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古茗控股有限公司
Guming Holdings Limited
Joint Sponsors, Joint Sponsor-Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
(A company incorporated in the Cayman Islands with limited liability)
Stock Code: 01364
古茗控股有限公司
Guming Holdings Limited
GLOBAL
OFFERING
古茗控股有限公司
Guming Holdings Limited


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If you are in any doubt about any of the contents in this document, you should obtain independent professional advice.
Guming Holdings Limited
ʮ̡
(A company incorporated in the Cayman Islands with limited liability)
GLOBAL OFFERING
Number of Offer Shares under the
Global Offering
: 158,612,000 Offer Shares (subject to the
Offer Size Adjustment Option and the
Over-allotment Option)
Number of Hong Kong Offer Shares : 15,861,200 Offer Shares (subject to
reallocation)
Number of International Offer Shares : 142,750,800 Offer Shares (subject to
reallocation, the Offer Size Adjustment
Option and the Over-allotment
Option)
Maximum Offer Price : HK$9.94 per Offer Share plus brokerage
of 1%, SFC transaction levy of
0.0027%, Stock Exchange trading fee
of 0.00565% and AFRC transaction
levy of 0.00015% (payable in full on
application in Hong Kong dollars,
subject to refund)
Nominal value : US$0.00001 per Share
Stock code : 01364
Joint Sponsors, Joint Sponsor-Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Overall Coordinators, Joint Global Coordinators,
Joint Bookrunners and Joint Lead Managers
Joint Bookrunners and Joint Lead Managers Joint Lead Manager
Hong Kong Exchanges and Clearing Limited, The Stock Exchange of Hong Kong Limited and Hong Kong Securities Clearing Company Limited take no responsib ility for the contents
of this document, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever ar ising from or in reliance upon
the whole or any part of the contents of this document.
A copy of this document, having attached thereto the documents specified in “Documents delivered to the Registrar of Companies and on Display” in Appe ndix V , has been registered
by the Registrar of Companies in Hong Kong as required by Section 342C of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (Chapter 3 2 of the Laws of Hong
Kong). The Securities and Futures Commission and the Registrar of Companies in Hong Kong take no responsibility for the contents of this document or an y other document referred
to above.
The Offer Price is expected to be fixed by agreement between the Overall Coordinators (for themselves and on behalf of the Underwriters) and us on the Pr ice Determination Date.
The Price Determination Date is expected to be on or around Monday, February 10, 2025. The Offer Price will be no more than HK$9.94 per Offer Share and is c urrently expected
to be no less than HK$8.68 per Offer Share unless otherwise announced. If, for any reason, the Offer Price is not agreed between the Overall Coordinator s (for themselves and on behalf
of the Underwriters) and us by 12:00 noon on Monday, February 10, 2025, the Global Offering will not proceed and will lapse.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may, with our consent, reduce the number of Offer Shares being offered und er the Global
Offering and/or the indicative Offer Price range below that stated in this document at any time on or prior to the morning of the last day for lodging appl ications under the
Hong Kong Public Offering. See “Structure of the Global Offering” and “How to Apply for Hong Kong Offer Shares” for further details.
The obligations of the Hong Kong Underwriters under the Hong Kong Underwriting Agreement are subject to termination by the Overall Coordinators (for themselves and on behalf
of the Hong Kong Underwriters) if certain grounds arise prior to 8:00 a.m. on the Listing Date. See “Underwriting — Underwriting Arrangements and Expe nses — Hong Kong Public
Offering — Grounds for Termination” for further details.
Prior to making an investment decision, prospective investors should consider carefully all of the information set out in this document, including t he risk factors set out in “Risk Factors.”
The Offer Shares have not been and will not be registered under the U.S. Securities Act or any state securities laws of the United States and may not be off ered or sold within or to
the United States, or for the account or benefit of U.S. persons (as defined in Regulation S) except in transactions exempt from, or not subject to, the r egistration requirements of the
U.S. Securities Act. The Offer Shares are being offered and sold (i) solely to QIBs pursuant to an exemption from registration under Rule 144A of the U.S . Securities Act and (ii) outside
the United States in offshore transactions in accordance with Regulation S.
IMPORTANT
February 4, 2025


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IMPORTANT NOTICE TO INVESTORS:
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering. We will not provide printed copies of this prospectus to the public
in relation to the Hong Kong Public Offering.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under “HKEXnews > New Listings > New Listing Information”
section and our website at www.gumingnc.com . If you require a printed copy of this
prospectus, you may download and print from the website addresses above.
To apply for the Hong Kong Offer Shares, you may use one of the following
application channels:
Application
Channel Platform Target Investors Application Time
HK eIPO
White Form
service /H1118/H1118/H1118
www.hkeipo.hk
Investors who would like
to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in your own
name.
From 9:00 a.m. on Tuesday,
February 4, 2025 to
11:30 a.m. on Friday,
February 7, 2025, Hong
Kong time.
The latest time for
completing full payment
of application monies
will be 12:00 noon on
Friday, February 7,
2025, Hong Kong time.
HKSCC EIPO
channel /H1118/H1118/H1118
Y our broker or custodian who is a
HKSCC Participant will submit an
EIPO application on your behalf
through HKSCC’s FINI system in
accordance with your instruction
Investors who would not
like to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied for
will be allotted and
issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated HKSCC
Participant’s stock
account.
Contact your broker or
custodian for the
earliest and latest time
for giving such
instructions, as this may
vary by broker or
custodian.
IMPORTANT
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We will not provide any physical channels to accept any application for the Hong
Kong Offer Shares by the public. The contents of the electronic version of this
prospectus are identical to the printed prospectus as registered with the Registrar of
Companies in Hong Kong pursuant to Section 342C of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
If you are an intermediary , broker or agent , please remind your customers, clients
or principals, as applicable, that this prospectus is available online at the website
addresses above.
Please refer to the section headed “How to apply for Hong Kong Offer Shares” in
this document for further details of the procedures through which you can apply for the
Hong Kong Offer Shares electronically.
Y our application must be for a minimum of 400 Hong Kong Offer Shares and in one
of the numbers set out in the table below. If you are applying through the HK eIPO
White Form service, you may refer to the table below for the amount payable for the
number of Shares you have selected. Y ou must pay the respective maximum amount
payable on application in full upon application for Hong Kong Offer Shares. If you are
applying through the HKSCC EIPO channel, you are required to prefund your
application based on the amount specified by your broker or custodian, as determined
based on the applicable laws and regulations in Hong Kong.
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
400 4,016.10 8,000 80,321.96 70,000 702,817.14 900,000 9,036,220.41
800 8,032.19 10,000 100,402.45 80,000 803,219.59 1,000,000 10,040,244.90
1,200 12,048.29 12,000 120,482.94 90,000 903,622.03 2,000,000 20,080,489.80
1,600 16,064.39 14,000 140,563.43 100,000 1,004,024.49 3,000,000 30,120,734.70
2,000 20,080.49 16,000 160,643.92 200,000 2,008,048.98 4,000,000 40,160,979.60
2,400 24,096.59 18,000 180,724.41 300,000 3,012,073.46 5,000,000 50,201,224.50
2,800 28,112.68 20,000 200,804.90 400,000 4,016,097.95 6,000,000 60,241,469.40
3,200 32,128.79 30,000 301,207.35 500,000 5,020,122.46 7,000,000 70,281,714.30
3,600 36,144.88 40,000 401,609.80 600,000 6,024,146.95 7,930,400
(1) 79,623,158.15
4,000 40,160.98 50,000 502,012.25 700,000 7,028,171.44
6,000 60,241.47 60,000 602,414.69 800,000 8,032,195.92
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is approximately 50% of the
Hong Kong Offer Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee
and AFRC transaction levy. If your application is successful, brokerage will be paid to the Exchange
Participants (as defined in the Listing Rules) or to the HK eIPO White Form Service Provider (for
applications made through the application channel of the HK eIPO White Form Service Provider)
while the SFC transaction levy, the Stock Exchange trading fee and the AFRC transaction levy will be
paid to the SFC, the Stock Exchange and the AFRC, respectively.
No application for any other number of Hong Kong Offer Shares will be considered
and any such application is liable to be rejected.
IMPORTANT
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If there is any change in the following expected timetable, we will issue an
announcement to be published on the websites of the Company at www.gumingnc.com and
the Hong Kong Stock Exchange at www.hkexnews.hk .
Date (1)
Hong Kong Public Offering commences ...................... .9:00 a.m. on Tuesday,
February 4, 2025
Latest time for completing electronic applications
under the HK eIPO White Form service through
the designated website www.hkeipo.hk . ......................1 1:30 a.m. on Friday,
February 7, 2025
Application lists open (3) .................................... 1 1:45 a.m. on Friday,
February 7, 2025
Latest time for (a) completing payment for
HK eIPO White Form applications by effecting
internet banking transfer(s) or PPS payment
transfer(s) and (b) giving electronic application
instructions to HKSCC
(4) ................................ .12:00 noon on Friday,
February 7, 2025
If you are instructing your broker or custodian who is a HKSCC Participant to submit
an EIPO application on your behalf through HKSCC’s FINI system to apply for the Hong Kong
Offer Shares, you are advised to contact your broker or custodian for the latest time for giving
such instructions which may be different from the latest time as stated above.
Application lists close
(3) .................................. .12:00 noon on Friday,
February 7, 2025
Expected Price Determination Date (5) .....................o no r before 12:00 noon on
Monday, February 10, 2025
(1) Announcement of the Offer Price, the level of
indications of interest in the International Offering,
the level of applications in the Hong Kong Public
Offering and the basis of allocation of the
Hong Kong Offer Shares on our website at
www.gumingnc.com
(6) and the website of the
Hong Kong Stock Exchange at www.hkexnews.hk
on or before .................................... T uesday, February 11, 2025
EXPECTED TIMETABLE
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(2) The results of allocations in the Hong Kong Public
Offering (with successful applicants’ identification
document numbers, where appropriate) to be
available through a variety of channels, including:
 in the announcement to be posted on our
website and the website of the Hong Kong
Stock Exchange at www.gumingnc.com
(6)
and www.hkexnews.hk , respectively ............................T uesday,
February 11, 2025
 from the “Allotment Results” page at
the designated results of allocations
website at www.hkeipo.hk/IPOResult
(or www.tricor.com.hk/ipo/result ) with a
“search by ID” function on a 24-hour basis from .......1 1:00 p.m. on Tuesday,
February 11, 2025 to
12:00 midnight on Monday,
February 17, 2025
 from the allocation results telephone enquiry
line by calling +852 3691 8488 between
9:00 a.m. and 6:00 p.m. from ................W ednesday, February 12, 2025
to Monday, February 17, 2025
(except Saturday, Sunday and
Hong Kong public holidays)
Share certificates in respect of wholly or partially
successful applications to be dispatched or
deposited into CCASS on or before
(7)(9) ................. T uesday, February 11, 2025
HK eIPO White Form e-Auto Refund payment
instructions/refund checks in respect of wholly or
partially successful applications (if applicable) or
wholly or partially unsuccessful applications to be
dispatched on or before
(8)(9) ........................ W ednesday, February 12, 2025
Dealings in the Shares on the Hong Kong Stock
Exchange expected to commence ................................ a t 9:00 a.m. on
Wednesday, February 12, 2025
EXPECTED TIMETABLE
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Notes:
(1) All times refer to Hong Kong local time, except as otherwise stated.
(2) Y ou will not be permitted to submit your application through the designated website at www.hkeipo.hk after
11:30 a.m. on the last day for submitting applications. If you have already submitted your application and
obtained an application reference number from the designated website at or before 11:30 a.m., you will be
permitted to continue the application process (by completing payment of application monies) until 12:00 noon
on the last day for submitting applications, when the application lists close.
(3) If there is/are a tropical cyclone warning signal number 8 or above, a “black” rainstorm warning and/or
Extreme Conditions in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, February
7, 2025, the application lists will not open or close on that day. See “How to Apply for Hong Kong Offer Shares
— E. Bad Weather Arrangements” in this prospectus.
(4) Applicants who apply for Hong Kong Offer Shares by instructing your broker or custodian to submit an EIPO
application on your behalf through HKSCC’s FINI system in accordance with your instruction should refer to
the section headed “How to Apply for Hong Kong Offer Shares — A. Application for Hong Kong Offer Shares
— 2. Application Channels” in this prospectus.
(5) The Price Determination Date is expected to be on or around Monday, February 10, 2025. If, for any reason,
we do not agree with the Overall Coordinators (on behalf of the Underwriters) on the pricing of the Offer
Shares by 12:00 noon on Monday, February 10, 2025, the Global Offering will not proceed and will lapse.
(6) None of the websites set out in this section or any of the information contained on the websites forms part of
this prospectus.
(7) Share certificates will only become valid at 8:00 a.m. on the Listing Date provided that the Global Offering
has become unconditional and the right of termination described in the section headed “Underwriting —
Underwriting Arrangements and Expenses — Hong Kong Public Offering — Grounds for Termination” in this
prospectus has not been exercised. Investors who trade Shares on the basis of publicly available allocation
details or prior to the receipt of Share certificates or the Share certificates becoming valid do so entirely at their
own risk.
(8) e-Auto Refund payment instructions/refund checks will be issued in respect of wholly or partially unsuccessful
applications pursuant to the Hong Kong Public Offering and also in respect of wholly or partially successful
applications in the event that the final Public Offer Price is less than the price payable per Offer Share on
application. Part of the applicant’s identification document number, or, if the application is made by joint
applicants, part of the identification document number of the first-named applicant, provided by the
applicant(s) may be printed on the refund check, if any. Such data would also be transferred to a third party
for refund purposes. Banks may require verification of an applicant’s identification document number before
encashment of the refund check. Inaccurate completion of an applicant’s identification document number may
invalidate or delay encashment of the refund check.
(9) Applicants who have applied through the HK eIPO White Form service for 1,000,000 or more Hong Kong
Offer Shares may collect any Share certificates in person from our Hong Kong Share Registrar, Tricor Investor
Services Limited, at 17/F, Far East Finance Centre, 16 Harcourt Road, Hong Kong from 9:00 a.m. to 1:00 p.m.
on Wednesday, February 12, 2025 or such other date as notified by us as the date of dispatch/collection of
Share certificates/e-Auto Refund payment instructions/refund checks. Applicants being individuals who are
eligible for personal collection may not authorize any other person to collect on their behalf. If you are a
corporate applicant which is eligible for personal collection, your authorized representative must bear a letter
of authorization from your corporation stamped with your corporation’s chop. Both individuals and authorized
representatives must produce evidence of identity acceptable to our Hong Kong Share Registrar at the time of
collection.
Applicants who have applied for Hong Kong Offer Shares through HKSCC EIPO channel should refer to the
section headed “How to Apply for Hong Kong Offer Shares — D. Despatch/Collection of Share Certificates
and Refund of Application Monies” in this prospectus for details.
EXPECTED TIMETABLE
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Applicants who have applied through the HK eIPO White Form service and paid their applications monies
through single bank accounts may have refund monies (if any) dispatched to the bank account in the form of
e-Auto Refund payment instructions. Applicants who have applied through the HK eIPO White Form service
and paid their application monies through multiple bank accounts may have refund monies (if any) dispatched
to the address as specified in their application instructions in the form of refund checks in favor of the
applicant (or, in the case of joint applicants, the first-named applicant) by ordinary post at their own risk.
Share certificates and/or refund checks for applicants who have applied for less than 1,000,000 Hong Kong
Offer Shares and any uncollected Share certificates and/or refund checks will be dispatched by ordinary post,
at the applicants’ risk, to the addresses specified in the relevant applications.
Further information is set out in the sections headed “How to Apply for Hong Kong Offer Shares — D.
Despatch/Collection of Share Certificates and Refund of Application Monies” in this prospectus.
The above expected timetable is a summary only. For further details of the structure of
the Global Offering, including its conditions, and the procedures for applications for Hong
Kong Offer Shares, please refer to the sections headed “Structure of the Global Offering” and
“How to Apply for Hong Kong Offer Shares” in this prospectus, respectively.
If the Global Offering does not become unconditional or is terminated in accordance with
its terms, the Global Offering will not proceed. In such a case, we will make an announcement
as soon as practicable thereafter.
EXPECTED TIMETABLE
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IMPORTANT NOTICE TO PROSPECTIVE INVESTORS
This document is issued by us solely in connection with the Hong Kong Public
Offering and the Hong Kong Offer Shares and does not constitute an offer to sell or a
solicitation of an offer to buy any security other than the Hong Kong Offer Shares offered
by this document pursuant to the Hong Kong Public Offering. This document may not be
used for the purpose of making, and does not constitute, an offer or invitation in any other
jurisdiction or in any other circumstance. No action has been taken to permit a public
offering of the Hong Kong Offer Shares in any jurisdiction other than Hong Kong and no
action has been taken to permit the distribution of this document in any jurisdiction other
than Hong Kong. The distribution of this document for purposes of a public offering and
the offering and sale of the Hong Kong Offer Shares in other jurisdictions are subject to
restrictions and may not be made except as permitted under the applicable securities laws
of such jurisdictions pursuant to registration with or authorisation by the relevant securities
regulatory authorities or an exemption therefrom.
Y ou should rely only on the information contained in this document to make your
investment decision. The Hong Kong Public Offering is made solely on the basis of the
information contained and the representations made in this document. We have not
authorized anyone to provide you with information that is different from what is contained
in this document. Any information or representations not contained or made in this
document must not be relied on by you as having been authorized by us, the Joint Sponsors,
the Overall Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint
Lead Managers, the Capital Market Intermediaries, any of the Underwriters, any of our or
their respective directors, officers, employees, agents or representatives, or any other
parties involved in the Global Offering.
Page
Expected Timetable ................................................. i i i
Contents .......................................................... v i i
Summary ......................................................... 1
Definitions ........................................................ 2 7
Glossary of Technical Terms .......................................... 3 9
Forward-looking Statements .......................................... 4 3
Risk Factors ....................................................... 4 5
Waivers and Exemptions ............................................. 9 0
CONTENTS
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Information about this Document and the Global Offering .................. 1 0 2
Directors and Parties Involved in the Global Offering ..................... 1 0 7
Corporate Information .............................................. 1 1 5
Industry Overview .................................................. 1 1 7
History, Reorganization and Corporate Structure ......................... 1 4 0
Business .......................................................... 1 5 9
Regulations ........................................................ 2 5 0
Relationship with our Controlling Shareholders ........................... 2 7 5
Connected Transactions ............................................. 2 8 0
Directors and Senior Management ..................................... 2 8 8
Substantial Shareholders ............................................. 3 0 0
Share Capital ...................................................... 3 0 3
Financial Information ............................................... 3 0 7
Cornerstone Investors ............................................... 3 7 1
Future Plans and Use of Proceeds ...................................... 3 7 8
Underwriting ...................................................... 3 8 8
Structure of the Global Offering ....................................... 4 0 2
How to Apply for Hong Kong Offer Shares .............................. 4 1 4
Appendix I – Accountants’ Report .............................. I - 1
Appendix II – Unaudited Pro Forma Financial Information ........... II-1
Appendix IIA – Profit Estimate for Y ear Ended December 31, 2024 ..... IIA-1
Appendix III – Summary of the Constitution of Our Company and
Company Law of the Cayman Islands ............... III-1
Appendix IV – Statutory and General Information ................... I V - 1
Appendix V – Documents Delivered to the Registrar of
Companies and on Display ........................ V - 1
CONTENTS
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This summary aims to give you an overview of the information contained in this
document and should be read in conjunction with the full text of this document. As this
is a summary, it does not contain all the information that may be important to you.
Moreover, there are risks associated with any investment. Some of the particular risks of
investing in the Offer Shares are set out in the section headed “Risk Factors.” Y ou should
read the entire document carefully before you decide to invest in the Offer Shares.
V arious expressions used in this section are defined in the sections headed “Definitions.”
OVERVIEW
We are a leading and fast-growing freshly-made beverage company in China. Our brand,
“Good me (̚প),” is China’s largest mid-priced freshly-made tea store brand and the second
largest freshly-made tea store brand across all price ranges, in terms of both GMV in 2023 and
store count as of December 31, 2023. In 2023, we generated a gross merchandise value, or
GMV , of RMB19.2 billion, representing an increase of 37.2% from 2022. In the nine months
ended September 30, 2024, we generated a GMV of RMB16.6 billion, representing an increase
of 20.4% from the same period in 2023, a growth rate exceeding the majority of the other top
ten freshly-made tea store brands. Our store network encompassed 9,001 stores as of December
31, 2023, representing an increase of 35.0% from December 31, 2022, and expanded to 9,778
stores as of September 30, 2024.
We primarily operate under a franchise model under “ Good me ” brand. The “ Good me ”
stores offer three categories of beverages: (i) fruit tea beverages, (ii) milk tea beverages, and
(iii) coffee beverages and others. We focus on the mid-priced segment of China’s freshly-made
tea store market, which is the largest segment in terms of GMV in 2023, the fastest-growing
segment in terms of expected GMV growth from 2023 to 2028, and a segment with intense
competition.
Over a decade ago, Mr. Y un’an Wang, our founder, opened the first “ Good me ” store in
his hometown Daxi, a small town in Zhejiang. There, consumers had limited access to
freshly-made tea beverages with fresh fruits and other quality ingredients, largely due to the
underdeveloped supply chain infrastructure in these typical lower-tier markets. With a firm
belief that the freshly-made beverage industry will evolve towards greater preference for fresh
ingredients, Mr. Wang embarked on a journey to serve freshly-made tea beverages made from
quality ingredients with short shelf-life distributed through cold-chain delivery. Along our way,
the persistent efforts to serve lower-tier markets have given us deep consumer and market
insights, which, together with our leading operating efficiency, enabled us to serve quality
beverages at affordable prices for the daily consumption of consumers.
We have steadily expanded our store network under what we refer to as the regional
densification strategy. We believe that operating a network of at least 500 stores in a province
signifies a critical mass. Leveraging our experience and advantage in provinces with a critical
mass, we strategically venture into neighboring provinces. We first reached a critical mass in
SUMMARY
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Zhejiang, where we continued to grow and now have over 2,000 stores. We have established
provincewide networks with a critical mass in eight provinces, which collectively accounted
for 87% of our GMV in 2023, and led us to become one of China’s largest freshly-made tea
store brands. In each of Zhejiang, Fujian and Jiangxi where we established store networks with
a critical mass the earliest, we achieved the highest market share in terms of GMV in the
freshly-made tea store markets across all price ranges. As of September 30, 2024, we had
presence in 17 provinces in China where we will continue to increase our store density, which,
along with another 17 provinces where we had yet to have presence, provide us with ample
room for growth. As we expand our store network, we maintained positive period-over-period
same-store GMV growth in these eight provinces with dense store networks and nationwide
during each of the three years ended December 31, 2023. The following graphs illustrate the
steady expansion footprint of our store network and ample room for our further growth.
Zhejiang
Province
As of December 31, 2018 As of December 31, 2020 As of September 30, 2024
Zhejiang
Province
Zhejiang
Province
<10 10-200 200-500 500-1,000 >1,000
Store count
Under our regional densification strategy, we strategically allocate resources towards
building store networks with high geographical density across all city tiers in target provinces.
As of December 31, 2023, our store count in second-tier and below cities accounted for 79%
of our total store count, the highest percentage as compared to those of the other top five
mid-priced freshly-made tea store brands in China, and slightly increased to 80% as of
September 30, 2024. In addition, as of December 31, 2023, 38% of our stores were located in
towns ( ᕄ) and townships ( ඊ), which are administrative areas typically located away from
downtown urban areas of cities. The percentage of our stores in these areas was the highest
among the top five mid-priced freshly-made tea store brands in China as of December 31, 2023,
and this percentage grew to 40% as of September 30, 2024.
The great density of our stores in a geographical area allows us to benefit from economies
of scale. For example, our dense store network significantly enhances our warehousing and
logistics efficiency. For the three years ended December 31, 2023, the logistics cost for
delivery from our warehouses to stores was less than 1% of our total GMV on average. The
improvements in warehousing and logistics efficiency can also be seen by comparing our own
warehouses. As of September 30, 2024, we operated a total of 22 warehouses. For the nine
SUMMARY
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months ended September 30, 2024, among these warehouses, 13 warehouses on average served
fewer than 500 stores per month during the operation period, and nine warehouses on average
served more than 500 stores per month during the operation period. In the nine months ended
September 30, 2024, on a per-store and monthly basis, the warehousing and logistics cost for
stores covered by such nine warehouses was 9% lower than that for stores covered by such 13
warehouses. These cost savings are primarily due to the density of our stores and their
proximity to our warehouses. As of September 30, 2024, approximately 76% of our stores are
located within 150 kilometers of one of our warehouses. As a result, we can also provide
cold-chain supply delivery to approximately 97% of our stores every two days upon request as
of September 30, 2024. In comparison, other China’s freshly-made tea store brands generally
provide delivery to stores every four days and often without the support of cold-chain supply
delivery. Among the top 10 freshly-made tea store brands in China in terms of GMV in 2023,
our Directors are of the view that we are the only brand capable of frequent deliveries every
two days of short-shelf-life fresh fruits and fresh milk to stores in lower-tier cities.
Substantially all beverages on our menu are made from short-shelf-life fresh fruits, tea leaves
and/or fresh milk that are stored and distributed through our cold-chain warehousing and
logistics infrastructure, which, our Directors are of the view that, is one of the largest in the
industry as of December 31, 2023.
We believe that the shared success of our franchisees is crucial for our business. In 2023,
our franchisees’ per-store operating profit reached RMB376,000 and franchisees’ per-store
operating profit margin reached 20.2%, whereas the estimated per-store operating profit margin
is generally in the low teens in the mid-priced freshly-made tea store market in China during
the same period. The strong performance of our stores leads to franchisees’ strong willingness
to open more “ Good me ” stores. As of September 30, 2024, among the franchisees that had
operated “ Good me ” stores for over two years, each on average operated 2.9 stores and 71%
operated two or more franchised stores. Sharing the perspective of longtermism, we have built
close and enduring franchisee relationships. These relationships enable effective and efficient
store operations and consistent high-quality product and service offerings, which further
enhance consumer experience and improve store-level performance, thereby attracting more
franchisees and solidifying franchisee relationships, forming a virtuous cycle.
Consistent with our slogan, “one cup a day, always enjoy it (ఀʔጰ),” we
provide our consumers with a variety of product offerings of consistent quality. Leveraging our
strong product development capabilities, we regularly launch new beverages to keep our
offerings appealing. In 2023 and for the nine months ended September 30, 2024, we launched
130 and 85 beverages. While we frequently update our menu, we are capable of having tens of
thousands of stores serve product offerings of consistent quality and taste, enabling “ Good me ”
to become a popular brand among consumers. We have accumulated a loyal member base,
including approximately 94 million and 135 million registered members on our mini programs
as of December 31, 2023 and September 30, 2024, respectively, with over 36 million and over
43 million quarterly active members in the three months ended December 31, 2023 and
September 30, 2024, respectively. In 2023, our average quarterly repurchase rate reached 53%,
compared to the average of below 30% among mid-priced freshly-made tea store brands in
China.
SUMMARY
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Our store management software can empower tens of thousands of stores. In particular,
we built the largest information technology team in China’s freshly-made tea beverage industry
as of December 31, 2023. Underpinned by our store management software, we have
concurrently expanded our store network, achieved a track record of franchisee profitability,
and offered a broad range of high-quality products. Moreover, our store management software,
the franchisee relationships and consumer satisfaction reinforce each other. The diagram below
illustrates the positive feedback loop.
Enduring Franchisee
Relationships
Excellent Consumer
Satisfaction
Store Management
Software
• Higher operating efficiency
 More information feedback
 More investments enabled by
larger scale
 Better brand reputation
 Higher consumer repurchase rate
 Expanding consumer base
 Solid store network expansion
 Track record of franchisee
profitability
 Consistently high-quality product
offering
We generate revenue mainly from the sales of goods and equipment and the provision of
services to our franchisees. We have experienced substantial growth during the Track Record
Period. Our revenue increased by 26.8% from RMB4,383.9 million in 2021 to RMB5,559.2
million in 2022, and further increased by 38.1% to RMB7,675.7 million in 2023. Our revenue
increased by 15.6% from RMB5,570.9 million in the nine months ended September 30, 2023
to RMB6,441.3 million in the same period in 2024. Our profit for the year was RMB24.0
million, RMB372.0 million and RMB1,096.4 million in 2021, 2022 and 2023, respectively. Our
profit for the period was RMB1,002.0 million and RMB1,119.8 million in the nine months
ended September 30, 2023 and 2024, respectively. Our adjusted profit (non-IFRS measure) was
RMB769.6 million, RMB788.1 million and RMB1,459.0 million in 2021, 2022 and 2023,
respectively, and was RMB1,044.5 million and RMB1,148.7 million in the nine months ended
September 30, 2023 and 2024, respectively. For more details, see “Financial Information —
Description of Major Components of Our Results of Operations — Non-IFRS Measures.”
SUMMARY
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OUR COMPETITIVE STRENGTHS
We believe the following strengths position us well to capitalize on the opportunities in
China’s freshly-made tea store market:
 Largest brand in the fast-growing mid-priced freshly-made tea store market in China
 Solid store network expansion under our regional densification strategy
 Track record of franchisee profitability and enduring franchisee relationships
 Diverse, consistent and high-quality product offerings, broadly embraced by
consumers
 Our efficient and flexible store management, product research and development, and
supply chain capabilities
 Diverse management pursuing open and inclusive culture
OUR GROWTH STRATEGIES
We will continue to pursue the following strategies which will drive further growth:
 Expand our store network and solidify our position in the industry
 Enhance our technologies to improve operating efficiency
 Continue to invest in product research and development to refine and expand our
product offerings
 Strengthen our branding and consumer engagement efforts
 Enhance our supply chain capabilities
OUR STORE NETWORK AND STORE PERFORMANCE
Our stores are primarily operated under a franchise model. Our franchised stores
contributed to approximately 99.9% of our GMV for the years ended December 31, 2021, 2022
and 2023 and the nine months ended September 30, 2024. To a much lesser extent, we directly
manage a few company-operated stores. As of September 30, 2024, we directly managed seven
company-operated stores.
We have steadily expanded our store network. Our store count reached 5,694 as of
December 31, 2021, increased by 17.1% to 6,669 as of December 31, 2022, further increased
by 35.0% to 9,001 as of December 31, 2023, and reached 9,778 as of September 30, 2024. As
we continually densified our store networks in various provinces, we had positive same-store
GMV growth in provinces with dense store networks and nationwide during each of the three
years ended December 31, 2023. For the nine months ended September 30, 2024, our
same-store GMV decreased by 0.7% due to (i) a general industry slowdown and (ii)
SUMMARY
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intensifying market competition, with some players launching low-priced products.
Nonetheless, we continued to grow our total GMV by 20.4% as compared to the same period
in 2023. The following table sets forth our store count and same-store GMV growth in the
periods indicated.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Zhejiang (1)
Store count at year/period end /H1118/H1118/H1118/H11181,725 1,868 2,054 2,117
Same-store GMV growth (%) /H1118/H1118/H1118/H111815.2 3.3 5.1 (0.8)
Fujian and Jiangxi (1)
Store count at year/period end /H1118/H1118/H1118/H11181,590 1,641 1,914 2,039
Same-store GMV growth (%) /H1118/H1118/H1118/H11187.4 3.2 12.0 1.1
Other five provinces with a
critical mass (1)
Store count at year/period end /H1118/H1118/H1118/H11181,689 2,349 3,317 3,643
Same-store GMV growth (%) /H1118/H1118/H1118/H111814.9 4.1 11.6 (1.4)
Nationwide
Store count at year/period end /H1118/H1118/H1118/H11185,694 6,669 9,001 9,778
Same-store GMV growth (%) /H1118/H1118/H1118/H111812.0 2.8 9.4 (0.7)
Note:
(1) Zhejiang’s store network reached a critical mass the earliest. The store networks in Fujian and Jiangxi reached
a critical mass between 2019 and 2020. The store networks in other five provinces reached a critical mass
between 2021 and 2023.
The following table sets forth certain key performance indicators of our stores:
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
Total GMV (RMB in thousands) /H1118/H1118/H1118/H1118/H111810,593,182.6 14,004,430.4 19,213,723.3 13,792,517.5 16,607,526.0
Per-store GMV (RMB in thousands) /H1118/H1118/H1118 2,189.2 2,262.8 2,466.4 1,857.6 1,776.3
Per-store daily GMV (RMB in
thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186.0 6.2 6.8 6.8 6.5
Total number of cups sold
(in thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118680,583.3 870,131.3 1,184,648.7 847,707.5 989,536.7
Per-store number of cups sold
(in thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118140.6 140.6 152.1 114.2 105.8
Per-store daily number of cups sold /H1118/H1118/H1118/H1118 385 385 417 417 386
Total number of orders (in thousands) /H1118/H1118 397,816.6 500,215.6 690,665.8 489,673.6 599,801.7
Average GMV per order (RMB) /H1118/H1118/H1118/H1118/H1118/H111826.6 28.0 27.8 28.2 27.7
Average number of orders per store
per day /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118225 221 243 241 234
SUMMARY
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For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
Average store equipment expenditure per
newly opened franchised store (RMB
in thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111895.2 100.8 109.2 110.3 110.8
Average daily GMV per newly opened
franchised store (RMB in thousands) /H1118/H1118 5.3 5.3 5.8 5.8 5.2
Our GMV and number of cups sold have been generally increasing during the Track
Record Period. However, when calculating per-store daily GMV and per-store daily number of
cups sold, we use the number of days that our stores could be open for business as the
denominator, which is measured by the number of days from (i) the latter of a store’s launch
day and the first day of the period, to (ii) the earlier of a store’s closure day and the last day
of the period. This number is usually larger than the actual number of days that our stores are
open for business. In 2022, due to the impact of COVID-19, the gap between the above two
numbers was larger than usual, which contributed to the lack of growth in our per-store daily
GMV and per-store daily number of cups sold from 2021 to 2022.
For the nine months ended September 30, 2024, as a result of the general industry
slowdown and increased competition as discussed above, we recorded smaller per-store GMV ,
per-store daily GMV , per-store number of cups sold, per-store daily number of cups sold,
average GMV per order, average number of orders per store per day, and average daily GMV
per newly opened franchised store as compared to the same period in 2023. Nonetheless, as we
continued our store network expansion and opened a number of new stores, we continued to
grow our total GMV and total number of cups sold. As confirmed by our industry consultant,
the decrease rate of our per-store GMV is also less than the majority of the other top ten
freshly-made tea store brands. Our Directors are of the view that our business will inevitably
be affected by the general macroeconomic conditions in China and the freshly-made tea store
market in general. In the medium and long term, with the expected growth of China’s economy
and consumer spending as well as the projected expansion of the freshly-made tea store market,
we believe we can capture opportunities in the industry as one of the leading players and regain
growth momentum in various operating metrics.
The following table sets forth the per-store daily GMV of our stores by years of opening
during the Track Record Period.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
Per-store daily GMV (RMB
in thousands)
Stores opened in 2021 and
before /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186.0 6.3 7.1 7.0 7.1
Stores opened in 2022 /H1118/H1118/H1118/H1118/H1118– 5.3 6.5 6.4 6.6
Stores opened in 2023 /H1118/H1118/H1118/H1118/H1118– – 5.8 5.8 5.6
SUMMARY
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In 2023, our franchisees’ per-store operating profit reached RMB376,000 and franchisees’
per-store operating profit margin reached 20.2%, whereas the estimated per-store operating
profit margin is generally in the low teens in the mid-priced freshly-made tea store market in
China during the same period. In particular, in fourth-tier and below cities, our franchisees’
per-store operating profit was RMB386 thousand in 2023, bringing significant income for our
franchisees’ household.
PRODUCT OFFERINGS
We focus on the mid-priced freshly-made tea beverage market and we offer three
categories of beverage offerings at “ Good me ” stores: (i) fruit tea beverages, (ii) milk tea
beverages, and (iii) coffee beverages and others. Our fruit tea beverages are made with tea and
a variety of fresh fruits, many with short shelf-life, and are characterized by their vibrant,
refreshing tastes. Our milk tea beverages generally have a smooth and creamy flavor and can
be served with tapioca pearls, or boba, and/or a range of other additional toppings. We also
serve coffee beverages, including traditional coffee beverages, beverages that combine coffee
with tea or fresh fruits, and other offerings such as yogurt shakes, classic tea, bakery products
and branded merchandise at our stores. During the Track Record Period, our product offerings’
prices remained relatively stable, typically between RMB10 and RMB18. We currently do not
have any plan to adjust the price range of our products.
OUR CUSTOMERS AND SUPPLIERS
Our customers are primarily our franchisees who operate our franchised stores and also
include enterprise customers that purchase the products from our processing facilities such as
blended tea leaves. During the Track Record Period, our revenue consisted primarily of
proceeds from the sales of goods and equipment to our franchisees, and fees associated with
the franchise management services we provided to our franchisees. For the years ended
December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024, revenue
from our five largest customers in each period amounted to RMB141.2 million, RMB169.6
million, RMB242.7 million and RMB169.8 million, representing 3.2%, 3.1%, 3.2% and 2.6%
of our total revenue for the respective periods. During the Track Record Period, we were not
subject to any material customer concentration risk.
We procure a variety of goods and equipment, including ingredients such as fresh fruits,
fruit juices, tea leaves, dairy and sugar products, packaging materials, and equipment such as
tea brewers, ice machines and freezers. For the years ended December 31, 2021, 2022 and 2023
and the nine months ended September 30, 2024, purchases from our five largest suppliers in
each period amounted to RMB601.3 million, RMB751.7 million, RMB810.8 million and
RMB756.0 million, representing 18.1%, 20.9%, 16.5% and 18.8% of our total purchase amount
for the respective periods. For the years ended December 31, 2021, 2022 and 2023 and the nine
months ended September 30, 2024, purchases from our largest supplier in each period
amounted to RMB252.8 million, RMB265.1 million, RMB224.3 million and RMB193.9
million, representing 7.6%, 7.4%, 4.5% and 4.8% of our total purchase amount for the
respective periods.
SUMMARY
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MARKET OPPORTUNITIES AND COMPETITIVE LANDSCAPE
Over the past five years, China’s freshly-made beverage market has witnessed rapid
growth. The GMV of China’s freshly-made beverage market increased from RMB187.8 billion
in 2018 to RMB517.5 billion in 2023, representing a CAGR of 22.5%. The market GMV is
expected to reach RMB1,163.4 billion in 2028, with an anticipated CAGR of 16.7% from 2024
to 2028. Freshly-made beverage stores, such as freshly-made tea stores and freshly-made
coffee shops, are the primary channels for consumers to purchase freshly-made beverages. The
“Good me ” brand had a market share of 4.8% in China’s freshly-made beverage store market
in terms of GMV in 2023.
The market for freshly-made tea beverages is the largest segment of China’s freshly-made
beverage market in terms of GMV , and freshly-made tea stores are the primary channels
through which consumers access their freshly-made tea beverages. The GMV of China’s
freshly-made tea store market increased from RMB70.2 billion in 2018 to RMB211.5 billion
in 2023, representing a CAGR of 24.7%. The market GMV is expected to further increase to
RMB519.3 billion in 2028, at a CAGR of 19.2% from 2024 to 2028. China’s freshly-made tea
store market was historically fragmented but has witnessed a continuous trend of consolidation.
The top five freshly-made tea store brands’ market share in terms of GMV increased from
38.5% in 2020 to 46.8% in 2023. The “ Good me ” brand ranked second in China’s freshly-made
tea store brands in terms of GMV in 2023, with a 9.1% market share. Additionally, the “ Good
me” brand ranked second in terms of store count as of December 31, 2023.
Within China’s freshly-made tea store market, the mid-priced freshly-made tea store
market, consisting of freshly-made tea stores with an average product list price less than
RMB20 but greater than RMB10, represents the largest segment in terms of GMV in 2023 and
the fastest growing segment in terms of expected GMV growth from 2024 to 2028. The market
GMV grew from RMB36.4 billion in 2018 to RMB108.6 billion in 2023, representing a CAGR
of 24.4%, and is expected to further increase to RMB280.9 billion in 2028, with a CAGR of
20.8% from 2024 to 2028.
The “ Good me ” brand competes with mid-priced freshly-made tea store brands across all
city tiers. Specifically, the “ Good me ” brand enjoys greater presence in second-tier and below
cities. As of December 31, 2023, 78.8% of “ Good me ” stores were located in second-tier and
below cities, the largest share among the top five mid-priced freshly-made tea store brands by
store count. In these cities, the “ Good me ” brand had approximately 22% market share in the
mid-priced freshly-made tea store market in 2023 in terms of GMV . As of December 31, 2023,
38.3% of the “ Good me ” brand stores were located in towns and townships, while China’s other
top five mid-priced freshly-made tea store brands generally had below 25% of their stores
located in towns and townships. Furthermore, as of the Latest Practicable Date, the “ Good me ”
brand was the only brand to adopt a regional densification strategy among the top five
mid-priced freshly-made tea store brands in China.
SUMMARY
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--- page 20 ---
Many stores in the freshly-made tea store market are in close proximity to each other,
resulting in heightened competition. When determining the location of “ Good me ” stores
(including our franchised stores and company-operated stores), we evaluate nearby pedestrian
traffic, consumer profiles and purchasing power, as well as the number of nearby Good me
stores and competitor stores, to determine whether a location meets our requirements. For
details, see “Business — Our Store Network — Store Network Expansion — Store Location
Selection Process.” At the store location selection stage, we generally consider the distance
between our stores and the presence of our competitors’ stores, as one part of a holistic
evaluation. While the presence of our competitors’ stores is one of the factors that we use to
estimate the demand of our products in the neighborhood, we neither establish a protective
distance between our potential new store and the competitors’ stores, nor consider the distance
between our potential new store and the competitors’ stores when determining the store sites.
Under our franchise agreement, we undertake not to open new franchised stores that are within
certain distance of existing stores without the existing franchisees’ consent (typically being 50
meters). However, even in the city with the highest density of “ Good me ” stores, the average
distance among these stores still significantly exceeds the minimum distance provided in the
franchise agreements.
In the nine months ended September 30, 2024, the growth of China’s freshly-made tea
store market slowed down compared with the same period of 2023. In addition, competition
within the market is intensifying. Specifically, (i) the top market players are competing for
appropriate locations, franchisees and consumers as they expand their store network; (ii)
underperforming stores, especially those of smaller brands, cannot compete with top
stores/brands and were forced to close; and (iii) several players launched low-priced products.
As a result of the above, we experienced a slowdown in our GMV growth rate as well as
decreases in a number of our per-store operating metrics including per-store GMV and
per-store number of cups sold. In the medium and long term, with the expected growth of
China’s economy and consumer spending as well as projected increases in the overall size of
the freshly-made tea store market, we continue to believe that we are well-positioned to
capitalize on the industry’s future growth.
SUMMARY OF HISTORICAL FINANCIAL INFORMATION
The following tables set forth summary financial data from our consolidated financial
information for the Track Record Period, extracted from the Accountants’ Report set out in
Appendix I to this document. The summary financial data set forth below should be read
together with, and is qualified in its entirety by reference to, the consolidated financial
statements in this document, including the related notes. Our consolidated financial
information was prepared in accordance with IFRSs.
SUMMARY
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Summary of Consolidated Statements of Profit or Loss and Comprehensive Income
The following table sets forth a summary of our consolidated statements of profit or loss
and comprehensive income in absolute amount and as a percentage of our revenue for the
periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
RMB % RMB % RMB % RMB % RMB %
(Unaudited)
(RMB in thousands, except percentages)
Revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,383,901 100.0 5,559,222 100.0 7,675,665 100.0 5,570,882 100.0 6,441,288 100.0
Cost of sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(3,070,196) (70.0) (3,996,290) (71.9) (5,272,334) (68.7) (3,844,469) (69.0) (4,476,906) (69.5)
Gross profit /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,313,705 30.0 1,562,932 28.1 2,403,331 31.3 1,726,413 31.0 1,964,382 30.5
Other income and gains /H1118/H1118 47,598 1.0 57,477 1.1 168,828 2.2 125,879 2.2 144,067 2.1
Selling and distribution
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(186,193) (4.2) (268,143) (4.8) (336,584) (4.4) (239,291) (4.3) (357,172) (5.5)
Administrative expenses /H1118/H1118(123,745) (2.8) (187,605) (3.4) (282,848) (3.7) (180,689) (3.2) (225,206) (3.3)
Research and development
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(65,030) (1.5) (118,288) (2.1) (198,736) (2.6) (129,055) (2.3) (165,826) (2.6)
Other expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118(5,775) (0.1) (1,069) (0.1) (9,456) (0.1) (9,434) (0.2) (16,711) (0.3)
Operating profit /H1118/H1118/H1118/H1118/H1118/H1118980,560 22.4 1,045,304 18.8 1,744,535 22.7 1,293,823 23.2 1,343,534 20.9
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5,079) (0.1) (5,424) (0.1) (5,233) (0.1) (4,299) (0.1) (2,216) (0.0)
Fair value changes of
financial liabilities at fair
value through profit or
loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(728,388) (16.7) (389,523) (7.0) (294,215) (3.8) (21,669) (0.3) (10,556) (0.2)
Profit before tax /H1118/H1118/H1118/H1118/H1118247,093 5.6 650,357 11.7 1,445,087 18.8 1,267,855 22.8 1,330,762 20.7
Income tax expense /H1118/H1118/H1118/H1118(223,101) (5.1) (278,332) (5.0) (348,733) (4.5) (265,818) (4.8) (210,994) (3.3)
Profit for the year/period /H1118 23,992 0.5 372,025 6.7 1,096,354 14.3 1,002,037 18.0 1,119,768 17.4
Total comprehensive
income for the
year/period /H1118/H1118/H1118/H1118/H1118/H1118/H111823,992 0.5 392,307 7.1 1,076,563 14.0 1,002,229 18.0 1,112,134 17.3
Total comprehensive
income for the
year/period
attributable to:
Owners of the parent /H1118/H1118 20,139 0.4 386,901 7.0 1,059,837 13.8 990,225 17.8 1,098,857 17.1
Non-controlling interests /H1118 3,853 0.1 5,406 0.1 16,726 0.2 12,004 0.2 13,277 0.2
SUMMARY
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Non-IFRS Measures
To supplement our consolidated financial statements, which are presented in accordance
with IFRSs, we also use adjusted profit (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) as additional financial measures, which are not required by, or presented in
accordance with, IFRSs.
The following table reconciles our adjusted profit (non-IFRS measure) for the periods
presented in accordance with IFRSs, which is profit for the year/period.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
(Unaudited)
(RMB in thousands)
Reconciliation of profit for the
year/period to adjusted profit
(non-IFRS measure):
Profit for the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,992 372,025 1,096,354 1,002,037 1,119,768
Add:
Fair value changes of financial
liabilities at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118728,388 389,523 294,215 21,669 10,556
Share-based payment expenses /H1118/H1118/H1118/H1118/H111817,226 24,476 55,537 18,981 –
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,080 12,884 1,815 18,393
Adjusted profit (non-IFRS measure) /H1118/H1118 769,606 788,104 1,458,990 1,044,502 1,148,717
We define adjusted profit (non-IFRS measure) as profit for the year/period, excluding fair
value changes of financial liabilities at fair value through profit or loss, share-based payment
expenses and listing expenses. We have made the following adjustments consistently during the
Track Record Period:
 Fair value changes of financial liabilities at fair value through profit or loss mainly
represent changes in the fair value of the redeemable ordinary shares, warrants and
the convertible redeemable preferred shares issued by us and relate to changes in our
valuation. We do not expect to record any further fair value changes of financial
liabilities at fair value through profit or loss after Listing as preferred shares
liabilities will be re-designated and reclassified from liabilities to equity as a result
of the automatic conversion into ordinary shares upon the Listing.
 Share-based payment expenses represent the non-cash employee benefit expenses
incurred in connection with our award to key employees. Such expenses in any
specific period are not expected to result in future cash payments.
 Listing expenses relate to this Global Offering of the Company.
SUMMARY
–1 2–


