---
title: "Juneyao Health IPO Approved, but Why Did the Issuance Review Committee Question the Number of Distributors?"
description: "The CSRC website recently published the results of the 97th meeting of the 18th Issuance Review Committee in 2020, showing that Hubei Juneyao Health Beverage Co., Ltd. (\"Juneyao Health\"), which had previously suspended its IPO process due to its capital verification firm being involved in the Kangdexin financial fraud case, passed the review. However, during the review, the committee raised questions about changes in the number of distributors and the high proportion of OEM production."
author: "New Distribution"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
telephone: "+8615854817671"
published: "2020-07-06"
language: "en"
canonical: "https://xinjignxiao.com/en/articles/juneyao-health-ipo-approved-but-why-did-the-issuance-review-committee-qu-73120747/"
markdown: "https://xinjignxiao.com/en/articles/juneyao-health-ipo-approved-but-why-did-the-issuance-review-committee-qu-73120747.md"
original_source: "https://mp.weixin.qq.com/s/9K4YyTTk4MmrhYRS0kLrVA"
translation: "https://xinjignxiao.com/zh/articles/%E5%9D%87%E7%91%B6%E5%A4%A7%E5%81%A5%E5%BA%B7ipo%E8%BF%87%E4%BC%9A-%E7%BB%8F%E9%94%80%E5%95%86%E6%95%B0%E9%87%8F%E4%B8%BA%E4%BD%95%E9%81%AD%E5%8F%91%E5%AE%A1%E5%A7%94%E8%B4%A8%E7%96%91-73120747.md"
attribution: "New Distribution — https://xinjignxiao.com/en/articles/juneyao-health-ipo-approved-but-why-did-the-issuance-review-committee-qu-73120747/"
usage_policy: "https://xinjignxiao.com/ai-policy.txt"
---

# Juneyao Health IPO Approved, but Why Did the Issuance Review Committee Question the Number of Distributors?

> The CSRC website recently published the results of the 97th meeting of the 18th Issuance Review Committee in 2020, showing that Hubei Juneyao Health Beverage Co., Ltd. ("Juneyao Health"), which had previously suspended its IPO process due to its capital verification firm being involved in the Kangdexin financial fraud case, passed the review. However, during the review, the committee raised questions about changes in the number of distributors and the high proportion of OEM production.

The CSRC website recently published the results of the 97th meeting of the 18th Issuance Review Committee in 2020, **Hubei Juneyao Health Beverage Co., Ltd. ("Juneyao Health"), which had previously suspended its IPO process due to its capital verification firm being involved in the Kangdexin financial fraud case, passed the review. However, during the review, the committee raised questions about changes in the number of distributors and the high proportion of OEM production.**

**-01-**

**High Proportion of OEM Production Raises Questions**

According to the prospectus, Juneyao Health plans to raise 1.199 billion yuan for projects including the Yichang Industrial Base in Hubei and the Quzhou Industrial Base in Zhejiang, each with an annual production capacity of 100,000 tons of ambient fermented milk beverages.

In 1998, Juneyao Health's predecessor, Juneyao Group Dairy Co., Ltd., was established, inheriting the group's dairy products and milk-containing beverage business. In 2011, Juneyao launched the "Wei Dong Li" series of new products, strategically entering the ambient lactic acid bacteria beverage market, which led to rapid performance growth. From 2017 to 2019, Juneyao Health's consolidated main business revenue was 1.146 billion yuan, 1.287 billion yuan, and 1.245 billion yuan, respectively, with net profits of 226 million yuan, 281 million yuan, and 303 million yuan.

**Despite the positive performance, Juneyao Health cannot escape its dependence on super single products.** During the reporting period, lactic acid bacteria series beverages accounted for over 95% of revenue, with the "Wei Dong Li" ambient plastic bottle series accounting for as high as 97.53%, 96.51%, and 89.48% of revenue, respectively.

In addition, **Juneyao Health has long been in a contradictory state of underutilized self-owned production capacity and heavy reliance on OEM production.** From 2017 to 2019, its overall capacity utilization rates were 51.78%, 64.39%, and 65.42%, respectively. Meanwhile, its OEM factories' output exceeded 50% of total output for several consecutive years. The proportion of OEM production for "Wei Dong Li" ambient lactic acid bacteria beverages was 62.81%, 39.96%, and 35.27% of Juneyao Health's total output for that product, respectively.

