Junlebao's IPO faces six consecutive regulatory queries; high debt, low profitability, and last-minute large dividends await resolution

Author: Qi Yun

Source: IPO Reference

Lead-in: Glory and pressure coexist.

In early 2026, Junlebao, branded as 'China’s third-largest integrated dairy company' and 'the first stock specializing in fresh milk,' officially shifted its listing plan from the A-share market to Hong Kong, pursuing a Hong Kong IPO under joint sponsorship by CICC and Morgan Stanley.

However, five months after submitting its application, Junlebao’s listing process has not progressed as smoothly as expected. Instead, deep regulatory inquiries and emergency share purchases by the founding team have exposed more underlying concerns at this dairy firm.

Unavoidable issues: Capital risks stemming from Junlebao’s equity changes

On the evening of May 31, 2026, Junlebao received feedback from China’s Securities Regulatory Commission (CSRC) regarding its overseas listing filing. The CSRC’s Department of International Cooperation requested supplementary materials concerning six key matters: capital contribution irregularities in past share issuances, compliance with capital reduction procedures, shareholder穿透 verification, transfers of equity incentive shares held by departing employees, rectification of administrative penalties, litigation developments, and plans for an A-share listing.

This round of inquiries goes beyond mere information supplementation—it constitutes a substantive legal and compliance review. These issues are also legacy problems that existed during Junlebao’s earlier preparations for an A-share IPO.

Junlebao initiated A-share IPO counseling in December 2023 but made no substantial progress over two years before pivoting to Hong Kong. Now, having switched tracks to the Hong Kong market, those unresolved issues have resurfaced at this critical juncture instead of vanishing.

Among the questions raised, the most critical ones concern 'specific details of capital contribution irregularities in all historical equity changes involving the company and its predecessor' and 'compliance with procedures, relevant tax payments, and payment of consideration in all prior capital reductions.'

Since 2021, Junlebao has conducted numerous acquisitions and financing rounds, resulting in frequent equity structure changes. Around the time of its listing submission, its shareholder composition shifted significantly again. In December 2025, multiple employee stock ownership platforms controlled by founder Wei Lihua increased their combined stake from approximately 15.00% to 20.61%, representing an increase of about 5.61%—a purchase exceeding RMB 1.1 billion. Meanwhile, new investors such as Moutai Jingshi Fund (backed by Kweichow Moutai Group) and Jingding Capital appeared on the shareholder list.

Wei Lihua and his core team used virtually all dividends received over the past three years for this share purchase. From 2023 through the first three quarters of 2025, Junlebao distributed approximately RMB 2.62 billion in dividends to shareholders—exceeding its net profit of RMB 2.022 billion over the same period.

Notably, regulators also required Junlebao to clarify 'the specifics of its previous A-share IPO counseling filing and whether it intends to continue pursuing an A-share listing.' This indicates that even after shifting its listing venue from the A-share market to Hong Kong, Junlebao’s historical A-share listing issues remain under regulatory scrutiny and have not been resolved simply by changing markets.

Under the pressure of RMB 10 billion in liabilities, can Junlebao's 'hero product' sustain growth?

From a financial standpoint, Junlebao has yet to escape its structural dilemma of 'high leverage and low profitability.'

According to prospectus data, as of September 30, 2025, Junlebao’s total liabilities reached RMB 17.57 billion, with a debt-to-asset ratio as high as 77.1%. By comparison, the average debt-to-asset ratio among 18 listed dairy companies in the industry was only 45.06%, with Yili and Mengniu at 58.66% and 57.52% respectively, and Feihe as low as 28.27%. Junlebao’s leverage not only significantly exceeds the industry average but is also notably higher than that of Hong Kong-listed peers like Feihe and Mengniu.

Junlebao also faces considerable short-term debt repayment pressure. As of the end of September 2025, the company held only RMB 1.366 billion in cash and cash equivalents, while its short-term borrowings amounted to RMB 1.91 billion and long-term borrowings due within one year totaled RMB 1.594 billion, leaving a short-term funding gap of RMB 2.138 billion.