--- page 23 ---
The following table reconciles our adjusted EBITDA (non-IFRS measure) for the periods
presented in accordance with IFRSs, which is profit for the year/period.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
(Unaudited)
(RMB in thousands)
Reconciliation of profit for the
year/period to adjusted EBITDA
(non-IFRS measure):
Profit for the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,992 372,025 1,096,354 1,002,037 1,119,768
Add:
Income tax expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118223,101 278,332 348,733 265,818 210,994
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,079 5,424 5,233 4,299 2,216
Depreciation and amortization /H1118/H1118/H1118/H1118/H111869,870 118,947 135,137 101,943 102,681
Less: Interest income /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(2,181) (5,375) (53,735) (35,583) (47,550)
EBITDA /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118319,861 769,353 1,531,722 1,338,514 1,388,109
Add:
Fair value changes of financial
liabilities at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118728,388 389,523 294,215 21,669 10,556
Share-based payment expenses /H1118/H1118/H1118/H1118/H111817,226 24,476 55,537 18,981 –
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,080 12,884 1,815 18,393
Adjusted EBITDA (non-IFRS
measure) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,065,475 1,185,432 1,894,358 1,380,979 1,417,058
We define adjusted EBITDA (non-IFRS measure) as profit for the year/period, excluding
income tax expense, finance costs, interest income, depreciation and amortization, fair value
changes of financial liabilities at fair value through profit or loss, share-based payment
expenses and listing expenses. For the same reasons stated above, we have made the
adjustments of fair value changes of financial liabilities at fair value through profit or loss,
share-based payment expenses and listing expenses.
We believe that adjusted profit (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) provide useful information to investors and others in understanding and evaluating
our consolidated results of operations in the same manner as they help our management.
However, our presentation of adjusted profit (non-IFRS measure) and adjusted EBITDA
(non-IFRS measure) may not be comparable to similarly titled measures presented by other
companies. The use of adjusted profit (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) has limitations as an analytical tool, and you should not consider them in isolation
from, or as a substitute for an analysis of, our results of operations or financial condition as
reported under IFRSs.
SUMMARY
–1 3–


--- page 24 ---
We experienced substantial growth during the Track Record Period. Our revenue
increased by 26.8% from RMB4,383.9 million in 2021 to RMB5,559.2 million in 2022,
primarily attributable to the growth in sales of goods and equipment mainly as a result of our
growing store network and increasing GMV . Our revenue increased by 38.1% from
RMB5,559.2 million in 2022 to RMB7,675.7 million in 2023, also primarily attributable to the
growth in sales of goods and equipment mainly as a result of the expansion of our store
network and growing GMV . Primarily because of the same reasons, our revenue increased by
15.6% from RMB5,570.9 million in the nine months ended September 30, 2023 to RMB6,441.3
million in the same period in 2024.
Our cost of sales increased by 30.2% from RMB3,070.2 million in 2021 to RMB3,996.3
million in 2022, primarily due to (i) an increase of RMB854.4 million in cost of sales of goods
and equipment, and (ii) an increase of RMB67.2 million in cost of providing franchise
management services. Our cost of sales increased by 31.9% from RMB3,996.3 million in 2022
to RMB5,272.3 million in 2023, primarily due to (i) an increase of RMB1,186.4 million in cost
of sales of goods and equipment, and (ii) an increase of RMB87.7 million in cost of providing
franchise management services. Our cost of sales increased by 16.4% from RMB3,844.5
million in the nine months ended September 30, 2023 to RMB4,476.9 million in the same
period in 2024, primarily due to (i) an increase of RMB592.0 million in cost of sales of goods
and equipment, and (ii) an increase of RMB38.7 million in cost of providing franchise
management services. The increases in our cost of sales are generally in line with our business
expansion and revenue growth.
Our gross profit increased by 19.0% from RMB1,313.7 million in 2021 to RMB1,562.9
million in 2022, and our gross profit margin slightly decreased from 30.0% in 2021 to 28.1%
in 2022, primarily because we reduced the prices of certain goods supplied to our franchisees
to support their operations during COVID-19. Our gross profit increased by 53.8% from
RMB1,562.9 million in 2022 to RMB2,403.3 million in 2023, and our gross profit margin
improved from 28.1% in 2022 to 31.3% in 2023. Our gross profit increased by 13.8% from
RMB1,726.4 million in the nine months ended September 30, 2023 to RMB1,964.4 million in
the same period in 2024, and our gross profit margin remained relatively stable at 30.5% in the
nine months ended September 30, 2024, as compared to 31.0% in the same period in 2023.
Primarily as a result of our substantial business growth due to our growing store network
and increasing GMV , and, to a lesser extent, the lower increase in the fair value of our financial
liabilities at fair value through profit or loss, our profit for the year increased significantly from
RMB24.0 million in 2021 to RMB372.0 million in 2022, and further increased by 194.7% to
RMB1,096.4 million in 2023. Our profit for the period increased by 11.8% from RMB1,002.0
million in the nine months ended September 30, 2023 to RMB1,119.8 million in the same
period in 2024.
For more discussion of our consolidated statements of profit or loss and comprehensive
income, see “Financial Information — Description of Major Components of Our Results of
Operations.”
SUMMARY
–1 4–


--- page 25 ---
Breakdowns of Revenue, Gross Profit and Gross Profit Margin
The following table sets forth the breakdowns of our revenue, gross profit and gross profit margin by nature of products/services during the
Track Record Period. For more details, see “Financial Information — Description of Major Components of Our Results of Operations.”
For the Y ear Ended December 31, For the Nine Months Ended September 30,
2021 2022 2023 2023 2024
Revenue
Gross
Profit
Gross
Profit
Margin Revenue
Gross
Profit
Gross
Profit
Margin Revenue
Gross
Profit
Gross
Profit
Margin Revenue
Gross
Profit
Gross
Profit
Margin Revenue
Gross
Profit
Gross
Profit
Margin
RMB RMB % RMB RMB % RMB RMB % RMB RMB % RMB RMB %
(Unaudited)
(RMB in thousands, except percentages)
Sales of goods and
equipment /H1118/H1118/H1118/H1118/H1118/H11183,546,918 594,838 16.8 4,505,145 698,639 15.5 6,144,711 1,151,850 18.7 4,477,504 841,244 18.8 5,153,346 925,084 18.0
– Sales of goods /H1118/H1118/H1118/H1118/H11183,348,943 578,572 17.3 4,282,733 677,703 15.8 5,778,264 1,117,216 19.3 4,175,719 812,596 19.5 4,872,023 897,424 18.4
– Sales of equipment /H1118/H1118/H1118 197,975 16,266 8.2 222,412 20,936 9.4 366,447 34,634 9.5 301,785 28,648 9.5 281,323 27,660 9.8
Franchise management
services /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118831,645 717,005 86.2 1,044,290 862,472 82.6 1,518,646 1,249,178 82.3 1,083,910 883,292 81.5 1,277,085 1,037,747 81.3
– Initial franchise fees /H1118/H1118 73,414 42,887 58.4 87,911 49,308 56.1 109,509 52,870 48.3 80,794 37,665 46.6 87,421 47,586 54.4
– Continuing support
services fees /H1118/H1118/H1118/H1118/H1118/H1118699,488 644,149 92.1 898,883 792,852 88.2 1,311,905 1,148,432 87.5 929,906 810,262 87.1 1,141,904 967,042 84.7
– Provision of training and
other services /H1118/H1118/H1118/H1118/H111858,743 29,969 51.0 57,496 20,312 35.3 97,232 47,876 49.2 73,210 35,365 48.3 47,760 23,119 48.4
Sales from company-
operated stores /H1118/H1118/H1118/H1118 5,338 1,862 34.9 9,787 1,821 18.6 12,308 2,303 18.7 9,468 1,877 19.8 10,857 1,551 14.3
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,383,901 1,313,705 30.0 5,559,222 1,562,932 28.1 7,675,665 2,403,331 31.3 5,570,882 1,726,413 31.0 6,441,288 1,964,382 30.5
SUMMARY
–1 5–


--- page 26 ---
During the Track Record Period, the vast majority of our revenue was contributed by our
franchised stores. In 2021, 2022 and 2023, revenue from franchised stores accounted for
97.9%, 97.9% and 97.1% of our total revenue, respectively. In the nine months ended
September 30, 2023 and 2024, revenue from franchised stores accounted for 97.4% and 97.2%
of our total revenue, respectively.
Summary of Consolidated Statements of Financial Position
The following table sets forth selected information from our consolidated statements of
financial position as of the dates indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Total non-current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118675,961 867,109 1,144,257 1,688,935
Total current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,367,539 2,164,567 4,008,672 4,661,814
Total assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,043,500 3,031,676 5,152,929 6,350,749
Total non-current liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118169,091 182,628 175,220 297,335
Total current liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,080,220 3,665,642 4,362,203 4,325,774
Total liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,249,311 3,848,270 4,537,423 4,623,109
Net current (liabilities)/assets /H1118/H1118/H1118/H1118/H1118(1,712,681) (1,501,075) (353,531) 336,040
Net (liabilities)/assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,205,811) (816,594) 615,506 1,727,640
Share capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 112 127 127
Reserves /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,216,305) (832,494) 582,865 1,681,722
Equity attributable to owners of
the parent /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,216,193) (832,382) 582,992 1,681,849
Non-controlling interests /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111810,382 15,788 32,514 45,791
(Deficiency in assets)/Total equity /H1118(1,205,811) (816,594) 615,506 1,727,640
We recorded net liabilities of RMB1,205.8 million and RMB816.6 million as of
December 31, 2021 and 2022, respectively, and recorded net assets of RMB615.5 million and
RMB1,727.6 million as of December 31, 2023 and September 30, 2024, respectively. Our net
liabilities decreased from RMB1,205.8 million as of December 31, 2021 to RMB816.6 million
as of December 31, 2022, primarily attributable to our profit for the year of RMB372.0 million
in 2022. As of December 31, 2023, we returned to a net assets position, primarily attributable
to our profit for the year of RMB1,096.4 million in 2023. As of September 30, 2024, our net
assets further increased primarily attributable to our profit for the period of RMB1,119.8
million in the nine months ended September 30, 2024.
SUMMARY
–1 6–


--- page 27 ---
We recorded net current liabilities of RMB1,712.7 million, RMB1,501.1 million and
RMB353.5 million as of December 31, 2021, 2022 and 2023, respectively, primarily due to the
presentation of convertible redeemable preferred shares as current liabilities. We recorded net
current assets of RMB336.0 million as of September 30, 2024, primarily due to our more
sufficient cash and bank balances and financial assets at fair value through profit or loss, while
fair value of financial liabilities remained stable for the nine months ended September 30,
2024. The increase in the total amounts of our cash and bank balances and financial assets at
fair value through profit or loss is further attributable to the fact that we generated net cash
flow from operating activities of RMB1,128.5 million in the nine months ended September 30,
2024. We recorded net current liabilities of RMB1,169.6 million as of January 15, 2025,
primarily due to other payables and accruals of RMB2,099.8 million, primarily as a result of
the dividend payable of RMB1,740.0 million. Our convertible redeemable preferred shares will
be reclassified from liabilities to equity as a result of the automatic conversion into ordinary
shares upon the Listing, after which we do not expect to recognize any further loss or gain on
changes in fair value of convertible redeemable preferred shares and will further improve our
net current asset position.
Our net current liabilities decreased from RMB1,712.7 million as of December 31, 2021
to RMB1,501.1 million as of December 31, 2022. The decrease was mainly due to an increase
in cash and bank balances of RMB995.4 million, primarily due to the expansion of our
business, partially offset by (i) an increase in financial liabilities at fair value through profit
or loss of RMB389.5 million, primarily due to the increase in the fair value of our convertible
redeemable preferred shares as a result of changes in the valuation of our Company, and (ii)
an increase in trade payables of RMB240.0 million, attributable to the enhanced bargaining
power to our suppliers and increased credit period.
Our net current liabilities decreased from RMB1,501.1 million as of December 31, 2022
to RMB353.5 million as of December 31, 2023. The decrease was mainly due to an increase
in cash and bank balances of RMB1,280.8 million, primarily due to the growth of our business,
partially offset by (i) an increase in financial liabilities at fair value through profit or loss of
RMB294.2 million, primarily due to the increase in the fair value of our convertible
redeemable preferred shares as a result of changes in the valuation of our Company, and (ii)
an increase in trade payables of RMB211.7 million, attributable to the enhanced bargaining
power to our suppliers and increased credit period.
We recorded net current liabilities of RMB353.5 million as of December 31, 2023, as
compared to net current assets of RMB336.0 million as of September 30, 2024. The change was
mainly due to (i) an increase in financial assets at fair value through profit or loss of
RMB1,408.9 million, primarily due to the expansion of our business and the increase in our
investment amounts in wealth management products, and (ii) an increase in trade receivables
of RMB80.8 million, mainly attributable to our increased sales of coffee machines to
franchisees which have long credit periods.
For more discussion of our balance sheet items, see “Financial Information — Discussion
of Certain Key Items of Consolidated Statements of Financial Position.”
SUMMARY
–1 7–


--- page 28 ---
Summary of Consolidated Statements of Cash Flows
The following table sets forth our cash flows for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
(Unaudited)
(RMB in thousands)
Net cash flows from
operating activities /H1118/H1118/H1118/H1118/H1118267,470 1,011,162 1,573,306 1,206,286 1,128,514
Net cash flows used in
investing activities /H1118/H1118/H1118/H1118/H1118(237,595) (57,341) (470,954) (318,607) (1,844,425)
Net cash flows (used
in)/from financing
activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(42,860) 5,315 139,958 (145,507) 44,176
Net (decrease)/increase in
cash and cash
equivalents /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(12,985) 959,136 1,242,310 742,172 (671,735)
Effect of foreign exchange
rate changes, net /H1118/H1118/H1118/H1118/H1118/H1118(1,325) 3,524 1,183 564 (8,358)
Cash and cash equivalents
at the beginning of the
year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118166,118 151,808 1,114,468 1,114,468 2,357,961
Cash and cash
equivalents at end of
the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118151,808 1,114,468 2,357,961 1,857,204 1,677,868
In 2021, our net cash flows generated from operating activities were RMB267.5 million,
primarily consisting of our profit before tax of RMB247.1 million, adjusted for certain
non-cash and non-operating items, and income tax paid of RMB159.6 million. In 2022, our net
cash flows generated from operating activities were RMB1,011.2 million, primarily consisting
of our profit before tax of RMB650.4 million, adjusted for certain non-cash and non-operating
items, and income tax paid of RMB354.7 million. In 2023, our net cash flows generated from
operating activities were RMB1,573.3 million, primarily consisting of our profit before tax of
RMB1,445.1 million, adjusted for certain non-cash and non-operating items, and income tax
paid of RMB310.2 million. In the nine months ended September 30, 2024, our net cash flows
generated from operating activities were RMB1,128.5 million, primarily consisting of our
profit before tax of RMB1,330.8 million, adjusted for certain non-cash and non-operating
items, and income tax paid of RMB179.3 million.
SUMMARY
–1 8–


--- page 29 ---
In 2021, 2022 and 2023, our net cash flows used in investing activities were RMB237.6
million, RMB57.3 million and RMB471.0 million, respectively. In the nine months ended
September 30, 2024, our net cash flows used in investing activities were RMB1,844.4 million.
In 2021, our net cash flows used in financing activities were RMB42.9 million. In 2022
and 2023, our net cash flows generated from financing activities were RMB5.3 million and
RMB140.0 million, respectively. In the nine months ended September 30, 2024, our net cash
flows generated from financing activities were RMB44.2 million.
For more discussion of our cash flow data, adjustments for non-cash and non-operating
items and the reasons underlying the changes, see “Financial Information — Liquidity and
Capital Resources.”
KEY FINANCIAL RATIOS
The following table sets forth certain of our key financial ratios for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
(Unaudited)
Adjusted profit margin
(non-IFRS measure) (1) /H1118/H1118 17.6% 14.2% 19.0% 18.7% 17.8%
Adjusted EBITDA margin
(non-IFRS measure) (2) /H1118/H1118 24.3% 21.3% 24.7% 24.8% 22.0%
Notes:
(1) Adjusted profit margin (non-IFRS measure) represents adjusted profit (non-IFRS measure) as a percentage of
the revenue for such year/period.
(2) Adjusted EBITDA margin (non-IFRS measure) represents adjusted EBITDA (non-IFRS measure) as a
percentage of the revenue for such year/period.
Our adjusted profit margin (non-IRFS measure) and adjusted EBITDA margin (non-IFRS
measure) decreased in the nine months ended September 30, 2024 as compared to the same
period in 2023, primarily because (i) our gross profit margin for sales of goods and equipment
decreased as we maintained stable raw material supplies despite upstream price fluctuations in
2024; (ii) we incurred higher advertising and promoting fees in the nine months ended
September 30, 2024; and (iii) we increased our employee headcount from 2,373 as of
September 30, 2023 to 2,720 as of September 30, 2024.
SUMMARY
–1 9–


--- page 30 ---
RISK FACTORS
We believe there are certain risks and uncertainties involved in our operations, some of
which are beyond our control. We have categorized these risks and uncertainties into: (i) risks
relating to our business and industry; (ii) risks relating to doing business in the country where
we operate; and (iii) risks relating to the Global Offering. These risks include, among others,
the following:
 Our future growth depends on our ability to expand and operate our store network.
We may not be able to successfully enter new geographical markets or expand our
presence in the existing markets.
 A recent general industry slowdown and increased industry competition has slowed
the pace of our new store openings and led to the decreases of some of our stores’
operating metrics. If such trend continues, our reputation, business, financial
position and results of operations could be negatively affected.
 Our business relies heavily on consumer taste, consumption trends, preferences and
perceptions of freshly-made tea beverages and we might not always accurately
predict and timely adapt to market trends and consumer preferences.
 We may not be able to maintain or increase the sales and profitability of our stores.
 We operate in a highly competitive and rapidly changing market in China. We face
intense competition in China’s freshly-made beverage market. Any failure to
compete effectively might negatively impact our market share and profitability.
 Any failure by us, our franchisee, suppliers or other business partners to maintain
food safety and quality might materially and adversely affect our brand, business,
and financial performance.
 Our business depends significantly on market recognition of our “ Good me ” brand,
and any failure to maintain, protect and enhance our brand could materially and
adversely impact our business and results of operations.
 Our extensive store network consists primarily of franchised stores that are operated
by third parties. We face certain risks associated with the use of franchise business
model.
 Our operating history might not reflect our future growth or financial results. If we
fail to manage our growth, our business and prospects may be materially and
adversely affected.
SUMMARY
–2 0–


--- page 31 ---
NON-COMPLIANCE INCIDENTS
Prior to and during the Track Record Period, we had certain non-compliance incidents
with respect to (i) historical tax non-compliance, (ii) social insurance and housing provident
funds, (iii) environmental impact assessment approval and (iv) fire safety. For details, see
“Business — Legal Proceedings and Compliance — Compliance.” Our Directors, as advised by
our PRC Legal Advisor, confirm that except as disclosed thereunder in this Prospectus, we had
complied with the relevant PRC laws and regulations in all material respects and had obtained
all necessary licenses that are material to our business operations from relevant government
authorities during the Track Record Period and up to the Latest Practicable Date.
IMPACT OF COVID-19
The outbreak of COVID-19 and its resurgence in 2022 severely impacted China and the
rest of the world. In an effort to contain the spread of COVID-19, China implemented
precautionary measures that reduced economic activities, including temporary closure of
workplaces and commercial centers and the imposition of travel and mobility restrictions. As
a result, our store operations and financial condition were negatively affected during the Track
Record Period. The supply of our goods and equipment was also adversely affected due to the
associated disruptions in the upstream supply chain and logistics services. We reduced the
prices of certain goods supplied to our franchisees to support their operations during
COVID-19. This adjustment resulted in a slight dip in our overall gross profit margin from
30.0% in 2021 to 28.1% in 2022. We also slowed down our store expansion efforts in 2022.
We opened 1,317 new stores in 2022, as compared to 1,808 new stores in 2021.
Nevertheless, our continuous efforts to improve our operation results enabled us to
achieve growth in 2022, and our revenue increased from RMB4,383.9 million in 2021 to
RMB5,559.2 million in 2022. This growth can be attributed to the growth of our per-store
GMV and our ongoing efforts to expand our store network. Our per-store GMV increased by
3.4% from RMB2.2 million in 2021 to RMB2.3 million in 2022, and we recorded same-store
GMV growth of 2.8% from 2021 to 2022. See “Risk Factors — Risks Relating to our Business
and Industry — Pandemics, extreme weather conditions, natural disasters, pests and other
natural conditions and other unexpected events may create substantial volatility in our business
and results of operations” and “Financial Information — Impact of COVID-19.”
OFFERING STATISTICS
All statistics in the following table are based on the assumptions that (i) the Global
Offering has been completed and 158,612,000 Offer Shares are issued pursuant to the Global
Offering; (ii) the Offer Size Adjustment Option and the Over-allotment Option are not
exercised; and (iii) each Preferred Share is converted into an Ordinary Share of our Company
on a 1:1 basis immediately prior to the Global Offering.
SUMMARY
–2 1–


