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
We adopted several measures to reduce channel stuffing risks.
Business · p. 171
We believe the risk of channel stuffing within our network is low because (i) we maintain a contractual buy-sell relationship with distributors, and (ii) we generally do not permit product returns unless quality issues attributable to us arise.
Business · p. 172
The termination decisions were made based on a number of factors, including sales performance and unsatisfactory cooperation, e.g. unable to achieve sales target, which was the main reason for the termination of existing distributors during the Track Record Period.
In 2023, 2024 and 2025, revenue generated from our distributors was RMB8.8 million, RMB62.6 million, and RMB167.4 million, respectively, representing 0.4%, 1.9% and 4.0%, respectively, of our total revenue in the corresponding periods.
Business · p. 135
As of December 31, 2023, 2024 and 2025, we had 2, 14 and 31 active distributors.
Business · p. 135
During the Track Record Period, the beneficial owners of certain distributors were our former employees.
During these years, revenue from distributors amounted to RMB402.9 million, RMB421.4 million and RMB642.1 million, representing 69.4%, 65.2% and 58.1% of our total revenue for the respective periods.
Business · p. 157
In 2023, 2024 and 2025, we engaged nine, four and 16 new distributors, respectively.
Business · p. 159
This enables us to monitor actual sales, track logistics, and mitigate risks such as channel stuffing and cannibalization among distributors.
As of December 31, 2023, 2024 and 2025, we had nil, 33 and 98 distributors, respectively.
Business · p. 140
For the years ended December 31, 2023, 2024 and 2025, revenue generated from our distributors amounted to nil, RMB85.2 million and RMB372.9 million, respectively, representing nil, 68.6% and 71.4% of our total revenue for the corresponding years.
Business · p. 140
We operate primarily on a made-to-order basis, with production and delivery scheduled after receiving relevant purchase orders and deposits.
Through our well-structured distributor management system that combines clear incentives with performance-based consequences, we actively encourage distribution partners to diversify their product portfolios by investing in new launches and non-flagship offerings rather than relying solely on bestsellers.
Business · p. 143
These integrated solutions enable us to maintain strict price control to protect brand value while optimising inventory turnover through systematic stock management, thereby ensuring the overall health of our distribution ecosystem.
Business · p. 143
We typically require advance payment from distribution partners before we arrange delivery to minimise financial risks.
As of the Latest Practicable Date, we had five distributors.
Business · p. 238
We require distributors to make full prepayment for the purchase of our products, which is specified in the sales contract.
Business · p. 238
During the Track Record Period, we ceased our distributorship arrangements with three distributors and did not renew our distribution agreement after expiration with one distributor, mainly as a result of their lower-than-expected marketing efforts put on our product after our assessment.
As of December 31, 2025, we had a total of 816 distributors, among which 785 and 31 were located in China and overseas, respectively.
Business · p. 146
The decrease in the number of distributors each year was primarily because (i) certain distributors exited from the coronary interventional medical devices market due to the adoption of the centralized procurement and two-invoice schemes, see ‘‘— Recent Development in Our Regulatory Environment — Centralized Procurement’’; and (ii) our distribution agreements with certain distributors expired and we decided not to renew such agreements due to commercial reasons, such as the distributors’ unsatisfactory sales performance or change of business focus.
Business · p. 146
We have implemented the following measures to minimize the risk of channel stuffing. We believe that our sales to distributors during the Track Record Period reflected genuine market demand and that the risk of channel stuffing was relatively low.
During the Track Record Period, nearly all of our revenue from the overseas markets was generated through our expanding distribution network.
Business · p. 118
For domestic distributors, we generally require payment prior to delivery, while granting credit terms based on their scale, creditworthiness, and cooperation history.
Business · p. 121
In 2023, 2024, and 2025, the amount of returns from our distributors to us was RMB0.01 million, RMB2.7 million, and RMB1.0 million, respectively.
This distribution approach remains at an early and experimental stage, as evidenced by the immaterial revenue contribution (accounting for only 0.9%, 0.8% and 0.9% of our total revenue from continuing operations for the years ended December 31, 2023, 2024 and 2025, respectively) and the limited number of distributors maintained throughout the Track Record Period.
Business · p. 118
Our distributors may distribute our products to both end users and sub-distributors in the designated sales territories.
Business · p. 119
We believe the risk of channel stuffing is low in relation to our sales with trading partners and distributors for the following reasons: (i) we generally require payment before delivery; (ii) we generally do not allow returns or replacements of products, unless there are product quality issues caused by us.
In 2025, we started to sell products under our overseas brand “Vortis” through a distributor in the United States, and such sale contributed less than 0.5% of our revenue in 2025.
Business · p. 131
Our distributor is an independent third party and we have a principal-agent relationship pursuant to a consignment arrangement.
