Zhengpin Holdings Files for a Second Listing on the Hong Kong Stock Exchange: Revenue Highly Dependent on Dairy Company, with Concentrated Credit Risk

Recently, according to information disclosed by the Hong Kong Stock Exchange, Zhengpin Holdings Limited (Zhengpin Holdings) has submitted a listing application to the Main Board of the Hong Kong Stock Exchange, with Harbour Capital Limited serving as its sole sponsor.

It is worth noting that this is the company’s second attempt to enter the Hong Kong capital market since its initial submission in July 2025.

According to available data, Zhengpin Holdings was established in 2011. The group mainly engages in the development, sales, marketing, and distribution of health and beauty supplements and products in Hong Kong. Zhengpin Holdings’ products are primarily divided into two categories: health supplements and products, and beauty supplements and products. The company outsources product manufacturing to suppliers (including manufacturers) and mainly distributes products through Mannings retail stores in Hong Kong under its own brands and third-party brands.

Sharp fluctuations in net profit margin, increasing trade receivables year over year

Zhengpin Holdings cited Frost & Sullivan data, stating that, based on retail value, the group’s market share among all international and local health and beauty supplement and product suppliers in Hong Kong was approximately 1.6% in 2024. In 2024, the group ranked first in retail value for health supplements and products related to deer in Hong Kong, with a market share of about 29.4%. Its proprietary brand “Yantongxiao” (炎痛消), which includes joint and pain relief and topical analgesic products, was among the top five best-selling joint and pain supplements and products in Mannings retail stores in 2024.

Since its establishment in 2011, Zhengpin Holdings has actively expanded its product portfolio, offering a variety of products to meet the needs of children, adults, and seniors. As of the most recent practical date, the company operates six proprietary brands: “Zhengpin,” “Yantongxiao,” “Organicpharm,” “Riyao Tang,” “Weizai Sheng,” and “Profix.” Additionally, it distributes six third-party brands, including “iPro+” and “Boiron.”

Financial data disclosed in the prospectus shows that the company has experienced rapid revenue growth over the past three years, although profit levels in the first half of 2025 have shown significant fluctuations.

For fiscal years 2023, 2024, and 2025 (ending March 31), the company achieved revenues of HKD 43.19 million, HKD 109 million, and HKD 130 million, respectively, with a compound annual growth rate (CAGR) of 73.6%. During the same period, net profits were HKD 11.31 million, HKD 35.48 million, and HKD 36.26 million.

In fiscal years 2023, 2024, and 2025, revenue from the company’s top five customers was approximately HKD 39 million, HKD 98 million, and HKD 109 million, accounting for about 90.6%, 89.4%, and 83.4% of total revenue, respectively. Revenue from the largest customer (a dairy company) was approximately HKD 39 million, HKD 84 million, and HKD 97 million, representing about 89.1%, 76.7%, and 74.5% of total revenue.

As of March 31, 2025, and for the six months ending September 30, 2024, and 2025, gross profit margins were approximately 81.6%, 78.6%, 75%, 75%, and 76.6%. Although the gross margin slightly rebounded to 76.6% in the first half of 2026, it remains below the level in fiscal year 2023. The company explained that the decline in gross margin was mainly due to increased promotional discounts to gain market share for proprietary products and a higher proportion of revenue from third-party brands, which generally have lower gross margins.

Additionally, net profit margins during these periods were approximately 26.2%, 32.4%, 27.8%, 22.6%, and 1.8%. In the period from April to September 2025 (the first six months of fiscal year 2026), the company recorded revenue of HKD 52.44 million, roughly unchanged from the same period last year; however, net profit was only HKD 944,000, a 92.5% drop from HKD 11.95 million in the same period last year. The company explained in the prospectus that the sharp decline in net profit was mainly due to increased professional service expenses related to the IPO and higher sales and distribution costs.