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Based on an
Offer Price of
HK$8.68 per
Share
Based on an
Offer Price of
HK$9.94 per
Share
Market capitalization of our Shares (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
HK$20,246
million
HK$23,185
million
Unaudited pro forma adjusted consolidated net tangible
assets of the Group attributable to owners of the
Company per Share
(2)(3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118HK$2.81 HK$2.90
Notes:
(1) The calculation of market capitalization is based on 2,332,525,060 Shares expected to be in issue immediately
upon completion of the Global Offering, assuming the Offer Size Adjustment Option and the Over-allotment
Option are not exercised.
(2) The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the
Company per Share as of September 30, 2024 is calculated after making the adjustments referred to in
Appendix II and on the basis that 2,332,525,060 Shares are expected to be in issue immediately upon
completion of the Global Offering, assuming the Offer Size Adjustment Option and the Over-allotment Option
are not exercised.
(3) The unaudited pro forma adjusted net tangible assets per Share is arrived at after making the adjustments
referred to in Appendix II to this prospectus. Had the Global Offering and the payment of the declared dividend
as disclosed in “— Recent Development and No Material Adverse Change” been taken into account, the
unaudited pro forma adjusted consolidated net tangible assets of our Group attributable to owners of our
Company as of September 30, 2024 per Share would be RMB1.84 (equivalent to HK$2.00) based on an Offer
Price of HK$8.68 per Share and RMB1.92 (equivalent to HK$2.09) based on an Offer Price of HK$9.94 per
Share, respectively, on the basis that a total of 2,332,525,060 shares were in issue assuming that the Global
Offering had been completed on September 30, 2024. After the Listing, our Company intends to declare and
distribute a special dividend in an amount of no less than RMB2 billion to our shareholders, which has not been
taken into account in the calculation of the unaudited pro forma adjusted consolidated net tangible assets of
our Group attributable to owners of our Company as of September 30, 2024.
LISTING EXPENSE
Based on the mid-point Offer Price of HK$9.31, the total estimated listing expenses in
relation to the Global Offering is approximately RMB111.2 million, or approximately 8.2% of
the gross proceeds, assuming the Offer Size Adjustment Option and the Over-allotment Option
are not exercised. We estimate that the listing expenses will consist of approximately RMB67.0
million in underwriting fees and RMB44.2 million in non-underwriting fees. During the Track
Record Period, the listing expenses charged to consolidated statement of profit or loss and
comprehensive income were RMB33.4 million. We estimate that we will incur listing expenses
of RMB77.8 million, of which RMB24.2 million will be charged to our consolidated statement
of profit or loss and comprehensive income. The balance of approximately RMB53.6 million,
which mainly includes underwriting commission, is expected to be accounted for as a
deduction from equity upon the completion of the Global Offering.
SUMMARY
–2 2–


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USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$1,356 million based on an Offer Price of HK$9.31 per Offer Share (being the mid-point
of the indicative Offer Price range) and assuming no exercise of the Offer Size Adjustment
Option and the Over-allotment Option, or HK$1,813 million if the Offer Size Adjustment
Option and the Over-allotment Option were exercised in full, after deducting underwriting fees
and commissions and other estimated offering expenses paid and payable by us in relation to
the Global Offering.
In line with our strategies, we plan to use the net proceeds from the Global Offering for
the purposes and in the amounts set forth below:
 approximately 25% of the net proceeds, or approximately HK$339 million, will be
used to strengthen our information technology team and continue to digitalize our
business management and store operations;
 approximately 25% of the net proceeds, or approximately HK$339 million, will be
used to enhance our supply chain capabilities and improve our supply chain
management efficiency;
 approximately 20% of the net proceeds, or approximately HK$271 million, will be
used to strengthen our branding and consumer engagement efforts and implement
diversified approaches to build our brand image and increase consumer awareness;
 approximately 10% of the net proceeds, or approximately HK$136 million, will be
used to recruit additional employees for franchisee management as we continue to
execute our regional densification strategy, strengthen our support for franchisees
and further foster a close franchisee community;
 approximately 10% of the net proceeds, or approximately HK$136 million, will be
used to recruit experts in product development and enhance our product
development capabilities; and
 approximately 10% of the net proceeds, or approximately HK$136 million, is
expected to be used for working capital and other general corporate purposes.
See “Future Plans and Use of Proceeds” for further details.
OUR CONTROLLING SHAREHOLDERS
Immediately after the completion of the Global Offering and assuming that the Offer Size
Adjustment Option and the Over-allotment Option are not exercised and by virtue of the
Acting-in-Concert Arrangement, Mr. Wang, Mr. Qi, Mr. Ruan and Ms. Pan, through various
intermediate holding companies, will together be interested in and control 1,728,260,872
Shares, representing approximately 74.09% of our issued Shares. Therefore, Mr. Wang, Mr. Qi,
Mr. Ruan and Ms. Pan and their respective intermediate holding companies will constitute a
group of Controlling Shareholders upon the Listing. See “Relationship with our Controlling
Shareholders” for details.
SUMMARY
–2 3–


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PRE-IPO INVESTORS
We received equity financing from our Pre-IPO Investors to support our expanding
business operations. Our Pre-IPO Investors consist of Long-Z, HongShan, New Budding and
Coatue 34. See “History, Reorganization and Corporate Structure — Pre-IPO Investments” for
details.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Listing Committee for the listing of, and permission to deal in, the
Shares in issue (including the Preferred Shares to be converted into our Shares) and to be
issued pursuant to the Global Offering (including any Shares which may be issued pursuant to
the exercise of the Offer Size Adjustment Option and the Over-allotment Option) and our
Post-IPO Share Scheme.
GLOBAL OFFERING
This document is published in connection with the Hong Kong Public Offering as part of
the Global Offering. The Global Offering comprises:
 the Hong Kong Public Offering of initially 15,861,200 Offer Shares (subject to
reallocation) in Hong Kong as described in “Structure of the Global Offering — The
Hong Kong Public Offering”; and
 the International Offering of initially 142,750,800 Offer Shares (subject to
reallocation, the Offer Size Adjustment Option and the Over-allotment Option) (i) in
the United States to QIBs in reliance on Rule 144A or another available exemption,
and (ii) outside the United States (including to professional and institutional
investors within Hong Kong) in offshore transactions in reliance on Regulation S, as
described in “Structure of the Global Offering — The International Offering.”
The Offer Shares will represent approximately 6.8% of the total Shares in issue
immediately following the completion of the Global Offering, assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised.
DIVIDENDS
In January 2025, the Company passed a Board resolution and Shareholders resolution,
declaring a dividend of RMB1.74 billion based on the Company’s share premium and retained
profits from our subsidiaries as of September 30, 2024 to our existing Shareholders whose
names appeared in the register of members of the Company on December 31, 2024 (the
“Dividend ”). As of September 30, 2024, the total amount of our cash and bank balances and
financial assets at fair value through profit or loss was RMB3.3 billion. We will not apply any
proceeds from the Listing for settlement of the Dividend. RMB0.4 billion of the Dividend has
SUMMARY
–2 4–


--- page 35 ---
been paid in January 2025. We will settle the remaining RMB1.34 billion of the Dividend by
March 2026 with the funds received from the dividend declared by our subsidiaries and/or
other financial resources. We shall disclose details of the payment of the Dividend in the annual
reports after the Listing.
The Company intends to declare and distribute by December 2025 a special dividend (the
“Special Dividend ”) in an amount of no less than RMB2 billion to our Shareholders (including
our new Shareholders after the Listing) based on our Company’s retained profits from our
subsidiaries as of December 31, 2024 and share premium included in capital reserve, upon
Special Dividend declaration. The Company will make announcements in due course after the
Listing in respect of the declaration and payment of the foregoing Special Dividend. The
Controlling Shareholders have undertaken to vote in favor of the Shareholders’ resolution for
the declaration and payment of such Special Dividend.
Save as disclosed above, we intend to adopt, before the Listing, a general dividend policy
of declaring and distributing dividends on an annual basis in an amount which is no less than
50% of our net profit generated in any fiscal year after the Listing after deducting any
significant capital expenditures or as otherwise authorized by the Board. For the avoidance of
doubt, the foregoing general dividend policy only applies to net profit generated in any fiscal
year after the Listing, i.e. for the year ending 31 December 2025 onwards. Other than the
foregoing Dividend declared in January 2025 and the Special Dividend, no further dividend
will be declared in 2025 in respect of our Company’s retained profits from the Company and/or
our subsidiaries as of December 31, 2024 or under the general dividend policy. Therefore, the
payment of the Dividend and the Special Dividend will not have any impact on the general
dividend policy. The decision on whether to declare dividends and the exact amount of any
such distributions in any year will be based upon our operations and earnings, cash flow,
financial condition, general business conditions and strategies, capital requirements, future
business prospects, statutory and contractual restrictions applying to the payment of dividends
and other factors that the Board may consider relevant, and subject to adjustment and
determination by the Board and compliance with the requirements under applicable laws and
regulations. As advised by our legal advisor on Cayman Islands law, Ogier, under the laws of
the Cayman Islands, dividends may be declared and paid out of our profits or share premium
account, provided that immediately following the date on which the distribution or dividend is
proposed to be paid, our Company shall be able to pay its debts as they fall due in the ordinary
course of business.
We are a holding company incorporated under the laws of the Cayman Islands. As a result,
the payment and amount of any future dividends will also depend on the availability of
dividends received from our subsidiaries. PRC laws require that dividends shall be paid only
out of the accumulated after-tax profits, if any, determined following PRC accounting
standards and regulations. In addition, enterprises in China are required to allocate at least 10%
of their respective after-tax profits each year, if any, to fund certain reserve funds until these
reserves have reached 50% of the registered capital of the enterprises. Dividend distribution to
our shareholders is recognized in a period in which the dividends are approved by our
Shareholders or Directors, where appropriate.
SUMMARY
–2 5–


--- page 36 ---
PROFIT ESTIMATE FOR THE YEAR ENDED DECEMBER 31, 2024
On the basis set out in Appendix IIA to this prospectus, and in the absence of unforeseen
circumstances, we estimate that our unaudited consolidated profit attributable to owners of our
Company for the year ended December 31, 2024 is as follows:
Estimated consolidated profit attributable
to owners of our Company /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Not less than RMB1.4 billion
RECENT DEVELOPMENT AND NO MATERIAL ADVERSE CHANGE
Since September 30, 2024 and up to the Latest Practicable Date, we continued to steadily
expand our business. Our store network encompassed 9,823 stores as of November 30, 2024,
as compared with 9,778 stores as of September 30, 2024. For the two months ended November
30, 2024, we generated a GMV of RMB3,794.2 million and sold a total of 224.2 million cups
of beverages. We also recorded higher revenue and gross profit in the eleven months ended
November 30, 2024 as compared to the same periods in 2023.
In January 2025, we declared a dividend of RMB1.74 billion to our existing shareholders
whose names appeared in our register of members on December 31, 2024. RMB0.4 billion of
the dividend has been paid in January 2025 and we will settle the remaining RMB1.34 billion
of the dividend by March 2026. For details of this dividend and our future dividends, see “—
Dividends.”
Our Directors have confirmed that, up to the date of this document, there has been no
material adverse change in our financial or trading position or prospects since September 30,
2024, being the end date of our latest audited consolidated financial statements, and there has
been no event since September 30, 2024 that would materially affect the information shown in
the Accountants’ Report set out in Appendix I to this document.
SUMMARY
–2 6–


--- page 37 ---
In this document, unless the context otherwise requires, the following terms shall
have the following meanings. Certain technical terms are explained in “Glossary of
technical terms.”
“Accountants’ Report ” the accountants’ report of our Company, the text of which
is set out in Appendix I
“Acting-in-Concert
Arrangement ”
the acting-in-concert agreement entered into by Mr.
Wang, Mr. Qi, Mr. Ruan, Ms. Pan, Modern Leaves
Limited, Ancient Leaves Limited, Chivalrous Lancers
Limited, Chivalrous Cavalry Limited, Cousin Tea
Limited, Uncle Tea Limited, Spring Equinox Drinks
Limited and Winter Solstice Drinks Limited on April 14,
2022 acknowledging and confirming that, among other
things, they are parties acting in concert since April 14,
2022 at any meeting of our Group where each of them
and/or the directors appointed by them is entitled to vote
on corporate matters as shareholders or directors and the
deed of adherence to the acting-in-concert agreement
entered into by Nascent Leaves Limited, Chivalrous
Knights Limited, Nephew Tea Limited and Summer
Solstice Drinks Limited dated December 27, 2023, details
of which are set out in the section headed “History,
Reorganization and Corporate Structure — Acting-in-
Concert Arrangement” of this document
“affiliate(s) ” with respect to any specified person, any other person,
directly or indirectly, controlling or controlled by or
under direct or indirect common control with such
specified person
“AFRC ” Accounting and Financial Reporting Council of Hong
Kong
“Articles ”o r“ Articles of
Association ”
the third amended and restated articles of association of
our Company conditionally adopted on January 27, 2025
with effect from the Listing Date, a summary of which is
set out in “Summary of the Constitution of Our Company
and Company Law of the Cayman Islands” in Appendix
III
“associate(s) ” has the meaning ascribed to it under the Listing Rules
DEFINITIONS
–2 7–


--- page 38 ---
“Board ” the board of Directors
“business day ” any day (other than a Saturday, Sunday or public holiday
in Hong Kong) on which banks in Hong Kong are
generally open for normal banking business
“BVI” the British Virgin Islands
“CAC” the Cyberspace Administration of China ( ʕശɛ͏΍ձ
܃)
“Capital Market
Intermediaries ”
the capital market intermediaries as named in “Directors
and Parties involved in the Global Offering”
“Cayman Companies Act ”o r
“Companies Act ”
the Companies Act, Cap. 22 (As Revised) of the Cayman
Islands, as amended, supplemented or otherwise modified
from time to time
“CCASS ” the Central Clearing and Settlement System established
and operated by HKSCC
“China ”o r“ the PRC ” the People’s Republic of China, and for the purpose of
this prospectus only, except where the context requires
otherwise, references to China or the PRC exclude Hong
Kong, Macau and Taiwan
“CIC” China Insights Industry Consultancy Limited ( ӧᗆΆุ
၍ଣፔ༔(ɪऎ)ʮ̡), a market research and
consulting company, which is an independent third party
“CIC Report ” the report prepared by CIC
“close associate ” has the meaning ascribed to it under the Listing Rules
“Companies Ordinance ” the Companies Ordinance (Chapter 622 of the Laws of
Hong Kong), as amended, supplemented or otherwise
modified from time to time
“Companies (Winding Up and
Miscellaneous Provisions)
Ordinance ”
the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong
Kong), as amended, supplemented or otherwise modified
from time to time
DEFINITIONS
–2 8–


--- page 39 ---
“Company ,” “ our Company ,”
“the Company ,” “ we,” “ our”
or “ us”
Guming Holdings Limited (ʮ̡), a
company with limited liability incorporated in the
Cayman Islands on August 31, 2021
“connected person(s) ” has the meaning ascribed to it under the Listing Rules
“connected transaction(s) ” has the meaning ascribed to it under the Listing Rules
“Controlling Shareholder(s) ” has the meaning ascribed to it under the Listing Rules and
unless the context otherwise requires, refers to Mr. Wang,
Mr. Qi, Mr. Ruan, Ms. Pan, and the intermediate holding
companies through which they are interested in our
Shares, namely Modern Leaves Limited, Ancient Leaves
Limited, Nascent Leaves Limited, Chivalrous Lancers
Limited, Chivalrous Cavalry Limited, Chivalrous
Knights Limited, Cousin Tea Limited, Uncle Tea Limited,
Nephew Tea Limited, Spring Equinox Drinks Limited,
Winter Solstice Drinks Limited and Summer Solstice
Drinks Limited
“CSRC ” China Securities Regulatory Commission ( ʕ਷ᗇՎ္ຖ
ึ)
“Director(s) ” the director(s) of our Company
“EIT” Enterprise income taxation
“Extreme Conditions ” the occurrence of “extreme conditions” as announced by
any government authority of Hong Kong due to serious
disruption of public transport services, extensive
flooding, major landslides, large-scale power outage or
any other adverse conditions before Typhoon Signal No.
8 or above is replaced with Typhoon Signal No. 3 or
below
“FINI ” “Fast Interface for New Issuance,” an online platform
operated by HKSCC that is mandatory for admission to
trading and, where applicable, the collection and
processing of specified information on subscription in
and settlement for all new listings
“Global Offering ” the Hong Kong Public Offering and the International
Offering
DEFINITIONS
–2 9–


--- page 40 ---
“Governmental Authority ” any governmental, regulatory, or administrative
commission, board, body, authority, or agency, or any
stock exchange, self-regulatory organization, or other
non-governmental regulatory authority, or any court,
judicial body, tribunal, or arbitrator, in each case whether
national, central, federal, provincial, state, regional,
municipal, local, domestic, foreign, or supranational
“Group ,” “ our Group ,” “ the
Group ,” “ we,” “ us,” or “ our”
our Company and our subsidiaries from time to time, and
where the context requires, in respect of the period prior
to our Company becoming the holding company of its
present subsidiaries, such subsidiaries as if they were
subsidiaries of our Company at the relevant time
“Guide for New Listing
Applicants ”
the Guide for New Listing Applicants issued by the Stock
Exchange in December 2023, with effect from January 1,
2024, as amended and supplemented from time to time
“Guming Technology ” Guming Technology Group Co., Ltd. (ࠢ
ʮ̡), a limited liability company established in the PRC
on June 12, 2018 and a wholly-owned subsidiary of our
Company
“HK eIPO White Form ” the application for the Hong Kong Offer Shares to be
issued in applicant’s own name by submitting
applications online through the designated website at
www.hkeipo.hk
“HK eIPO White Form Service
Provider ”
the HK eIPO White Form service provider designated
by our Company, as specified on the designated website
at www.hkeipo.hk
“HK”o r“ Hong Kong ” the Hong Kong Special Administrative Region of the
People’s Republic of China
“HKSCC ” Hong Kong Securities Clearing Company Limited, a
wholly-owned subsidiary of Hong Kong Exchanges and
Clearing Limited
“HKSCC EIPO channel ” the arrangement in HKSCC Operational Procedures for
instructions to be given electronically to HKSCC by
participants via FINI for applications to be made on their
behalf for new issue shares and for the payment of
application moneys, and for those instructions to be acted
upon
DEFINITIONS
–3 0–


--- page 41 ---
“HKSCC Nominees ” HKSCC Nominees Limited, a wholly-owned subsidiary
of HKSCC
“HKSCC Operational
Procedures ”
the operational procedures of the HKSCC, containing the
practices, procedures and administrative or other
requirements relating to HKSCC’s services and the
operations and functions of the systems established,
operated and/or otherwise provided by or through
HKSCC (including FINI and CCASS) as from time to
time in force
“HKSCC Participant(s) ” a participant admitted to participate in CCASS as a direct
clearing participant, a general clearing participant or a
custodian participant
“Hong Kong dollars ”o r“ HK
dollars ”o r“ HK$”
Hong Kong dollars, the lawful currency of Hong Kong
“Hong Kong Offer Shares ” Shares being initially offered for subscription in the Hong
Kong Public Offering (subject to reallocation as
described in “Structure of the Global Offering”)
“Hong Kong Public Offering ” the offer of the Hong Kong Offer Shares for subscription
by the public in Hong Kong at the Offer Price (plus
brokerage of 1%, SFC transaction levy of 0.0027%, Stock
Exchange trading fee of 0.00565% and AFRC transaction
levy of 0.00015%) on the terms and subject to the
conditions described in “Structure of the Global Offering
— The Hong Kong Public Offering”
“Hong Kong Share Registrar ” Tricor Investor Services Limited
“Hong Kong Takeovers Code ”
or “ Takeovers Code ”
Code on Takeovers and Mergers and Share Buy-backs
issued by the SFC, as amended, supplemented or
otherwise modified from time to time
“Hong Kong Underwriters ” the underwriters of the Hong Kong Public Offering as
listed in “Underwriting — Hong Kong Underwriters”
“Hong Kong Underwriting
Agreement ”
the underwriting agreement, dated February 3, 2025,
relating to the Hong Kong Public Offering, entered into
by, among others, the Joint Sponsors, the Overall
Coordinators, the Hong Kong Underwriters and our
Company, as further described in “Underwriting —
Underwriting Arrangements and Expenses — Hong Kong
Public Offering — Hong Kong Underwriting Agreement”
DEFINITIONS
–3 1–


--- page 42 ---
“IFRS ” International Financial Reporting Standards, as issued
from time to time by the International Accounting
Standards Board
“independent third party(ies) ” any entity or person who is not a connected person of our
Company within the meaning ascribed to it under the
Listing Rules
“International Offer Shares ” Shares being initially offered for subscription under the
International Offering together, where relevant, with any
additional Shares that may be sold pursuant to any
exercise of the Offer Size Adjustment Option and/or the
Over-allotment Option (subject to reallocation as
described in “Structure of the Global Offering”)
“International Offering ” the conditional placing of the International Offer Shares
at the Offer Price outside the United States in offshore
transactions in accordance with Regulation S and in the
United States to QIBs only in reliance on Rule 144A or
any other available exemption from the registration
requirements under the U.S. Securities Act, as further
described in “Structure of the Global Offering”
“International Underwriters ” the underwriters of the International Offering
“International Underwriting
Agreement ”
the international underwriting agreement, expected to be
entered into on or about February 10, 2025, relating to the
International Offering, expected to be entered into by,
among others, our Company, the Overall Coordinators
and the International Underwriters, as further described
in “Underwriting — International Offering —
International Underwriting Agreement”
“Joint Bookrunners ” the joint bookrunners as named in “Directors and Parties
involved in the Global Offering”
“Joint Global Coordinators ” the joint global coordinators as named in “Directors and
Parties involved in the Global Offering”
“Joint Lead Managers ” the joint lead managers as named in “Directors and
Parties involved in the Global Offering”
“Joint Sponsors ” Goldman Sachs (Asia) L.L.C. and UBS Securities Hong
Kong Limited
DEFINITIONS
–3 2–


--- page 43 ---
“Latest Practicable Date ” January 25, 2025, being the latest practicable date for
ascertaining certain information in this document before
its publication
“Laws ” all laws, statutes, legislation, ordinances, rules,
regulations, guidelines, opinions, notices, circulars,
directives, requests, orders, judgments, decrees, or
rulings of any Governmental Authority (including the
Stock Exchange and the SFC) of all relevant jurisdictions
“Listing ” the listing of the Shares on the Main Board
“Listing Committee ” the Listing Committee of the Stock Exchange
“Listing Date ” the date, expected to be on or about Wednesday, February
12, 2025, on which the Shares are to be listed and on
which dealings in the Shares are to be first permitted to
take place on the Stock Exchange
“Listing Rules ” the Rules Governing the Listing of Securities on The
Stock Exchange of Hong Kong Limited, as amended,
supplemented or otherwise modified from time to time
“M&A Rules ” the Regulations on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors (Իᒅ
)
“Main Board ” the stock exchange (excluding the option market)
operated by the Stock Exchange which is independent
from and operates in parallel with the Growth Enterprise
Market of the Stock Exchange
“Memorandum ”o r
“Memorandum of
Association ”
the third amended and restated memorandum of
association of our Company conditionally adopted on
January 27, 2025, with effect from the Listing Date, as
amended from time to time, a summary of which is set
out in “Summary of the Constitution of Our Company
and Company Law of the Cayman Islands” in Appendix
III
“MOF” the Ministry of Finance of the PRC (݁
௅)
DEFINITIONS
–3 3–


--- page 44 ---
“MOFCOM ” the Ministry of Commerce of the PRC ( ʕശɛ͏΍ձ਷
ਠਕ௅)
“Mr. Qi ” Mr. Xia Qi (΋͛), an executive Director, the
president of our Company and one of our Controlling
Shareholders
“Mr. Ruan ” Mr. Xiudi Ruan (΋͛), an executive Director and
one of our Controlling Shareholders
“Mr. Wang ”o r“ Founder ” Mr. Y un’an Wang ( ˮථτ΋͛), founder of our Group,
Chairman of the Board, an executive Director, the chief
executive officer of our Company and one of our
Controlling Shareholders
“Ms. Pan ” Ms. Pingping Pan ( ᆙററɾɻ), one of our Controlling
Shareholders
“NDRC ” National Development and Reform Commission of the
PRC (ึ)
“Offer Price ” the final offer price per Offer Share (exclusive of
brokerage, SFC transaction levy, Stock Exchange trading
fee and AFRC transaction levy), expressed in Hong Kong
dollars, at which Hong Kong Offer Shares are to be
subscribed for pursuant to the Hong Kong Public
Offering and International Offer Shares are to be offered
pursuant to the International Offering, to be determined
as described in “Structure of the Global Offering —
Pricing and Allocation”
“Offer Share(s) ” the Hong Kong Offer Shares and the International Offer
Shares
DEFINITIONS
–3 4–


--- page 45 ---
“Offer Size Adjustment Option ” the option expected to be granted by our Company under
the International Underwriting Agreement to the
International Underwriters, exercisable by the Overall
Coordinators (for themselves and on behalf of the
International Underwriters), pursuant to which our
Company may be required to allot and issue up to an
aggregate of 23,791,600 additional new Shares,
representing approximately 15% of the initial number of
Offer Shares offered under the Global Offering, at the
Offer Price to cover any excess demand in the
International Offering, if any, details of which are
described in the section headed “Structure of the Global
Offering — Offer Size Adjustment Option”
“Overall Coordinators ” the overall coordinators as named in “Directors and
Parties involved in the Global Offering”
“Over-allotment Option ” the option expected to be granted by our Company to the
International Underwriters, exercisable by the Overall
Coordinators (for themselves and on behalf of the
International Underwriters) under the International
Underwriting Agreement, to require our Company to allot
and issue up to an aggregate of 27,360,400 additional
Shares (representing approximately 15% of the Offer
Shares offered under the Global Offering assuming the
Offer Size Adjustment Option is exercised in full) or up
to an aggregate of 23,791,600 additional Shares
(representing approximately 15% of the Offer Shares
initially offered under the Global Offering assuming the
Offer Size Adjustment Option is not exercised), at the
Offer Price to cover over-allocations in the International
Offering, if any, details of which are described in
“Structure of the Global Offering — Over-allotment
Option”
“PBOC ” People’s Bank of China ( ʕ਷ɛ͏ვБ)
“Post-IPO Share Scheme ” the share incentive plan approved and adopted by our
Company on January 27, 2025, and amended from time to
time, the principal terms of which are set out in
“Statutory and General Information — Post-IPO Share
Scheme” in Appendix IV
“PRC Legal Advisor ” Shihui Partners, our legal advisor on PRC law
DEFINITIONS
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“Pre-IPO Investment(s) ” the investments in our Company undertaken by the
Pre-IPO Investors, the details of which are set out in
“History, Reorganization and Corporate Structure —
Pre-IPO Investments”
“Pre-IPO Investor(s) ” the investors set out in “History, Reorganization and
Corporate Structure — Pre-IPO Investments —
Information on the Pre-IPO Investors”
“Price Determination
Agreement ”
the agreement to be entered into between our Company
and the Overall Coordinators (for themselves and on
behalf of the Underwriters) on or about the Price
Determination Date to record and fix the Offer Price
“Price Determination Date ” the date, expected to be on or about Monday,
February 10, 2025 and in any event no later than 12:00
noon on Monday, February 10, 2025, on which the Offer
Price is to be fixed for the purposes of the Global
Offering
“QIB” a qualified institutional buyer within the meaning of Rule
144A
“Regulation S ” Regulation S under the U.S. Securities Act
“RMB”o r“ Renminbi ” Renminbi, the lawful currency of China
“Rule 144A ” Rule 144A under the U.S. Securities Act
“SAFE ” the State Administration of Foreign Exchange of the PRC
(̮ි၍ଣ҅)
“SAIC ” the State Administration for Industry and Commerce of
the PRC (၍ଣᐼ҅),
which has now been merged into the State Administration
for Market Regulation of the PRC (࢕
̹ఙ္ຖ၍ଣᐼ҅)
“SAMR ” the State Administration for Market Regulation of the
PRC (̹ఙ္ຖ၍ଣᐼ҅)
“SAT” the State Administration of Taxation of the PRC ( ʕശɛ
೼ਕᐼ҅)
DEFINITIONS
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“SCNPC ” the Standing Committee of the National People’s
Congress of the PRC (ɽึ
ึ)
“Series A Preferred Share(s) ”
or “ Preferred Share(s) ”
Series A-1 Preferred Shares, Series A-2 Preferred Shares,
Series A-3 Preferred Shares, and Series A-4 Preferred
Shares
“Series A-1 Preferred Share(s) ” the Series A-1 preferred shares of the Company with par
value of US$0.00001 each
“Series A-2 Preferred Share(s) ” the Series A-2 preferred shares of the Company with par
value of US$0.00001 each
“Series A-3 Preferred Share(s) ” the Series A-3 preferred shares of the Company with par
value of US$0.00001 each
“Series A-4 Preferred Share(s) ” the Series A-4 preferred shares of the Company with par
value of US$0.00001 each
“SFC” Securities and Futures Commission of Hong Kong
“SFO”o r“ Securities and
Futures Ordinance ”
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), as amended, supplemented or
otherwise modified from time to time
“Share(s) ”o r“ Ordinary
Share(s) ”
ordinary share(s) in the share capital of the Company
with par value of US$0.00001 each
“Shareholder(s) ” holder(s) of our Share(s)
“Stabilizing Manager ” Goldman Sachs (Asia) L.L.C.
“State Council ” State Council of the PRC ( ʕശɛ͏΍ձ਷਷ਕ৫)
“Stock Exchange ”o r“ Hong
Kong Stock Exchange ”
The Stock Exchange of Hong Kong Limited
“subsidiary ”o r“ subsidiaries ” has the meaning ascribed to it in section 15 of the
Companies Ordinance
“substantial shareholder(s) ” has the meaning ascribed to it in the Listing Rules
DEFINITIONS
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“Track Record Period ” each of the years ended December 31, 2021, 2022 and
2023 and the nine months ended September 30, 2024
“treasury shares ” has the meaning ascribed to it under the Listing Rules
“Underwriters ” the Hong Kong Underwriters and the International
Underwriters
“Underwriting Agreements ” the Hong Kong Underwriting Agreement and the
International Underwriting Agreement
“United States ,” “ U.S. ”o r“ US” the United States of America, its territories, its
possessions and all areas subject to its jurisdiction
“U.S. dollars ,” “ US dollars ”o r
“US$”
United States dollars, the lawful currency of the United
States
“U.S. Securities Act ” the United States Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder
“VAT” value-added tax
“Warranting Shareholders ” Mr. Wang, Nascent Leaves Limited, Ancient Leaves
Limited, Modern Leaves Limited, Mr. Qi and Mr. Ruan
“%” per cent
Unless otherwise expressly stated or the context otherwise requires, all data in this
document is as of the date of this document.
The English names of PRC entities, PRC laws or regulations, and PRC governmental
authorities referred to in this document are translations from their Chinese names and are for
identification purposes. If there is any inconsistency, the Chinese names shall prevail.
Certain amounts and percentage figures included in this document have been subject to
rounding adjustments. Accordingly, figures shown as totals in certain tables may not be an
arithmetic aggregation of the figures preceding them.
DEFINITIONS
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This glossary contains definitions of certain technical terms used in this document
in connection with us and our business. These may not correspond to standard industry
definitions, and may not be comparable to similarly terms adopted by other companies.
“active members ” members that placed at least one order through one of our
mini programs or over the counter in a given period
“administrative area ” According to the Ministry of Civil Affairs of the PRC,
China is divided geographically into (i) province-level
regions (ਜ), including primarily provinces (޲)
and municipalities (ᒍ̹), (ii) prefecture-level areas
(ਜ), including primarily prefecture-level cities
(̹) and autonomous prefectures (ψ), (iii) county-
level areas (ਜ), including primarily counties
(ጤ), districts ( ̹ᒍਜ) and county-level cities ( ጤॴ̹),
and (iv) township-level areas (ਜ), including
primarily towns ( ᕄ), townships ( ඊ) and subdistricts ( ൑
༸)
“average store equipment
expenditure per newly
opened franchised store ”
Calculated by dividing the total value of initial
equipment purchase by newly opened stores for a
particular period by the number of newly opened stores
that made initial equipment purchase during the same
period
“CAGR ” compound annual growth rate
“cold-chain ” a temperature-controlled supply chain infrastructure
comprising refrigerated warehousing and logistics
facilities supported by equipment that can constantly
maintain the required low-temperature range
“critical mass ” in the context of discussing our regional densification
strategy, a province or the store network in a province
achieving “critical mass” refers to at least 500 “ Good me ”
stores opened in the province
“first-tier cities ” Beijing, Shanghai, Guangzhou and Shenzhen
“fourth-tier and below cities ” all prefecture-level areas in China excluding first-tier
cities, new first-tier cities, second-tier cities and third-
tier cities
GLOSSARY OF TECHNICAL TERMS
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“franchisees’ per-store
operating profit ”
an annual metric calculated by multiplying our
franchisees’ per-store daily operating profit by 365. The
franchisees’ per-store daily operating profit is calculated
by dividing the total estimated operating profit of our
franchised stores in a given year by the aggregate of the
number of days that each of our franchised stores could
be open for business in the given year, which is measured
by the number of days from (i) the latter of a store’s
launch day and the first day of the year, to (ii) the earlier
of a store’s closure day and the last day of the year.
Launch day refers to the first day a newly launched store
opens for business.
The total estimated operating profit of our franchised
stores in a given year is calculated by removing, from the
net proceeds from our franchised stores’ product sales, as
recorded in our system, (i) our franchised stores’ total
cost of ingredient supplies, being our franchisees’
procurement amount for the goods purchased from us, (ii)
our franchised stores’ rental cost as recorded in our
system based on the numbers reported to us by our
franchisees, (iii) our franchised stores’ total labor cost
being the actual salary cost as reported to us by our
franchisees, or store-specific estimates, and (iv) our
franchised stores’ total estimated utility and
miscellaneous expenses, which are store-specific
estimates.
For the above calculations, we rely on our franchised
stores who report to us their rental cost and, in some
cases, labor cost. We have cross-checked the rental cost
against our record of the stores’ lease agreements and
cross-checked the labor cost against the stores’ scale of
operation (as measured by GMV). However, we are not
able to independently verify the franchised stores’ actual
rental and labor cost paid
“franchisees’ per-store
operating profit margin ”
calculated by dividing our franchisees’ per-store
operating profit by their net proceeds from product sales,
as recorded in our system
“GMV” gross merchandise value
GLOSSARY OF TECHNICAL TERMS
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“HPP” high pressure processing, a food processing technique
that helps retain the rich and fresh flavors of ingredients
“key opinion leader ”o r“ KOL” an influential individual on a social platform that
consumers trust with purchasing decisions and popular
opinions
“new first-tier cities ” Chengdu, Xi’an, Wuhan, Suzhou, Zhengzhou,
Chongqing, Hangzhou, Nanjing, Tianjin, Changsha,
Dongguan, Ningbo, Hefei, Kunming and Qingdao
“per-store GMV ” calculated by multiplying the per-store daily GMV by the
number of days in the relevant period. The number of
days for the years ended December 31 is 365 days, and
the number of days for the nine months ended September
30 is 274 days. The per-store daily GMV is calculated by
dividing the total GMV generated by our stores in a given
period by the aggregate of the number of days that each
of our stores could be open for business in the given
period, which is measured by the number of days from (i)
the latter of a store’s launch day and the first day of the
year, to (ii) the earlier of a store’s closure day and the last
day of the period. Launch day refers to the first day a
newly launched store opens for business
“per-store number of cups sold ” calculated by multiplying the per-store daily number of
cups sold by the number of days in the relevant period.
The number of days for the years ended December 31 is
365 days, and the number of days for the nine months
ended September 30 is 274 days. The per-store daily
number of cups sold is calculated by dividing the total
number of cups sold by our stores in a given period by the
aggregate of the number of days that each of our stores
could be open for business in the given period, which is
measured by the number of days from (i) the latter of a
store’s launch day and the first day of the period, to (ii)
the earlier of a store’s closure day and the last day of the
period. Launch day refers to the first day a newly
launched store opens for business
“presence ” in the context of discussing our regional densification
strategy, establishing “presence” in a province refers to at
least 10 “ Good me ” stores opened in the province
GLOSSARY OF TECHNICAL TERMS
–4 1–


