New Stocks Analysis | Ying Tong Holdings: Facing the "de-intermediation" trend, is it difficult to be an "intermediary" in the perfume industry?

The Hong Kong stock market is entering the countdown for the listing of China's "first perfume stock". According to the disclosure by the Hong Kong Stock Exchange on June 9, Ying Tong Holdings Limited (referred to as Ying Tong Holdings) is undergoing a listing hearing on the main board of the Hong Kong Stock Exchange, with BNP Paribas and CITIC SEC as its joint sponsors. The fourth largest perfume group in mainland China Ying Tong Holdings can trace its history back to 1987 when it began introducing international perfumes to mainland China through one of its subsidiaries, Ying Tong Far East, becoming an early pioneer in the importation of perfumes to mainland China. At the same time, the company also introduced eyewear products to Hong Kong and Macau, further enriching its product portfolio. Currently, Ying Tong Holdings' brand portfolio includes perfumes, cosmetics, skincare products, personal care products, eyewear, and home fragrances. The perfume business generated revenue of 1.687 billion yuan in the 2025 fiscal year, accounting for 80.9% of total revenue. According to the Frost & Sullivan report, based on 2023 retail sales, Ying Tong Holdings is the fourth largest perfume group in mainland China with a market share of approximately 8.1%. In 2023, the company ranked first in retail sales of perfume products among non-proprietary perfume groups. It is observed that Ying Tong Holdings has grown into a leading perfume group due to its clear brand and product strategy. According to the prospectus, the company's business mainly consists of two key parts aimed at helping global brands establish a foothold in the Chinese market and continuously increase their influence and penetration rate. One is brand product distribution. The company distributes brand products to consumers through Wuxi Online Offline Communication Information Technology Co., Ltd.'s omnichannel sales network. The company's channel network covers over 100 self-operated offline sales points and more than 8,000 retail sales points in over 400 cities in China, and integrates e-commerce platforms and social media resources to reach a diverse consumer base. The other is market deployment services. The company customizes market entry and expansion strategies for brands, covering market research, channel planning, and marketing activity design. For example, designing customized offline pop-up stores for high-end brands, formulating online social media marketing plans, or assisting brands in completing localization and compliance processes to help them quickly adapt to the Chinese market environment and increase market share. Since introducing the first international perfume brand in 1987, Ying Tong Holdings has accumulated more than 30 years of retail POS channel resources, as well as end-to-end compliance capabilities such as cosmetics registration and supply chain management. They have become a "necessary intermediary" for international brands entering the Chinese market. As of May 31, 2025, the company's perfume brand portfolio includes 52 external brands, covering several world-renowned brands, famous perfume brands, and emerging niche brands, including Versace, Santa Maria Novella, Parfums de Marly, and Xerjoff. Stable performance growth, pressure on perfume business gross profit margin In terms of performance, from the 2023 to 2025 fiscal years, Ying Tong Holdings' revenue increased from 1.699 billion yuan to 2.083 billion yuan, with a compound annual growth rate of 10.7%; net profit also increased from 173 million yuan to 227 million yuan during the same period, with a compound annual growth rate of 14.5%. During the same period, the company's sales gross margin remained relatively stable at 50.4%, 50.3%, and 50.3% respectively. The growth of Ying Tong Holdings' performance is closely related to the profound changes in the Chinese consumer market. On one hand, with the increase in disposable income per capita, consumers' awareness of perfume is changing from a "luxury product" to a "daily consumer product". High-end perfumes, as symbols of identity and personalized expressions, have seen a continuous rise in demand. On the other hand, international brands are increasing their investment in the high-end market in China, strengthening their brand appeal through various marketing methods, directly driving the increase in the proportion of high-end product category revenue. Ying Tong Holdings' perfume sales performance also reflects this trend. Specifically, the company's perfume sales volume increased from 6.5405 million units in the 2023 fiscal year to 7.1741 million units in the 2025 fiscal year, with a compound annual growth rate of approximately 4.6%. During the