Liuliumei (06658.HK) Zen Horizon Report

Ideal buy price ≤ HK$34 (about PE 12.5x, about 22% below the offer price). Logic: after normalizing unsustainable expense cuts and excluding part of the government subsidies, "maintainable clean earnings" are below RMB182 million. The reported PE of 16.4x corresponds to about 19-20x on normalized earnings. To keep a margin of safety on quality-adjusted earnings, the entry price should be pushed down to 12-13x on reported earnings. The current price, namely the offer price of 43.58, sits in the middle of the base range, neither cheap nor extremely expensive.

IPO-subscription perspective (short term, see Section XI): hot oversubscription, at one point above 240x, plus small market cap, 6-month cornerstone lock-up, 15% greenshoe, and a strong Hong Kong IPO market give first-day trading a decent win rate. A small cash subscription for gray-market/first-day trading can be considered, with same-day exit. However, consumer IPOs usually see moderate first-day gains, the Hong Kong IPO break-rate in 2026 is still about 30.6%, and medium- to long-term exposure should be avoided.

Note: this report is rated "Watch" and, under this site's rules, does not automatically trigger the review/supplement workflow.

II. Company Profile

Business model. Liuliumei follows a "hero product + consumer brand" model, centered on green plums and plum-derived snacks. It has three main product categories:

• Dried plum snacks (preserved plums, snow plums, and other traditional pickled/sun-dried plum products): once the absolute core, but now shrinking. Revenue fell from about RMB974 million in 2023 to about RMB830 million in 2025. Sales volume in 2025 fell about 21% year on year, and revenue share dropped from about 60% in 2024 to about 48% in 2025.

• Plum jelly (jelly category, marketed around "natural ingredients / 0 fat"): the second growth curve. It accounted for about 27% of revenue in 2025 and had the highest gross margin among the three lines, about 48%. It is the most important current growth engine, but growth has already slowed from the high rates of the previous two years.

• Prune products (marketed around dietary fiber / bowel movement): the fastest-growing category in 2025, about +70%, with share rising to about 22%. However, gross margin has already fallen to about 30% due to imported-prune price pressure. Growth is being won through volume and price cuts.

Almost 100% of revenue comes from plum-related products. Single-category dependence is the company's largest structural feature.

Channels. The channel structure has changed sharply. Traditional distribution fell from about 74.5% of revenue in 2022 to about 40.8% in 2024, while direct sales to retailers, including snack mass retailers, exceeded half of revenue for the first time. By customer type, snack specialty stores / mass retailers accounted for about 38% of revenue in 2025, surging from about 13% in 2021. The cost is a rapid rise in customer concentration. The top five customers rose from 12.7% of revenue in 2022 to about 45.8% in 2025. Mingming Henmang and Haoxianglai, the two leading mass retailers, together contributed about 26% of revenue in 2024. The company has also co-created products for Sam's Club, Pang Dong Lai, Freshippo, RT-Mart M Member Store, and others.

Brand. Since 2013, Liuliumei has used Yang Mi as endorser. "When you are free, eat Liuliumei / Are you alright?" became a national-level marketing symbol. It later added Focus Media elevator ads and livestreaming commerce. Watch the brand risk: after terminating Yang Mi in 2023, the company signed Xiao Zhan and Teens in Times. The brand symbol requires continuous paid maintenance. Endorsement/advertising spending in 2024 equaled about 71% of that year's net profit. The introduction of Dalong Development, an entity under Focus Media founder Jiang Nanchun, as a cornerstone investor effectively doubles down on the elevator-ad branding playbook.

Capacity and supply chain. As of the end of 2024, capacity utilization was about 85%-90%, close to full capacity, so 61% of proceeds are earmarked for expansion. More than 70% of plum jelly is produced by OEMs, which is asset-light but leaves quality control and gross margin constrained by contract manufacturers. On raw materials, the company mainly purchases externally, with a very low share from self-owned planting. Green plums are purchased from farmers in producing regions across China, including Zhao'an in Fujian, Puning/Raoping in Guangdong, and Huangshan in Anhui. Prunes are almost entirely imported, mainly from Chile, France, and the United States. Raw-material costs as a share of revenue rose from 41.7% in 2022 to about 47.7% in 2024. Vertical layout has not created an upstream cost advantage.