--- page 52 ---
“province(s) ” unless stated otherwise, means China’s province-level
regions (ਜ) according to the Ministry of Civil
Affairs of the PRC
“repurchase rate ” calculated by dividing, among those that had become our
registered members before the first day of a given period,
(i) the number of our members that placed at least two
orders through our mini programs or over the counter in
a given period, by (ii) the number of our active members
in the same period
“same-store GMV growth ” the percentage difference in GMV generated by same
stores between a given period and the corresponding
period in the previous year, or the prior period. Same
stores are stores that have been launched prior to the first
day of the prior period and have not been permanently
closed as of the last day of the given period
“second-tier cities ” Foshan, Shenyang, Jinan, Wuxi, Xiamen, Fuzhou,
Wenzhou, Jinhua, Harbin, Dalian, Guiyang, Nanning,
Quanzhou, Shijiazhuang, Changchun, Nanchang,
Huizhou, Changzhou, Jiaxing, Xuzhou, Nantong,
Taiyuan, Baoding, Zhuhai, Zhongshan, Taizhou, Linyi,
Weifang, Shaoxing and Y antai
“store(s) ”o r“ our stores ” in the context of describing our store network, “stores” or
“our stores” include our franchised stores and company-
operated stores, unless explicitly stated otherwise
“third-tier cities ” Anqing, Anyang, Bengbu, Cangzhou, Changde,
Chaozhou, Chuzhou, Dezhou, Fuyang, Ganzhou, Guilin,
Haikou, Handan, Hengyang, Heze, Hohhot, Huai’an,
Huanggang, Huzhou, Jiangmen, Jieyang, Jingzhou,
Jining, Jiujiang, Langfang, Lanzhou, Lianyungang,
Liaocheng, Liuzhou, Lu’an, Luoyang, Mianyang,
Nanchong, Nanyang, Ningde, Putian, Qingyuan, Sanya,
Shangqiu, Shangrao, Shantou, Suqian, Suzhou, Tai’an,
Taizhou, Tangshan, Urumqi, Weihai, Weinan, Wuhu,
Xiangyang, Xianyang, Xingtai, Xinxiang, Xinyang,
Y ancheng, Y angzhou, Yichang, Yichun, Yinchuan,
Y ueyang, Zhangzhou, Zhanjiang, Zhaoqing, Zhenjiang,
Zhoukou, Zhumadian, Zhuzhou, Zibo and Zunyi
“towns and townships ” when used together, towns and townships refer to all of
China’s township-level administrative areas excluding
subdistricts ( ൑༸), which are typically located in
relatively developed, downtown urban areas
GLOSSARY OF TECHNICAL TERMS
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Certain statements in this document are forward-looking statements that are, by their
nature, subject to significant risks and uncertainties. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions, future events, or
performance (often, but not always, through the use of words or phrases such as “will,”
“expect,” “anticipate,” “estimate,” “believe,” “going forward,” “ought to,” “may,” “seek,”
“should,” “intend,” “plan,” “projection,” “could,” “vision,” “goals,” “aim,” “aspire,”
“objective,” “target,” “schedules” and “outlook”) are not historical facts, are forward-looking
and may involve estimates and assumptions and are subject to risks (including but not limited
to the risk factors detailed in this document), uncertainties and other factors some of which are
beyond our Company’s control and which are difficult to predict. Accordingly, these factors
could cause actual results or outcomes to differ materially from those expressed in the
forward-looking statements.
Our forward-looking statements have been based on assumptions and factors concerning
future events that may prove to be inaccurate. Those assumptions and factors are based on
information currently available to us about the businesses that we operate. The risks,
uncertainties and other factors, many of which are beyond our control, that could influence
actual results include, but are not limited to:
 our goals and strategies;
 our future business development, financial condition and results of operations;
 expected changes in our revenues, expenses or expenditures;
 the expected growth of the freshly-made beverage market in China;
 our expectations regarding demand for and market acceptance of our products and
services;
 our expectations regarding our relationship with franchisees;
 competition in our industry;
 general economic and business conditions in China and elsewhere;
 government policies and regulations relating to our industry;
 the outcome of any current and future legal or administrative proceedings; and
 all other risks and uncertainties described in the section headed “Risk Factors.”
FORW ARD-LOOKING STATEMENTS
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Since actual results or outcomes could differ materially from those expressed in any
forward-looking statements, we strongly caution investors against placing undue reliance on
any such forward-looking statements. Any forward-looking statement speaks only as of the
date on which such statement is made, and, except as required by the Listing Rules, we
undertake no obligation to update any forward-looking statement to reflect events or
circumstances after the date on which such statement is made or to reflect the occurrence of
unanticipated events. Statements of or references to our intentions or those of any of our
Directors are made as of the date of this document. Any such intentions may change in light
of future developments.
All forward-looking statements in this document are expressly qualified by reference to
this cautionary statement.
FORW ARD-LOOKING STATEMENTS
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An investment in our Shares involves significant risks. Y ou should carefully
consider all of the information in this document, including the risks and uncertainties
described below, before making an investment in our Shares. The following is a
description of what we consider to be our material risks. Any of the following risks could
materially and adversely affect our business, financial condition, and results of
operations. The market price of our Shares could significantly decrease due to any of
these risks, and you may lose all or part of your investment.
These factors are contingencies that may or may not occur, and we are not in a
position to express a view on the likelihood of any such contingency occurring. The
information is given as of the Latest Practicable Date unless otherwise stated, will not be
updated after the date hereof, and is subject to the cautionary statements in “Forward-
looking Statements” in this document.
We believe there are certain risks and uncertainties involved in our operations, some of
which are beyond our control. We have categorized these risks and uncertainties into: (i) risks
relating to our business and industry; (ii) risks relating to doing business in the country where
we operate; and (iii) risks relating to the Global Offering. Additional risks and uncertainties
that are presently not known to us or not expressed or implied below or that we currently deem
immaterial could also harm our business, financial condition and operating results. Y ou should
consider our business and prospects in light of the challenges we face, including the ones
discussed in this section.
RISKS RELATING TO OUR BUSINESS AND INDUSTRY
Our future growth depends on our ability to expand and operate our store network. We
may not be able to successfully enter new geographical markets or expand our presence
in the existing markets.
During the Track Record Period, we generated substantially all of our revenue from the
sales of goods and equipment and the provision of management services to our franchisees.
Accordingly, our future growth depends significantly on our ability to operate and expand our
store network. We may not be successful in expanding our store network.
In terms of new geographical markets, any additional new markets we might enter in the
future could present different competitive conditions, consumer preferences, spending patterns,
and regulatory and compliance requirements. We cannot guarantee that the actual market
demands of new regions will align with our expectations or that we will open new stores in
these markets in a timely manner or at all. To increase our brand awareness in new
geographical markets, we might need to invest more in advertising and promotional activities
than originally planned. If we cannot successfully enter these new geographical markets or if
there is a delay in our expansion in these markets, our business, financial position, and results
of operations might be adversely affected.
RISK FACTORS
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--- page 56 ---
For existing geographical markets, as we increase our store density in select provinces,
we will also need to enhance our supply chain infrastructure in these provinces to meet the
growing market demand, while maintaining the high quality and freshness of the ingredients
for our beverages. As a result, we might incur additional operating expenses as we continue our
expansion in these markets. Further, we may also encounter difficulties during our expansion.
For example, we may face intense competition from other brands. In the event that we fail to
maintain our relationship with existing franchisees or our competitors offer more favorable
terms, our existing franchisees may choose to instead collaborate with other brands, which
may, in turn, negatively affect our market share in the existing markets. If our expansion in the
existing markets is not cost-effective or fails to achieve positive results, it could negatively
impact our business, financial position, and results of operations.
The pace of our new store openings is affected by the overall growth and competitive
landscape of the freshly-made beverage market and freshly-made tea store market in China.
Weak market conditions and increased competition may limit our ability to expand our store
network. In the nine months ended September 30, 2024, the freshly-made tea store market
experienced a slowdown in growth, which contributed to us opening fewer new stores during
this period. If we and our franchisees over expand the store network, the franchised stores’
operating profit may be negatively affected and our reputation, business, financial position and
results of operations could be negatively affected.
All the factors mentioned above, whether individually or in combination, might delay or
hinder our store network expansion. Moreover, our expansion could place considerable
demands on our management and our operational, technological, and financial resources. If we
cannot manage these demands, our business, financial position, and results of operations could
be negatively affected.
A recent general industry slowdown and increased industry competition has caused us to
slow the pace of our new store openings and led to the decreases of some of our stores’
operating metrics. If such trend continues, our reputation, business, financial position
and results of operations could be negatively affected.
In the nine months ended September 30, 2024, the freshly-made tea store market
experienced a slowdown in growth and there was increased competition within the industry
with some players launching low-priced products. As a result, we opened new stores at a slower
pace in the nine months ended September 30, 2024 than we did in 2023. In addition, some of
our stores’ operating metrics, including same-store GMV , per-store GMV , per-store number of
cups sold, average GMV per order, average number of orders per store per day, and average
daily GMV per newly-opened franchised stores, experienced decreases. We also experienced
a larger number of store closures and terminated our relationship with a larger number of
franchisees in the nine months ended September 30, 2024. While we expect China’s economy
and consumer spending to experience steady growth and the freshly-made tea store market to
continue to expand in the medium and long term, we cannot assure you that the trend observed
in the nine months ended September 30, 2024 will not persist, at least in the short term. If such
trend continues, the pace of our new store openings and our stores’ operating metrics could be
adversely affected, which could further impact our reputation, business, financial position and
results of operations.
RISK FACTORS
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Our business relies heavily on consumer taste, consumption trends, preferences and
perceptions of freshly-made tea beverages and we might not always accurately predict
and timely adapt to market trends and consumer preferences.
Consumer taste, consumption patterns, and perceptions greatly influence the growth of
the freshly-made tea beverage market in China. Since our store sales directly affect our revenue
and profit, any shift in consumer preferences or a decrease in the consumption of freshly-made
tea beverages in China could decrease our store sales, harming our business.
While we consistently monitor market trends to develop new products and enhance
existing ones, consumer tastes change frequently. Our offerings may not always align with their
preferences. We cannot guarantee our ability to consistently adapt to market trends and
evolving consumer tastes. Any failure to predict, understand, and adjust to these changes could
result in decreased consumer interest and demand for our products, which could negatively
impact our business, financial standing, and operational results.
Consumer health or dietary preferences, like concerns over calorie, caffeine, and sugar
intake, could also affect our business. For example, there is a growing consciousness about
calorie intake, which is why we introduce products with reduced sugar to cater to those seeking
healthier beverage choices. Similarly, as caffeine becomes a point of consideration for many,
we offer beverages with varied caffeine content to suit those seeking both low and
high-caffeine options. In light of the shift in consumer preference towards fresh ingredients,
our fruit tea beverages are made with fresh fruits to bring out the natural flavors of fruits.
However, even if we accurately predict and adjust to these shifts, we cannot assure that our new
products will meet their preferences. If we cannot timely adapt to changes in consumer health
or dietary preferences, or if competitors address these changes more timely or effectively, our
business and financial health could suffer. Negative publicity, whether related to our products
or not, concerning the health effects of ingredients, could also adversely impact our business
and operational results.
We may not be able to maintain or increase the sales and profitability of our stores.
The sales and profitability of our stores would also affect the growth of our business and
remain as key factors affecting our revenue and profit. Factors such as diverse product
offerings, quality of products, service quality of staff, consumer experience, delivery options
and prime store locations with high consumer traffic can influence these outcomes.
Furthermore, the operations of our franchisees can considerably impact our brand reputation
and store sales. There is no guarantee that our stores’ sales growth and profitability will
consistently align with our expectations. For the nine months ended September 30, 2024, in
light of the general industry slowdown and increased competition, our same-store GMV
decreased by 0.7% as compared to the same period of 2023. In addition, between the nine
months ended September 30, 2023 and 2024, our per-store GMV decreased from RMB1.9
million to RMB1.8 million, per-store daily GMV decreased from RMB6.8 thousand to RMB6.5
thousand, per-store number of cups sold decreased from 114.2 thousand to 105.8 thousand,
per-store daily number of cups sold decreased from 417 to 386, average GMV per order
RISK FACTORS
–4 7–


