Perfume King Yingtong Holdings Hits "Audit Hijack": Just After Fundraising, Prepaid HK$70 Million, Changed Auditors Within 9 Months of Listing

Source: Huaxia Times

As the “First Chinese Perfume Stock” listed on the Hong Kong Stock Exchange, Ying Tong Holdings (06883.HK) is approaching nine months since its listing when it became embroiled in a controversy involving a HKD 70 million prepayment, dubbed the “Rashomon.” On the evening of March 16, the company suddenly announced that its auditor, PricewaterhouseCoopers (PwC), resigned at the “request” of the board, just as the audit for the 2025/2026 fiscal year was about to commence.

This rare “resignation” controversy stems from a suspicious payment made after the IPO. According to PwC’s resignation letter, shortly after Ying Tong Holdings listed on June 26, 2025, it signed multi-year agreements with three service providers for public relations, data analysis, and social media promotion, and made a one-time prepayment of HKD 70 million. Faced with questions from the auditor regarding the background of the vendors, internal control procedures, fair pricing, and whether the expenditure qualifies as listing costs or fundraising use, Ying Tong Holdings failed to provide reasonable explanations. The two sides also could not agree on additional audit fees, ultimately leading to PwC’s resignation.

Affected by this matter, Ying Tong Holdings announced a suspension of trading on March 17 pending further disclosures. As of press time, Ying Tong Holdings has not responded to the interview request from Huaxia Times. Strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, Zhan Junhao, said in an interview that changing auditors not only increases audit costs but may also delay the release of annual reports, which could negatively impact the company’s stock price and subsequent financing environment.

Ying Tong Holdings’ Internal Control Concerns

Ying Tong Holdings listed on the main board of HKEX on June 26, 2025, raising approximately HKD 883 million. As a well-known perfume distributor, the company’s revenue is almost entirely derived from product distribution for 72 external brands including Hermès and Chopard. According to the prospectus, the funds raised are intended to develop its own brands, acquire external brands, expand direct sales channels, and accelerate digital transformation.

The sudden change of auditor was triggered by a HKD 70 million prepayment. Shortly after completing the IPO, Ying Tong Holdings prepaid a total of HKD 70 million to three service providers for multi-year public relations, data analysis, and social media promotion services. The commercial reasonableness and compliance of this transaction raised doubts from the then-auditor PwC. The two sides failed to reach consensus on the scope and fees of the audit, leading PwC to resign at the board’s request.

PwC’s resignation letter pointed out that management was asked to explain several issues, including whether the payment was an IPO expenditure or related to fundraising, the background of the three vendors and whether they participated in the company’s business during the IPO period, whether internal approval procedures were followed before engagement, and whether the service fees, contracts, and payment terms were in line with market practices.

Ying Tong Holdings stated that it has appointed independent professional advisors to investigate these issues under the supervision of the audit committee. PwC emphasized that the investigation’s results would significantly impact the nature, timing, and scope of its 2025/2026 fiscal year audit, and that it needs to fully understand the progress of the investigation.

However, as of March 16, PwC had not received detailed updates, explanations, documents, or materials related to the investigation. PwC stated that it could not establish a definitive timetable for completing the audit procedures and that handling related matters would incur additional costs, which need to be negotiated with the company.

The Ying Tong Holdings board responded that, since PwC could not assess the nature, timing, and scope of the additional audit procedures, nor establish a completion timetable, the company could not accept the extra audit fees arising from this. Under these circumstances, PwC resigned at the board’s request.

Regarding market concerns about whether this would affect the release of the first annual report post-listing, the board confirmed that as of March 16, PwC had not commenced any work on the 2025/2026 audit but believed that changing auditors would not have a significant impact on the annual audit or performance disclosure.

Currently, Ying Tong Holdings has appointed RSM Hong Kong as its new auditor to fill the vacancy until the next annual general meeting. The company has committed to providing RSM with all necessary documents to complete the audit.

Zhan Junhao believes that this resignation directly damages Ying Tong Holdings’ market reputation and capital image, triggering strong doubts about the company’s internal controls and financial authenticity, and may lead to regulatory inquiries and a crisis of investor trust.

Performance “Slowdown” Emerges

Beyond the audit controversy, Ying Tong Holdings’ operational fundamentals are also under severe pressure. Once a high-profile company with over HKD 2 billion in revenue and dubbed the “First Perfume Stock,” the brand management group has shown signs of growth fatigue in its first interim report after listing.

According to the six-month interim results ending September 30, 2025, Ying Tong Holdings achieved revenue of HKD 1.028 billion, a decrease of 3.4% year-on-year. This marks the first mid-year revenue decline after three consecutive years of growth (compound annual growth rate of about 10.7%). Despite a 15.3% increase in profit to HKD 133 million, driven by cost optimization, net cash from operating activities plummeted 49.7% to HKD 94.46 million, indicating a clear cash flow tightening trend.

The company explained that the revenue decline was mainly due to strict price controls to cope with fierce competition and the sale of subsidiaries to streamline operations. In China’s “scent economy,” which remains highly optimistic, Ying Tong Holdings’ revenue slump reveals that its reliance on agency expansion has hit a ceiling.

Zhan Junhao pointed out that Ying Tong’s current predicament stems from its agency model, overly dependent on foreign perfume brand licenses, lacking self-owned brands, and with weak bargaining power. Coupled with industry price wars and channel shuffling, revenue has declined for the first time. Meanwhile, the significant cash flow contraction and limited operational resilience expose the weaknesses of a growth model that is overly reliant on external brands and lacks diversification.

Jiang Han, senior researcher at Pangu Think Tank, analyzed for Huaxia Times that market competition and business model limitations are major challenges for Ying Tong Holdings. Although it remains a leading player in the perfume industry, the revenue decline reflects that its reliance on agency expansion has reached a ceiling. In the highly promising Chinese “scent economy,” the company must contend with intense market competition and implement strict price controls to maintain market share, which could impact profitability. Selling subsidiaries to streamline operations may boost short-term profits but could hinder long-term growth. The company needs to find new growth points, optimize its business structure, and enhance core competitiveness to adapt to market changes and challenges.

Despite the “First Stock” label, Ying Tong Holdings’ business model remains heavily dependent on external brand licensing, with insufficient internal revenue generation. As of September 30, 2025, the company represented 74 external brands, including Hermès and Van Cleef & Arpels, while only one self-owned brand, Santa Monica, existed. Although the company launched Santa Monica in 1999 and attempted to enter the perfume and eyewear sectors, its performance has remained marginal. Historically, from 2023 to 2025, the brand’s revenue share never exceeded 1%, contributing only HKD 10.5 million in 2025, accounting for 0.5% of total revenue.

Compared to the HKD 883 million net IPO proceeds, a significant portion was planned for developing self-owned brands and acquisitions, but no substantial breakthroughs have been achieved so far. Meanwhile, supplier concentration risk remains high, with procurement from the top five suppliers accounting for 84%, 81.6%, and 77.8% of purchases in the past three fiscal years. In 2022, a non-renewal of a luxury brand license led to a HKD 425 million revenue drop in a single year, a risk still looming over the company.

On one hand, the auditor’s resignation over “unclear” prepayments exposes potential internal control flaws; on the other, the first-year performance slowdown and weak self-owned brands reveal operational realities. For Ying Tong Holdings, less than a year after entering the capital market, clarifying internal control doubts and reversing the “difficult revenue growth, weak self-owned brands” dilemma are critical tests. With the new auditor RSM involved, the final investigation into the HKD 70 million prepayment will be a key measure for market judgment on the company’s governance quality.