Headquarters and governance. The company is based in Fanchang, Wuhu, Anhui. Founder/chairman Yang Fan (born in 1969) and spouse Li Huimin are a controlling-shareholder group. Through direct shareholdings and platforms including Jurun Investment, Triumph Star, and Kailai Star, they control about 87.78% in total, an absolute controlling position. R&D staff number about 26, or about 1.2% of employees, with total headcount about 2,100-2,200. The CFO comes from fast-moving consumer-goods companies including Tingyi.

III. Vertical Evolution and IPO Process

(As a new stock, the company has no secondary-market share-price history. The following reconstructs the vertical timeline through "business evolution + capital process + IPO process.")

Business milestones: in 1999, Yang Fan founded the predecessor in Wuhu, Anhui Liuliu. Around 2000, the "Liuliumei" brand was launched. In 2006, the company focused on Liuliumei and positioned itself as "China's No. 1 green-plum food brand." In 2009, Liuliumei Orchard Group was established. In 2013, Yang Mi's endorsement and highly repetitive advertising triggered the breakout (sales were about RMB50 million that year). In 2015, sales exceeded RMB1 billion. In 2019, the company launched the "plum jelly" second curve. In 2021-2022, Xiao Zhan took over as endorser.

Capital process: in 2015-06, Sequoia invested about RMB135 million in the Series A round, implying a pre-money valuation of about RMB900 million. In 2016, individual investor Li Qing invested about RMB103 million in the Series B round. Later, when Sequoia exited A in 2019, the shares were transferred to Shenzhen Junrong. ⚠️ Media reports use both "Li Qing" and "Shenzhen Junrong" for the Series B investor; the prospectus should be treated as authoritative. In 2024-12, Hua'an Fund and Xingnong Fund made a late Series D investment at RMB33.04 per share. Worth noting: the company's valuation stayed stagnant for a long time, from about RMB2.4 billion in the Series C round in 2020 to about RMB2.2 billion in the Series D round in 2025. This, counterintuitively, meant its convertible redeemable preferred shares did not generate large fair-value losses that distorted profit. In this accounting dimension, earnings quality is cleaner.

★ Sequoia exited entirely at the redemption floor. This is the most telling signal: Sequoia waited almost ten years without seeing an IPO, signed a repurchase agreement in 2024-06, and was paid in two installments from 2024-12 to 2025-01, totaling about RMB261 million (RMB135 million principal + about RMB126 million interest, equal to the redemption floor at about 10% simple interest per year). The IRR over nearly ten years was only about 7-8%. Smart early money chose to take the fixed-return floor and leave, giving up post-IPO equity upside. That is itself a negative vote on the company's prospects.

IPO process, about 7 years and four attempts: (1) 2019-06 GEM filing, then voluntary withdrawal in 2019-12. CEO Yang Fan later said the company needed to invest heavily in a new strategy that year, making the statements look unattractive and the attempt "too willful"; regulators focused on single-category risk, with plum products contributing more than 85%. (2) 2025-04-16 first Hong Kong filing, which lapsed. (3) 2025-10-28 second filing, which lapsed. (4) 2026-05-21 third filing, under the renamed entity "Liuliumei Co., Ltd.", passed the hearing on 05-26 and listed on 06-15.

★ Six valuation-adjustment agreements forced the listing: the six financing rounds correspond to six valuation-adjustment agreements, covering Series A Sequoia, Series B Junrong, Series C1 Nuoxiang Jinhong, Series C2 Nuoxiang Dongchen, Series D1 Hua'an, and Series D2 Xingnong. Redemption price = principal + 6% simple interest per year. Deadlines: D1/D2 were 2025-12-31, already triggered; B/C1/C2 were revised in 2026-04 to a unified deadline of 2026-06-30. Excluding Sequoia, the remaining potential repurchase amount was about RMB389 million according to media citations, borne by Yang Fan and spouse. The listing date of 06-15 was only about half a month before the valuation-adjustment deadline of 06-30. This is a typical listing forced by valuation-adjustment agreements, where the time window is a hard constraint and valuation/market conditions are no longer the primary consideration.