--- page 58 ---
decreased from RMB28.2 to RMB27.7, average number of orders per store per day decreased
from 241 to 234, and average daily GMV per newly-opened franchised store decreased from
RMB5.8 thousand to RMB5.2 thousand. Should the above metrics fail to meet our expectations
or experience a downturn, our business, financial status, and results of operations could be
materially and adversely affected. Furthermore, our brand value may be harmed and we may
encounter difficulties in attracting new franchisees.
Moreover, our strategy to broaden our footprint and densify our store network in existing
geographical markets may inadvertently lead to competition among our franchisees.
Establishing new stores near existing ones might result in the diversion of consumer traffic,
potentially diminishing the sales performance of our established locations. In addition, it may
not be profitable for the franchisees to open new stores in certain locations where there are
sufficient stores from our competitors. While we currently have measures in place to evaluate
the potential cannibalization effect, there is no guarantee that these measures are, or can always
be, effective. As our expansion continues, these competitive pressures could dampen our
overall sales growth, thereby affecting our business, financial condition, and operational
results.
We operate in a highly competitive and rapidly changing market in China. We face
intense competition in China’s freshly-made beverage market. Any failure to compete
effectively might negatively impact our market share and profitability.
The freshly-made beverage market in China is highly competitive and rapidly evolving. We
face intense competition from other freshly-made tea store brands in various areas, including
product development and innovation, product quality and consistency, value for money, store
location, consumer experience, and consumer acquisition and retention. In particular, there is
a significant number of tea brands in China amidst low product differentiation, and many stores
in the freshly-made tea store market are in close proximity to each other. In the nine months
ended September 30, 2024, the growth of China’s freshly-made beverage market slowed down
compared with the same period in 2023. As a result, the growth rate of our GMV slowed from
37.2% between 2022 and 2023 to 20.4% between the nine months ended September 30, 2023
and 2024. We may fail to compete effectively against, or be outperformed by, other
freshly-made tea stores. For example, our competitors might have more financial,
technological, marketing, and other resources than we have. They might be more experienced
or able to devote greater resources to develop and promote their products and expand to new
areas. Any competitive measures they take in response to our expansion could hinder our
growth and adversely affect our sales and results of operations. Additionally, if we are unable
to attract and retain our consumers with quality beverages, develop and launch new products
that cater to our consumers’ preferences, continually enhance our consumer experience, or
continue to build brand awareness, consumers might choose products and services offered by
our competitors, which could adversely affect our business, financial condition, and results of
operations.
RISK FACTORS
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--- page 59 ---
Furthermore, intense competition might reduce our market share and profitability and
require us to increase our sales and marketing efforts and capital commitment in the future.
This could negatively affect our results of operations. There is no assurance that we will
continue to expand or retain our consumer base in the future against current or future
competitors. If we fail to compete effectively, our business might suffer from reduced market
share and consumer traffic, and our financial condition and results of operations could be
materially and adversely affected.
Any failure by us, our franchisee, suppliers or other business partners to maintain food
safety and quality might materially and adversely affect our brand, business, and
financial performance.
Ensuring the food safety and quality of our products is vital to our success and reputation.
In particular, our business is susceptible to food or beverage-borne illnesses, health epidemics,
and other outbreaks. Given the extent of our operations and the growth of our store network,
upholding food safety and quality of our products significantly depends on the effectiveness of
our quality control system. This effectiveness is contingent on several factors: the design of our
quality control system, our ability to ensure that our franchisees, staff in our stores, third-party
suppliers, or other business partners, such as warehousing and logistics service providers,
involved in our operations adhere to our quality assurance policies and guidelines, and our
capability to monitor potential violations of our quality control system effectively. For more
information, refer to “Business — Quality Control and Safety Protocols.”
However, there is no guarantee that our quality control system will always be effective,
nor can we ensure that we can identify all flaws in our quality control system in a timely
manner. We might not be able to ensure that our employees, franchisees, staff in franchised
stores, third-party suppliers, or other business partners consistently adhere to our internal
policies and guidelines. In addition, we cannot guarantee that our internal controls and training
will be fully effective in preventing food or beverage-borne illnesses. The quality of goods or
services provided by these parties can be influenced by factors beyond our control. Our
reliance on third-party suppliers, franchisees and staff in the franchised stores may subject us
to the risk of food or beverage-borne illness incidents, as the operations of third-party suppliers
and franchised stores are outside our control. There is also a possibility of multiple locations
being affected instead of just one store. Moreover, the operations of our stores involve the
handling, processing and storage of food and beverages. There is no assurance that these
procedures will be completed properly, which may subject our stores to risks of food or
beverage-borne illnesses. Any significant breakdown or deterioration of our quality control
systems, or any failure to prevent food safety issues might materially and adversely impact our
reputation, financial condition, and results of operations. We may be generally responsible for
compensation on consumers’ loss even if the contamination of food and beverage is not caused
by us. Therefore, we may also be held liable if our employees, franchisees, suppliers or other
business partners fail to comply with applicable food-safety related rules and regulations.
While we may seek indemnification from the responsible parties afterwards, the
indemnification may not be sufficient and our reputation could still be adversely affected.
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There have been, and there might continue to be, negative incidents and publicity related
to food safety issues in our stores. In addition, instances or reports, whether true or not, of food
or beverage-safety issues such as food or beverage-borne illnesses, tampering, adulteration,
contamination, or mislabeling during growing, manufacturing, packaging, transportation,
storage, or preparation, failures in employee or store staff hygiene and cleanliness, or improper
employee or store staff conduct have previously severely damaged the reputations of
companies in the food and beverage sectors. Any report linking us to such instances could
significantly reduce our sales and could potentially lead to liability claims, litigation, and/or
temporary store closures. Furthermore, issues of food or beverage safety, even those involving
only the stores of our competitors or suppliers (regardless of whether we currently or
previously used those suppliers), could, due to resulting negative publicity about us or the
freshly-made beverage industry in general, adversely affect our sales on a regional or national
level. Consequently, we could face public scrutiny primarily concerning the food safety and
quality of our products. Critiques, complaints, and negative media coverage, regardless of their
veracity, could result in unfavorable publicity. This might result in damage to our reputation
and brand and could negatively affect our business and prospects. A decline in consumer traffic
due to food or beverage-safety concerns, negative publicity, temporary store closures, product
recalls, or food or beverage-safety claims or litigation could materially harm our business and
operational results.
Our business depends significantly on market recognition of our “ Good me ” brand, and
any failure to maintain, protect and enhance our brand could materially and adversely
impact our business and results of operations.
We believe that the success of our business depends substantially on the recognition of
our “ Good me ” brand among consumers, which has helped us manage our costs of consumer
acquisition and retention and has also contributed to the growth and success of our business.
Therefore, maintaining, protecting and enhancing the recognition of our brand is vital to our
business and competitive advantage in the industry. Any actual or perceived contamination,
spoilage or other product mislabeling or tampering may lead to the erosion of our brand and
damage our brand value, regardless of its merits.
Many factors, some of which are beyond our control, are important to maintaining,
protecting and enhancing our brand. These factors include but not limited to our ability to:
 maintain the quality and attractiveness of our existing products and develop new
products that address consumers’ needs;
 deliver a pleasant consumer experience;
 enhance brand awareness through marketing and brand promotion activities;
 maintain mutually beneficial relationship and retain favorable terms with our
franchisees, suppliers, service providers and other business partners;
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 ensure compliance with relevant laws and regulations;
 compete effectively against current and future competitors; and
 preserve our reputation and goodwill, especially in the event of any negative
publicity on our products, services, data security, or other issues affecting us or
China’s food and beverage sector in general.
Our brand’s strength is vital as we expand our store network and increase our
geographical presence. Maintaining consistent product quality and consumer trust becomes
increasingly challenging with this growth. If the public perceives, even incorrectly, that we or
other industry participants do not uphold high standards, our reputation could suffer, thus
reducing our brand value. This perception could hinder our ability to attract and retain
customers, which would negatively impact our business and financial outcomes.
Furthermore, we have observed instances where others imitate our brand, potentially
misleading consumers. While we are not directly accountable for the actions of these imitators,
any inferior products sold under misleadingly similar names could tarnish our brand image.
This deception could lead to decreased financial performance and increased efforts and costs
to combat such imitations. There is no guarantee that the measures that we currently have in
place to combat imitations, such as (i) procedures for consumers to report unauthorized uses
of our brand or counterfeit products and (ii) having our legal team monitor and handle
imitations and counterfeiting issues, are or will be always effective. Any failure to address
these challenges could significantly affect our business’s overall health. See also “— We may
not be able to adequately protect our intellectual property, which could harm our brand value
and adversely affect our business and results of operation.”
Our extensive store network consists primarily of franchised stores that are operated by
third parties. We face certain risks associated with the use of franchise business model.
We primarily operate our business under the franchise model. As of December 31, 2021,
2022 and 2023 and September 30, 2024, we had 2,381, 2,949, 4,614 and 4,842 franchisees,
respectively, and 5,689, 6,664, 8,995 and 9,771 franchised stores, respectively. Therefore, our
business operation depends heavily on the success of, and cooperation with, our franchisees.
The results of our operations are also significantly influenced by the performance of our
franchised stores.
We face a number of risks associated with the use of our franchise business model, each
of which may impact our revenue generation, harm our brand image, and may adversely affect
our business and results of operations. These risks include, among others:
 Revenue contribution of our franchised stores . During the Track Record Period, our
revenue was significantly contributed by our franchised stores, including the
revenue generated from the sales of goods and equipment and franchise management
services. Our financial performance is highly dependent on our franchisees’ sales
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growth. If they do not achieve expected sales, our revenue and profit margins could
be negatively affected. Moreover, if sales trends decline for our franchisees, it might
result in store closures, delayed payments, or reduced payments to us.
 Ability and willingness of franchisees to operate stores . The success of our store
network expansion largely depends on the willingness and ability of our franchisees
to implement major initiatives. These initiatives, such as marketing and promotional
activities, may involve additional cost and might be more beneficial in the long
term. There is no assurance that our franchisees will always implement these
initiatives, align with our visions or prioritize long-term benefits.
 Management of franchisees . Our franchisees generally operate their businesses
independently and are responsible for the day-to-day operation of their stores. Thus,
the success and quality of a franchised store are largely dependent on the franchisee.
We cannot guarantee that our management of franchisees will always be effective.
If our franchisees do not fulfill their obligations in accordance with their franchise
agreements with us or our internal policies or guidelines, or if they fail to
successfully operate stores consistent with our standards, our brand’s image and
reputation could suffer, which in turn could hurt our business and results of
operation. Our contractual rights and remedies might be limited, potentially costly
to exercise, or subject to litigation.
 Litigation regarding franchisees . Our franchisees face various litigation risks,
including consumer claims, personal-injury claims, environmental claims, and
employee allegations of improper termination. Even though we are not directly
responsible for these litigation costs, they might increase the costs for our
franchisees and affect their profitability. This could limit funds available for fees to
us, renovations, store development, or the renewal of their agreements with us,
which in turn could adversely affect our business and operating results and may have
negative impact on our brand image.
If any of our franchisees defaults under our agreements or commits misconducts, they
may not be in a position to compensate us sufficiently for losses that we suffered as a result
of such defaults or misconducts. Further, the bankruptcy of a franchisee could also
substantially impact our ability to collect payments from our franchisees. While we may take
action to terminate our relationship with these franchisees, it is not always possible to promptly
identify and address problems. Consequently, our brand image and reputation could be
compromised, leading to a material adverse impact on our operational results.
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Our operating history might not reflect our future growth or financial results. If we fail
to manage our growth, our business and prospects may be materially and adversely
affected.
We have achieved rapid growth with 9,778 stores covering over 200 cities across all city
tiers as of September 30, 2024. However, our operating history may not serve as an adequate
basis for evaluating our prospects and operating results, and our historical growth may not be
indicative of our future growth or financial performance. There is no assurance that we will be
able to maintain our historical growth rates in future periods. For example, we opened a
relatively large number of new stores in 2021 and 2023 and relatively fewer new stores in 2022
and the nine months ended September 30, 2024. In particular, we opened 1,218 stores and
closed 441 stores in the nine months ended September 30, 2024. The speed of our new store
openings may fluctuate from time to time, due to factors such as changing market conditions
and adjustments to our strategic focus from increasing scale to improving operating efficiency.
Our growth rates may decline for a variety of reasons, and some of them are beyond our
control, including prevailing dietary preferences and perceptions of consumers, increasingly
intense competition, the emergence of alternative business models, and changes in government
policies or general economic conditions. We will continue to expand our store network and
enrich our product offerings to further increase our consumer base and enhance the consumer
experience. However, our expansion is subject to uncertainties, and our business may not grow
at the rate we expect for the reasons stated above. If our growth rates decline, investors’
perceptions of our business and prospects may be adversely affected, and the market price of
our Shares could decline.
The expansion of our store network may place substantial demands on our management
and our operational, technological, labor, and other resources. Our expansion will also place
significant demands on us to maintain consistent food and service quality and preserve our
reputation to ensure that our brand will not suffer as a result of any deterioration, whether
actual or perceived, in the quality of our food or services. Our continued success also depends
on our ability to recruit, train, and retain additional qualified management, administrative,
sales, and marketing personnel, particularly as we expand into new markets. In addition, we
need to continue to manage our relationships with our franchisees, consumers, suppliers,
service providers, and other business partners. These endeavors will require substantial
management attention and efforts and will require significant additional expenditures. We
cannot assure you that we will be able to manage any future growth effectively and efficiently,
and any failure to do so may materially and adversely affect our ability to capitalize on new
business opportunities. This, in turn, may have a material adverse effect on our business,
financial condition, and results of operations.
Pandemics, extreme weather conditions, natural disasters, pests and other natural
conditions and other unexpected events may create substantial volatility in our business
and results of operations.
Our business operations are vulnerable to extreme weather conditions such as
windstorms, hailstorms, drought, temperature extremes and typhoons, natural disasters such as
earthquakes, forest fires and floods, and other events that may affect our supplies. Our business
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is also dependent on proper warehousing and prompt delivery and transportation of products
to our stores. Perishable fruits and other food ingredient may deteriorate due to malfunctioning
of refrigeration facilities caused by power failures and other events. Certain events, such as
adverse weather conditions, natural disasters, severe traffic accidents and delays and labor
strikes, could also lead to delayed or lost deliveries of products to our stores. In addition, fires,
floods, earthquakes and terrorist attacks may lead to evacuations and other disruptions in our
operations, which may also prevent our stores from providing products and services to
consumers, thereby affecting our business and damaging our reputation. Any such event could
materially and adversely affect our business operations and results of operations.
In addition, pandemics may also cause a volatility for our business and results of
operation. For instance, during the Track Record Period, our store operations and financial
condition were negatively impacted by the COVID-19 pandemic. The supply of our goods and
equipment was also affected due to the associated disruptions in the upstream supply chain and
logistics services. We reduced the prices of certain goods supplied to our franchisees to support
their operations during COVID-19. This adjustment resulted in a slight dip in our overall gross
profit margin from 30.0% in 2021 to 28.1% in 2022. We also slowed down our store expansion
efforts in 2022. We opened 1,317 new stores in 2022, as compared to 1,808 new stores in 2021.
See “Financial Information — Impact of COVID-19.” These events are beyond our control, and
we cannot assure you that similar events will not happen in the future. Our future responses to
these events and other preventative measures may not always be effective.
We face the risk of fluctuations in the cost, availability and quality of our supplies, which
could adversely affect our results of operations.
Our supplies, including ingredients for our tea beverages and coffee beverages, such as
fresh fruits, fresh juices, tea leaves and dairy products, are crucial to the operation of our
stores. Any fluctuation in the market prices of our supplies may result in material changes in
our cost of goods and equipment, which, in turn, could adversely affect our business and results
of operations. For example, the consumer price index, or CPI, for fruits in China increased
from 102.8 in 2021 to 112.9 in 2022. In addition, the CPI for tea in China slightly increased
from 101.1 in 2021 to 102.4 in 2022, and the CPI for dairy products witnessed a minor decrease
from 101.8 in 2021 to 100.8 in 2022. For more details, see “Industry Overview — Cost of Raw
Materials and Labor — Cost of Raw Materials.” Our cost of sales of goods and equipment
accounted for 67.3%, 68.4% and 65.0% of our total revenue in 2021, 2022 and 2023,
respectively, and 65.3% and 65.6% of our total revenue in the nine months ended
September 30, 2023 and 2024, respectively. In addition, as fruits and most of our supplies have
relatively short shelf-life, frequent and timely supply of these products remains important to
our operations. In particular, for certain seasonal fruits whose prices may vary significantly
throughout the year, we also preemptively limit the extent of the fluctuations by locking in our
procurement quantity and purchase prices of some of our ingredients in our procurement
agreement with suppliers, sometimes as far as one year in advance. However, there is no
guarantee that these measures would be effective to secure sufficient supplies or to control our
cost of goods. Shortages of one or more of the supplies for our menu items could force our
stores to remove items from the menus, which may cause consumers to purchase similar
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products from our competitors. Furthermore, the cancellation of our supply arrangements by
our suppliers or the disruptions, delay or inability of these suppliers to deliver our supplies may
materially and adversely affect our results of operations if we fail to timely secure alternative
sources. Lack of availability of these products, whether due to shortages in supply, delays or
interruptions in processing, failure of timely delivery or otherwise, could interrupt our
operations and adversely affect our financial results.
In addition, the quality and safety of the products offered in our stores is a key factor to
our success. If we fail to effectively implement quality control measures on the sourcing,
storage and the use of our supplies, the quality of our products would be negatively affected
and we may lose some of our existing consumers and fail to attract new consumers, which may
materially and adversely affect our results of operations.
Our business operation depends on third-party suppliers and other business partners to
provide supplies and services to us, and the loss of any of these suppliers or other business
partners, or any significant interruption in the operations of our third-party suppliers
and other business partners may negatively impact our business.
Our business operation depends on third-party suppliers and other business partners to
provide supplies and services to us. For the years ended December 31, 2021, 2022 and 2023
and the nine months ended September 30, 2024, purchases from our five largest suppliers in
each period amounted to RMB601.3 million, RMB751.7 million, RMB810.8 million and
RMB756.0 million, representing 18.1%, 20.9%, 16.5% and 18.8% of our total purchase amount
for the respective periods. For details of our supply chain management, see “Business —
Supply Chain Management.” Any interruptions to their operations, any failure of our suppliers
to accommodate our fast business growth, any termination or suspension of our supply
arrangements, any change in cooperation terms, any deterioration of cooperative relationships,
or any disputes with our third-party suppliers or other business partners may materially and
adversely affect our results of operations. For instance, a significant interruption in the
operations of our suppliers could cause a delay or temporary shortage of supplies for our tea
beverages. A significant interruption in the operations of our internet service provider could
impact the operation of our online operations. In addition, our competitors may be more
effective in providing incentives to our suppliers to prioritize their orders in case of supply
shortage. We cannot assure you that we would be able to find replacement suppliers with
commercially reasonable terms or on a timely manner. In the event of a loss of any suppliers
or other business partners, our operations could be interrupted and we may incur additional
costs in identifying other suitable suppliers or business partners. If we could not solve the
impact of the interruptions of the operations of or cooperation with our third-party suppliers
or other business partners, our business operations and financial results may be materially and
adversely affected.
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We may not be able to effectively manage our inventory, which may materially and
adversely affect our results of operations, financial condition and liquidity.
Our inventories mainly include ingredients such as fresh fruits, fruit juices, tea leaves,
dairy and sugar products, and packaging materials. Managing our inventory effectively is
essential to our operations. We base our purchasing decisions on demand forecasts for varied
goods and work to manage our inventory accordingly. However, this demand can shift between
the time of order and the intended sale date. Multiple factors can influence this demand,
including seasonality, product launches, pricing strategies, potential product defects, and
evolving consumer behaviors and preferences. It is also possible that our franchisees may not
order products in the quantities we have predicted. In addition, when we procure a new kind
of fresh fruit for a new product, our demand forecasts may not align with the consumer
acceptance of our new products and it may be challenging for us to accurately predict demand
for the fruit.
As we continue to enrich our product offerings, we foresee an increase in ingredient
variety for our tea beverages, complicating our inventory management process. There is no
certainty that our inventory levels will always match consumer and franchisees’ demands,
which may adversely affect our sales. Ineffectual inventory management could expose us to
risks like inventory obsolescence, a decline in inventory value, and significant inventory
write-offs. These challenges may materially and adversely affect our business, results of
operations and financial condition. If we miscalculate product demand, or if there are lapses
in our suppliers’ timely provision of quality ingredients, inventory shortages might ensue.
These shortages could erode brand loyalty, lead to revenue loss, and jeopardize our business
reputation, negatively affecting our operations, financial position, and overall liquidity.
We may incur significant costs in connection with our marketing and promotional efforts,
which may not be as effective as expected and therefore negatively impact our results of
operations.
We continuously invest in comprehensive marketing and promotional activities, spanning
both digital and traditional channels, to promote our products. Following our regional
densification strategy, we typically consolidate resources to build up our brand awareness
region by region. The effectiveness of our marketing and promotional efforts directly
influences our operating results. In 2021, 2022 and 2023, our advertising and promoting fees
amounted to RMB40.9 million, RMB36.6 million and RMB62.5 million, representing
approximately 0.9%, 0.7% and 0.8% of our revenue in these years, respectively. In the nine
months ended September 30, 2023 and 2024, our advertising and promoting fees amounted to
RMB42.7 million and RMB115.9 million, representing 0.8% and 1.8% of our revenue in these
periods, respectively. We will continue to adopt and implement marketing and promotional
strategies to fortify our market standing.
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We may incur significant costs in connection with our marketing and promotional efforts.
However, we cannot guarantee that such efforts will resonate with the audience or translate into
increased sales. In addition, the dynamic nature of marketing trends in China’s consumer sector
requires us to constantly refine our marketing strategies and embrace innovative methodologies
in tune with industry shifts and consumer preference. Any failure to refine our marketing
approaches or to adapt to new or more cost-effective marketing techniques could negatively
affect our business, growth prospects and results of operations. With our continuous marketing
and promotional efforts, we expect that our advertising and promoting fees will continue to
increase in absolute amount. In addition, our crossover collaborations with third-party partners
may not always yield the anticipated outcomes. If any of the foregoing risks materializes, our
businesses and results of operations may be materially and adversely affected.
Any illegal actions or misconduct, alleged illegal actions or misconduct, or any failure or
alleged failure by employees, franchisees, staff in the franchised stores, third-party
suppliers or other business partners to provide satisfactory products or services could
materially and adversely affect our business, reputation, financial condition and results of
operations. Additionally, we may not be able to secure adequate compensation from these
parties for the damages they cause.
Our reputation and operations might be harmed by illegal conduct, unsatisfactory actions
or subpar performance by, disputes with, or grievances from our employees, franchisees, staff
in our franchised stores, third-party suppliers, service providers and other business partners,
which are beyond our control. For example, if our suppliers fail to comply with food safety or
other regulations, or experience contamination during delivery to our processing facilities or
warehouses, our operations could be interrupted, leading to potential claims against us. As we
also use third-party vehicles to fulfill our delivery needs, our business may be negatively
affected if third-party transportation service providers fail to ensure timely deliveries and
maintain the quality of our ingredients during the transportation. A franchisee or staff in a
franchised store could violate our protocols or mishandle consumer complaints. Potential
employee misconduct, including fraudulent activities and theft, poses a risk to our operations.
Additionally, any failure to adhere to our internal policies and applicable regulations might
harm our reputation and/or expose us to regulatory penalties. We had also engaged external
consultants to support our site selections when entering new markets. During the Track Record
Period, one of our external consultants, who is no longer with us, engaged in allegedly
fraudulent conduct by misrepresenting the financial prospects of our franchised stores to
parties interested in becoming our franchisees and requesting personal kickbacks for helping
such parties to become our franchisees. These actions are against our internal policies and
strictly prohibited. Upon discovering this external consultant’s actions, we promptly reported
this matter to the police and are cooperating with relevant investigations. We have also adopted
internal control policies to prevent similar issues from occurring. As of the Latest Practicable
Date, we did not have any external consultant and did not plan to engage any external
consultant. Nonetheless, any misconduct or violations of applicable laws or our internal
policies by employees, franchisees, staff in the franchised stores, third-party suppliers or other
business partners might harm our reputation and/or disrupt our business operation.
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In the event that we face claims due to the misconduct or unsatisfactory performance of
our employees, franchisees, staff in our franchised stores, third-party suppliers, service
providers, or other business partners, we may try to seek compensation from them.
Nevertheless, the amount of such compensation might be limited. If we cannot assert a claim
against these parties, or if the amounts we claim are not fully recoverable from the involved
party, we might need to cover such losses and compensation ourselves. This could materially
and adversely affect our business, financial condition, and operational results.
Any significant liability claims or consumer complaints involving our products, services
or store operations, adverse publicity or heightened regulatory scrutiny may have a
negative impact on our business and results of operation.
We face the inherent risk of liability claims or consumer complaints in our industry,
particularly given the nature of the offerings in our freshly-made tea stores. Being in the
freshly-made beverage industry, we face the risk of food safety issues, consumer complaints,
regulatory investigations or liability claims. We take these complaints seriously and endeavor
to reduce consumer complaints by implementing various remedial measures, such as
strengthening the management and supervision of our franchised stores. Nevertheless, we
cannot assure that we can successfully prevent or address all consumer complaints in a timely
manner or at all.
Publicity about our business can also attract heightened attention from the public,
regulators, and the media. Due to our large store network and ongoing business expansion, we
may face intensified regulatory and public scrutiny, particularly regarding consumer protection
and food safety issues, leading to additional legal and societal obligations. Any adverse report
about our business, financial condition, or results — whether true or not — can tarnish our
brand image, affect sales, and potentially lead to liability claims, litigation, or damages. Any
negative publicity about the freshly-made tea beverage industry in general could also adversely
affect our sales on a regional or national level. Furthermore, improper actions or statements by
our employees, endorsers, or celebrities we collaborate with could significantly harm our brand
and operations. While we strive to maintain our reputation, there is no guarantee against future
regulatory or public scrutiny, which could have a negative impact on our reputation, business,
and prospects.
Significant liability claims or consumer complaints, or adverse publicity and heightened
regulatory scrutiny involving our products, services or stores operations, may have a negative
impact on our business and results of operation. Any complaints or claims against us, even if
meritless or unsuccessful, may divert management attention and other resources from our
business and adversely affect our business and operations. Consumers may lose confidence in
us and our brand, which may adversely affect our business and results of operations.
Furthermore, adverse publicity including but not limited to negative online reviews on social
media platforms, industry findings or negative public or medical opinions about the health
effects of consuming tea or coffee beverages, media reports related to food quality, safety,
public health concerns, illness, injury or government, whether or not accurate, and whether or
not concerning our products, can adversely affect our business, results of operations and
reputation.
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Unexpected or prolonged disruptions in our processing facilities, warehouses or freight
vehicles may adversely affect our business operations.
Our timely delivery of goods and equipment to our stores relies heavily on the smooth
operation of our processing facilities, warehouses, and freight vehicles. As of September 30,
2024, we operated three processing facilities dedicated to fruit juice and tea leaves processing,
and 22 warehouses with cold storage spaces supporting various temperature ranges.
Unexpected and prolonged disruptions, such as water, electricity shortages, or fires, can
seriously impact our business. If we are unable to swiftly restore or relocate the affected
facilities, our business operations will be materially and adversely interrupted. While we have
put prevention measures in place, there is no guarantee of their effectiveness. If our processing
facilities or any of our warehouses were to experience a significant incident, we might suffer
product losses, incur substantial costs for restoration or relocation, and potentially face legal
repercussions for not adhering to applicable laws and regulations. Furthermore, if such incident
leads to damages incurred by third parties, and we are deemed partially or wholly responsible,
we might also face compensation liabilities. As a result, our business operation, results of
operations and financial condition may be adversely affected.
Given the fragile and perishable nature of our tea beverage ingredients, we have set strict
temperature guidelines for transportation. Our logistics capabilities ensure the safe and
efficient transfer of products between the warehouses and from warehouses to stores. As of
September 30, 2024, we directly owned and operated over 360 vehicles. If any significant
breakdowns, especially concerning temperature or humidity controls, were to occur over an
extended period, it could compromise the freshness and quality of the stored ingredients.
Delays caused by traffic congestion, accidents, or other unforeseen incidents could also disrupt
our logistics operations and impact timely deliveries. In the event of equipment malfunctions,
not only might we need to discard compromised products, but equipment repairs or upgrades
can be costly and time-consuming. These challenges in logistics could adversely affect our
business operations and financial results.
We depend on a limited number of third-party service providers for order delivery to our
consumers.
We offer our order delivery options primarily through two channels: orders directly
placed on and fulfilled by third-party online delivery platforms, and delivery orders placed via
our mini programs and fulfilled by third-party delivery couriers. Approximately 241.5 million,
373.9 million, 510.8 million and 418.3 million cups were sold through delivery services in
2021, 2022, 2023 and the nine months ended September 30, 2024, respectively, representing
35.5%, 43.0%, 43.1% and 42.3% of the total cups sold in these periods, respectively.
Our delivery option is heavily reliant on a few service providers, notably two leading
third-party delivery platforms in China. Any disruption or challenges in our and franchisees’
collaboration with these third-party providers — be it disruptions in their delivery service,
issues with order accuracy or quality control during the delivery process, interruption to their
business operations, termination or suspension of our cooperation, disputes or deterioration
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with respect to our relationships, or adverse changes in key contractual terms such as increased
fee rate — might lead to order delivery delays, heighten our costs, or have other negative
impacts on our business and results of operations. Pursuant to our agreements with these
third-party delivery platforms, our stores (including franchised stores and company-operated
stores) are generally responsible for securing food safety and product quality of our products
to be delivered. If third-party delivery platforms suffer losses attributable to our fault or our
stores’, such as the quality or safety issues of our products or services, the third-party delivery
platform has the right to claim compensation from us.
There can be no assurance that our existing relationships with these third-party service
providers will continue on terms that are favorable to us. Furthermore, our attempts to form
new partnerships with other delivery service providers may not always result in success. If we
face challenges in sustaining or developing positive relationships with these service providers
or if we struggle to engage with new service providers, our store sales and brand image could
suffer, which would negatively impact our overall business.
A significant number of our stores are located in a few provinces in China. Any event
negatively affecting the freshly-made tea beverage industry in these regions could have a
material adverse effect on our overall business and results of operations.
Our business operations exhibit a concentration within specific geographical regions. A
significant number of our stores are currently located in eight provinces in Eastern and
Southern China, which collectively generated 90%, 91%, 87% and 84% of our GMV in 2021,
2022, 2023 and the nine months ended September 30, 2024, respectively. Any adverse event
or circumstance unique to these regions could have an amplified impact on our overall
performance. This includes not only industry-specific challenges, like changes in consumer
preferences or market saturation but also broader external changes. Factors such as localized
economic downturns, natural disasters, outbreaks of infectious diseases, acts of terrorism, or
new regulations imposed by local authorities that might impose constraints on our operations
or the freshly-made tea beverage industry as a whole can substantially affect our revenue. The
fallout from any of these events may materially and adversely affect our financial results and
business operation.
We encounter risks related to leased properties, which could negatively impact our
business operations and financial outcomes.
As of September 30, 2024, almost all of our franchised stores, our company-operated
stores, office spaces and warehouses are located on leased premises. As a result, we and our
franchisees encounter various risks related to these leased properties during regular business
operations. Specifically, potential title defects and usage defects of our leased properties may
expose us, including our self-operated stores, to risks. Our franchised stores may be subject to
similar risks from potential title defects of their leased properties.
Our stores’ lease agreements are generally with a term of one to five years. Therefore, the
ability to renew existing lease agreements at reasonable commercial terms is critical to the
stores’ continuous operations and profitability, especially for those in high traffic areas. We or
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our franchisees might struggle to negotiate lease renewal with the landlord and may be forced
to relocate to locations with unsatisfactory consumer traffic. Furthermore, we and our
franchisees may also face the risk of unexpected early lease termination, either initiated by the
landlords or due to uncontrollable reasons. If we and our franchisees are unable to find
alternative suitable premises on acceptable terms in a timely manner, affected stores may need
to close temporarily, which may materially and adversely affect their financial and operational
outcomes. In 2021, 2022, 2023 and the nine months ended September 30, 2024, 17, 20, 25 and
34 of our franchised stores were closed due to early termination or failure of renewal of their
lease agreements. Relocations would also lead to additional costs, thus affecting our business
operations and financial condition. Additionally, we and our franchisees may also need to
compete with other businesses for desired locations. As a result, rental payments may
significantly increase due to high demand for the leased properties, which may further
adversely affect the business operations and financial condition of us and our franchised stores.
In addition, potential title defects might exist in the leasehold interest of our properties
and our rights to some of the leased properties could face challenges from property owners or
other external parties. As of the Latest Practicable Date, 10 of our 44 leased properties in China
with an aggregate gross floor area of approximately 48,000 square meters were subject to
potential title defects, representing approximately 23% of the total gross floor area of our
leased properties in China. Such 10 leased properties are used for office, warehousing or
production activities. The landlords of such leased properties failed to provide us with the
relevant title ownership certificates for the leased properties or proof of authorizations from the
property owners to sublease the properties to us. See “Business — Properties and Facilities.”
There is a risk that such landlords may not have the relevant property ownership certificates
or the right to lease or sublease such properties to us, in which case the relevant lease
agreements might be deemed unenforceable in accordance with the relevant laws and
regulations and we may be forced to vacate these properties and relocate. In this event, our
operations in such properties may be impaired and we may not be adequately indemnified by
the landlords for our related losses. Also, we cannot assure you that our franchised stores are
not faced with similar title defects or our franchisees’ rights to their leased properties would
not be challenged by third parties. We and our franchisees will incur additional costs in
relocating to other suitable locations, thus affecting our business operations and financial
condition. Moreover, if our lease agreements are challenged by third parties, it could result in
diversion of management attention and cause us to incur costs associated with defending such
actions, even if such challenges are ultimately determined in our favor.
Under the applicable PRC laws and regulations, property lease agreements are required
to be registered with the relevant real estate administration bureaus in the PRC. As of the Latest
Practicable Date, the lease agreements with respect to most of our leased properties were not
registered with the appropriate government authorities in the PRC. As advised by our PRC
Legal Advisor, failure to complete the registration of lease agreements will not affect the
validity of the lease agreements or result in us being required to vacate the leased properties.
However, the relevant PRC authorities may require us to complete the registration, and if we
still fail to do so, we may be imposed a fine ranging from RMB1,000 to RMB10,000 for each
of such lease agreements.
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Additionally, as of the Latest Practicable Date, the actual use of five leased properties,
with an aggregate gross floor area of approximately 220 square meters, representing
approximately 0.1% of our total leased gross floor area, did not fit into the prescribed scope
of usage shown on the relevant certificates. Some of these leased properties are used for our
self-operated stores. For the leased properties with usage defects, as advised by our PRC Legal
Advisor, administrative penalties may be imposed on the landlords if the properties are leased
for the usage incompatible with the prescribed scope, and our usage of the leased properties
with usage defects may be interrupted, which may negatively affect the operations of our
self-operated stores, our business and results of operation.
In light of the foregoing reasons, we and our franchisees may need to secure equivalent
or even superior store locations under advantageous terms in a swift and efficient manner. Any
delay or inability in this regard not only affect our business operations but also poses a risk to
our brand reputation and customer loyalty.
Information technology system failures or breaches of our network security could
interrupt our operations and adversely affect our business.
We rely on our technology infrastructure and systems to serve consumers, conduct the
daily operations of our stores, and manage inventory and supplies. A damage or failure of our
technology infrastructure and systems that causes interruptions or inaccuracies in the
operations of our stores could have a material adverse effect on our businesses and results of
operation.
In addition, we are subject to cyber-attacks and network security breaches. Since the
methods used to gain unauthorized access to or sabotage networks are constantly evolving, we
may lack the expertise and technological sophistication necessary to predict and deter rapidly
changing cyber-attack forms. As a result, we may not be able to detect or enforce sufficient
countermeasures against these threats. We have not experienced a material incident related
cyber-attack or network security breach during the Track Record Period and up to the Latest
Practicable Date. However, we cannot guarantee that we could prevent these attacks and
security breaches, and we may face risks of considerable legal and financial responsibility,
damage to our brand image, and affected financial results. Actual or planned attacks and threats
can result in substantially increased costs, including staff and network security technology
deployment, employee training, and engagement of third-party experts and consultants. In
addition, if our network security is compromised, and private information is stolen or obtained
by unauthorized persons or used inappropriately, we may be subject to litigation or
investigation brought by consumers and related institutions. These proceedings could distract
our management from running our business and cause us to incur significant unplanned losses
and expenses. Consumer perception of our brand could also be negatively affected by these
events, which could further adversely affect our businesses and results of operation.
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We face risks related to payments through third-party platforms.
Consumers may purchase products at our stores using a variety of payment methods
through third-party online payment service providers, including Weixin Pay, Alipay and Union
Pay, among others. Substantially all of our cups sold in 2023 and the nine months ended
September 30, 2024 were attributable to some form of third-party online payment. There are
certain risks associated with these payment methods, including but not limited to the following:
 the service fees paid to payment service providers may increase over time, which
may raise our operating costs;
 there might be incidents of fraud, security breaches and other illegal activities in
connection with those payment methods; and
 there might be fines, increased expenses or the loss of ability to use payment
methods if our stores fail to comply with rules, regulations and requirements
governing electronic funds transfers.
Furthermore, the implementation of security measures by third-party online payment
service providers is beyond our control. In the event of any security breaches involving these
payment service providers, we may be subject to litigation and possible liability and our
reputation could be damaged. During the business operation of our stores, if there is any leak
of confidential information, breach of network security or other misappropriation or misuse of
personal information by third-party online payment service providers, our business may be
interrupted, additional costs may be incurred, and litigation and other liabilities may ensue. As
a result, our results of operation and financial condition could be negatively affected.
We may not be successful in promoting our membership program.
We have launched our membership program through our mini programs and Weixin
official account. See “Business — Marketing and Promotion — Our Membership Program.”
We use our members’ past transaction history to enhance our consumer experience and gain
insights to further improve our membership program. Our ability to track and analyze
information regarding consumers and transactions will largely depend on consumer acceptance
of our membership program as well as its successful operations. We have limited experience
in operating such membership program, and we cannot accurately predict the rate or extent to
which our consumers will subscribe for such membership program. There is no assurance that
our membership program will be implemented successfully or remain sustainable, nor can we
assure you that the program will be effective in retaining existing members or increase their
repurchases. Additionally, our membership program may adversely affect the volume and
frequency of purchases by consumers who do not become our members. If any of the foregoing
risks materializes, our businesses and results of operations may be materially and adversely
affected.
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We may not be able to adequately protect our intellectual property, which could harm our
brand value and adversely affect our business and results of operation.
We believe that our brand is essential to our success and competitive position. We will
continue to use our brand, trade names and trademarks to enhance brand awareness and to
further improve our products. Third parties may infringe upon our intellectual property rights
or misappropriate our proprietary knowledge, which could have a material adverse effect on
our business, financial condition or operating results. The measures we take to protect our
brand, trademarks, trade names and other intellectual property rights may not be adequate to
prevent the unauthorized use by third parties. If we are unable to adequately protect our brand,
trademarks, trade names and other intellectual property rights, we may lose these rights, which
could harm our brand value and adversely affect our business.
In the past, we have found that certain third parties used or imitated our trademarks or
trade names without our authorization to operate tea stores. The unauthorized use of our
trademarks and trade names by unrelated third parties may damage our reputation and brand.
If the operations of third parties who used or imitated our trademarks or trade names without
our authorization result in adverse effects on consumers, we may be associated with negative
publicity as a result. Preventing trademark and trade name infringement and trade secret
misappropriation is difficult, costly and time-consuming. During the Track Record Period and
up to the Latest Practicable Date, we had initiated over 40 legal proceedings against certain
third parties, and all of such legal proceedings had been settled in ways satisfactory to us.
During the Track Record Period and up to the Latest Practicable Date, we did not experience
any material infringement of our intellectual properties. In the future, we may, from time to
time, need to institute litigations to protect and enforce our trademarks and other intellectual
property rights. These litigations could result in substantial costs and diversion of resources,
which could negatively affect our sales, profitability and prospects. Even if these litigations are
resolved in our favor, we may not be able to successfully enforce the judgment and remedies
awarded by the court and the remedies may not be adequate to compensate us for our actual
or anticipated losses, whether tangible or intangible.
The success of our business relies heavily on our ability to operate without violating the
intellectual property rights of third parties. We could face intellectual property
infringement claims that may be costly to defend and could disrupt our business.
We cannot be certain that our operations or any aspects of our business do not or will not
infringe upon or otherwise violate intellectual property rights held by third parties. We may be
subject to legal proceedings and claims relating to the intellectual property rights of others in
the future. There may also be existing intellectual property that we are unaware of, which our
products might inadvertently infringe. We cannot assure you that holders of intellectual
property purportedly relating to some aspect of our technology systems, software and other
applications or business in general, if any such holders exist, would not seek to enforce
relevant intellectual property against us. If we are found to have violated the intellectual
property rights of others, we may be subject to liability for our infringement activities or may
be prohibited from using such intellectual property, and we may incur licensing fees or be
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forced to develop alternatives of our own. In addition, we may incur significant expenses, and
may be forced to divert management’s time and other resources from our business and
operations to defend against these infringement claims, regardless of their merits. Successful
infringement or licensing claims made against us may result in significant monetary liabilities
and may materially disrupt our business and operations by restricting or prohibiting our use of
the intellectual property in question, and our business, financial position and results of
operations could be materially and adversely affected.
The insurance policies we have might not offer sufficient coverage for all risks related to
our business operations.
We purchase and maintain insurance policies that we believe are customary for businesses
of our size and type and as required under the relevant laws and regulations. See “Business —
Insurance.” However, we cannot guarantee that our insurance policies will provide adequate
coverage for all the risks in connection with our business operations, nor can we assure you that
our franchisees will adhere to our requirements regarding insurance coverage. Consistent with
customary practice in China, we do not carry specific business interruption or litigation
insurance. If we were to incur substantial losses and liabilities that are outside the scope of our
insurance coverage, we could suffer significant costs and diversion of our resources, which
could have a material and adverse effect on our financial conditions and results of operations.
We may also be required to bear the losses to the extent that our insurance coverage is
insufficient.
Our success depends on the continuing efforts of our key employees and senior
management. If we fail to recruit, retain and motivate these individuals, or maintain our
corporate culture as we grow, our business may be affected.
Our success is dependent upon the continuing services and performance of our key
employees and senior management, as well as experienced and capable personnel generally. If
one or more members of our key employees and senior management are not able or willing to
continue to perform their current responsibilities, we may not be able to locate suitable
replacements, and may incur additional expenses to recruit and train new staff, which could
disrupt our business and growth. In addition, if any of our key employees and senior
management joins a competitor or forms a competing business, we may lose trade secrets,
technical know-how, key professionals and staff members.
Our growth also requires us to hire, train, and retain a wide range of talents who can adapt
to a dynamic, competitive and challenging business environment and are capable of helping us
conduct effective marketing, develop new products, and enhance technological capabilities. We
may need to offer attractive compensation and other benefits package, including share-based
compensation, to attract and retain them. We also need to provide our employees with sufficient
training to help them realize their career development goal and grow with us. Any failure to
attract, train, retain or motivate key employees and senior management, as well as experienced
and capable personnel, could severely disrupt our business and growth.
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Any labor shortages, increased labor costs or other factors affecting the labor force may
adversely affect our store performance, our business and results of operations.
Our business operations and the operation of our franchised stores require a substantial
number of personnel. Any failure to retain stable and dedicated labor by us or our franchisees
may lead to disruption to the business operations of us and our franchised stores. In addition,
any material increase in the staff turnover rates may adversely impact the operations of our
franchised stores. We and our franchisees have experienced, and may continue to experience,
increases in labor costs due to increases in salary, social benefits and employee headcount. We
also compete with other companies in our industry and in some labor-intensive industries for
labor, and we may not be able to offer competitive remuneration and benefits compared to
them. If we are unable to manage and control our labor costs, our business, financial condition
and results of operations may be materially and adversely affected.
We, our Directors, management, franchisees and employees may not always succeed in
defending against litigation and regulatory investigations and proceedings, including
claims related to food safety, commercial issues, labor, employment, antitrust or securities
matters.
We face potential liabilities, legal claim expenses, and regulatory risks due to the nature
of our business. For example, consumers might file legal claims against us related to personal
injuries from food poisoning or tampering incidents. The focus on consumer protection has
intensified in recent years, with the PRC government, media entities, and public advocacy
groups playing a pivotal role. See “Regulations — Regulations on Consumer Protections.” The
offering of defective products by our stores may expose us to liabilities associated with
consumer protection laws. We may be generally responsible for compensation on consumers’
loss even if the contamination of food and beverage is not caused by us. Therefore, we may also
be held liable if our employees, franchisees, suppliers or other business partners fail to comply
with applicable food-safety related rules and regulations. While we can seek indemnification
from the responsible parties afterwards, the indemnification may not be sufficient and our
reputation could still be adversely affected. Furthermore, our Directors, management,
franchisees, and employees might occasionally face litigation, regulatory investigations, and
other proceedings. These matters, which can relate to food safety, commercial issues, labor,
employment, antitrust, or securities, could adversely affect our reputation and results of
operations.
After we become a publicly listed company, we may face additional exposure to claims
and lawsuits. These claims could divert management time and attention away from our business
and result in significant costs to investigate and defend, regardless of the merits of the claims.
In some instances, we may elect or be forced to pay substantial damages if we are unsuccessful
in defending against these claims, which could harm our business, financial condition and
results of operations.
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Non-compliance with existing or new government regulations by us, our franchisees or
other business partners related to the freshly-made tea beverage industry, fire safety, food
hygiene and environmental protection could materially and adversely affect our business
and operating results.
Our business is subject to various compliance and operation requirements under
applicable laws, regulations, and regional policies relating to the freshly-made tea beverage
industry, fire safety, food hygiene, and environmental protection. We and our franchisees are
required to maintain various approvals, licenses and permits to operate our business and stores
in the PRC, respectively. See “Regulations — Regulations on Business Operation of Food
Service Industry in the PRC” and “Regulations — Regulations on Fire Prevention.” However,
some of the licenses or approvals may be subject to satisfaction of certain prerequisites that are
out of our control. For example, we could not complete the record-filing of fire safety
acceptance check results for the decorating projects of some of the stores directly operated by
us because (i) the owners of the leased properties have not completed the required as-built
acceptance check, or (ii) the local government authorities refused to accept the application for
such record-filing if the prescribed scope of usage of the leased properties is for residential
purposes. In addition, we failed to comply with the environmental impact assessment
requirements for one of our processing facilities in Guangxi, on a leased property, because the
property was constructed by the lessor on agricultural land, which is in violation of the
applicable laws and regulations. We have not been subject to any material fines or other
penalties in relation to any non-compliance in the past. If we, our franchisee or our stores
operated by our franchisee fail to comply with relevant rules and regulations or to cure any
non-compliance in a timely manner, we, our franchisee or the franchise stores may be subject
to fines, confiscation of the gains or the suspension of operations related to non-compliant
stores, which could cause a material and adverse effect on the business or results of operation.
As advised by our PRC Legal Advisor, given that we and the franchisees operate independently
and shall independently assume the obligations, and it is the franchisees who shall be
responsible for obtaining necessary permits and licenses and completing the necessary filings
in accordance with the franchise agreements, we would not be legally liable for the
non-compliance of the franchisees or the franchise stores themselves. However, non-
compliance by the franchisees may adversely affect our reputation, which, in turn, may
adversely impact on our business and results of operation. Additionally, complying with
government regulations may require substantial expense, and any non-compliance may expose
us to liability. In case of any non-compliance, we may have to incur significant expense and
divert substantial management time to resolving any deficiencies. We may also experience
adverse publicity arising from the non-compliance with government regulations that negatively
impacts our brand and business.
New laws and regulations may be promulgated and come into effect from time to time,
and the interpretation and implementation of existing laws and regulations may be subject to
change. If additional approvals or licenses are required according to new laws and regulations
or new interpretation and implementation of existing laws and regulations, additional
restrictions are imposed on our operations, we may incur additional costs and liabilities and our
reputation, business and operations might be adversely affected once we are unable to comply
with the then-applicable laws and regulations.
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Since we, our stores, processing facilities, warehouses, and freight vehicles require various
approvals, licenses and permits to operate, any failure to obtain or renew these approvals,
licenses and permits could materially and adversely affect our business and results of
operations.
In accordance with the PRC laws and regulations, we, our stores, processing facilities,
warehouses, and freight vehicles require various approvals, licenses and permits to operate.
These approvals, licenses and permits are achieved upon satisfactory compliance with,
amongst other things, the applicable food hygiene and safety, environmental protection and fire
safety laws and regulations. For example, each of our stores in China needs to obtain the
relevant food operation license. We are also required to obtain the road transportation operation
permits and the road transportation certificates for relevant freight vehicles, in relation to the
delivery and transportation of products performed by our freight vehicles. As of the Latest
Practicable Date, all but seven of our freight vehicles in operation had obtained the required
road transport certificates. As of the same date, we were in the process of applying for the
required road transport certificates for the remaining freight vehicles, and expected to obtain
such certificates in the near future. If we fail to apply for road transport certificates in a timely
manner for any of our newly added freight vehicles, we may be subject to a fine between
RMB3,000 and RMB10,000 per vehicle. In addition, substantially all our stores, processing
facilities, and warehouses need to complete the record-filing of fire safety acceptance check.
As of the Latest Practicable Date, six of our company-operated stores and four of our leased
warehouses had not completed the necessary record-filing of fire safety acceptance check. We
and our franchisees may be subject to a fine of not more than RMB 5,000 on each store and/or
warehouse that had not completed the necessary the record-filing of fire safety acceptance
check. In addition, certain of our processing facilities might also be required to submit
environment impact report and statement of construction projects to competent environmental
protection authorities for review and approval. Most of these licenses are subject to
examinations or verifications by relevant authorities and some are valid only for a fixed period
of time subject to renewal and accreditation. As of the Latest Practicable Date, we had not
obtained the approval for the environmental impact assessment with respect to our tea leaves
processing facility in Guangxi and we may be subject to a fine between RMB50,000 and
RMB250,000 and required to restore the processing facility to its original condition. During the
Track Record Period and up to the Latest Practicable Date, we had not been subject to any
administrative investigation or penalty resulting from the environment impact assessment.
However, we cannot assure you that the relevant government authorities will not impose fines
on us or require us to restore the processing facility. If we are otherwise subject to
investigations related to non-compliance with relevant laws and regulations and are imposed
severe penalties, our business, financial condition and results of operations may be adversely
affected.
Our franchisees are responsible for and required to obtain and maintain relevant
approvals, licenses and permits relating to their operation of franchised stores in accordance
with the PRC laws and regulations. In addition, according to the franchise agreements between
our franchisees and us, our franchisees are responsible for the validity and effectiveness of the
required approvals, licenses and permits for operating the franchised stores, and the
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non-compliance in this regard may cause penalties, such as temporary closure, for related
franchised stores until they regain compliance. If a large number of franchised stores are
subject to such penalties or temporary closure, our results of operation and financial
performance may be adversely affected.
We and our franchisees may experience difficulties, delays or failures in obtaining the
necessary approvals, licenses and permits for new stores. In addition, there can be no assurance
that we or our franchisees will be able to obtain, renew and/or convert all approvals, licenses
and permits required for existing business operations upon expiration in a timely manner, or
at all. If we or our franchisees cannot obtain or maintain all approvals, licenses and permits
required to operate our stores, our business operations and expansion of store network may be
delayed and our ongoing business could be interrupted. We may also be subject to fines and
penalties. For details, see “Business — Licenses and Regulatory Approvals.”
We may be subject to additional contributions of social insurance and housing provident
funds and late payments and fines imposed by relevant governmental authorities, which
may materially and adversely affect our business and results of operations.
In accordance with the PRC Social Insurance Law and the Regulations on the
Administration of Housing Provident Fund and other relevant laws and regulations, China
establishes a social insurance system and other employee benefits including basic pension
insurance, basic medical insurance, work-related injury insurance, unemployment insurance,
maternity insurance and housing provident fund (collectively, the “ Employee Benefits ”). An
employer shall pay the Employee Benefits for its employees in accordance with the rates
provided under relevant regulations and shall withhold the social insurance and other
Employee Benefits that should be assumed by the employees. As advised by our PRC Legal
Advisor, an employer that has not made social insurance contributions at a rate and based on
an amount prescribed by the law, or at all, may be ordered to rectify the non-compliance and
pay the required contributions within a stipulated deadline and be subject to a late fee of up
to 0.05% of the outstanding amount for each day of delay. If the employer still fails to rectify
the failure to make social insurance contributions within the stipulated deadline, it may be
subject to a fine ranging from one to three times of the amount overdue.
Under the Social Insurance Law and the Regulations on the Administration of Housing
Provident Fund, PRC subsidiaries shall register with local social insurance agencies and
register with applicable housing provident fund management centers and establish a special
housing provident fund account in an entrusted bank. Both PRC subsidiaries and their
employees are required to contribute to the Employee Benefits.
During the Track Record Period and up to the Latest Practicable Date, we had not made
full contributions to Employee Benefits for our employees. In 2021, 2022 and 2023 and the
nine months ended September 30, 2024, the aggregate shortfall of social insurance and housing
provident fund contributions amounted to RMB4.9 million, RMB6.1 million, RMB9.8 million
and RMB9.3 million, respectively. We had not made any provision for the shortfall in our
social insurance and housing provident fund contributions during the Track Record Period and
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up to the Latest Practicable Date. As of the Latest Practicable Date, we had not received any
notice from the relevant government authorities or any claim or request from these employees
in this regard. In addition, during the Track Record Period, we used third-party service
providers to apply for social insurance registration and housing provident fund deposit
registration and to pay social insurance and housing provident funds for some of our
employees, which may be inconsistent with relevant laws and regulations. See “Business —
Legal Proceedings and Compliance — Compliance — Social Insurance and Housing Provident
Funds,” and “Regulations — Regulations on Labor Right and Interests” for details.
However, we cannot assure you that the relevant government authorities will not require
us to pay the outstanding amount and impose late fees or fines on us. If we are otherwise
subject to investigations related to non-compliance with labor laws and are imposed severe
penalties or incur significant legal fees in connection with labor law disputes or investigations,
our business, financial condition and results of operations may be adversely affected.
Any failure to comply with data privacy protection and information security laws could
harm our reputation, result in a loss of revenue, lead to substantial additional costs, and
expose us to litigation and regulatory scrutiny.
During the ordinary course of our business, we receive certain necessary personal
information of our consumers as they become our members or place orders via our mini
programs, which may include user code, delivery address and phone number. We provide our
consumers with data privacy notices and ensure that they provide data authorization before
they access our mini programs. We use such information or data we obtain for delivering our
products, providing after-sales services and sending the most up-to-date information of our
brand.
In recent years, data privacy protection and information security have received increasing
regulatory attention from government authorities across the globe. In the past few years, the
PRC government has enacted a series of laws, regulations and governmental policies on
privacy and data protection that may apply to us. We have adopted internal guidelines for the
protection of personal information of our consumers and our compliance with relevant PRC
laws and regulations with respect to privacy and personal information protection. We have also
implemented measures to protect data security and privacy in relation to the collection, use,
storage, transfer, disclosure and security of personal information, including removing and
destroying data in secure manners, a strict access control mechanism and multiple layers of
safeguards and firewalls. Nevertheless, the efforts that we take to protect our consumers’
personal information may not always be sufficient or effective. Any improper handling of our
consumers’ personal information as a result of any misconduct by our employees or any
information leakage due to external factors, such as unauthorized access to our consumer
database by hackers, could result in civil or regulatory liabilities which may subject us to
significant legal, financial and operational consequences.
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As of the Latest Practicable Date, we have not been subject to any material administrative
penalties, mandatory rectifications, or other sanctions by any competent regulatory authorities
in relation to cybersecurity and data protection, nor have there been material cybersecurity and
data protection incidents or infringement upon any third parties, or other legal proceedings,
administrative or governmental proceedings, pending or, to the best of our knowledge,
threatened against or relating to us. In addition, we have neither received any notification from
the relevant authorities that the data we process is important data or core data, nor been
involved in any investigation on data processing activities that affect or may affect national
security as of the Latest Practicable Date. Based on the foregoing and a detailed analysis of its
provisions by our PRC Legal Advisor, we and our PRC Legal Advisor do not foresee any
impediment for us to comply with the Measures for Cyber Security Review in any material
aspect, given that we have implemented a comprehensive set of internal policies, procedures
and measures to ensure our compliance practice. Nevertheless, there are challenges in
predicting future regulatory developments and we cannot assure you that relevant authorities
will not take a view contrary to, or otherwise different from, that of our PRC Legal Advisor
above in the future. We will closely monitor the legislative and regulatory development in
connection with cybersecurity and data protection, including the interpretation or
implementation rules of laws and regulations of cybersecurity and data protection, if any, and
we will adjust and enhance our data practices in a timely manner to ensure compliance once
the regulations come into effect.
The interpretation and application of laws, regulations and standards on data protection
and privacy shall follow the then effective laws and regulations and are still evolving. We
cannot assure you that our data privacy and protection measures are, and will be, always
considered sufficient under applicable laws and regulations. We may be subject to
investigations and inspections by government authorities regarding our compliance with laws
and regulations on data privacy, and we cannot assure you that our practices will always fully
comply with all applicable rules and regulatory requirements. In addition, laws, regulations and
standards on data protection and privacy continue to develop and may vary from jurisdiction
to jurisdiction. Complying with emerging and changing international requirements may cause
us to incur substantial costs or require us to change our business practices. Additionally, the
integrity of our data privacy and protection measures is also subject to risks of systemic failure,
interruption, inadequacy, security breaches or cyber-attacks. If we are unable to comply with
the then applicable laws and regulations, or to address any data privacy and protection
concerns, such actual or alleged failures could damage our reputation, impact our ability to
manage digital operations and could subject us to significant legal, financial and operational
consequences.
We face risks in connection with Third-party Payment Arrangements.
From January 1, 2021 and up to November 22, 2023 (the “ Relevant Period ”), we
accepted payment made on behalf of certain of our franchisees (the “ Relevant Franchisees ”)
through the accounts of third parties designated by the Relevant Franchisees (the “ Third-party
Payment Arrangement ”). During the Relevant Period, we have duly booked all payments
received under the Third-party Payment Arrangement according to our internal accounting
policies and tax related laws and regulations. In 2021, 2022 and 2023, we received third-party
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payments from 729, 573 and 614 franchisees, and the aggregate amount of third-party
payments we received was RMB867.9 million, RMB1,017.8 million and RMB856.8 million,
respectively, representing approximately 18.0%, 16.9% and 10.3% of the total payments we
received from our franchisees, respectively. Subsequent to November 22, 2023, we had ceased
accepting third-party payments and updated our system such that our franchisees can only pay
with their own bank accounts.
We were subject to various risks relating to such Third-party Payment Arrangements, such
as (i) possible claims from third-party payors for return of funds as they were not contractually
indebted to us and possible claims from liquidators of third-party payors and (ii) potential
money laundering risks as we have limited knowledge about the source of the funds utilized
by the third-party payors and their identities. In the event of any claims from third-party payors
or their liquidators, or legal proceedings (whether civil or criminal or regulatory actions)
instituted or brought against us to demand return of the relevant payment or for violation or
non-compliance of laws and regulations, we will have to spend significant financial and
managerial resources to defend against such claims, legal proceedings or regulatory actions,
and we may be forced to comply with the court ruling or order and return the payment for the
products that we sold and services that we provided. For details, see “Business — Risk
Management and Internal Control — Control of Third-party Payment Arrangements.”
If we fail to maintain an effective system of internal control over financial reporting, we
may be unable to accurately report our financial results, meet our reporting obligations
or prevent fraud.
We have established an effective system of internal control consisting of the relevant risk
management policies and risk control procedures to identify, evaluate and manage risks arising
from financial reporting operations. Since our risk management and internal control systems
depend on implementation by our employees and our franchisees, we cannot assure you that all
of our employees and franchisees will adhere to such policies and procedures, and the
implementation of these policies and procedures may involve human errors or mistakes.
Moreover, our growth and expansion may affect our ability to implement stringent risk
management and internal control policies and procedures as our business evolves. If we fail to
timely adopt, implement and modify, as applicable, our risk management and internal control
policies and procedures, we may be unable to accurately report our financial results, meet our
reporting obligations or prevent fraud.
Our business is subject to seasonal fluctuations.
Our business operations are influenced by seasonal trends. During the summer, when the
weather is warmer, we typically see more consumer traffic and generate higher sales. Similarly,
festive and holiday seasons tend to boost our sales due to heightened consumer activity. At the
same time, ingredients of our tea beverages, such as fresh fruits, fruit juices and tea leaves,
undergo price fluctuations throughout the year based on their availability and market dynamics.
As a result, our results of operations may fluctuate significantly from period to period and
comparisons of different periods may not be meaningful. Our financial condition and results of
operations for future periods may continue to fluctuate, from time to time, due to seasonality.
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We recorded net liabilities as of December 31, 2021 and 2022, and recorded net current
liabilities as of December 31, 2021, 2022 and 2023.
We recorded net liabilities of RMB1,205.8 million and RMB816.6 million as of
December 31, 2021 and 2022, respectively. In addition, we recorded net current liabilities of
RMB1,712.7 million, RMB1,501.1 million and RMB353.5 million as of December 31, 2021,
2022 and 2023, respectively. Our net liabilities and net current liabilities position as of each
of these dates were primarily due to non-operational impact of our convertible redeemable
preferred shares classified as financial liabilities at fair value through profit and loss. There is
no assurance that we will generate sufficient net income or operating cash flows to meet our
working capital requirements and repay our liabilities as they become due. There can be no
assurance that we will be able to prudently manage our working capital or raise additional
equity or debt financing on terms that are acceptable to us. Our inability to take these actions
as and when necessary could materially adversely affect our liquidity, results of operations and
financial condition.
Our results of operations, financial conditions and prospects have been adversely affected
by fair value changes in our convertible redeemable preferred shares. The valuation of
our convertible redeemable preferred shares is uncertain due to the use of unobservable
inputs.
Historically, we issued to investors certain convertible redeemable preferred shares,
consisting of Series A-1, Series A-2, Series A-3 and Series A-4 Preferred Shares (the
“Convertible Redeemable Preferred Shares ”), upon the completion of certain specified
events, respectively. For more details, see note 30 to the Accountants’ Report in Appendix I to
this document. Upon the completion of this Global Offering, all of such Convertible
Redeemable Preferred Shares will be automatically converted into ordinary shares.
Additionally, the foregoing investors have the right to require us to redeem such Convertible
Redeemable Preferred Shares if this Global Offering is not consummated on or prior to certain
date or upon the occurrence of some specified events. For the identity and background of the
foregoing investors, see the section headed “History, Reorganization and Corporate Structure
— Pre-IPO Investments” of this document.
Upon conversion, the Convertible Redeemable Preferred Shares will be recorded on a fair
value basis based on market valuation. We use significant unobservable inputs, such as
expected volatility, discount for lack of marketability, risk-free interest rate, expected rate of
return and discount rate, in valuing certain of our assets and liabilities, including the
Convertible Redeemable Preferred Shares. The use of unobservable inputs involves a
significant degree of management judgement and are inherently uncertain. Changes in these
unobservable inputs and other estimates and judgements could materially affect the fair value
of our Convertible Redeemable Preferred Shares, which in turn may adversely and materially
affect our results of operations, financial conditions and prospects. We recorded fair value
changes in financial liabilities at fair value through profit or loss of RMB728.4 million,
RMB389.5 million and RMB294.2 million for the years ended December 31, 2021, 2022 and
2023, respectively and of RMB21.7 million and RMB10.6 million for the nine months ended
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September 30, 2023 and 2024, respectively. Factors beyond our control can significantly
influence and cause adverse changes to the estimates we use and thereby affect the fair value
of such financial liabilities. These factors include, but are not limited to, general economic
condition, changes in market interest rates and stability of the capital markets. Any of these
factors, as well as others, could cause our estimates to vary from actual results, which could
materially and adversely affect our results of operation and financial condition. After the
automatic conversion of the Convertible Redeemable Preferred Shares into Shares upon the
completion of the Global Offering, we do not expect to recognize any further gains or losses
on fair value changes from these Convertible Redeemable Preferred Shares in the future.
If we were to be required to redeem all such Convertible Redeemable Preferred Shares if
the Global Offering is not consummated on or prior to a certain date or upon the occurrence
of certain specified events, the aggregate redemption price shall be the sum of the aggregate
consideration for the issuance of such Convertible Redeemable Preferred Shares, plus
applicable interest accrued thereon. The aggregate consideration at which our Convertible
Redeemable Preferred Shares were issued equal to RMB674.1 million. As of September 30,
2024, our cash and cash equivalents was RMB1,677.9 million. The redemption of the
Convertible Redeemable Preferred Shares, if triggered, could have a negative impact on our
cash and liquidity position and financial condition.
We historically invested and may in the future invest in wealth management products that
are subject to varying degrees of investment risks.
During the Track Record Period, we invested in wealth management products to
mobilize our capital and generate investment returns for the benefits of our Shareholders. As
of December 31, 2021, 2022 and 2023 and September 30, 2024, the amounts of our
wealth management products were RMB241.7 million, RMB37.3 million, RMB197.3 million
and RMB1,606.2 million, respectively. Going forward, we may from time to time invest
in wealth management products with low/medium risks or low-risks on a case-by-case basis if
these products are in our interest upon evaluations and analyses. The investment in wealth
management products may be subject to various risks that are out of our control, including risks
relating to macro-economic environment and general market conditions, as well as risk control
and credit of issuing banks. There can be no assurance that the internal policies and guidelines
that we currently have in place to manage our investment in wealth management products will
always be effective, or at all. If we fail to properly manage the risks in relation to our
investment in wealth management products, we may incur significant losses, and as a result,
our financial condition may be materially adversely affected.
Our financial assets at fair value through profit or loss represented wealth management
products with maturity period within one year that we purchased from various reputable
financial institutions in China without guaranteed returns, which amounted to RMB241.7
million, RMB37.3 million, RMB197.3 million and RMB1,606.2 million as of December 31,
2021, 2022 and 2023 and September 30, 2024, respectively. We recorded fair value gains in
financial assets at fair value through profit or loss of RMB16.3 million, RMB10.9 million and
RMB1.9 million for the years ended December 31, 2021, 2022 and 2023, respectively, and of
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RMB1.7 million and RMB7.7 million for the nine months ended September 30, 2023 and 2024,
respectively. We cannot assure you that market conditions and regulatory environment will
result in fair value gains on the wealth management products we invest in or we will not incur
any fair value losses on our investments in wealth management products in the future. If we
incur such fair value losses, our results of operations, financial condition and prospects may
be adversely affected.
Our equity investment designated at fair value through other comprehensive income
represent our investment in the equity interests of a company, which also supplies us with milk
and dairy products during our procurement process. See note 16 to the Accountants’ Report in
Appendix I to this document for more details. We recorded equity investment designated at fair
value through other comprehensive income of RMB247.5 million, RMB277.1 million,
RMB257.1 million and RMB248.1 million as of December 31, 2021, 2022 and 2023 and
September 30, 2024, respectively. We use valuation technique to determine the price-to-sales
ratio for similar instruments, adjusted by discount for lack of marketability, which involves
estimates that could materially affect the fair value of our equity investment designated at fair
value through other comprehensive income, which in turn may adversely and materially affect
our results of operations.
We may require additional financing to support our further developments or adapt to
changes in business conditions, but we may not be able to obtain additional financing on
favorable terms, if at all.
Expanding our store network, building a well-known brand and accumulating a large and
continuously growing consumer base are costly and time-consuming. Substantial and
continuous investments in advertising, branding and marketing activities are also required for
further establishing brand awareness to attract new consumers and retain existing ones. Our
Directors are of the view that, taking into account our current cash and cash equivalents,
anticipated cash flow from operations and the net proceeds we expect to receive from this
Global Offering, we will have available sufficient working capital to meet our present
requirements and for at least the next 12 months from the date of this document. We may,
however, require additional cash resources to finance our continued growth or other future
developments or adapt to changes in business conditions, including any investments we may
decide to pursue. If our financial resources are insufficient to satisfy our cash requirements, we
will be required to seek additional financing or to defer planned expenditures. There can be no