Business · p. 131
There was no distributor movement recorded during the Track Record Period, as we have engaged only one distributor.
During the Track Record Period, we observed a slowdown in the growth of both the number of distributor-operated stores and distributors.
Business · p. 120
We strive to minimize the channel stuffing risks associated with our distributors through the following measures: (i) determining reasonable purchase amount requirement based on the specific customer level considering factors such as their scale of operations and financial resources, (ii) we generally do not allow returns of products sold to distributors unless there are product defects and other causes that are not attributable to the distributors, a return policy that is in line with the industry norms and (iii) from time to time communicate with distributors about the inventory status and conduct ad hoc store inspection to gain insights on their daily management sales conditions.
During the Track Record Period, our product sales primarily focused on ethanol and microbial protein, and we adopted a dual sales model combining direct sales and distributorships to serve different customer segments.
Business · p. 133
Our Directors believes that the risk of “channel stuffing” in our distribution model is minimal due to several factors: (i) before selling products to distributors, we assess transaction history, sales volume in the region, and payment history of the distributors to evaluate the reasonableness of sales amounts
As of December 31, 2025, our distribution network comprised 116 distributors across over 31 provincial-level regions in China.
Business · p. 158
There were no sub-distributors during the Track Record Period, and our distributors typically place purchase orders with us only after receiving confirmed medication orders from end-customers.
Business · p. 159
Based on the above, our Directors believe that there was no unreasonable accumulation of inventories by our distributors during the Track Record Period.
Less than 1.0% of our revenue was from distributors in each year during the Track Record Period.
Business · p. 138
Our distributors place orders with us based on market demand and then on-sell our products to their customers. Therefore, we believe our products are at remote risk of channel stuffing in our distribution network.
Business · p. 138
Distributors are generally required to make full payment before we deliver our vehicles to them.
During the Track Record Period, we collaborated with 754, 1,705 and 2,458 regional sales partners and reached over 293,000, 292,000 and 258,000 dispensing terminals in 2023, 2024 and 2025, respectively.
Business · p. 143
The significant increase in 2024 is primarily due to the new regional sales partners we collaborated through our subsidiaries in the PRC, as we leveraged our sales network and strategically moved to expand customer coverage, deepen market penetration and enhance both the depth and breadth of our market presence in the PRC.
Business · p. 144
We also implemented internal control measures to prevent channel stuffing.
Distributors purchase our productized GJ AI workforce solutions for promotion and resale the same to end users leveraging their local marketing resources, expertise in specific industry verticals and experience in introducing AI solutions to the local market.
Business · p. 143
We did not renew our agreements with such distributors upon expiration, based on our evaluation of their market potential and our future business strategies.
Business · p. 143
Demand-driven procurement and sales network structure inherently eliminates financial motivation for distributors to overstock offerings procured from us.
The revenue generated from our Type A distributors accounted for over 80% of the overall revenue generated from our distribution channel in each year during the Track Record Period.
Business · p. 161
Upon engagement, type A distributors are required to conduct monthly inventory checks and submit monthly PSI reports to us, which include stock levels, changes in inventory, and alerts on potential overstocking or stockouts.
Business · p. 164
We aim to minimize cannibalization among the distributors and sales channels, including sales carried out by distributors outside their designated geographic areas and sales across different sales channels without our prior authorization.
As of December 31, 2025, we were working with 126 distributors and did not rely on any single or a few distributors.
Business · p. 137
The number of distributors terminated increased during the Track Record Period, primarily because (i) we continued to establish our overseas sales network and reduced our reliance on distributors; and (ii) we refined our distribution network to phase out certain underperforming distributors.
Business · p. 139
In light of the foregoing, we believe that our sales reflect actual demand from our end customers, thereby minimizing the risk of channel stuffing and cannibalization within the distribution network.
As of December 31, 2023, 2024 and 2025, we had 212, 156 and 67 channel partners covering all the provinces in China, respectively.
Business · p. 150
The significant decrease in the number of our channel partners during the Track Record Period resulted from a deliberate and proactive strategy to optimize our distribution network.
Business · p. 150
We incurred channel marketing expenses of RMB64.5 million, RMB70.9 million and RMB68.3 million in 2023, 2024 and 2025, respectively, accounting for 40.4%, 46.4% and 38.8% of our selling and marketing expenses during the same periods, respectively.
In addition to selling our products to display panel manufacturers directly, we also sell our products to display panel manufacturers through distributors primarily for shorter cash collection cycle and better capital management.
Business · p. 162
In 2023, 2024 and 2025, sales to our distributors amounted to RMB506.1 million, RMB656.7 million and RMB736.2 million, accounting for 70.3%, 73.7% and 66.6% of our total revenue in the respective years.
Business · p. 163
During the Track Record Period, the Group has been dependent on a limited number of distribution channels to market its products.