New Stock Outlook | Xizi Health: Annual income exceeds 1.6 billion yuan vs 99% of income relies on online sales. Is "Success comes from Douyin, worries also from Douyin"?

With the increase in health awareness and the promotion of a healthy lifestyle, consumers are paying more and more attention to nutrition and health foods. Especially in the post-pandemic era, the public's health awareness has been further strengthened, and people are no longer relying solely on daily diet to obtain nutrients. This trend has also brought great opportunities for the nutrition and health food industry. According to Frost & Sullivan, the retail sales of nutrition and health foods in China have been continuously increasing in recent years, from RMB 297.9 billion in 2020 to RMB 405.7 billion in 2024, with a compound annual growth rate of 8.0%. It is expected to reach RMB 645.2 billion by 2029, with a compound annual growth rate of 9.7%. In this context, more and more nutrition and health food companies are accelerating their layout and expanding their development to the secondary market. For example, Xizi Health, holding the popular product "FIBOO Vitality Iron," submitted an application for listing on the Hong Kong Stock Exchange on January 8. The company is a sports nutrition and functional food company that has grown into a major player in the domestic sports nutrition field through precise marketing and content seeding on platforms such as Douyin. Next, let's take a further look through Xizi Health's prospectus - can the company become a dark horse in the Hong Kong stock market's nutrition and health food sector with the industry's growth momentum? "Heavy Marketing" vs. "High Growth" Established in 2013, Xizi Health has become a leader in domestic sports nutrition brand. The company is mainly engaged in the research, production, and sale of sports nutrition foods, with four major brands including FoYes, fiboo, Guben Diary, and HotRule, covering categories such as whey protein powder, creatine, functional gummies, ready-to-drink/instant coffee, and energy supplements. According to Frost & Sullivan, in terms of retail sales of sports nutrition foods in 2024, the company ranks third among sports nutrition food brands in China and has become a leader in the domestic sports nutrition food sector. The company is also the fastest-growing sports nutrition food brand operator in China from 2022 to 2024. Xizi Health's rapid rise is also closely related to its data-driven marketing. The company is adept at online traffic operations, customizing differentiated operating strategies for different brands and sales channels, building a highly efficient multi-channel sales network targeting consumers directly online (DTC) and strategically expanding offline. Based on this model, Xizi Health has incubated several popular brands in a short period of time. For example, the brand "FoYes" saw a 364% year-on-year growth in revenue in the first 9 months of 2025, while other brands also achieved sales exceeding RMB 500 million within one or two years of listing. This is mainly due to the company's saturation attack on content platforms such as Douyin. Through precise marketing and content seeding, Xizi Health's core financial data has also achieved high growth. According to the prospectus data, the company's revenue for the nine months ending September 30 of 2023, 2024, and 2025 were RMB 1.447 billion, RMB 1.692 billion (up 16.9% year-on-year), and RMB 1.609 billion (up 23.0% year-on-year), respectively. The growth is driven by the volume of own-brand sales (FoYes accounted for 35.0% of revenue in the first 9 months of 2025) and the increased penetration rate of online channels. At the same time, the company's net profit has also steadily increased: in 2023, 2024, and the first 9 months of 2025, Xizi Health's net profits were RMB 94 million, RMB 149 million, and RMB 118 million, respectively, with year-on-year growth of 58.5% and 1.9% in the last two years. However, behind the high growth lies the development concern of Xizi Health's heavy reliance on marketing. According to the prospectus data, the company's sales expenses were RMB 473 million, RMB 751 million, and RMB 756 million in the 9 months ending September 30 of 2023, 2024, and 2025, respectively, showing a continuous increase year by year. The sales expense ratio also increased from 32.7% in 2023 to 47% in the first three quarters of 2025, which has eroded the company's profit. The significant increase in sales expenses has put significant pressure on the company's cash flow as well. Its net cash flow from operating activities has been declining from RMB 270 million in 2023 to RMB 66 million in the first 9 months of 2025, reflecting that the company's high growth is also consuming a large amount of operating funds. It can be seen that Xizi Health's marketing approach is the core engine of its success in the short term, but it is also the biggest concern for long-term development. Successful Transformation Also Brings "Long-term Worries" Looking at the revenue structure, Xizi Health has successfully completed the strategic transformation from being driven by third-party brand operations to being driven by a combination of its own brands, showing the company's internal growth potential through the successful launch and rapid growth of its own brands. According to Frost & Sullivan's report, the company is one of the few successful companies that have transitioned from operating third-party brand services to managing a portfolio of its own nutrition and health food brands. This transformation is the result of Xizi Health's long-term cultivation of the industry value chain and forward-looking strategic layout. With the rapid growth of its own brands, the contribution of the company's own brand revenue has increased from 42.4% in 2023 to 97.3% in the nine months ending September 30, 2025. Specifically, the company's own brand revenue increased from RMB 614 million in 2023 to RMB 1.498 billion in 2024, a year-on-year growth of 144.0%, and further increased to RMB 1.567 billion in the first nine months of 2025, a year-on-year growth of 38.7%. At the same time, thanks to the significantly increased contribution of high-margin own brands, Xizi Health's gross margin has also shown a steady upward trend. The gross margin was 44.4% in 2023, rose to 58.8% in 2024, and further increased to 59.5% in the first nine months of 2025. However, although Xizi Health has successfully transformed its brand, the company's high dependence on a single platform still raises some questions about its future growth. The prospectus shows that Xizi Health's revenue is highly concentrated on online channels: in 2023, 2024, and the first three quarters of 2025, online channel revenue accounted for approximately 99.4%, 99.0%, and 98.9%, respectively. Among them, Douyin is the most critical "single battlefield": during the reporting period, Douyin channel revenue accounted for as high as 45.5%, 61.9%, and 62.8%. In addition, the company also disclosed that its sales model is mainly focused on "direct-to-consumer sales (DTC)" - in 2024, DTC revenue accounted for approximately 88.4%, and in the first three quarters of 2025, approximately 89.8%. This high reliance on a single platform and individual consumer sales model has inadvertently exposed Xizi Health's growth defects, particularly the risk of being heavily impacted by platform algorithm adjustments, rising traffic costs, or platform policy changes, which poses significant systemic risks. In summary, Xizi Health has seized the rhythm of "online, popular, and branded" in the industry, quickly rising to prominence with its keen traffic sense and brand incubation capabilities. However, whether it can truly open a new "growth cycle" in the future depends on its ability to break free from "flow dependency" and move from being a "internet celebrity" to a "long-lasting celebrity". For investors, whether Xizi Health can effectively reduce its dependence on a single online channel, control its marketing expense ratio, and demonstrate that its high-margin own brands have sustainable product innovation and user stickiness with the funds raised through the IPO, is also an observation factor that cannot be ignored.