assurance that we can obtain additional financing on favorable terms to us, if at all. In addition,
our ability to raise additional funds in the future is subject to a variety of uncertainties,
including, but not limited to:
 investors’ perception of, and demand for, securities of businesses in the freshly-
made tea beverage industry;
 our future results of operations, financial condition and cash flows;
 general market conditions for capital raising and debt financing activities; and
 economic, political and other conditions in China and elsewhere.
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In addition, if we raise additional financing by selling additional equity securities, your
equity interest in us may be diluted. Alternatively, if we raise additional financing by incurring
debt obligations, we may be subject to various covenants under the relevant debt instruments
that may, among other things, restrict our ability to pay dividends or obtain additional
financing. If we cannot obtain sufficient capital on favorable terms, our business, financial
condition and prospects may be materially and adversely affected.
RISKS RELATING TO DOING BUSINESS IN THE COUNTRY WHERE WE OPERATE
Changes in economic, political and social conditions could affect our business and
operations.
We are headquartered in Zhejiang, China, and substantially all of our operations are
conducted in China. Accordingly, our business, financial condition and results of operations
may be influenced by the economic, political and social conditions in China. China’s
freshly-made tea beverage market in general is affected by macro-economic factors, including
changes in international, national, regional and local economic conditions, employment levels,
consumer demands and discretionary spending. In addition, any severe or prolonged slowdown
in the global or regional economy may materially and adversely affect our business, financial
condition and results of operations.
Developments in the applicable PRC laws and regulations may affect our business
operations and the legal protection available thereunder.
Our business in the PRC is subject to the applicable PRC laws and regulations, including
those applicable to food safety and hygiene, product quality and foreign investment in the PRC.
The laws and regulations in China are subject to revisions or interpretations from time to time.
New laws, regulations, guidelines and interpretations that are promulgated in the future may
affect the rights and obligations of the parties involved. We cannot assure you that our business
operations will not be adversely affected in the future.
From time to time, we may have to resort to administrative and court proceedings to
enforce our legal rights. However, the outcome of administrative and court proceedings and the
level of legal protection we enjoy would be subject to the prevailing legislative environment
and the conditions for implementation and enforcement, and it may be difficult to predict the
outcome of administrative and court proceedings and the level of legal protection we may
enjoy in the future. Any failure to respond to developments in the applicable PRC laws and
regulations, including laws relating to food safety and hygiene, product quality and foreign
investment in China effectively, could materially and adversely affect our business and
operations.
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We may be subject to the approval, filing or other requirements of the CSRC or other
PRC governmental authorities in connection with future capital raising activities.
We cannot assure you that any new rules or regulations promulgated in the future will not
impose additional requirements or restrictions on us or our financing activities. If it is
determined in the future that approval from or filing with the CSRC or other regulatory
authorities or other procedures are required, we may fail to obtain such approval, perform such
filing procedures or meet such other requirements in a timely manner or at all. We may face
sanctions by the CSRC or other PRC regulatory authorities for failure to seek CSRC approval
or other government authorization, or perform filing procedures, for our future financing
activities, and these regulatory authorities may impose fines and penalties on us, limit our
operating activities in the PRC, limit our ability to pay dividends outside the PRC, delay or
restrict the repatriation of the net proceeds from the Global Offering into the PRC or take other
actions to restrict our financing activities, which could have a material adverse effect on our
business.
Fluctuations in exchange rates could have a material and adverse effect on our results of
operations and the value of your investment.
During the Track Record Period, substantially all of our revenue and expenditures were
denominated in Renminbi, although some procurement contracts were denominated in other
currencies, while the net proceeds from the Global Offering will be in Hong Kong dollars.
Fluctuations in the exchange rate between the Renminbi and the Hong Kong dollar will affect
the relative purchasing power in Renminbi in terms of the proceeds from the Global Offering.
Fluctuations in the exchange rate may also cause us to incur foreign exchange losses and affect
the relative value of any dividend issued by our PRC subsidiaries. In addition, appreciation or
depreciation in the value of the Renminbi relative to the Hong Kong dollar or U.S. dollar would
affect our financial results in Hong Kong dollar or U.S. dollar terms without giving effect to
any underlying change in our business or results of operations.
We are subject to the currency exchange regulation system in China.
The conversion of Renminbi is subject to applicable laws and regulations in the PRC. It
cannot be guaranteed that under a certain exchange rate, we will have sufficient foreign
exchange to meet our foreign exchange requirements. Under the current PRC foreign exchange
regulation system, foreign exchange transactions under the current account conducted by us,
including the payment of dividends, do not require advance approval from the SAFE, but we
are required to present documentary evidence of such transactions and conduct such
transactions at designated foreign exchange banks within China that have the licenses to carry
out foreign exchange business.
Under existing foreign exchange regulations, following the completion of the Global
Offering, we will be able to pay dividends in foreign currencies without prior approval from
the SAFE by complying with certain procedural requirements. However, there is no assurance
that these foreign exchange policies regarding payment of dividends in foreign currencies will
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continue in the future. In addition, any insufficiency of foreign exchange may restrict our
ability to obtain sufficient foreign exchange for dividend payments to shareholders or to satisfy
any other foreign exchange requirements, capitalize our capital expenditure plans, and even our
business, operating results and financial condition, may be affected.
Y ou may experience difficulties in effecting service of legal process, enforcing foreign
judgments or bringing actions against us or our management named in this document
based on foreign laws.
Most of our assets are situated in mainland China and most of our management named in
this document reside in mainland China. A judgement of a court of another jurisdiction may be
reciprocally recognized or enforced in China only if the jurisdiction has a treaty with China or
if the jurisdiction has been otherwise deemed by Chinese courts to satisfy the requirements for
reciprocal recognition, subject to the satisfaction of other requirements. As cross-border
service of process is typically cumbersome and time-consuming, it may be difficult for
investors outside China to effect service of process, enforce foreign judgements or bring
actions against us or management named in this document based on foreign laws.
On July 14, 2006, Hong Kong and mainland China entered into the Arrangement on
Reciprocal Recognition and Enforcement of Judgments in Civil and Commercial Matters by the
Courts of the Mainland and of the Hong Kong Special Administrative Region Pursuant to
Choice of Court Agreements Between Parties Concerned (৫
τર) (the “ 2006 Arrangement ”),
promulgated on July 3, 2008, pursuant to which a party with a final court judgment rendered
by a Hong Kong court requiring payment of money in a civil and commercial case pursuant to
a choice of court agreement in writing may apply for recognition and enforcement of the
judgment in mainland China. Similarly, a party with a final judgment rendered by a PRC court
requiring payment of money in a civil and commercial case pursuant to a choice of court
agreement in writing may apply for recognition and enforcement of the judgment in Hong
Kong. A choice of court agreement in writing is defined as any agreement in writing entered
into between parties after the effective date of the 2006 Arrangement in which a Hong Kong
court or a PRC court is expressly designated as the court having sole jurisdiction for the
dispute. Therefore, it is not possible to enforce a judgment rendered by a Hong Kong court in
mainland China if the parties in dispute have not agreed to enter into a choice of court
agreement in writing. Although the 2006 Arrangement became effective on August 1, 2008, the
outcome and effectiveness of any action brought under the 2006 Arrangement will be subject
to the PRC courts further adjudication in accordance with PRC laws, including the PRC civil
procedure law.
On January 18, 2019, the Supreme People’s Court of the PRC and the government of the
Hong Kong Special Administrative Region entered into the Arrangement on Reciprocal
Recognition and Enforcement of Judgments in Civil and Commercial Matters by the Courts of
the Mainland and of the Hong Kong Special Administrative Region (ಥतйБ
τર) (the “ 2019 Arrangement ”), which seeks
to establish a bilateral legal mechanism that provides clarity and certainty for the recognition
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and enforcement of judgments in a wider range of civil and commercial matters between Hong
Kong and mainland China, based on criteria other than a written choice of court agreement.
Under the 2019 Arrangement, any party concerned may apply to the relevant PRC court or
Hong Kong court for recognition and enforcement of the effective judgments in civil and
commercial cases subject to the conditions set forth in the 2019 Arrangement. However, we
cannot assure you that all final judgments will be recognized and effectively enforced by the
relevant PRC court.
The M&A Rules and certain other relevant regulations establish certain procedures for
some acquisitions of Chinese companies by foreign investors, which could affect our
acquisitions.
MOFCOM, State-owned Assets Supervision and Administration Commission of the State
Council (ึ), SA T, the State Administration for Industry and
Commerce of the PRC (၍ଣᐼ҅), the CSRC and SAFE jointly promulgated the
Regulations for Mergers with and Acquisition of Domestic Enterprises by Foreign Investors
() (the “ M&A Rules ”) in 2006, which was amended
in June 2009. Merger and acquisition activities by foreign investors are subject to procedures
and requirements under M&A rules, laws and other regulations and rules concerning M&A,
including requirements in some instances that MOFCOM be notified in advance of any
change-of-control transaction in which a foreign investor takes control of a PRC domestic
enterprise, which could potentially require a foreign investor to spend more time navigating
through the review process. In addition, the Provisions of the Ministry of Commerce on the
Implementation of the Safety Review System for Merger and Acquisition of Domestic
Enterprises by Foreign Investors (֛)
issued by MOFCOM that became effective in September 2011 specify that mergers and
acquisitions by foreign investors that raise “national defense and security” concerns and
mergers and acquisitions through which foreign investors may acquire de facto control over
domestic enterprises that raise “national security” concerns are subject to strict review by
MOFCOM, and the rules prohibit any activities attempting to bypass a security review,
including by structuring the transaction through a proxy or contractual control arrangement.
Moreover, the Anti-Monopoly Law promulgated by the Standing Committee of the National
People’s Congress of China and effective in 2008, as most recently amended on June 24, 2022
and effective from August 1, 2022, requires that transactions which are deemed concentrations
and involve parties with specified turnover thresholds must be cleared by the relevant
anti-monopoly authority before they can be completed. It also requires business operators not
to abuse data, algorithms, technology, capital advantages and platform rules to exclude or limit
competition.
In the future, we may grow our business by acquiring complementary businesses.
Complying with the requirements of the abovementioned regulations and other relevant rules
to complete such transactions could be time-consuming, and any required approval processes,
including obtaining approval from MOFCOM or its local counterparts may delay or inhibit our
ability to complete such transactions, which could affect our ability to expand our business or
maintain our market share.
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Failure to comply with the PRC regulations relating to the establishment of offshore
special purpose companies by PRC residents may subject our PRC resident beneficial
owners or our wholly foreign-owned subsidiaries in China to liability or penalties, limit
our ability to inject capital into these subsidiaries, limit these subsidiaries’ ability to
increase their registered capital or distribute profits to us, or may otherwise adversely
affect us.
SAFE promulgated the SAFE Circular 37 on July 4, 2014, which replaced the former
circular commonly known as “SAFE Circular 75” promulgated by SAFE on October 21, 2005.
SAFE Circular 37 and its implementing rules require PRC residents to register with banks
designated by local branches of SAFE in connection with their direct establishment or indirect
control of an offshore entity, for the purpose of overseas investment and financing, with the
PRC residents’ legally owned assets or equity interests in domestic enterprises or offshore
assets or interests, referred to in SAFE Circular 37 as a “special purpose vehicle.” See
“Regulations — Regulations on Foreign Exchange Registration of Overseas Investment by
PRC Residents” for details.
Each of Mr. Wang, Mr. Qi, Mr. Ruan and Ms. Pan, the ultimate main individual
shareholders of our Company subject to the registration requirements under Circular 37 has
completed the required registration respectively pursuant to Circular 37 in relation to their
offshore investments as PRC residents. However, we cannot assure you that all of our
Shareholders who are PRC residents will comply with our request to make or obtain any
applicable registrations or comply with other requirements required by Circular 37 or other
related regulations. In addition, there is no assurance that all of our future Shareholders or
beneficial owners who are PRC residents will make or obtain any applicable registrations or
approvals required by SAFE Circular 37 or other related regulations. We cannot assure you that
the SAFE or its local branches will not release explicit requirements or interpret the relevant
PRC laws and regulations otherwise. Failure to comply with SAFE Circular 37 or other related
regulations could subject us to fines or legal liabilities, limit our overseas or cross-border
investment activities, limit our ability to contribute additional capital into our PRC
subsidiaries, or limit our PRC subsidiaries’ ability to pay dividends or make distributions or
other payments to our Company or affect our ownership structure, which could adversely affect
our business, financial position and prospects. Moreover, failure to comply with the SAFE
registration requirements by our Shareholders could result in liabilities under applicable laws
for evasion of foreign exchange regulations.
Furthermore, since those SAFE regulations, and any future regulation concerning
offshore or cross-border transactions, may be subject to interpretation and amendment in the
future, we cannot predict how these regulations will affect our business operations or future
strategy. Failure to register or comply with relevant requirements may also limit our ability to
contribute additional capital to our PRC subsidiaries and limit our PRC subsidiaries’ ability to
distribute profits to us. These risks may have a material adverse effect on our business,
financial condition and results of operations.
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Any failure to comply with relevant regulations regarding the registration requirements
for employee stock incentive plans may subject our plan participants or us to fines and
other legal or administrative sanctions when we adopt incentive plans in the future.
Pursuant to SAFE Circular 37, PRC residents who participate in stock incentive plans in
overseas non-publicly-listed companies may, prior to the exercise of an option, submit
applications to SAFE or its local branches for the foreign exchange registration with respect
to offshore special purpose companies. After the Global Offering, our Directors, executive
officers and other employees who are PRC citizens or who are non-PRC citizens residing in the
PRC for a continuous period of not less than one year, subject to limited exceptions, and whom
we may grant RSUs, options or restricted shares, may follow the Notice on Issues Concerning
the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive
Plan of Overseas Publicly Listed Company (ɛਞၾྤ̮ɪ̹ʮ
), issued by SAFE in February 2012, to apply for
the foreign exchange registration. According to those regulations, employees, directors and
other management members participating in any stock incentive plan of an overseas publicly
listed company who are PRC citizens or who are non-PRC citizens residing in China for a
continuous period of not less than one year, subject to limited exceptions, are required to
register with SAFE through a domestic qualified agent, which may be a PRC subsidiary of the
overseas listed company, and complete certain other procedures. Failure to complete the SAFE
registrations may subject them to fines and legal sanctions and may also limit their ability to
make payment under the relevant equity incentive plans or receive dividends or sales proceeds
related thereto in foreign currencies, or our ability to contribute additional capital into our
domestic subsidiaries in China and limit our domestic subsidiaries’ ability to distribute
dividends to us. We also face regulatory requirements under applicable laws that could restrict
our ability to adopt additional equity incentive plans for our Directors, executive officers and
other employees.
In addition, the State Taxation Administration (೼ਕᐼ҅) (the “ STA”) has issued
circulars concerning employee RSUs, share options or restricted shares. Under these circulars,
employees working in the PRC whose RSUs or restricted shares vest, or who exercise share
options, will be subject to PRC individual income tax. The PRC subsidiaries of an overseas
listed company have obligations to file documents related to employee RSUs, share options or
restricted shares with relevant tax authorities and to withhold individual income taxes of those
employees related to their RSUs, share options or restricted shares. Although we currently
withhold income tax from our PRC employees in connection with their exercise of options, if
the employees fail to pay, or the PRC subsidiaries fail to withhold, their income taxes
according to relevant laws, rules and regulations, the PRC subsidiaries may face penalties
imposed by the tax authorities.
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If we are classified as a PRC resident enterprise for PRC income tax purposes, such
classification could result in unfavorable tax consequences to us and our non-PRC
shareholders.
Under the Enterprise Income Tax Law of the PRC ()
(the “ EIT Law ”), an enterprise established outside of the PRC with a “de facto management
body” within China is considered a resident enterprise and will be subject to the enterprise
income tax on its global income at the rate of 25%. The Regulation on the Implementation of
the Enterprise Income Tax Law of China (ૢԷ) (the
“EIT Rules ”) define the term “de facto management body” as the body that exercises full and
substantial control over, and overall management of, the business, production, personnel,
accounts and properties of an enterprise. On April 22, 2009, the STA issued a circular, known
as Circular 82, which was last amended on December 29, 2017. Circular 82 provides certain
specific criteria for determining whether the “de facto management body” of a PRC-controlled
enterprise that is incorporated offshore is located in China. Although this circular only applies
to offshore enterprises controlled by PRC enterprises or PRC enterprise groups, not those with
no single individual controller like us, the criteria set forth in the circular may reflect the SA T’s
general position on how the “de facto management body” test should be applied in determining
the tax resident status of all offshore enterprises. According to Circular 82, an offshore
incorporated enterprise controlled by a PRC enterprise or a PRC enterprise group will be
regarded as a PRC tax resident by virtue of having its “de facto management body” in China
and will be subject to PRC enterprise income tax on its global income only if all of the
following conditions are met: (i) the primary location of the day-to-day operational
management is in China; (ii) decisions relating to the enterprise’s financial and human resource
matters are made or are subject to approval by organizations or personnel in China; (iii) the
enterprise’s primary assets, accounting books and records, company seal, and board and
shareholder resolutions, are located or maintained in China; and (iv) at least 50% of voting
board members or senior executives habitually reside in China.
We believe none of our entities outside of China is a PRC resident enterprise for PRC
income tax purposes. However, the tax resident status of an enterprise is subject to
determination by the PRC tax authorities, and we cannot be certain on how the tax authorities
will interpret the term “de facto management body.” As most of our management members are
based in China, it remains unclear how the tax residency rule will apply to our case. If the PRC
tax authorities determine that our Company or any of our subsidiaries outside of the PRC is a
PRC resident enterprise for PRC enterprise income tax purposes, our Company or such
subsidiary could be subject to PRC tax at a rate of 25% on its global income, which could
materially reduce our net profit. In addition, we will also be subject to PRC enterprise income
tax reporting obligations. Furthermore, if the PRC tax authorities determine that we are a PRC
resident enterprise for enterprise income tax purposes, gains realized on the sale or other
disposition of our ordinary shares may be subject to PRC tax, at a rate of 10% in the case of
non-PRC enterprises or 20% in the case of non-PRC individuals (in each case, subject to the
provisions of any applicable tax treaty), if such gains are deemed to be from PRC sources.
There is possibility that non-PRC shareholders of our Company would not be able to claim the
benefits of any tax treaties between their country of tax residence and the PRC in the event that
we are treated as a PRC resident enterprise. Any such tax may reduce the returns on your
investment in our Shares.
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We and our Shareholders may be adversely affected by tax adjustments with respect to
indirect transfers of equity interests in PRC resident enterprises or other assets attributed
to a PRC establishment of a non-PRC company.
On February 3, 2015, the STA issued Bulletin 7, which has been further amended by
Bulletin 37 issued by the STA on October 17, 2017 and amended on June 15, 2018. Pursuant
to these bulletins, an “indirect transfer” of assets, including equity interests in a PRC resident
enterprise, by non-PRC resident enterprises may be re-characterized and treated as a direct
transfer of PRC taxable assets, if the arrangement does not have a reasonable commercial
purpose and was established for the purpose of avoiding payment of PRC enterprise income
tax. As a result, gains derived from this indirect transfer may be subject to PRC enterprise
income tax. See also “Regulations — Regulations on Tax in the PRC.”
Bulletin 7 may be determined by the tax authorities to be applicable to some of our
offshore restructuring transactions or sale of the shares of our offshore subsidiaries or
investments where PRC taxable assets are involved. The transferors and transferees may be
subject to the tax filing and the transferees may be subject to withholding or tax payment
obligation, while our PRC subsidiaries may be requested to assist in the filing. Furthermore,
we, our non-resident enterprises and PRC subsidiaries may be required to spend valuable
resources to comply with Bulletin 7 or to establish that we and our non-resident enterprises
should not be taxed under Bulletin 7, for our previous and future restructuring or disposal of
shares of our offshore subsidiaries, which may have a material adverse effect on our financial
condition and results of operations.
The PRC tax authorities have powers under Bulletin 7 to make adjustments to the taxable
capital gains based on the difference between the fair value of the taxable assets transferred and
the cost of investment. If the PRC tax authorities make adjustments to the taxable income of
the transactions under Bulletin 7, our income tax costs associated with potential acquisitions
or disposals will increase, which may have an adverse effect on our financial condition and
results of operations.
If our preferential tax treatments and government subsidies are revoked or become
unavailable or if the calculation of our tax liability is successfully challenged by the PRC
tax authorities, we may be required to pay tax, interest and penalties in excess of our tax
provisions, and our financial performance may be materially and adversely impacted.
Our PRC subsidiaries enjoy certain tax incentives pursuant to relevant laws and
regulations, including reduced enterprise income tax rates. For example, under the Enterprise
Income Tax Law and its implementation rules, the statutory enterprise income tax rate is 25%.
However, the income tax of an enterprise that has been determined to be a high and new
technology enterprise can be reduced to a preferential rate of 15%. Certain of our subsidiaries
in China were accredited as “High and New Technology Enterprises” and therefore entitled to
a preferential income tax rate of 15% for the years ended December 31, 2022 and 2023 and the
nine months ended September 30, 2024. Additionally, certain of our subsidiaries that are
registered in Jingning She Autonomous County, Zhejiang, are entitled to a preferential income
RISK FACTORS
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tax policy for an exemption of the local portion of income tax for 10 years since the date of
their registration. Furthermore, one of our subsidiaries in China was qualified as a “Double
Soft Enterprise” (“ DSE”) under the PRC Enterprise Income Tax Law during the years ended
December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024, which
entitled it to an income tax exemption for two years commencing from its first profitable year,
and a 50% reduction in the applicable tax rates for the subsequent three years if it meets the
criteria of DSE each year. Any increase in the enterprise income tax rate applicable to our PRC
subsidiaries in China, or any discontinuation, retroactive or future reduction or refund of any
of the preferential tax treatments and local government subsidies currently enjoyed by our PRC
subsidiaries in China, could adversely affect our business, financial condition and results of
operations.
In 2021, 2022 and 2023, we recognized government grants of RMB23.5 million,
RMB18.6 million and RMB90.0 million, respectively, which represent incentives received
from the local governments as their support to the growth of local enterprises. In the nine
months ended September 30, 2023 and 2024, we recognized government grants of RMB77.5
million and RMB72.9 million, respectively. However, we cannot assure you that we will
continue to be eligible to receive government grants from any local government in China in the
future. If we cannot continue to receive such government grants, our financial performance
may be materially and adversely affected.
Further, in the ordinary course of our business, we are subject to complex income tax and
other tax regulations, and significant judgements are required in the determination of a
provision for income taxes. Although we believe our tax provisions are reasonable, if the PRC
tax authorities successfully challenge our position, and we are required to pay tax, interest and
penalties in excess of our tax provisions, our financial condition and results of operations
would be materially and adversely affected.
We may rely on dividends and other distributions on equity paid by our PRC subsidiaries
to fund any cash and financing requirements we may have, and any limitation on the
ability of our PRC subsidiaries to make payments to us could have a material and adverse
effect on our ability to conduct our business.
We are a holding company and rely to a significant extent on dividends and other
distributions on equity paid by our PRC subsidiaries for our offshore cash and financing
requirements, including the funds necessary to pay dividends and other cash distributions to
our shareholders, fund inter-company loans, service any debt we may incur outside of China
and pay our expenses. If our PRC subsidiaries incur additional debt, the instruments governing
the debt may restrict their ability to pay dividends or make other distributions or remittances,
including loans, to us. Furthermore, the laws, rules and regulations applicable to our PRC
subsidiaries and certain other subsidiaries permit payments of dividends only out of their
retained earnings, if any, determined in accordance with applicable accounting standards and
regulations.
RISK FACTORS
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Under applicable laws, rules and regulations, each of our subsidiaries incorporated in
China is required to set aside a portion of its net income each year to fund certain statutory
reserves. These reserves, together with the registered equity, are not distributable as cash
dividends. As a result of these laws, rules and regulations, our subsidiaries incorporated in
China are restricted in their ability to transfer a portion of their respective net assets to their
shareholders as dividends. In addition, registered share capital and capital reserve accounts are
also restricted from withdrawal in the PRC, up to the amount of net assets held in each
operating subsidiary.
RISKS RELATING TO THE GLOBAL OFFERING
There has been no public market for our Shares prior to the Global Offering, and you may
not be able to resell our Shares at or above the price you pay, or at all.
Prior to completion of the Global Offering, there has been no public market for our
Shares. There can be no guarantee that an active trading market for our Shares will develop or
be sustained after completion of the Global Offering. The Offer Price is the result of
negotiations among our Company and the Overall Coordinators (for themselves and on behalf
of the Underwriters), which may not be indicative of the price at which our Shares will be
traded following completion of the Global Offering. The market price of our Shares may drop
below the Offer Price at any time after completion of the Global Offering.
The trading price of the Shares may be volatile which could result in substantial losses to
you.
The trading price of our Shares may be volatile and could fluctuate widely in response to
factors beyond our control, including general market conditions of the securities markets in
Hong Kong and elsewhere in the world. In particular, the performance and fluctuation of the
market prices of other companies with business operations located mainly in China that have
listed their securities in Hong Kong may affect the volatility of the price of, and trading
volumes for our Shares. A number of PRC-based companies have listed their securities, and
some are in the process of preparing for listing their securities, in Hong Kong. Some of these
companies have experienced significant volatility, including significant price declines after
their offerings. The trading performances of the securities of these companies at the time of,
or after, their offerings may affect the overall investor sentiment towards PRC-based
companies listed in Hong Kong, and consequently may impact the trading performance of our
Shares. These broad market and industry factors may significantly affect the market price and
volatility of our Shares, regardless of our actual operating performance.
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The actual or perceived sale or availability for sale of substantial amounts of our Shares,
especially by our Directors, executive officers and substantial shareholders, could
adversely affect the market price of our Shares.
Future sales of a substantial number of our Shares, especially by our Directors, executive
officers and substantial shareholders, or the perception or anticipation of such sales, could
negatively impact the market price of our Shares in Hong Kong and our ability to raise equity
capital in the future at a time and price that we deem appropriate.
The Shares held by our Controlling Shareholders are subject to certain lock-up periods.
While we are currently not aware of any intention of such persons to dispose of significant
amounts of their Shares after the expiry of the lock-up periods, we cannot assure you that they
will not dispose of any Shares they may own now or in the future.
Y ou will incur immediate and substantial dilution and may experience further dilution in
the future.
As the Offer Price of Shares is higher than the net tangible book value per share of our
Shares immediately prior to the Global Offering, purchasers of our Shares in the Global
Offering will experience an immediate dilution. There can be no assurance that if we were to
immediately liquidate after the Global Offering, any assets will be distributed to Shareholders
after the creditors’ claims. To expand our business, we may consider issuing additional Shares
in the future. Purchasers of the Global Offering may experience dilution in the net tangible
asset value per Share of their Shares if we issue additional Shares in the future at a price which
is lower than the net tangible asset value per Share at that time.
If securities or industry analysts cease to publish research or reports about our business,
or if they adversely change their recommendations regarding our Shares, the market
price for our Shares and trading volume could decline.
The trading market for our Shares will be influenced by the research and reports that
securities or industry analysts publish about us or our business. If research analysts do not
establish and maintain adequate research coverage or if one or more of the analysts who covers
us downgrades our Shares or publishes inaccurate or unfavorable research about our business,
the market price for our Shares would likely decline. If one or more of these analysts cease
coverage of our Company or fail to regularly publish reports on us, we could lose visibility in
the financial markets, which in turn could cause the market price or trading volume for our
Shares to decline.
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We cannot assure you that we will declare and distribute any amount of dividends in the
future and you may have to rely on price appreciation of our Shares for return on your
investment.
We did not declare or distribute dividends to our shareholders during the Track Record
Period. Save for the intended declaration of Special Dividend as disclosed in the section headed
“Summary — Dividends”, there can be no assurance that we will declare and distribute any
amount of dividends in the future. Therefore, you should not rely on an investment in our
Shares as a source for any future dividend income.
Our Board of Directors has discretion as to whether to distribute dividends, subject to
certain restrictions under Cayman Islands law, namely that our Company may only pay
dividends either out of profits or share premium account, and provided always that in no
circumstances may a dividend be paid if this would result in our Company being unable to pay
its debts at they fall due in the ordinary course of business. In addition, our shareholders may
by ordinary resolution declare a dividend, but no dividend may exceed the amount
recommended by our board of directors. Even if our board of directors decides to declare and
pay dividends, the timing, amount and form of future dividends, if any, will depend on, among
other things, our future results of operations and cash flow, our capital requirements and
surplus, the amount of distributions, if any, received by us from our subsidiary, our financial
condition, contractual restrictions and other factors deemed relevant by our board of directors.
Accordingly, the return on your investment in our Shares will likely depend entirely upon any
future price appreciation of our Shares. There is no guarantee that our Shares will appreciate
in value or even maintain the price at which you purchased the Shares. Y ou may not realize a
return on your investment in our Shares and you may even lose your entire investment in our
Shares.
Our Controlling Shareholders have significant influence over our Company and their
interests may not be aligned with the interests of our other Shareholders.
Immediately upon the completion of the Global Offering, without taking into account any
Shares which may be issued pursuant to the exercise of the Offer Size Adjustment Option and
the Over-allotment Option, our Controlling Shareholders will control approximately 74.09% of
the voting power at our general meetings. Our Controlling Shareholders will, through their
voting power at the Shareholders’ meetings and their delegates on the Board, have significant
influence over our business and affairs, including decisions in respect of mergers or other
business combinations, acquisition or disposition of assets, issuance of additional Shares or
other equity securities, timing and amount of dividend payments, and our management. Our
Controlling Shareholders may not act in the best interests of our minority Shareholders. In
addition, without the approval of our Controlling Shareholders, we could be prevented from
entering into transactions that could be beneficial to us. This concentration of ownership may
also discourage, delay or prevent a change in control of our Company, which could deprive our
Shareholders of an opportunity to receive a premium for the Shares as part of a sale of our
Company and may significantly reduce the price of our Shares.
RISK FACTORS
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Certain statistics contained in this document are derived from publicly available official
sources.
This document, particularly the section headed “Industry Overview,” contains
information and statistics relating to the freshly-made beverage market in China. Such
information and statistics have been derived from various official government and other
publications and from a third-party report commissioned by us. We believe that the sources of
such information are appropriate sources for such information and have taken reasonable care
in extracting and reproducing such information. We have no reason to believe that such
information is false or misleading or that any fact has been omitted that would render such
information false or misleading. However, we cannot guarantee the quality or reliability of
information from official government sources. The information from official government
sources has not been independently verified by the Company, the Joint Sponsors, any of our
or their respective directors, officers or representatives or any other person involved in the
Global Offering and no representation is given as to its accuracy. In addition, we cannot assure
you that such information is stated or compiled on the same basis or with the same degree of
accuracy as or consistent with similar statistics presented elsewhere or similar metrics we used,
and such information may not be complete or up-to-date. In any event, you should consider
carefully the importance placed on such information or statistics.
There may be difficulties in protecting your interests under the laws of the Cayman
Islands.
Our corporate affairs are governed by, among other things, our Memorandum and Articles
of Association, the Companies Act and common law of the Cayman Islands. The rights of
Shareholders to take action against our Directors, actions by minority shareholders and the
fiduciary responsibilities of our Directors to us under Cayman Islands law are to a large extent
governed by the common law of the Cayman Islands. The common law of the Cayman Islands
is derived in part from comparatively limited judicial precedent in the Cayman Islands as well
as from English common law, which has persuasive, but not binding, authority on a court in
the Cayman Islands. The laws of the Cayman Islands relating to the protection of the interests
of minority shareholders differ in some respects from those in other jurisdictions. Such
differences may mean that the remedies available to the minority shareholders may be different
from those they would have under the laws of other jurisdictions. See “Appendix III —
Summary of the Constitution of Our Company and Company Law of the Cayman Islands” for
more details.
We are subject to changing laws and regulations regarding corporate governance and
public disclosure that have increased both our costs and the risk of non-compliance.
We are or will be subject to rules and regulations by various governing bodies, including,
for example, the Stock Exchange, which together with the SFC is charged with the protection
of investors and the oversight of companies whose securities are publicly traded, the various
regulatory authorities in China, Hong Kong and the Cayman Islands, and to new and evolving
regulatory measures under applicable law. Our efforts to comply with new and changing laws
RISK FACTORS
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and regulations have resulted in and are likely to continue to result in, increased general and
administrative expenses and a diversion of management time and attention from revenue-
generating activities to compliance activities.
Moreover, the interpretation and application of these laws, regulations and standards may
evolve from time to time. This evolution may result in continuing uncertainty regarding
compliance matters and additional costs necessitated by ongoing revisions to our disclosure
and governance practices. If we fail to address and comply with these regulations and any
subsequent changes, we may be subject to penalty and our business may be harmed.
Y ou should read the entire document carefully and should not rely on any information
contained in press articles or other media regarding us and the Global Offering.
We strongly caution you not to rely on any information contained in press articles or other
media regarding us and the Global Offering. Prior to the publication of this document, there
has been press and media coverage regarding us, our business, our industry and the Global
Offering. There may be additional media coverage regarding us, our business, our industry and
the Global Offering subsequent to the date of this document but prior to the completion of the
Global Offering. Such press and media coverage may include references to certain information
that does not appear in this document, including certain operating and financial information
and projections, valuations and other information. None of us or any other person involved in
the Global Offering has authorized the disclosure of any such information in the press or media
and none of us accepts any responsibility for any such press or media coverage or the accuracy
or completeness of any such information or publication. We make no representation as to the
appropriateness, accuracy, completeness or reliability of any such information or publication.
To the extent that any such information is inconsistent or conflicts with the information
contained in this document, we disclaim responsibility for it. Accordingly, prospective
investors are cautioned to make their investment decisions on the basis of the information
contained in this document only and should not rely on any other information.
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In preparation for the Listing, we have sought the following waivers from strict
compliance with the Listing Rules and exemptions from the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
MANAGEMENT PRESENCE IN HONG KONG
Pursuant to Rule 8.12 of the Listing Rules, an issuer must have a sufficient management
presence in Hong Kong. This will normally mean that at least two of its executive directors
must be ordinarily resident in Hong Kong. We do not have sufficient management presence in
Hong Kong for the purposes of Rule 8.12 of the Listing Rules.
Our Group’s management headquarters, senior management, business operations and
assets are primarily based outside Hong Kong, in mainland China. The Directors consider that
the appointment of executive Directors who will be ordinarily resident in Hong Kong would
not be beneficial to, or appropriate for, our Group and therefore would not be in the best
interests of our Company or the Shareholders as a whole.
Accordingly, we have applied for, and the Stock Exchange has granted, a waiver from
strict compliance with Rule 8.12 of the Listing Rules. We will ensure that there is an effective
channel of communication between us and the Stock Exchange in accordance with paragraph
10 of Chapter 3.10 of the Guide for New Listing Applicants issued by the Stock Exchange by
way of the following arrangements:
(a) pursuant to Rule 3.05 of the Listing Rules, our Company has appointed and will
continue to maintain two authorized representatives who shall act at all times as the
principal channel of communication with the Stock Exchange. Each of our
authorized representatives will be readily contactable by the Stock Exchange by
telephone, facsimile and/or e-mail to deal promptly with enquiries from the Stock
Exchange. Both of our authorized representatives are authorized to communicate on
our behalf with the Stock Exchange. At present, our two authorized representatives
are Mr. Wang, our Chairman of the Board, an executive Director and the chief
executive officer of our Company, and Ms. Ying Man Sham, one of our joint
company secretaries;
(b) pursuant to Rule 3.20 of the Listing Rules, each Director will provide his/her contact
information (including their mobile phone numbers, office phone numbers and
e-mail addresses (if available)) to the Stock Exchange and to the authorized
representatives. This will ensure that the Stock Exchange and the authorized
representatives should have means for contacting all Directors promptly at all times
as and when required;
(c) we will endeavour to ensure that each Director who is not ordinarily resident in
Hong Kong possesses or can apply for valid travel documents to visit Hong Kong
and can meet with the Stock Exchange within a reasonable period;
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(d) pursuant to Rule 3A.19 of the Listing Rules, our Company has retained the services
of Altus Capital Limited as compliance adviser (the “ Compliance Adviser ”), who
will act as an additional channel of communication with the Stock Exchange. The
Compliance Adviser will provide our Company with professional advice on ongoing
compliance with the Listing Rules. We will ensure that the Compliance Adviser has
prompt access to our Company’s authorized representatives and Directors. In turn,
they will provide the Compliance Adviser with such information and assistance as
the Compliance Adviser may need or may reasonably request in connection with the
performance of the Compliance Adviser’s duties. The Compliance Adviser will also
provide advice to our Company when consulted by our Company in compliance with
Rule 3A.23 of the Listing Rules; and
(e) meetings between the Stock Exchange and the Directors can be arranged through the
authorized representatives or the Compliance Adviser, or directly with the Directors
within a reasonable time frame. We will inform the Stock Exchange as soon as
practicable in respect of any change in the authorized representatives, the Directors
and/or the Compliance Adviser in accordance with the Listing Rules.
JOINT COMPANY SECRETARIES
Pursuant to Rules 3.28 and 8.17 of the Listing Rules, the company secretary must be an
individual who, by virtue of his/her academic or professional qualifications or relevant
experience, is, in the opinion of the Stock Exchange, capable of discharging the functions of
company secretary.
Pursuant to Note 1 to Rule 3.28 of the Listing Rules, the Stock Exchange considers the
following academic or professional qualifications to be acceptable:
(a) a member of The Hong Kong Chartered Governance Institute;
(b) a solicitor or barrister as defined in the Legal Practitioners Ordinance (Chapter 159
of the Laws of Hong Kong); and
(c) a certified public accountant as defined in the Professional Accountants Ordinance
(Chapter 50 of the Laws of Hong Kong).
Pursuant to Note 2 to Rule 3.28 of the Listing Rules, in assessing “relevant experience,”
the Stock Exchange will consider the individual’s:
(a) length of employment with the issuer and other issuers and the roles he/she played;
(b) familiarity with the Listing Rules and other relevant law and regulations including
the SFO, Companies Ordinance, Companies (Winding Up and Miscellaneous
Provisions) Ordinance, and the Takeovers Code;
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(c) relevant training taken and/or to be taken in addition to the minimum requirement
under Rule 3.29 of the Listing Rules; and
(d) professional qualifications in other jurisdictions.
Our Company appointed Ms. Ying Man Sham of Tricor Services Limited, and Mr. Saibin
Wang, a senior finance manager of our Company, as joint company secretaries of our Company.
See the section headed “Directors and Senior Management — Joint Company Secretaries” for
their biographies.
Ms. Ying Man Sham is a member of The Hong Kong Chartered Governance Institute, and
therefore meets the qualification requirements under Note 1 to Rule 3.28 of the Listing Rules
and is in compliance with Rule 8.17 of the Listing Rules.
The Company’s principal business activities are outside Hong Kong. We believe that it
would be in the best interests of our Company and the corporate governance of our Group to
have as its joint company secretary a person such as Mr. Saibin Wang, who has been an
employee of our Company and who has day-to-day knowledge of our Company’s affairs. Mr.
Saibin Wang has the necessary nexus to the Board and close working relationship with
management of our Company in order to perform the function of a joint company secretary and
to take the necessary actions in the most effective and efficient manner.
Accordingly, while Mr. Saibin Wang does not possess the academic or professional
qualifications required of a company secretary under Rules 3.28 and 8.17 of the Listing Rules,
we have applied to the Stock Exchange for, and the Stock Exchange has granted, a waiver from
strict compliance with the requirements under Rules 3.28 and 8.17 of the Listing Rules such
that Mr. Saibin Wang may be appointed as a joint company secretary of our Company.
Our Company has applied for, and the Exchange has granted, a waiver from strict
compliance with Rules 3.28 and 8.17 of the Listing Rules for a three-year period from the
Listing Date on the conditions that: (i) Ms. Ying Man Sham is appointed as a joint company
secretary to assist Mr. Saibin Wang in discharging his functions as a company secretary and in
gaining the relevant experience under Rule 3.28 of the Listing Rules; the waiver will be
revoked immediately if Ms. Ying Man Sham, during the three-year period, ceases to provide
assistance to Mr. Saibin Wang as a joint company secretary; and (ii) the waiver will be revoked
if there are material breaches of the Listing Rules by our Company. In addition, Mr. Saibin
Wang will comply with the annual professional training requirement under Rule 3.29 of the
Listing Rules and will enhance his knowledge of the Listing Rules during the three-year period
from the Listing Date. Our Company will further ensure that Mr. Saibin Wang has access to the
relevant training and support that would enhance his understanding of the Listing Rules and the
duties of a company secretary of an issuer listed on the Stock Exchange. Before the end of the
three-year period, the qualifications and experience of Mr. Saibin Wang and the need for
on-going assistance of Ms. Ying Man Sham will be further evaluated by our Company. We will
liaise with the Stock Exchange before the end of the three year period to enable it to assess
whether Mr. Saibin Wang, having benefited from the assistance of Ms. Ying Man Sham for the
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preceding three years, will have acquired the skills necessary to carry out the duties of
company secretary and the relevant experience within the meaning of Note 2 to Rule 3.28 of
the Listing Rules so that a further waiver will not be necessary.
W AIVER FROM STRICT COMPLIANCE WITH RULE 4.04(1) OF THE LISTING
RULES AND EXEMPTION FROM STRICT COMPLIANCE WITH SECTION 342(1)(b)
IN RELATION TO PARAGRAPH 27 OF PART I AND PARAGRAPH 31 OF PART II
OF THE THIRD SCHEDULE TO THE COMPANIES (WINDING UP AND
MISCELLANEOUS PROVISIONS) ORDINANCE
Rule 4.04(1) of the Listing Rules requires this document to include, among other things,
details of the financial results of the company for the financial year immediately preceding the
issue of the document, being the year ended December 31, 2024 or such shorter period as may
be acceptable to the Stock Exchange.
Section 342(1)(b) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance requires, subject to section 342A of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, all prospectuses to state the matters specified in Part I of the Third
Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance and set out
the reports specified in Part II of the Third Schedule to the Companies (Winding Up and
Miscellaneous Provisions) Ordinance.
According to paragraph 27 of Part I of the Third Schedule to the Companies (Winding Up
and Miscellaneous Provisions) Ordinance, a company is required to include in the prospectus
a statement as to the gross trading income or sales turnover (as may be appropriate) of the
company during each of the three financial years immediately preceding the issue of the
prospectus as well as an explanation of the method used for the computation of such income
or turnover and a reasonable breakdown of the more important trading activities.
According to paragraph 31 of Part II of the Third Schedule to the Companies (Winding
Up and Miscellaneous Provisions) Ordinance, a company is required to include in the
prospectus a report by auditors of the listing applicant with respect to profits and losses in
respect of each of the three financial years immediately preceding the issue of the prospectus
and assets and liabilities of the listing applicant at the last date to which the financial
statements of the listing applicant were prepared.
Pursuant to section 342A(1)(a) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance, the SFC may, subject to such conditions (if any) as the SFC thinks fit,
issue a certificate of exemption from compliance with the relevant requirements under
Companies (Winding Up and Miscellaneous Provisions) Ordinance if, having regard to the
circumstances, the SFC considers that the exemption will not prejudice the interest of the
investing public and compliance with any or all of such requirements would be irrelevant or
unduly burdensome, or is otherwise unnecessary or inappropriate.
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Chapter 1.1A of the Guide for New Listing Applicants has provided the conditions for
granting a waiver from strict compliance with Rule 4.04(1) of the Listing Rules.
The Accountants’ Report for each of the three years ended December 31, 2023 and the
nine months ended September 30, 2024 has been prepared and is set out in Appendix I to this
document.
Pursuant to the relevant requirements set out above, our Company is required to include
three full years of audited accounts for the three years ended December 31, 2024 in this
document. As such, an application has been made to the Stock Exchange for a waiver from
strict compliance with Rule 4.04(1) of the Listing Rules, and such waiver has been granted by
the Stock Exchange on the conditions that:
(a) this document will be issued on or before February 4, 2025 and the Company’s
Shares will be listed on or before March 31, 2025, i.e. three months after the latest
financial year-end;
(b) in accordance with Chapter 1.1A of the Guide for New Listing Applicants, a profit
estimate for the financial year ended December 31, 2024 has been included in this
document, in compliance with Rules 11.17 to 11.19 of the Listing Rules and a
Directors’ statement that there is no material and adverse change to the financial and
trading positions or prospects of our Company, with specific reference to the trading
results from October 1, 2024 to December 31, 2024; and
(c) our Company obtains a certificate of exemption from the SFC on strict compliance
with paragraph 27 of Part I and paragraph 31 of Part II of the Third Schedule to the
Companies (Winding Up and Miscellaneous Provisions) Ordinance.
An application has also been made to the SFC for a certificate of exemption from strict
compliance with the requirements under section 342(1)(b) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance in relation to paragraph 27 of Part I and paragraph 31 of
Part II of the Third Schedule to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance and a certificate of exemption has been granted by the SFC under section
342A(1)(a) of the Companies (Winding Up and Miscellaneous Provisions) Ordinance on the
conditions that:
(a) the particulars of the exemption are disclosed in this document;
(b) the issuance of the document on or before February 4, 2025; and
(c) our Company’s Shares will be listed on the Stock Exchange on or before March 31,
2025.
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The applications to Stock Exchange for a waiver from strict compliance with Rule 4.04(1)
of the Listing Rules and to the SFC for a certificate of exemption from strict compliance with
the requirements under section 342(1)(b) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance in relation to paragraph 27 of Part I and paragraph 31 of Part II of the
Third Schedule to the Companies (Winding Up and Miscellaneous Provisions) Ordinance have
been made on the grounds, among others, that strict compliance with the above requirements
would be unduly burdensome and the waiver and exemption would not prejudice the interests
of the investing public as:
(a) there would not be sufficient time for our Company and the reporting accountants
of our Company (the “ Reporting Accountants ”) to finalise the audited financial
statements for the year ended December 31, 2024 for inclusion in this document. If
the financial information for the year ended December 31, 2024 is required to be
audited, our Company and the Reporting Accountants would have to carry out
substantial volume of work to prepare, update and finalise the Accountants’ Report
and this document, and the relevant sections of the document will need to be updated
to cover such additional period. This would involve additional time and costs since
substantial work is required to be carried out for audit purposes. It would be unduly
burdensome for the audited results for the year ended December 31, 2024 to be
finalised in a short period of time. Our Directors consider that the benefits of such
work to the existing and prospective shareholders of our Company may not justify
the additional work and expenses involved and the delay of the listing timetable;
(b) our Directors and the Joint Sponsors confirm, after performing sufficient due
diligence work up to the date of this prospectus, that there has been no material
adverse change to the financial and trading positions or prospects of the Group since
October 1, 2024 (immediately following the date of the latest audited statement of
financial position in the Accountants’ Report set out in Appendix I to this document)
up to the date of this prospectus, and there has been no event since October 1, 2024
which would materially affect the information contained in the Accountants’ Report
as set out in Appendix I to this document, the financial information section, the
profit estimate as set out in Appendix IIA to this document and information
regarding the Company’s recent development subsequent to the Track Record Period
and up to the date of this document;
(c) our Company and the Joint Sponsors are of the view that the Accountants’ Report
covering the three years ended December 31, 2023 and the nine months ended
September 30, 2024, together with the profit estimate for the year ended December
31, 2024 (in compliance with Rules 11.17 to 11.19 of the Listing Rules) included in
this document have already provided the potential investors with adequate and
reasonably up-to-date information in the circumstances to form a view on the track
record and earnings trend of our Company; and our Directors confirm that
all information which is necessary for the investing public to make an informed
assessment of the activities, assets and liabilities, financial position,
trading position, management and prospects has been included in this document.
Therefore, the waiver and exemption would not prejudice the interests of the
investing public; and
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(d) our Company will comply with the requirements under Rules 13.46(2) and 13.49(1)
of the Listing Rules in respect of the publication of our annual results and annual
report. Our Company currently expects to issue our annual results and annual report
for the financial year ended December 31, 2024 on or before March 31, 2025 and
April 30, 2025, respectively. In this regard, our Directors consider that the
Shareholders, the investing public as well as potential investors of our Company will
be kept informed of the financial results of our Group for the financial year ended
December 31, 2024.
CONTINUING CONNECTED TRANSACTIONS
We have entered into certain transactions which will constitute continuing connected
transactions of our Company under the Listing Rules following the completion of the Global
Offering. We have applied to the Stock Exchange for, and the Stock Exchange has granted, a
waiver from strict compliance with (where applicable) (i) the announcement requirement, and
(ii) the circular and independent shareholders’ approval requirement set out in Chapter 14A of
the Listing Rules for such continuing connected transactions. For further details in this respect,
see the section headed “Connected Transactions.”
CORNERSTONE SUBSCRIPTION BY A CLOSE ASSOCIATE OF AN EXISTING
SHAREHOLDER
Rules 2.03(2) and (4) of the Listing Rules require the issue and marketing of securities
to be conducted in a fair and orderly manner, and that all holders of listed securities be treated
fairly and equally.
Rule 10.04 of the Listing Rules provides that a person who is an existing shareholder of
the issuer may only subscribe for or purchase securities for which listing is sought which are
being marketed by or on behalf of a new applicant either in his or its own name or through
nominees if the conditions in Rules 10.03(1) and (2) are fulfilled. The conditions under Rule
10.03 of the Listing Rules are that (1) no securities are offered to the existing shareholder on
a preferential basis and no preferential treatment is given to the existing shareholder in the
allocation of the securities; and (2) the minimum prescribed percentage of public shareholders
required by Rule 8.08(1) of the Listing Rules is achieved.
Paragraph 5(2) of Appendix F1 to the Listing Rules prohibits allocation of shares in a
global offering to existing shareholders of the applicant or their close associates, whether in
their own names or through nominees, unless the conditions in Rules 10.03 and 10.04 of the
Listing Rules are fulfilled or prior written consent of the Stock Exchange has been obtained.
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According to Chapter 4.2 of the Guide for New Listing Applicants, notwithstanding the
requirements under Rule 10.04 of, and paragraph 5 of Appendix F1 to, the Listing Rules,
exercise of anti-dilution rights before and in connection with the global offering is permissible
if:
(a) the allocation is necessary to give effect to pre-existing contractual rights;
(b) there is full disclosure of the anti-dilution rights and the number of shares to be
subscribed in the listing document and the allotment results announcement; and
(c) the additional shares will be subscribed at the IPO price.
Chapter 4.15 of the Guide for New Listing Applicants sets out the basis and conditions
and/or required information for the Stock Exchange to grant its consent to allow placing to
existing shareholders or their close associates in the International Offering. According to:
(a) paragraph 12 of Chapter 4.15 of the Guide for New Listing Applicants, the Stock
Exchange would ordinarily agree to grant a consent and waiver for allocation to
existing shareholders or their close associates if it is satisfied that the actual or
perceived preferential treatment arising from their ability to influence the applicant
during the allocation process can be addressed; and
(b) paragraph 15 of Chapter 4.15 of the Guide for New Listing Applicants, the Stock
Exchange will generally not presume that there is preferential treatment, and
fulfilment of the Existing Shareholder Conditions (as defined in paragraph 13 of
Chapter 4.15 of the Guide for New Listing Applicants) is not required, where
existing shareholders are purchasing securities pursuant to an anti-dilution
provision.
Immediately before the completion of the Global Offering, Beijing Meiming Enterprise
Management Consulting Partnership (Limited Partnership) (পΆุ၍ଣፔ༔ΥྫΆุ
(Υྫ)) (“ Meiming ”) and Beijing Meiyan Enterprise Management Consulting Partnership
(Limited Partnership) (Άุ၍ଣፔ༔ΥྫΆุ(Υྫ)) (“ Meiyan ”, together with
Meiming, “ Long-Z ”), two or our existing Shareholders, held in aggregate approximately 8.0%
of the total issued share capital of our Company.
Pursuant to the Shareholders Agreement entered into between our Company and the
Pre-IPO Investors on December 26, 2023, each of the Pre-IPO Investors (including Long-Z)
have been granted an anti-dilution option, which it is entitled to apportion among itself and its
affiliates, to purchase all or part of the pro rata ratio of total securities issued in a qualified
initial public offering at the Offer Price (the “ Anti-Dilution Right ”). See the section headed
“History, Reorganization and Corporate Structure — Pre-IPO Investments — Special rights of
the Pre-IPO Investors” in this prospectus for details.
An affiliate of Long-Z, Long-Z Fund I, LP (“ Long-Z’s Affiliate ”), a limited partnership
entity which is also ultimately controlled by Mr. Y onghua Zhu, intends to invest Hong Kong
dollar equivalent of US$8 million (excluding brokerage, transaction levies and stock exchange
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trading fees which will be paid in respect of the Offer Share) as a cornerstone investor, through
exercise of the Anti-Dilution Right (the “ Exercise of Anti-Dilution Right ”) to subscribe for
a maximum of 7,180,000 Offer Shares (calculated based on the low-end of the indicative range
of the Offer Price) to be issued by our Company pursuant to the Global Offering and to which
it is entitled under the Anti-Dilution Right (the “ Entitled Shares ”), at the Offer Price.
Upon subscription of the Offer Shares by Long-Z’s Affiliate pursuant to the Exercise of
Anti-Dilution Right, based on the low-end of the indicative range of the Offer Price and
assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised,
Long-Z and Long-Z’s Affiliate will hold, in aggregate, approximately 7.76% of the total issued
share capital of our Company.
Our Company has applied for, and the Stock Exchange has granted, a waiver from strict
compliance with the requirements under Rule 10.04 of, and a consent under paragraph 5(2) of
Appendix F1 to, the Listing Rules, in respect of the Exercise of Anti-Dilution Right based on
the following conditions:
(a) the allocation of the Entitled Shares to Long-Z’s Affiliate pursuant to the Exercise
of the Anti-Dilution Right is necessary in order to give effect to the Anti-Dilution
Right under the Shareholders Agreement, which is a pre-existing contractual right;
(b) full disclosure of the Anti-Dilution Right and the number of shares to be subscribed
for by Long-Z’s Affiliate will be made in the prospectus and the allotment results
announcement of our Company;
(c) the Entitled Shares will be subscribed for by Long-Z’s Affiliate at the Offer Price,
and will not result in the aggregate percentage of equity interest held by Long-Z and
Long-Z’s Affiliate in the Company exceeding that held by Long-Z immediately prior
to the Global Offering;
(d) the allocation of the Entitled Shares to Long-Z’s Affiliate pursuant to the Exercise
of the Anti-Dilution Right will not affect our Company’s ability to satisfy the public
float requirement under Rule 8.08(1)(a) of the Listing Rules;
(e) our Company confirms that (i) the cornerstone investment agreement with Long-Z’s
Affiliate does not contain any material terms which are more favorable than those
in other cornerstone investment agreements; and (ii) no preferential treatment has
been, nor will be, given to Long-Z and Long-Z’s Affiliate in the allocation of Shares
by virtue of their relationship with our Company other than the assured entitlement
as a cornerstone investor; and
(f) the Overall Coordinators confirm that, to the best of their knowledge and belief, no
preferential treatment has been, nor will be, given to Long-Z and Long-Z’s Affiliate
in the allocation of Shares by virtue of their relationship with our Company, other
than the assured entitlement as a cornerstone investor.
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PUBLIC FLOAT REQUIREMENTS
Rule 8.08(3) of the Listing Rules provides that not more than 50% of the securities in
public hands at the time of listing can be beneficially owned by the three largest public
shareholders, save where: (a) the securities to be listed are options, warrants or similar rights
to subscribe or purchase shares; (b) such securities are offered to existing holders of a listed
issuer’s shares by way of bonus issue; and (c) in the 5 years preceding the date of the
announcement on the proposed bonus issue, there are no circumstances to indicate that the
shares of the issuer may be concentrated in the hands of a few shareholders.
We are proposing to offer 158,612,000 Offer Shares, representing approximately 6.80%
of our Company’s issued share capital immediately after the completion of the Global Offering
(assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised).
Upon completion of the Global Offering (assuming the Offer Size Adjustment Option and the
Over-allotment Option are not exercised), our Company’s issued share capital held in public
hands will be approximately 25.38%. On this basis, pursuant to Rule 8.08(3) of the Listing
Rules, the aggregate shareholding of the three largest public Shareholders should not exceed
12.69% of our Company’s issued share capital, being 50% of the Shares to be held in public
hands.
Based on the proposed size of the Global Offering, the aggregate shareholding of the three
largest public Shareholders will be approximately 14.63% of our Company’s enlarged issued
share capital, representing approximately 57.65% of the Shares to be held in public hands,
immediately after the completion of the Global Offering (assuming the Offer Size Adjustment
Option and the Over-allotment Option are not exercised), comprising:
(a) Meiming and Meiyan (together “ Long-Z ”), both existing Shareholders, and Long-
Z’s Affiliate, each of which are ultimately controlled by the same independent third
party individual, holding in aggregate approximately 7.76% of our Company’s
issued share capital;
(b) Max Mighty Limited (“ HongShan ”), an existing Shareholder, holding
approximately 3.73% of our Company’s issued share capital; and
(c) Nascent Sprouts Limited, an existing Shareholder, holding approximately 3.14% of
our Company’s issued share capital.
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Rule 8.08 of the Listing Rules aims to ensure an open market in the securities to be listed
on the Stock Exchange. In light of the size of the Global Offering, as well as the number and
the corresponding board lots and market capitalization of Shares in public hands (excluding the
shareholding of the three largest public Shareholders), there will be sufficient Shares (in terms
of board lots) for broad distribution to the public in Hong Kong as well as professional and
institutional investors and other investors in and outside Hong Kong. This would ensure a
diverse investor base in the Shares, and will further contribute to an active and liquid
aftermarket in the trading of the Shares, subject to market conditions and other external factors.
The following table sets out (i) the total number of Shares held by public Shareholders;
(ii) the number of Shares held by public Shareholders other than the three largest public
Shareholders; and (iii) the number of Shares held by public Shareholders other than those
which are the subject of lock-up undertakings, immediately after the completion of the Global
Offering (assuming the Offer Size Adjustment Option and the Over-allotment Option are not
exercised):
Shares in public
hands
Shares in public
hands (excluding the
three largest public
Shareholders)
Shares in public
hands and not
subject to any
lock-up
Number of Shares and
number of board lots
of 400 Shares each /H1118/H1118/H1118
592,032,303
(1)
(1,480,080 board
lots)
250,750,838 (2)
(626,877 board
lots)
94,890,000 (3)
(237,225
board lots)
HK$ value of the Shares
(based on HK$8.68
per Offer Share, being
the low-end of the
indicative Offer Price
range) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
HK$5.1
billion
HK$2.2
billion
HK$0.8
billion
Approximate percentage
of total issued Shares
immediately following
completion of the
Global Offering
(assuming the Offer
Size Adjustment
Option and the Over-
allotment Option are
not exercised) /H1118/H1118/H1118/H1118/H1118/H111825.38% 10.75% 4.07%
Notes:
(1) Consists of an aggregate of: (i) 158,612,000 initial Offer Shares under the Global Offering (including
Offer Shares to be subscribed by Long-Z’s Affiliate as a cornerstone investor); and (ii) 433,420,303
Shares held by certain existing Shareholders (i.e. Long-Z, HongShan, Coatue PE Asia 34 LLC, New
Budding Capital Inc, Nascent Sprouts Limited and Thriving Leafbuds Limited) immediately prior to the
completion of the Global Offering, which count towards the public float.
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(2) Calculated by deducting (i) 173,913,040 Shares in aggregate held by Long-Z and 7,180,000 Offer Shares
to be subscribed by Long-Z’s Affiliate as cornerstone investor based on the low end of the indicative
Offer Price range; (ii) 86,956,540 Shares held by HongShan; and (iii) 73,231,885 Shares held by
Nascent Sprouts Limited, from the total number of Shares in public hands as set out in note (1) above.
(3) Calculated by considering that (i) all of the Shares held by each of the existing Shareholders will be
subject to lock-up arrangements due to their respective undertakings to, among others, the Company, the
Overall Coordinators and the Joint Sponsors. For further details, please refer to the section headed
“Underwriting — Lock-Up Arrangements”; and (ii) among the 158,612,000 initial Offer Shares under
the Global Offering, a maximum of 63,722,000 Offer Shares would be subscribed by cornerstone
investors participating in the Global Offering (based on the low end of the indicative Offer Price range)
who would be subject to lock-up arrangements pursuant to their respective cornerstone investment
agreement.
Accordingly, we have applied for, and the Stock Exchange has granted us, a waiver from
strict compliance with Rule 8.08(3) of the Listing Rules to allow the three largest public
Shareholders to hold no more than 57.65% of the Shares to be held in public hands immediately
after the completion of the Global Offering (assuming the Offer Size Adjustment Option and
the Over-allotment Option are not exercised).
We will disclose in the allotment results announcement the total number of Shares held
by the three largest public Shareholders and the corresponding percentage of Shares held in
public hands and of our Company’s issued share capital at the time of Listing.
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DIRECTORS’ RESPONSIBILITY FOR THE CONTENTS OF THIS PROSPECTUS
This prospectus, for which our Directors, including any proposed director who is named
as such in this prospectus, collectively and individually accept full responsibility, includes
particulars given in compliance with the Companies (Winding Up and Miscellaneous
Provisions) Ordinance (Chapter 32 of the Laws of Hong Kong), the Securities and Futures
(Stock Market Listing) Rules (Chapter 571V of the Laws of Hong Kong) and the Listing Rules
for the purpose of giving information to the public with regard to our Group. Our Directors,
having made all reasonable enquiries, confirm that to the best of their knowledge and belief the
information contained in this prospectus is accurate and complete in all material respects and
not misleading or deceptive, and there are no other matters the omission of which would make
any statement herein or this prospectus misleading.
GLOBAL OFFERING
This prospectus is published solely in connection with the Hong Kong Public Offering,
which forms part of the Global Offering. For applicants under the Hong Kong Public Offering,
this prospectus contains the terms and conditions of the Hong Kong Public Offering.
The Hong Kong Offer Shares are offered solely on the basis of the information contained
and representations made in this prospectus and on the terms and subject to the conditions set
out herein and therein. No person is authorized to give any information in connection with the
Global Offering or to make any representation not contained in this prospectus, and any
information or representation not contained herein and therein must not be relied upon as
having been authorized by our Company, the Joint Sponsors, the Overall Coordinators, the
Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Capital Market
Intermediaries, and any of the Underwriters, any of their respective directors, agents,
employees or advisors or any other party involved in the Global Offering.
The Listing is sponsored by the Joint Sponsors and the Global Offering is managed by the
Overall Coordinators and the Joint Global Coordinators. Pursuant to the Hong Kong
Underwriting Agreement, the Hong Kong Public Offering is fully underwritten by the Hong
Kong Underwriters under the terms of the Hong Kong Underwriting Agreement, subject to
agreement on the Offer Price. The International Offering is expected to be fully underwritten
by the International Underwriters subject to the terms and conditions of the International
Underwriting Agreement, which is expected to be entered into on or about the Price
Determination Date.
The Offer Price is expected to be determined among the Overall Coordinators (on behalf
of the Underwriters) and our Company on the Price Determination Date. The Price
Determination Date is expected to be on or around Monday, February 10, 2025. If, for whatever
reason, the Offer Price is not agreed among the Overall Coordinators and our Company on or
before 12:00 noon on Monday, February 10, 2025, the Global Offering will not become
unconditional and will lapse immediately.
INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
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See the section headed “Underwriting” in this prospectus for further information about
the Underwriters and the underwriting arrangements.
PROCEDURES FOR APPLICATION FOR HONG KONG OFFER SHARES
The application procedures for the Hong Kong Offer Shares are set forth in “How to
Apply for Hong Kong Offer Shares” in this prospectus.
CSRC FILING
Pursuant to the Trial Measures released by the CSRC on February 17, 2023, which came
into effect on March 31, 2023, domestic companies that seek to offer and list securities
overseas, directly or indirectly, should fulfill the filing procedure and report relevant
information to the CSRC. Pursuant to the Trial Measures, any overseas offering and listing
made by an issuer that meets both of the following conditions will be deemed as indirect
overseas offering and listing that should be filed with the CSRC: (i) 50% or more of the issuer’s
operating revenue, total profit, total assets or net assets as documented in its audited
consolidated financial statements for the most recent fiscal year is accounted for by PRC
domestic companies; and (ii) the key aspects of the issuer’s business activities are conducted
in mainland China, or its main places of operations are located in mainland China, or the senior
managers in charge of its operation and management are mostly Chinese citizens or domiciled
in the PRC.
Given that our domestic operating entities generated a substantial amount of our total
revenue as shown in our audited consolidated financial statements for the year ended December
31, 2022 and that our business activities are mainly conducted in the PRC, our PRC Legal
Advisor is of the opinion that we are required to go through the filing procedures with the
CSRC with respect to the offering and listing after the submission of our application to the
Stock Exchange. We have timely filed with the CSRC on January 3, 2024, which was officially
accepted by the CSRC on January 8, 2024. The CSRC issued a notice of filing on December
9, 2024 for the Global Offering and the listing of our Shares on the Stock Exchange.
STRUCTURE AND CONDITIONS OF THE GLOBAL OFFERING
Details of the structure of the Global Offering, including its conditions, are set forth in
the section headed “Structure of the Global Offering” in this prospectus.
SELLING RESTRICTIONS ON OFFERS AND SALE OF SHARES
Each person acquiring the Hong Kong Offer Shares under the Hong Kong Public Offering
will be required to, or be deemed by his/her acquisition of Offer Shares to, confirm that he/she
is aware of the restrictions on offers for the Offer Shares described in this prospectus.
INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
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No action has been taken to permit a public offering of the Offer Shares in any
jurisdiction other than in Hong Kong, or the distribution of this prospectus in any jurisdiction
other than Hong Kong. Accordingly, this prospectus may not be used for the purpose of, and
does not constitute an offer or invitation in any jurisdiction or in any circumstances in which
such an offer or invitation is not authorized or to any person to whom it is unlawful to make
such an offer or invitation. The distribution of this prospectus and the offering and sale of the
Offer Shares in other jurisdictions are subject to restrictions and may not be made except as
permitted under the applicable securities laws of such jurisdictions pursuant to registration
with or authorisation by the relevant securities regulatory authorities or an exemption
therefrom.
APPLICATION FOR LISTING ON THE STOCK EXCHANGE
We have applied to the Stock Exchange for the listing of, and permission to deal in, (a)
the Shares in issue (including the Shares to be converted from Preferred Shares); (b) the Shares
to be issued pursuant to the Global Offering (including any Shares which may be issued
pursuant to the exercise of the Offer Size Adjustment Option and the Over-allotment Option);
and (c) the Shares which may be issued pursuant to the Post-IPO Share Scheme.
Dealings in the Shares on the Stock Exchange are expected to commence on Wednesday,
February 12, 2025. No part of our Shares or loan capital is listed on or dealt in on any other
stock exchange and no such listing or permission to list is being or proposed to be sought. All
Offer Shares will be registered on the Hong Kong Share register of members of our Company
in order to enable them to be traded on the Stock Exchange.
Under section 44B(1) of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance, any allotment made in respect of any application will be invalid if the listing of,
and permission to deal in, the Shares on the Stock Exchange is refused before the expiration
of three weeks from the date of the closing of the application lists, or such longer period (not
exceeding six weeks) as may, within the said three weeks, be notified to our Company by the
Stock Exchange.
OFFER SIZE ADJUSTMENT OPTION, OVER-ALLOTMENT OPTION AND
STABILIZATION
Details of the arrangements relating to the Offer Size Adjustment Option, the Over-
allotment Option and stabilization are set out in the section headed “Structure of the Global
Offering” in this prospectus.
SHARES WILL BE ELIGIBLE FOR ADMISSION INTO CCASS
Subject to the granting of the listing of, and permission to deal in, the Shares on the Stock
Exchange and compliance with the stock admission requirements of HKSCC, the Shares will
be accepted as eligible securities by HKSCC for deposit, clearance and settlement in CCASS
with effect from the Listing Date or any other date as determined by HKSCC. Settlement of
transactions between participants of the Stock Exchange is required to take place in CCASS on
the second settlement day after any trading day. All activities under CCASS are subject to the
General Rules of HKSCC and HKSCC Operational Procedures in effect from time to time.
INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
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All necessary arrangements have been made for the Shares to be admitted into CCASS.
Investors should seek the advice of their stockbroker or other professional advisor for details
of those settlement arrangements and how such arrangements will affect their rights and
interests.
SHARE REGISTER AND STAMP DUTY
Our principal register of members will be maintained in the Cayman Islands by our
principal registrar, Ogier Global (Cayman) Limited. Our Hong Kong Share register of members
will be maintained by the Hong Kong Share Registrar, Tricor Investor Services Limited, in
Hong Kong.
All Offer Shares issued pursuant to applications made in the Hong Kong Public Offering
and the International Offering will be registered on the Hong Kong register of members of our
Company in Hong Kong. Dealings in the Shares registered in our Hong Kong register of
members will be subject to Hong Kong stamp duty. For further details of Hong Kong stamp
duty, please seek professional tax advice.
PROFESSIONAL TAX ADVICE RECOMMENDED
Potential investors in the Global Offering are recommended to consult their professional
advisors if they are in any doubt as to the taxation implications of subscribing for, holding and
dealing in the Shares or exercising any rights attached to them. It is emphasized that none of
the Company, the Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators, the
Joint Bookrunners, the Joint Lead Managers, the Capital Market Intermediaries, the
Underwriters, any of their respective affiliates, directors, supervisors, employees, agents or
advisors or any other party involved in the Global Offering accepts responsibility for any tax
effects on, or liabilities of holders of the Shares resulting from the subscription, purchase,
holding or disposal of the Shares or exercising any rights attached to them.
EXCHANGE RATE CONVERSION
Solely for your convenience, this prospectus contains translations of certain Renminbi
amounts into Hong Kong dollars, of Renminbi amounts into U.S. dollars and of Hong Kong
dollars into U.S. dollars at specified rates. Unless we indicate otherwise, the translation of
Renminbi into Hong Kong dollars, of Renminbi into U.S. dollars and of Hong Kong dollars
into U.S. dollars, and vice versa, in this prospectus was made at the following rates:
RMB0.9204 to HK$1.00
RMB7.1705 to US$1.00
HK$7.7903 to US$1.00
INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
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No representation is made that any amounts in Renminbi, Hong Kong dollars or U.S.
dollars can be or could have been at the relevant dates converted at the above rates or any other
rates or at all.
LANGUAGE
If there is any inconsistency between the English version of this prospectus and the
Chinese translation of this prospectus, the English version of this prospectus shall prevail
unless otherwise stated. However, if there is any inconsistency between the names of any of
the entities mentioned in the English prospectus that are not in the English language and are
English translations, the names in their respective original languages shall prevail.
ROUNDING
Any discrepancies in any table or chart in this prospectus between total and sum of
amounts listed therein are due to rounding.
OTHER
Unless otherwise specified, all references to any shareholdings in our Company following
the completion of the Global Offering assume that the Offer Size Adjustment Option and the
Over-allotment Option are not exercised.
INFORMATION ABOUT THIS DOCUMENT AND THE GLOBAL OFFERING
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DIRECTORS
Name Address Nationality
Executive Directors
Mr. Y un’an Wang ( ˮථτ
΋͛)
Room 201, Unit 2, Building 18
Jinyayuan, Jianggan District, Hangzhou
Zhejiang Province, PRC
Chinese
Mr. Xia Qi (΋͛) Room 2404, Unit 3, Block 1
Hefeng Court, Linfeng Garden
Shangcheng District, Hangzhou
Zhejiang Province, PRC
Chinese
Mr. Xiudi Ruan (΋͛) Room 1702, Building 6
Qianjiang Y ufu, Ziyang Street
Shangcheng District, Hangzhou
Zhejiang Province, PRC
Chinese
Ms. Y ayu Jin (ඩ͗ɾɻ) Room 202, Unit 2
Building 9, Renbin Apartment
Shangcheng District, Hangzhou
Zhejiang Province, PRC
Chinese
Mr. Y unjiang Cai ( ᇹථϪ΋͛) 219, Qianwayu Village
Daxi Town, Wenling
Zhejiang Province, PRC
Chinese
Non-executive Director
Mr. Y aoxin Huang ( ර᪙㒥
΋͛)
San’ai Center, No. 15, Guanghuali
Chaoyang District
Beijing, PRC
Chinese
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Independent Non-executive Directors
Mr. Y ue Zhuo ( ՙ൳΋͛) No. 16-2, Zone A, Xueli’aoxiang
Xisanqi Huayuan 1 Li
Haidian District
Beijing, PRC
Chinese
(Hong Kong)
Ms. Xiaodong Zheng ( ቍወ̆
ɾɻ)
Room 402, Building 59
No. 258 Kaixuan Road, Hangzhou
Zhejiang Province, PRC
Chinese
Mr. Jianbo Li (΋͛) Room 1004, Unit 2, Building 8
No. 66, East Jingyang Street
Shijingshan District, Beijing
Chinese
Further information about the directors and other senior management members are set out
in the section headed “Directors and Senior Management” in this document.
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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PARTIES INVOLVED IN THE GLOBAL OFFERING
Joint Sponsors Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
UBS Securities Hong Kong Limited
52/F Two International Finance Centre
8 Finance Street
Central, Hong Kong
Joint Sponsor-Overall Coordinators Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
UBS AG Hong Kong Branch
52/F Two International Finance Centre
8 Finance Street
Central, Hong Kong
Overall Coordinators Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
UBS AG Hong Kong Branch
52/F Two International Finance Centre
8 Finance Street
Central, Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Joint Global Coordinators Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
UBS AG Hong Kong Branch
52/F Two International Finance Centre
8 Finance Street
Central, Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
Joint Bookrunners Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
UBS AG Hong Kong Branch
52/F Two International Finance Centre
8 Finance Street
Central, Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
BOCI Asia Limited
26/F, Bank of China Tower
1 Garden Road
Central, Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
Joint Lead Managers Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
UBS AG Hong Kong Branch
52/F Two International Finance Centre
8 Finance Street
Central, Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
BOCI Asia Limited
26/F, Bank of China Tower
1 Garden Road
Central, Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
Futu Securities International
(Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty, Hong Kong
Capital Market Intermediaries Goldman Sachs (Asia) L.L.C.
68/F, Cheung Kong Center
2 Queen’s Road Central
Hong Kong
UBS AG Hong Kong Branch
52/F Two International Finance Centre
8 Finance Street
Central, Hong Kong
China International Capital Corporation
Hong Kong Securities Limited
29/F, One International Finance Centre
1 Harbour View Street
Central, Hong Kong
The Hongkong and Shanghai Banking
Corporation Limited
1 Queen’s Road Central
Hong Kong
ABCI Capital Limited
11/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
ABCI Securities Company Limited
10/F, Agricultural Bank of China Tower
50 Connaught Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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BOCI Asia Limited
26/F, Bank of China Tower
1 Garden Road
Central, Hong Kong
CMB International Capital Limited
45/F, Champion Tower
3 Garden Road
Central, Hong Kong
Futu Securities International
(Hong Kong) Limited
34/F, United Centre
No. 95 Queensway
Admiralty, Hong Kong
Legal Advisors to our Company As to Hong Kong and U.S. laws
Skadden, Arps, Slate, Meagher & Flom
and affiliates
42/F, Edinburgh Tower
The Landmark
15 Queen’s Road Central
Central, Hong Kong
As to PRC law
Shihui Partners
42/F, Tower C, Beijing Yintai Centre
No. 2 Jianguomenwai Avenue
Chaoyang District
Beijing 100022
PRC
As to Cayman Islands law
Ogier
11th Floor, Central Tower
28 Queen’s Road Central
Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
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Legal Advisors to the Joint Sponsors and
the Underwriters
As to Hong Kong and U.S. laws
Cleary Gottlieb Steen & Hamilton
(Hong Kong)
37/F, Hysan Place
500 Hennessy Road
Causeway Bay
Hong Kong
As to PRC law
Jingtian & Gongcheng
Room 1401A, Tower 2
Kerry Center Qianhai
Qianhai Avenue
Nanshan District
Shenzhen, Guangdong Province
PRC
Independent Auditor and Reporting
Accountants
Ernst & Y oung
Certified Public Accountants
Registered Public Interest Entity Auditor
27/F, One Taikoo Place, 979 King’s Road
Quarry Bay, Hong Kong
Industry Consultant China Insights Industry Consultancy
Limited
10F, Block B, Jing’an International Center
88 Puji Road, Jing’an District
Shanghai, PRC
Receiving Bank CMB Wing Lung Bank Limited
45 Des V oeux Road Central
Hong Kong
DIRECTORS AND PARTIES INVOLVED IN THE GLOBAL OFFERING
–1 1 4–


