2025 and June 30, 2026, we had five, 15, 13 and 16 distributors, which we define as distributors with whom we maintain valid distribution agreements as of the respective dates.
Business · p. 168
We have implemented a set of operational controls to mitigate channel stuffing risks and prevent cross-channel diversion: (i) payment discipline: we require full payment prior to delivery for most distributor orders; (ii) territorial and channel boundaries: we assign distributors to defined geographic regions and sales channels, and prohibit unauthorized cross-regional sales or sub-distribution; in cases of customer overlap, we coordinate resolution by allowing the distributor to continue engagement or, where direct contracting occurs, we settle service fees with the distributor to preserve their role in pre-sales and after-sales support; and (iii) pricing control and enforcement: we maintain minimum price thresholds for distributors and monitor compliance through our marketing team; in cases of non-compliance, we may impose penalties, suspend supply, or terminate distribution rights.
Business · p. 169
All significant risks, including inventory risks, are transferred to our distributors upon delivery and acceptance, and we retain no ownership control over the products sold to our distributors.
For the same period, sales through distributor amounted to RMB0.5 million, accounting for 0.1% of our revenue.
Business · p. 153
The cooperation of the Company with the distributor has been terminated in April 2025.
Business · p. 153
We do not accept returns from distributor except for product quality issues, and we are not subject to the risk of channel stuffing in relation to our distributorship given the immateriality of our distributor sale.
In FY2023, FY2024, FY2025 and 6M2026, the revenue from our sales to the resellers amounted to RMB253.7 million, RMB283.3 million, RMB303.5 million and RMB179.5 million, respectively, representing 8.6%, 8.7%, 8.9% and 8.4% of the total revenue for the same years, respectively.
Business · p. 127
we therefore believe that orders placed by our resellers generally correspond to underlying end customers’ demand, our Directors consider that the risk of channel stuffing in respect of our sales to the resellers is low. Based on independent due diligence work conducted by the Sole Sponsor, nothing has come to the attention of the Sole Sponsor that would cause it to disagree with our Directors’ view above.
In 2023, 2024, 2025 and the six months ended June 30, 2025 and 2026, sales to our distributors amounted to approximately RMB2,659.6 million, RMB2,722.2 million, RMB2,694.3 million, RMB1,295.2 million and RMB1,330.3 million, which accounted for 66.5%, 65.5%, 66.2%, 64.2% and 66.9% of our revenue from the sale of products, respectively.
Business · p. 128
The number of distributors that ceased to distribute our products during the periods presented was primarily because we have been refining our distributor network so as to optimize our sales efficiency, under which certain former distributors did not meet our updated expectations and requirements regarding distribution capability, coverage and service quality.
Business · p. 129
We do not require our distributors to maintain minimum inventory levels, and we do not impose fixed minimum purchase requirements on our distributors.
The number of our channel partners increased from 324 as of December 31, 2023 to 397 as of December 31, 2024 and further to 443 as of December 31, 2025, reflecting the growing market demand, our expanding distribution network and successful commercialization strategies.
Business · p. 149
We believe the risk of channel stuffing is effectively mitigated through the structure of our operating model and the inventory-management measures.
Most of our distribution sales are made under consignment arrangements, under which we retain primary responsibility for downstream-customer development and technical engagement.
Business · p. 143
The decrease in the number of our distributors in 2024 primarily reflected our proactive optimization of our distribution network, under which we concentrated our distribution volume among distributors with greater scale, financial strength and operational capabilities, so as to improve our operating efficiency and facilitate channel management.
Business · p. 144
Based on the foregoing measures, we believe that our risk of channel stuffing is low.
In 2023, 2024, 2025 and the three months ended March 31, 2026, revenue generated from such distributor customers accounted for 6.0%, 6.3%, 2.5% and 7.0% of our total revenue, respectively.
Summary · p. 6
Therefore, our Directors believe that there was no channel stuffing issue during the Track Record Period.
Business · p. 161
In 2023, 2024, 2025 and the three months ended March 31, 2026, we terminated business relationship with 47, 71, 91 and 27 distributors, respectively, primarily due to the expiration of the distribution agreements.
Our relationship with Customer I is of a trading nature.
Business · p. 171
As our financing capability improved, we gradually phased out such arrangements, and only one to two product models remain subject to such arrangements as of the Latest Practicable Date.
Business · p. 171
The PRC Legal Advisor has confirmed that the arrangement with Customer I is legal and valid under PRC law.
Our revenue from dealers was RMB262.5 million, RMB711.5 million, RMB1,847.9 million and RMB962.5 million, in 2023, 2024, 2025 and the four months ended April 30, 2026, representing 12.2%, 23.9%, 46.9% and 60.5% of our total revenue during the same period.
Business · p. 136
Our relationship with our dealers is a buyer and seller relationship, as our dealers acquire ownership of the products we deliver to them.
Business · p. 137
Our Directors believe that the risk of channel stuffing on our dealers is low, based on the following facts and observations: (1) our relationship with dealers is a buyer and seller relationship, and dealers are responsible for their own inventory risks; (2) we do not accept returns of our products and only allow exchanges of our products under limited circumstances such as quality defects or damages during transportation.
We primarily sell our pharmaceutical products and medical devices through third-party distributors, who are our direct customers and subsequently sell our products to hospitals, pharmacies, and other medical institutions.
Business · p. 188
As of June 30, 2026, our distribution network comprised 678 distributors across over 30 provincial-level regions in China.
Business · p. 188
In particular, in the six months ended June 30, 2026, as certain of our products, such as TaiJia and XinLiXin, participated in national VBP schemes following the start of VBP cycles, we strategically optimized our distribution network by focusing on large-scale distributors, which resulted in a decrease in the number of distributors.