IV. Financial Review

Three/four-year income statement (RMB):

(1) Root cause of gross-margin decline = active price cuts to drive penetration + a surge in low-margin channel mix. The trajectory needs clarification: gross margin was not a simple "three-year straight decline." It moved from 38.6% (2022) to 40.1% (2023 peak), then 36.0%, 35.6% (2025), and 34.6% (H1 2025). Only from the 2023 peak is it a consecutive decline. The root causes are an approximately 11% decline in the average price of dried plum products over two years, an approximately 32% decline in the average price of plum jelly (described in the prospectus as "strategic pricing to improve penetration"), plus a rising share of mass retail / direct low-margin channels.

(2) ★ Excess net-profit growth almost entirely came from expense contraction, rather than operating improvement. Gross margin is declining, so the portion by which net-profit CAGR, about 35%, far exceeded revenue CAGR, about 14%, mainly came from the selling expense ratio being cut from 24.1% to 15.9% (absolute selling expenses were actively cut from RMB310 million in 2024 to RMB272 million in 2025) + government subsidies (about RMB33.8 million in 2024, about 23% of that year's net profit). R&D was cut by half once in 2024 (-43.8%), but had recovered in 2025 to about RMB27.9 million, with an expense ratio of about 1.6%. "Continuous R&D cuts" is therefore not accurate; it was a one-off action in 2024.

(3) ★ Double-negative in the second half, hard evidence of weak earnings quality. In H1 2025, revenue was +25% and net profit was +75%, but H2 revenue was -11.4% and net profit was about -12.9%. Almost 100% of full-year growth came from the first half. Once the company stopped burning money on marketing, revenue immediately turned negative, confirming that "cutting marketing to preserve profit" is unsustainable.

(4) Cash flow has monotonically deteriorated for four years. Net operating cash inflow fell from RMB202 million (2022) to RMB127 million (2023), RMB84.4 million (2024), and RMB74.5 million (2025), diverging from net profit in the opposite direction. Cash conversion, operating cash flow / net profit, fell from 128% in 2023 to 41% in 2025. The divergence is driven by inventory buildup (about RMB673 million in 2025, turnover about 198 days) and a doubling of accounts receivable (about RMB80.52 million to about RMB221 million, with turnover days extending from 23 days to 43 days), the cost of pushing goods to large mass-retail customers to secure revenue.

(5) Balance sheet and special dividend. Cash and cash equivalents at the end of 2025 were only about RMB33.9 million, while interest-bearing bank borrowings were high, about RMB475 million according to media citations, pending prospectus verification. On 2026-05-10, immediately before the IPO, the company declared a special dividend of RMB67.347 million and paid it within two days. That was about twice year-end 2025 cash and about 37% of 2025 net profit. Because the founder couple held 87.78%, about RMB59 million flowed to the actual controllers. Paying dividends while borrowing, with 80% going to themselves, against a backdrop of "little cash on the books, high debt, and imminent public fundraising," is a significant governance flaw.

V. Moat: 2.5/5 Overall (Eroding Narrow Moat)

Overall view: the moat is real, but narrow, and being eroded. Score: 2.5/5, with risk skewed toward 2.0. The company has a real brand and real niche No. 1 positions, so it is not a no-moat bad business. However, the pricing-power test has clearly failed, channel bargaining power has shifted downstream, R&D is thin, and entry barriers are not high.