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Head office and principal place of
business in the PRC
5/F, Tower A
Science and Technology Innovation Center
618 Boxue Road, Xiaoshan District
Hangzhou, Zhejiang Province, China
Principal place of business in Hong Kong Room 1910, 19/F
Lee Garden One
33 Hysan Avenue
Causeway Bay, Hong Kong
Registered office in the Cayman Islands 89 Nexus Way, Camana Bay
Grand Cayman, KY1-9009
Cayman Islands
Company’s website www.gumingnc.com
(The information contained on this website
does not form part of this prospectus)
Joint company secretaries Mr. Saibin Wang
5/F, Tower A
Science and Technology Innovation Center
618 Boxue Road, Xiaoshan District
Hangzhou, Zhejiang Province, China
Ms. Ying Man Sham
(HKCGI , CGI)
Room 1910, 19/F
Lee Garden One
33 Hysan Avenue
Causeway Bay, Hong Kong
Authorized representatives Mr. Y un’an Wang
5/F, Tower A
Science and Technology Innovation Center
618 Boxue Road, Xiaoshan District
Hangzhou, Zhejiang Province, China
Ms. Ying Man Sham
Room 1910, 19/F
Lee Garden One
33 Hysan Avenue
Causeway Bay, Hong Kong
CORPORATE INFORMATION
–1 1 5–