In this regard, **the Issuance Review Committee required Juneyao Health to explain whether the standard for OEM processing fees was stable during the reporting period; whether there were related-party relationships or relevant interest arrangements between Juneyao Health and its affiliates and the OEM factories; and whether there were behaviors such as sharing costs or transferring benefits for Juneyao Health.**

**-02-**

**Less Than Half of Distributors Have Continuous Cooperation**

In addition to the OEM issue, the Issuance Review Committee also raised questions about Juneyao Health's distribution model. Specific issues included the large number of new distributors added in 2018, the reasons and rationality for the number of exiting distributors being greater than new ones in 2017 and 2019, the reasons and rationality for the rapid growth in orders over 300,000 yuan since 2018, and whether there were situations of pressuring distributors to stock up to adjust revenue.

According to the prospectus, Juneyao Health added 668 distributors and exited 468 in 2018; in 2019, it added 524 and exited 622, with a total of 1,306 distributors at the end of the period. However, only 516 distributors had continuous cooperation over the three years, less than half.

Juneyao Health explained in the prospectus that during the reporting period, revenue from distributors with continuous cooperation accounted for over 60% of revenue in each period. The significant increase and decrease in distributor revenue in 2018 was mainly due to the strict implementation of third-party payment policies starting in June 2018, which led some distributors to change their corporate nature or cooperate through other companies designated by the distributors. Due to the regulation of third-party payments in 2018, distributor revenue changes in 2019 significantly decreased. Except for 2018, when strict third-party payment policies led to significant revenue changes, the impact of distributor exits on revenue in other periods was within 5%, which is considered reasonable.

Regarding the impact of the COVID-19 pandemic, Juneyao Health stated in the prospectus that as a production enterprise registered in Yichang, Hubei Province, its production and financial conditions were affected to a certain extent, mainly in logistics and delayed resumption of work, with the impact expected to be mainly in the first quarter of 2020, especially in February. Currently, both its own factories and OEM factories have resumed production, and the company will actively organize production to meet customer order demands.

**-03-**

**IPO Suspended Due to Capital Verification Firm Issues**

**In May 2019, Juneyao Health first published its prospectus. Just as the outside world questioned the sustainability of its performance growth and feared it would affect the IPO prospects, its capital verification firm, Ruihua Certified Public Accountants, became involved in the Kangdexin financial fraud case, which forced Juneyao Health's listing process to be suspended.** On April 9, 2020, the CSRC disclosed Juneyao Health's updated prospectus.

If Juneyao Health successfully lists, it will not only be the "first stock of lactic acid bacteria beverages" in China, but also the fourth listed company controlled by its actual controller, Wang Junjin. Wang Junjin currently holds a total of 67.9% of Juneyao Health's shares. In the industry's view, Wang Junjin is skilled in capital operations, involved in five major sectors: air transport, financial services, modern consumption, education services, and technological innovation, including three listed companies: Juneyao Airlines, Aijian Group, and Dadongfang.

It is worth noting that in the first prospectus, Wang Yingying, the niece of shareholder and actual controller Wang Junjin, attracted outside attention due to her long-term "loss of contact." In the new prospectus, Juneyao Health stated that it has made contact with Wang Yingying, but she has not yet expressed her opinion on the IPO.

Shen Meng, executive director of Chanson Capital, previously said in an interview with Beijing News that generally, an IPO requires unanimous consent from all shareholders, because if there are differences, it is difficult to guarantee that no disputes will arise during the IPO application and review process, and disputes would inevitably lead to delays or even suspension of the IPO.

The pandemic has had a negative impact on the dairy industry, including large dairy companies under considerable pressure. Regional companies like Juneyao may face even greater pressure, but judging from the current A-share market conditions, a successful IPO is still the best choice for Juneyao.

Source: Beijing News


---

## Copyright and AI use

This article is sourced from New Distribution. Search, quotation, summarization, and model training are permitted, but every use must credit New Distribution and retain the canonical source URL.

Contact: zhaobo258@gmail.com · +86 158 5481 7671