• Brand (real, but "rented"): "When you are free, eat Liuliumei" is a national mental symbol in the green-plum/preserved-plum category, and the company ranks first in plum products with 7.0% share. The brand accumulation is real. However, this is a brand maintained through continuous spending. Endorsement/advertising spending in 2024 equaled about 71% of net profit, and three-year marketing spending totaled about RMB900 million, about 2.3x the same-period net profit. The 2023 termination of Yang Mi also exposed dependence on a "super symbol." This is a marketing-maintained brand, not a structurally self-locking one.

• Market share (big fish in a small pond): the 4.9% fruit-snack share is No. 1 in a highly fragmented large market, where the leisure-snack CR5 is only about 16%. The often-cited "45.7% and No. 1 in natural-ingredient jelly" is a self-defined narrow scope. In the full jelly industry, the company ranks only sixth, with 2.9% share.

• Channels (the opposite of a moat): bargaining power is shifting from brand owner to snack mass retailers. Top-five customer share rose from 12.7% to 45.8%. Channels are eroding gross margin rather than protecting it.

• Supply chain (shallow barriers): prunes are almost entirely imported, raw-material costs have risen year by year to about 48% of revenue, and vertical layout has not translated into a cost advantage.

• R&D (thin): R&D expense ratio is about 1-2%, consistent with a heavy-marketing, light-R&D profile. Plum jelly is a differentiated bright spot, but the technical threshold is not high and imitation is easy.

• ★ Pricing-power test (failed): gross margin fell from the 2023 peak of 40.1% to 34.6% in H1 2025, and the core dried-plum gross margin fell from 39.6% to 32.1%. A business with pricing power can defend gross margin; Liuliumei cannot. This is textbook moat erosion.

Tier positioning: Canaan (Avoid 2/5, bad business) < Liuliumei (Watch 2.5/5, eroding) ≈ RXRX (Watch 2.5/5, unprofitable option) < Fabrinet/Harmonic Drive (Watch 3/5, narrow but able to defend pricing power) < Cheniere/Siemens Energy (Hold 4/5, wide moat). It ranks above Canaan because it has a real brand, real share, and real profit. It ranks below Fabrinet/Harmonic Drive because pricing power is being lost, with negative net momentum. If gross margin continues to fall and channel concentration rises further, it should be downgraded to 2.0.

VI. Industry Demand

Track. China's leisure-snack market is a trillion-yuan mature red ocean, with growth already down to the mid-single digits. The fruit-snack sub-segment in which Liuliumei operates was about RMB52 billion in 2024 and is expected to reach about RMB78 billion in 2029, a CAGR of about 8.6%, outperforming the overall market. It is also highly fragmented, with the leader at only 4.9%, leaving room to gain share.

But the absolute plum market is small. China's full-scope plum-product market was about RMB49.9 billion in 2024, but beverages and alcohol, such as green-plum wine and prune juice, accounted for nearly half, and Liuliumei is barely involved. Excluding beverages and alcohol, Liuliumei's core battlefield is about RMB23 billion. ⚠️ Narrower third-party scopes are only RMB11.7 billion to RMB17.5 billion, with large definition differences and no averaging here. Core niche shares are already high: green-plum fruit snacks 39.8%, prune fruit snacks about 55%, and natural-ingredient jelly 45.7%. The incremental margin from taking share is diminishing, so growth increasingly depends on "expanding the category" and "entering adjacent categories."

The second curve also has a limited ceiling. The "natural-ingredient jelly" sub-segment where plum jelly sits is about RMB900 million, while the full jelly industry is about RMB14.1 billion and dominated by Xizhilang. Scaling up requires directly challenging Xizhilang. The prune fruit-snack sub-segment is about RMB400 million. Health trends are tailwinds for prunes/plum jelly and headwinds for traditional high-sugar, high-salt preserved plums. The brand is tightly bound to "plum," and expansion across fruit categories remains unproven.

Judgment: this sits between "long runway, deep snow" and "low niche ceiling," tilting toward the latter. The second curve is real but incremental room is limited. Whether it can open space through plum jelly entering mainstream jelly, prunes capturing health demand, and category extension is an upside option for valuation, not a realized fundamental.