The reason Junlebao’s high debt ratio is unlikely to improve in the near term may lie in its profitability. Despite revenue approaching RMB 20 billion and net profit hovering around RMB 1 billion, Junlebao’s gross margin continues to decline, and its net profit margin remains persistently low. From 2023 to the first three quarters of 2025, its gross margins were 34.2%, 34.7%, and 32.0% respectively—the decline in 2025 being particularly pronounced. In contrast, Mengniu reported a gross margin of 41.8% and Yili 35.3% during the same period. Although Junlebao’s adjusted net profit margin improved from 3.4% in 2023 to 6.2% in the first three quarters of 2025, this improvement stemmed primarily from cost-cutting rather than a fundamental boost in gross margin, raising questions about its sustainability.

As early as 2019, when Mengniu divested its stake in Junlebao, Mengniu’s then CFO candidly stated that Junlebao’s gross margin was lower than Mengniu’s, and removing it would noticeably improve the company’s financial statements. This comment by Mengniu, to some extent, reflects Junlebao’s weak profitability.

In terms of business structure, Junlebao’s once-dominant infant formula segment has been steadily shrinking, and growth now hinges entirely on its new pillar—chilled dairy products. Infant formula was historically Junlebao’s foundation and primary revenue driver. In 2021, the formula segment contributed RMB 15 billion in revenue, accounting for 74% of total revenue. However, by the first three quarters of 2025, formula sales had dropped to RMB 3.345 billion, representing just 22.1% of total revenue—a 15.8% year-over-year decline in 2025. The share of formula revenue plummeted from 74% to 22.1%, marking a dramatic structural shift.

Junlebao’s chilled dairy business, driven by two hero products—Jianchun (sugar-free yogurt) and Yuexianhuo (fresh milk)—has seen its revenue contribution rise from under 40% in 2023 to 42.5% in the first three quarters of 2025, generating RMB 6.437 billion in revenue and officially surpassing infant formula as the company’s largest segment. Jianchun sugar-free yogurt achieved annual sales exceeding RMB 4 billion, solidifying its position as China’s top-selling chilled yogurt SKU. Meanwhile, Yuexianhuo fresh milk generated RMB 2.247 billion in revenue in the first three quarters of 2025, up 40.6% year-over-year, capturing a 24% market share in the premium fresh milk segment.

However, amid intensifying competition in a saturated market, the growth ceiling for Junlebao’s chilled dairy segment is becoming increasingly apparent. In the first three quarters of 2025, revenue from chilled yogurt grew by just 1.2%, signaling a clear slowdown in momentum.

In recent years, as part of its preparations for an IPO and efforts to scale up, Junlebao pursued an aggressive acquisition and expansion strategy. Since 2021, the company has invested approximately RMB 5 billion in acquisitions, purchasing Sikeqi Foods, Royal Dairy (Laisi’er), and Yinqiao Dairy, while also making several strategic investments—including in Moyogurt and Tishen Shijia. These deals have largely underperformed: Tishen Shijia has entered bankruptcy liquidation, and Moyogurt has already been impaired. Moreover, these acquisitions have generated substantial goodwill on Junlebao’s balance sheet, which will directly weigh on future profitability.

For dairy companies, distribution channels have always been one of the key foundations for growth. In recent years, however, Junlebao’s dealer network has been 'bleeding.' According to its prospectus, the number of new dealers added by Junlebao has been declining from 2023 to 2025. In both 2024 and 2025, the number of terminated dealers exceeded the number of newly added dealers, resulting in a net reduction of 564 dealers by the end of 2025 compared to the end of 2023.

Junlebao not only faces capital redemption pressure stemming from its complex equity structure but also urgently needs IPO proceeds to alleviate its debt burden. Amid intensifying competition in the dairy industry—where established players are accelerating transformation and emerging brands are aggressively capturing market share—Junlebao’s path to capital markets is far less 'glamorous' than it appears.

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