In terms of cash flow and assets and liabilities, as of March 31, 2025, the company’s total assets were HKD 84.22 million, total liabilities HKD 61.32 million, and equity HKD 22.9 million. For fiscal year 2025, net cash flow from operating activities was HKD 38.28 million, net cash flow from financing activities was -HKD 37.99 million, and net cash flow from investing activities was -HKD 149,000, indicating some pressure on overall cash flow.

Furthermore, trade receivables increased year over year during the reporting period, reaching HKD 14.4 million, HKD 31.6 million, and HKD 42.5 million in fiscal years 2023, 2024, and 2025, respectively, further exacerbating cash flow pressure.

Highly dependent on the dairy company, with overdue receivables

Behind the rapid growth, Zhengpin Holdings faces the major challenge of extreme customer concentration, especially reliance on its core customer, the dairy company (Niu Nai International Holdings Limited).

Zhengpin Holdings has maintained a relationship with the dairy company since 2013.

The prospectus shows that during the historical periods, most products were sold to the dairy company, which then distributed and sold the products to end customers through Mannings retail stores in Hong Kong and Mannings’ online channels.

During the historical periods, revenue from the dairy company remained high.

In fiscal year 2023, it was HKD 38.5 million, accounting for 89.1% of total revenue; in 2024, HKD 84 million, accounting for 76.7%; in 2025, HKD 97.1 million, accounting for 74.5%; and in the first half of 2026, HKD 48.2 million, accounting for 91.9%. Although the overall proportion slightly declined, the customer remains the dominant source of revenue, and the issue of customer concentration has not been fundamentally addressed.

It is important to note that reliance on a major customer not only limits the company’s bargaining power but also introduces multiple potential risks.

The company stated in the prospectus that if its relationship with the dairy company is adversely affected for any reason—such as the dairy company restricting product sales in its stores or ceasing sales altogether—the group would need to find alternative channels to sell to the general public, which may not have as extensive a network as the dairy company.

The company’s products are mainly sold through the dairy company, which the group cannot control in terms of business plans or strategies, including expansion or reduction plans, store coverage, or customer retention strategies. If the dairy company does not continue to expand its stores, sales growth could be impacted. If the dairy company’s business deteriorates and it reduces the number of stores or cuts back on marketing and promotional activities, product sales could be adversely affected. In the worst case, if the dairy company’s business fails, the group could lose most of its sales channels and would need to seek other avenues to sell to the public.

According to the trade terms agreement between the group and the dairy company, there are no minimum purchase obligations or contractual purchase guarantees. Therefore, the dairy company could reduce or cease placing orders at any time during the agreement period for any reason. In such cases, the group would lose most of its sales channels and would need to find alternative ways to sell to the public.

The prospectus shows that over 95% of the company’s trade receivables during the reporting period come from the dairy company and other wholesale customers, indicating significant credit concentration risk. In fiscal years 2023, 2024, and 2025, as well as the first half of 2026, overdue receivables of varying amounts were recorded.

The prospectus also indicates that the dairy company and other wholesale customers may pay only after their credit periods expire. As of March 31, 2023, 2024, and 2025, and September 30, 2025, the company’s trade receivables were approximately HKD 14 million, HKD 31.6 million, HKD 42.5 million, and HKD 29.3 million, respectively, with about HKD 100,000, HKD 300,000, HKD 40,000, and HKD 700,000 overdue.

Additionally, during the same periods, approximately 98.9%, 99.4%, 95.5%, and 99.5% of the total trade receivables were owed by the dairy company and other wholesale customers, further highlighting credit concentration risk.

Beyond customer dependence, Zhengpin Holdings also faces risks related to supplier concentration.

During the historical periods, the total procurement from the top five suppliers was approximately HKD 6.2 million, HKD 22.2 million, HKD 22.3 million, and HKD 13 million, accounting for about 86.3%, 77.3%, 80.3%, and 77.1% of total procurement, respectively. The largest supplier’s purchases were approximately HKD 4 million, HKD 990,000, HKD 770,000, and HKD 480,000, representing about 55.6%, 34.5%, 27.8%, and 28% of total procurement, respectively.

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