VII. Horizontal Peers and Valuation

Offer valuation: total share capital after issuance is about 78.81 million shares, and total market cap is about HK$3.435 billion. The three-way check closes: 78.81 million × 43.58 ≈ HK$3.435 billion. Offer PE is about 16.4x (static, based on 2025 net profit of RMB182 million ÷ current exchange rate of 0.866 ≈ HK$210 million; Ming Pao also confirms "PE above 16x"). PS is about 1.7x.

Peer comparison (mixed basis, directional comparison):

Judgment: the offer PE of 16.4x is lower in absolute terms than most A-share peers, where PE is 21-37x, so it looks "somewhat cheap". But that mainly reflects the structural discount of Hong Kong stocks relative to A shares (A-share liquidity premium), not individual-stock undervaluation. Using Weilong, the most comparable Hong Kong-listed peer, for an apples-to-apples comparison: Weilong trades at about 17-18x PE, nearly the same as Liuliumei, while Weilong is better across gross margin 48%, net margin 19.8%, and revenue growth +15.3% versus Liuliumei's 35.6%, 10.6%, and +5.9%, and has more diversified categories, including the konjac breakout. At the same PE, Liuliumei has no value-for-money advantage and is only reasonable after quality adjustment. The low-PE portion is precisely the market's rational pricing of slowing growth and gross-margin decline.

VIII. Current Offering Terms

The fixed offer price is HK$43.58. The global offering comprises 11.4641 million H shares, with 1.1465 million in Hong Kong and 10.3176 million internationally, representing about 14.5% of post-issuance total share capital. Gross proceeds are about HK$499 million and net proceeds about HK$440 million. Board lot is 100 shares and entry fee is HK$4,401.96. The 15% greenshoe covers about 1.7196 million shares. Use of proceeds: about 61% for capacity expansion, 21% for brand/channel/internationalization, 8% for R&D, and 10% for operations. Cornerstone investors Fanchang Revitalization (Fanchang district state capital) + Dalong Development (Jiang Nanchun / Focus Media-related) together invest about HK$148 million, about 29.55% of the offering, with a 6-month lock-up. Joint sponsors are CITIC Securities + Guoyuan International. Timetable: offer 06-05 to 06-10, allotment results 06-12, gray market 06-12 (16:15-18:30), listing 06-15. As of 06-08, the third day of the offer period, public-offering margin oversubscription had at one point exceeded 240x (122x on the first day, 06-06).

IX. Valuation

Three scenarios (ranges shown in the Section I table):

• Base (34-50): the plum jelly / prune second curve continues, gross margin stabilizes around 35%, growth remains in the mid-single digits, and PE is 12.5-18x. Benchmark near Weilong. The offer price of 43.58 sits in the middle of this range.

• Bear (25-34): IPO-subscription heat fades + the second curve is disproved or the H2 negative-growth trend continues + valuation is compressed to PE 9-13x.

• Bull (50-60): plum jelly breaks through / prunes capture health-driven demand, gross margin recovers, and Hong Kong consumer-stock valuation is revised upward, with PE 18-22x. Note: given growth has already stalled, higher multiples lack support.

Ideal buy price ≤ HK$34 (about PE 12.5x, about 22% below the offer price). Quality-adjustment logic: 2025 net profit of RMB182 million included government-subsidy contribution of about 23%, and high growth relied on unsustainable expense contraction plus one-sided H1 support. "Maintainable clean earnings" are materially below reported earnings. The reported PE of 16.4x corresponds to about 19-20x on normalized earnings. To keep a margin of safety on quality-adjusted earnings, the entry price should be pushed down to 12-13x on reported earnings.

X. Risks

(1) Stalled growth + poor earnings quality [High]: 2025 revenue was only +5.9%, while H2 revenue was -11.4% and net profit about -12.9%. High net-profit growth was propped up by marketing cuts (expense ratio 24% to 16%) + government subsidies (about 23% of 2024 net profit). Once spending stops, growth turns negative.

