Perfume King Yingtong Holdings Encounters "Audit Hijacking": Prepays 74 Million Yuan Right After Fundraising, Changes Auditor After Just 9 Months of Listing

As the “First Perfume Stock Listed on the Hong Kong Stock Exchange,” Ying Tong Holdings (06883.HK) is embroiled in a controversy just nine months after going public, involving a HKD 70 million prepayment in a “Rashomon” incident. 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, Ying Tong Holdings shortly after listing on June 26, 2025, signed multi-year agreements with three service providers involving public relations, data analysis, and social media promotion, and paid up to HKD 70 million upfront. Faced with questions from the auditor regarding the background of the vendors, internal control processes, fair pricing, and whether the expenditure qualifies as listing costs or fundraising use, Ying Tong Holdings failed to provide reasonable explanations. The parties also could not reach an agreement on additional audit fees, ultimately leading to the resignation.

Affected by this matter, Ying Tong Holdings announced a trading halt on March 17 pending further disclosures. As of press time, Ying Tong Holdings has not responded to the Huaxia Times’ interview request. Strategic positioning expert and founder of Fujian Huace Brand Positioning Consulting, Zhan Junhao, told this reporter 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 distributing products for 72 external brands including Hermès and Chopard. According to the prospectus, the funds raised are intended to develop proprietary brands, acquire external brands, expand direct sales channels, and accelerate digital transformation.

The sudden change of auditor is linked to 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.

In its resignation letter, PwC stated that management was asked to clarify several issues, including whether the payment was a listing expense or IPO fundraising use; the background of the three vendors and whether they participated in the company’s business during the IPO; 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 said it has engaged independent professional advisors to investigate these issues under the supervision of the audit committee. PwC emphasized that the investigation results will significantly impact the nature, timing, and scope of its 2025/2026 annual audit, and that it needs to fully understand the investigation progress.

However, as of March 16, PwC had not received detailed updates on the investigation, nor any explanations, documents, or materials requested. PwC stated it could not establish a definitive timetable for completing the audit procedures and noted that handling these matters would incur additional costs, which need to be negotiated with the company.

The Ying Tong Holdings board responded that, given PwC’s inability to assess the nature, timing, and scope of the additional procedures, and its inability to establish a completion timetable, the company cannot accept the extra audit fees. Under these circumstances, PwC resigned at the board’s request.

Regarding market concerns about whether this will affect the release of the first annual report post-listing, the board confirmed that as of March 16, PwC had not undertaken any work for 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 the new auditor to fill the vacancy until the next annual general meeting. The company has committed to providing RSM with all necessary information to complete the audit.

Zhan Junhao believes that this auditor resignation has directly damaged 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 “Deceleration” 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 post-listing interim report.

According to the interim results as of September 30, 2025, Ying Tong Holdings reported revenue of HKD 1.028 billion, a 3.4% decline year-over-year. This marks the first time in three fiscal years (2023–2025) of continuous growth (compound annual growth rate about 10.7%) that the company experienced a mid-year revenue decline. Although net profit increased by 15.3% to HKD 133 million due to cost optimization, operating cash flow plummeted 49.7% to HKD 94.47 million, indicating a tightening of cash flow.

Ying Tong Holdings 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. Despite China’s “scent economy” being highly regarded, the company’s revenue decline reflects that its reliance on agency expansion has reached a ceiling.

Zhan Junhao pointed out that Ying Tong’s current predicament stems from its agency model, overly dependent on foreign perfume brand authorizations, lacking proprietary brands, and with weak bargaining power. Coupled with industry price wars and channel shuffling, revenue has fallen for the first time. Meanwhile, cash flow has significantly tightened, exposing weaknesses in resilience. In the “scent economy” track, a single growth model and poor risk resistance are prominent issues.

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. Although a leading company in the perfume industry, its revenue decline indicates that its reliance on agency expansion has hit a ceiling. In the highly competitive Chinese “scent economy,” the company must contend with fierce market competition and implement strict pricing to maintain market share, which could impact profitability. Additionally, 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.

Despite the “First Stock” halo, Ying Tong’s 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 proprietary brand, Santa Monica, was maintained. Although launched in 1999, Santa Monica has remained marginal. Historical data shows that from 2023 to 2025, its revenue share never exceeded 1%, contributing only HKD 10.5 million in 2025, just 0.5% of total revenue.

Compared to the HKD 883 million IPO net proceeds, a significant portion was planned for developing proprietary brands and acquisitions, but no substantial breakthroughs have been seen 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 by a luxury brand licensor led to a HKD 425 million revenue drop that year, a risk still looming over the company.

On one side, the resignation of the auditor due to “unclear” prepayments exposes potential internal control flaws; on the other, the sluggish performance in the first year of listing and weak proprietary brands reflect operational realities. For Ying Tong, which has been in the capital market for less than a year, clarifying internal control doubts and reversing the “difficulties in increasing revenue but not profit, strong agency dependence, weak proprietary brands” dilemma are critical tests. With the new auditor RSM involved, the investigation into the HKD 70 million prepayment will be a key indicator for market judgment on the company’s governance quality.

责任编辑：徐芸茜 主编：公培佳