same period, the average selling price increased from 215.6 yuan to 220.3 yuan, a 2.2% increase. It is worth noting that while both the sales volume and price of the perfume business increased, the gross profit margin showed a downward trend, with gross profit margins of 49.1%, 48.5%, and 48.4% for the 2023-2025 fiscal years. By analyzing Ying Tong Holdings' sales costs, it can be seen that the cost of goods sold increased from 801 million yuan in the 2021 fiscal year to 1.006 billion yuan in the 2025 fiscal year, with a compound annual growth rate of approximately 12.05%, higher than the revenue growth rate. According to the prospectus, the company's cost of goods sold includes the cost of purchasing products sold by the company and related tariffs. Facing the risk of "de-intermediation" The faster growth of Ying Tong Holdings' cost of goods sold compared to revenue has somewhat affected the company's perfume business gross profit margin, indicating that the company's bargaining power with upstream suppliers needs to be further strengthened, which is not an easy task. During the reporting period, Ying Tong Holdings purchased brand products from external brand licensors. From the 2023 to 2025 fiscal years, the company's purchases from the top five suppliers amounted to approximately 698 million yuan, 772 million yuan, and 851 million yuan, accounting for approximately 84%, 81.6%, and 77.8% of total purchases during the same period. A high level of supplier concentration may not only weaken the company's bargaining power in procurement price negotiations but also expose the company to potential risks in supply chain stability. If major suppliers experience supply interruptions, price increases, or termination of cooperation, this may have a significant impact on the company's normal operations and profitability. For example, in December 2022, the distribution agreement between Ying Tong Holdings and a major brand licensor of a luxury brand expired, and was not renewed, primarily because the brand licensor decided to operate the brand in mainland China on its own. Ying Tong Holdings' business relationship with the brand licensor began in 2016. As of the year ended March 31, 2023, sales of the brand had to be.The revenue generated by the brand's products was 4.25 billion RMB, accounting for 25% of the total revenue that year.Currently, the international trend of "disintermediation" is intensifying, with top brands such as Dior and Chanel accelerating the development of their own e-commerce channels to directly sell to consumers. This not only squeezes the market space of distribution companies, but also shifts the bargaining power towards the brands. YingTong Holdings openly stated in its prospectus that the company may face litigation risks due to any disagreements that may arise with brand licensing partners regarding disintermediation. If any of the aforementioned situations occur, it will have a significant adverse impact on the company's business, financial situation, operating performance, reputation, and prospects. Faced with these challenges, YingTong Holdings plans to seek breakthrough through its IPO fundraising. The funds will mainly be used to expand its own brands, upgrade digital systems, and expand channel networks. For example, increasing investment in its own brand SantaMonica, expanding it from the perfume field to home fragrances and men's care; upgrading the CRM system, integrating consumer data for precise marketing; adding "Scent Box" stores in core cities to create a fragrance social space and enhance consumer stickiness. From the industry outlook, the Chinese perfume market is currently in a period of high growth. According to a report by Frost & Sullivan, the retail sales of perfumes in China increased from 14.6 billion RMB in 2018 to 26.1 billion RMB in 2023, with a compound annual growth rate of approximately 12.3%. It is expected to reach 47.7 billion RMB by 2028, with a compound annual growth rate of around 12.8% from 2023 to 2028. In 2023, the average perfume expenditure per capita in mainland China was 16 RMB, lower than that in Japan, South Korea, the United States, and the United Kingdom, which were 47 RMB, 170 RMB, 423 RMB, and 406 RMB respectively. In this context, as a leading company in the industry, YingTong Holdings is expected to meet the demand for international brand penetration and share in the industry's growth dividend with its full-channel network and brand operation capabilities. Of course, while enjoying the high industry prosperity, YingTong Holdings also needs to actively address risks such as brand dependence and intensified competition. For investors, the company's ability to make breakthroughs in its own brand development, digital transformation, and other aspects will be crucial in determining its long-term investment value.