(2) Continued cash-flow deterioration [High]: operating cash flow has fallen monotonically for four years (RMB202 million to RMB74 million), cash conversion is only 41%, year-end cash was about RMB33.9 million, receivables doubled (turnover 23 to 43 days), and inventory turnover was about 198 days.

(3) Single-category (plum) dependence and ceiling [High]: almost 100% of revenue comes from plum products. Core dried plums are shrinking, with 2025 volume down 21%. The absolute plum market is small, core niche shares are already high, and growth depends on unproven category expansion.

(4) Gross-margin decline [High]: gross margin fell from the 2023 peak of 40.1% to 34.6% in H1 2025, driven by active price cuts and a rising share of low-margin mass-retail channels. This is trend-like, not one-off.

(5) Hard governance flaws [Medium-high]: special dividend of RMB67.347 million immediately before the IPO, about twice year-end cash and 80% to the founders; six valuation-adjustment agreements forcing the listing, with listing only half a month before the 6-30 deadline; Sequoia exiting at the redemption floor, a negative signal; husband-and-wife absolute control of 87.78%; signs of related transactions, such as share transfers to Nuoxiang platforms under valuation-adjustment arrangements for cash-out.

(6) Channel concentration and channel change [Medium-high]: top-five customer share rose from 12.7% to 45.8%, and dependence on mass retailers such as Mingming Henmang / Haoxianglai has increased. The mass-retail model naturally favors substitution by white-label or retailer-owned brands.

(7) Raw-material price volatility [Medium]: green plums are weather-dependent (2017 frost drove procurement unit price +38%), while prunes are almost entirely imported, with price increases squeezing gross margin.

(8) Food safety / public-opinion risk [Medium]: Black Cat complaints include mold and foreign objects. The company has historical penalties for labeling inconsistencies and excessive mold counts. Plum products contain sugar and salt, and some processes are outsourced to contract manufacturers.

(9) Risk of absorbing fundraising-funded capacity expansion [Medium]: when demand weakens, allocating 61% of proceeds to capacity expansion creates risk that utilization falls short and incremental depreciation eats profit.

(10) Small-cap liquidity risk [Medium]: free float after issuance is small. New issuance accounts for about 14.5%, and after deducting cornerstone shares, first-day freely tradable market cap is only about HK$350 million. Once speculation fades, turnover can shrink and the stock can drift lower.

Pre-mortem (assuming the stock breaks issue price after listing or falls sharply within one year, the most likely reasons): (1) IPO-subscription money exits and valuation has no growth support. The small-cap stock is pushed up by oversubscription hot money, then profit-taking follows, while a "single-category company with growth down to 5.9%" cannot support the short-term trading premium. Technically the IPO trade works; fundamentally the value case is disproved. (2) The second curve is disproved. If plum jelly growth slows while dried plums keep shrinking, under pressure from Yanjin, Xizhilang, Weilong's konjac line, and others, the only engine stalls. (3) Founder incentives shift after valuation-adjustment agreements are lifted. If the listing was mainly to meet the 6-30 deadline, motivation for growth/capital operations may decline after listing, and further dividends or share reductions after the 6-month lock-up could pressure the share price.

XI. IPO Subscription Analysis (Short Term, Separate from Medium- to Long-Term Rating)

Technical setup (somewhat strong): (1) hot oversubscription. As of 06-08, public-offering margin oversubscription had at one point exceeded 240x (122x on the first day). Above 100x triggers clawback to 50% of the public offering. (2) Small market cap. Net proceeds are only about HK$440 million, market cap about HK$3.4 billion, and first-day float after deducting cornerstone shares is extremely small, making supply concentrated and easier to push up. (3) 6-month cornerstone lock-up + 15% greenshoe support. (4) A strong Hong Kong IPO market.

Sober reminder (keep expectations restrained): (1) consumer IPOs usually see moderate first-day gains. For example, Guming rose about +10% on the first day and about +20% in gray-market trading. They are not AI/hard-tech names with explosive rallies. The market narrative that "recent IPOs rise about 100% on the first day on average" clearly overestimates the consumer sector. (2) The Hong Kong IPO break-rate in 2026 is still about 30.6%. This stock's fundamentals are weak and valuation is already full; any first-day gain is liquidity/sentiment-driven rather than value-driven. (3) The cornerstones are "local state capital + industrial capital (Focus Media-related)." There is no top-tier institution such as Hillhouse or a long-only fund anchoring the book, so the endorsement quality is middling.

Judgment: a small cash subscription for gray-market/first-day trading can be considered, with same-day exit, no overnight hold, and no core position. Given an expected allocation rate of only about 5-10%, large margin financing is not recommended because interest erodes returns. Medium- to long-term exposure should be avoided. The money to be made is from IPO-market heat, not from the company.

XII. Zen Horizon Convergence

Vertically, Liuliumei is a real company with genuine profitability, a national-level brand, and several niche No. 1 positions. It is clearly better than a loss-making / no-pricing-power bad business, and that is why it is not rated "Avoid." But the vertical view also exposes the essence of its problem: growth has stalled (2025 +5.9%, H2 turned negative), profit is "manufactured" through expense cuts and subsidies, cash flow has deteriorated for four years, the company spent about 7 years and four attempts on the IPO, was forced by six valuation-adjustment agreements to list half a month before the deadline, and Sequoia exited at the redemption floor. This is a stock that genuinely makes money, but is deteriorating, and is being pushed to market by valuation-adjustment pressure.

Horizontally, the moat is 2.5/5 and eroding. The brand is maintained through spending, pricing power is being lost as channel power shifts to mass retailers, and several No. 1 niche positions are big-fish-in-small-pond claims. The offer valuation of PE 16.4x is "apparently cheap but reasonable after quality adjustment." Against the most comparable peer, Weilong, it is only at parity in valuation while materially inferior in quality. Cheap valuation is the only presentable support, but there is a reason it is cheap.

Convergence conclusion: real profitability / real brand / real niche No. 1 / undemanding valuation versus stalled growth + poor earnings quality + hard governance flaws + moat erosion. The former keeps it above "Avoid," while the latter keeps it below "Hold/Buy." The landing point is Watch, with a bearish tilt. For medium- to long-term investors, wait for fundamental validation (whether plum jelly can take over, gross margin can stabilize, cash flow can improve, and founder incentives after valuation-adjustment removal) or a lower price (≤ HK$34). Short-term IPO trading is a separate matter. The technical setup is strong and a small first-day trade is possible, but that is money from IPO-market heat.

Research Uncertainties

• The prospectus is an image-based PDF, and some details are cited through media: the following numbers are directionally correct but have not been independently checked to first-hand sources. The final prospectus should prevail: interest-bearing debt of about RMB475 million, remaining valuation-adjustment repurchase amount excluding Sequoia of about RMB389 million, prune fruit-snack market share of about 55%, some customer-concentration endpoints (12.7%/14.1%/26%), and the Series B investor name (Li Qing vs Shenzhen Junrong).

• PE basis: 16.4x is static PE, as a new stock has no forward consensus, calculated using the current exchange rate of HK$1≈RMB0.866. Using the older exchange rate of 0.91 would overstate it to about 17x.

• Gross-margin trajectory: "decline" should be measured from the 2023 peak of 40.1% (2022 was 38.6%, lower), not as a simple monotonic three-year decline.

• Industry TAM definitions differ greatly: full-scope plum products are about RMB49.9 billion, including beverages and alcohol at nearly half, versus about RMB23 billion excluding beverages, versus third-party estimates of RMB11.7 billion to RMB17.5 billion. This report presents them in parallel and does not average them.

• IPO-subscription data are dynamic/forecast: margin oversubscription changes during the offering process, gray-market trading is on 06-12, and the expected allocation rate of about 5-10% is a broker forecast. Actual announcements should prevail.

• Valuation scenario ranges are framework estimates, not price forecasts.

This report is based on public information and does not constitute investment advice. Markets carry risk; invest with caution.