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Audit committee Mr. Y ue Zhuo ( chairperson )
Mr. Jianbo Li
Mr. Y aoxin Huang
Remuneration committee Mr. Jianbo Li ( chairperson )
Mr. Y un’an Wang
Mr. Y ue Zhuo
Nomination committee Mr. Y un’an Wang ( chairperson )
Ms. Xiaodong Zheng
Mr. Jianbo Li
Principal share registrar and transfer
office
Ogier Global (Cayman) Limited
89 Nexus Way, Camana Bay
Grand Cayman, KY1-9009
Cayman Islands
Hong Kong Share Registrar Tricor Investor Services Limited
17/F, Far East Finance Centre
16 Harcourt Road
Hong Kong
Compliance adviser Altus Capital Limited
21 Wing Wo Street
Central
Hong Kong
Principal banks Industrial and Commercial Bank of
China Co., Ltd.
Wenling Daxi Branch
No. 141-151 Fangshan Avenue
Daxi Town, Wenling
Zhejiang Province, PRC
Zhejiang Wenling Rural Commercial
Bank Co., Ltd.
Shanshi Branch
Jinshan Road, Daxi Town, Wenling
Zhejiang Province, PRC
CORPORATE INFORMATION
–1 1 6–


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The information and statistics set out in this section and other sections of this
document were extracted from a report prepared by CIC, or the CIC Report, which was
commissioned by us, and from various official government publications and other
publicly available publications. We engaged CIC to prepare the CIC Report, an
independent industry report, in connection with the Global Offering. The information
from official government sources has not been independently verified by us, the Joint
Sponsors, the Joint Global Coordinators, the Overall Coordinators, the Joint Bookrunners
and Joint Lead Managers, any of our and their respective directors, supervisors, officers,
representatives, employees, advisers or any other persons or parties involved in the
Global Offering, and no representation is given as to its accuracy.
SOURCE OF INFORMATION
We engaged CIC, an independent market research and consulting company that provides
industry consulting services, commercial due diligence, and strategic consulting, to conduct
detailed research on and analysis of the freshly-made beverage market in China. We have
agreed to pay a fee of RMB954,000 to CIC in connection with the preparation of the CIC
Report. We have incorporated certain information from the CIC Report into this section, as
well as into “Summary,” “Business,” “Financial Information,” and elsewhere in this document
to provide potential investors with a comprehensive presentation of the industries where we
operate.
During the preparation of the CIC Report, CIC conducted both primary and secondary
research, and gathered knowledge, statistics, information, and insights on industry trends
within the target research markets. The primary research involved interviews with key industry
experts and leading industry participants. The secondary research consisted of analyzing data
from various publicly available sources, such as the National Bureau of Statistics, International
Monetary Fund, and United States Department of Agriculture.
The CIC Report was compiled based on the following assumptions: (i) the overall social,
economic, and political environment in China is expected to remain stable during the forecast
period; and (ii) China’s economic and industrial development is likely to maintain a steady
growth trajectory during the forecast period, supported by sustained market demand,
technological advancements, and ongoing initiatives promoting infrastructure development.
CHINA’S FRESHLY-MADE BEVERAGE MARKET
Freshly-made beverages are prepared on-site for immediate consumption, and span a
variety of offerings, including tea beverages, coffee beverages and other beverages such as
fresh juices and yogurt-based beverages.
INDUSTRY OVERVIEW
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The market for freshly-made beverages in China is burgeoning, exhibiting ample room for
growth when compared to more mature markets. According to the CIC Report, the annual per
capita consumption of freshly-made beverages in China was approximately 22 cups in 2023,
in comparison to the 323 cups in the United States, 225 cups in the United Kingdom, and 172
cups in Japan, indicating the significant potential for expansion in China.
Over the past five years, China’s freshly-made beverage sector has witnessed rapid
growth. According to the CIC Report, the GMV of China’s freshly-made beverage market
increased from RMB187.8 billion in 2018 to RMB517.5 billion in 2023, representing a CAGR
of 22.5%. The market GMV is expected to reach RMB1,163.4 billion in 2028, with an
anticipated CAGR of 16.7% from 2024 to 2028. This robust growth can be attributed to rising
per capita disposable incomes, evolving consumer habits, and ongoing enhancements in
product quality spurred by market innovations and supply chain improvements.
In the nine months ended September 30, 2024, the growth of China’s freshly-made
beverage market slowed down compared with the same period of 2023. Even so, along with the
expected growth of China’s economy and consumer spending in the coming years, the market
is expected to increase in size at a CAGR of 16.7% between 2024 and 2028, considering that
(i) per capita annual consumption of freshly-made beverages in China was 22 cups in 2023,
compared to 323, 225 and 172 cups in the United States, the United Kingdom and Japan,
respectively. By 2028, per capita annual consumption of freshly-made beverages in China is
expected to more than double to 51 cups, presenting significant growth prospects; (ii) per
capita annual consumption of freshly-made beverages in first-tier cities of China was 70 cups
in 2023, compared to 16 cups in second-tier and below cities, leaving great potential in
lower-tier markets; and (iii) in the medium to long term, both the economy in general and
consumer spending in China are expected to show steady growth.
Major Segments of China’s Freshly-made Beverage Market
China’s freshly-made beverage market primarily consists of tea beverages and coffee
beverages, representing about 50.0% and 33.3% of the GMV of the entire freshly-made
beverage market in 2023, respectively.
 Freshly-made tea beverages . The market for freshly-made tea beverages is the
largest segment of China’s freshly-made beverage market in terms of GMV . Made
with tea, a long-time favorite in China, and innovatively added ingredients like fresh
fruits, freshly-made tea beverages have gained immense popularity and become
daily staples for work and leisure. The market segment has witnessed rapid growth,
highlighting its widespread appeal. According to the CIC Report, the GMV of this
segment grew from RMB108.5 billion in 2018 to RMB258.5 billion in 2023,
representing a CAGR of 19.0%, and is expected to reach RMB573.2 billion in 2028,
with a CAGR of 16.4% from 2024 to 2028. Freshly-made tea beverages are
predominantly available in freshly-made tea stores, but can also be offered by coffee
shops, bakeries, and restaurants.
INDUSTRY OVERVIEW
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 Freshly-made coffee beverages . The market for freshly-made coffee beverages is the
most rapidly expanding segment of China’s freshly-made beverage market. Thanks
to market innovations that modified coffee beverages to suit Chinese consumers’
taste, the habit of consuming coffee beverages has gained traction in China and the
popularity of freshly-made coffee beverages continues to soar. According to the CIC
Report, the GMV of this segment expanded from RMB36.6 billion in 2018 to
RMB172.1 billion in 2023, representing a CAGR of 36.3%, and is expected to
further grow to RMB424.2 billion in 2028, with a CAGR of 18.5% from 2024 to
2028.
The following diagram sets forth the GMV of China’s freshly-made beverage market,
broken down by major segments, from 2018 to 2028.
GMV of China’s freshly-made beverage market,
breakdown by major segments, 2018-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
187.8
245.0 274.7
360.5
421.3
517.5
627.9
746.4
876.2
1,016.8
1,163.4
0
200
400
600
800
1,000
1,200
RMB (billion)
Freshly-made tea beverages
Freshly-made coffee beverages
Other freshly-made beverages
(1)
Total
42.7 52.0 56.1 67.9 72.8
19.0%
CAGR
(2018-2023)
CAGR
(2024E-2028E)
36.3%
15.3%
16.4%
18.5%
13.5%
22.5% 16.7%
86.9 100.1 115.0 131.2 147.860.0 73.8 106.8 134.8 172.1 215.1 262.5 313.3 368.4
144.8
185.8
213.7
258.5
312.7
368.9
431.7
500.6
166.0
424.2
573.2
133.0108.5
36.6
Source: The CIC Report, National Bureau of Statistics of the PRC, International Monetary Fund
Note:
(1) Other freshly-made beverages mainly include fresh juices and yogurt-based beverages.
Freshly-made beverage stores, such as freshly-made tea stores and freshly-made coffee
shops, are the primary channels for consumers to purchase freshly-made beverage. The “ Good
me” brand had a market share of 4.8% in China’s freshly-made beverage store market in terms
of GMV in 2023.
CHINA’S FRESHLY-MADE TEA STORE MARKET
Freshly-made tea stores primarily offer freshly-made tea beverages for on-site dining,
pick-up or delivery. These venues represent the main channels through which consumers access
their freshly-made tea beverages.
INDUSTRY OVERVIEW
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Market Size and Growth Trends of China’s Freshly-made Tea Store Market
China’s freshly-made tea store market has witnessed substantial growth and is expected
to see persistent and rapid expansion going forward. According to the CIC Report, the GMV
of China’s freshly-made tea store market increased from RMB70.2 billion in 2018 to
RMB211.5 billion in 2023, representing a CAGR of 24.7%. This rapid growth marks the latest
development in a series of evolutions of China’s freshly-made tea stores over the past decades,
as illustrated in the following chart.
1 Before the emergence of
freshly-made tea stores
Before 1990s
• Long history of tea culture
Origination: tea culture
• Large consumer base of tea
consumption
• Freshly-made tea stores
emerged and expanded
mainly through the franchise
model
• Further drove freshly-made
tea drinks’ popularity
• Generally pursued the use of
quality ingredients such as
fresh fruits, the diversification
of shop formats, and enhanced
management under the franchise
model
• Continuous product
innovation and development
to meet the changing needs of
consumers
• Upgrade of the supply chain
to support expansion of
business scale
• Freshly-made tea stores
brands that provided value-
for-money products gained
growing popularity
• Major brands applied the
franchise model to capture the
tremendous market growth
potentials
• Simplified the tea brewing
process and improved the
convenience of tea drinks
consumption, and expanded
the tea drinker base
• The sophisticated brewing
procedures limited Chinese
consumers’ consumption of
tea especially among younger
generation
2
3
4
Emergence and early
development of
freshly-made tea stores
A new generation of
freshly-made tea stores
leading upgrade
Latest development of
the freshly-made tea
stores industry
1990s-2000s
2010s
2020s
Innovation: freshly-made tea
stores
Upgrade: ingredients quality,
store format and operational
efficiency
Iteration: scalability and
value-for-money product
Source: The CIC Report
According to the CIC Report, the GMV of China’s freshly-made tea store market is
expected to further increase to RMB519.3 billion in 2028, at a CAGR of 19.2% from 2024 to
2028. This uptrend stems from an expanding consumer base and amplified consumption
frequency of freshly-made tea beverages, driven by the continuous evolution of China’s
freshly-made tea stores. As consumers continue to demand enhancements in product quality
and purchase convenience, as well as more personalized consumption experiences, China’s
freshly-made tea stores are expected to keep evolving by incorporating more fresh ingredients
into their recipes, improving management and operation efficiency through digitalization,
optimizing store expansion strategies, and exploring many other potential avenues for
innovation. In the nine months ended September 30, 2024, the growth of China’s freshly-made
tea store market slowed down compared with the same period of 2023. Even so, along with the
expected growth of China’s economy and consumer spending, the market size is expected to
increase at CAGR of 19.2% between 2024 and 2028, considering that (i) per capita annual
consumption of freshly-made tea beverages in mainland China was 11 cups in 2023, compared
to over 50 cups in Hong Kong and Taiwan, both of which share a similar long-standing tea
drinking culture. By 2028, per capita annual consumption of freshly-made tea beverages in
mainland China is expected to more than double to 26 cups, presenting significant growth
prospects; (ii) per capita annual consumption of freshly-made tea beverages in first-tier cities
of China was 27 cups in 2023, compared to less than 10 cups in second-tier and below cities,
INDUSTRY OVERVIEW
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--- page 131 ---
leaving great potential in lower-tier markets; (iii) the number of freshly-made tea chain stores
(as defined below) as a percentage of the total number of freshly-made tea stores in China is
expected to increase from 56.1% in 2023 to 72.0% in 2028. The increase is expected to lead
to higher average store-level performance in China’s freshly-made tea store market and thus a
larger market size overall; and (iv) in the medium to long term, both the economy in general
and consumer spending in China are expected to show steady growth.
A significant trend in the evolution of China’s freshly-made tea stores has been the
increasing adoption of the franchise model. China’s freshly-made tea stores consist of chain
stores and independent stores, with chain stores operated under the franchise or direct
operation models. With a franchise model, brand owners generally can accomplish rapid
growth to meet consumers’ rising demand, with a lower need for capital investment since they
can leverage their franchisee’ local knowledge and resources. Recent trends show an increasing
preference for the franchise model in China, with franchised stores accounting for 91.9% of the
total number of freshly-made tea chain stores as of December 31, 2023 in China.
The traditional franchise model presented challenges to brand owners in terms of
maintaining standardized store-level operations and consistently high quality of product
offerings. In response, brand owners have been emphasizing tighter control over franchisees,
ensuring consistent quality of products and uniform operational standards of stores. For
example, leading brands of freshly-made tea stores that adopt the franchise model typically (i)
require their franchisees to procure major supplies directly from them to ensure product safety
and maintain consistent quality, (ii) deploy dedicated personnel for regular store inspections
and implement digital systems to monitor various indicators such as ingredient freshness,
adherence to product preparation standards, and the cleanliness and upkeep of store interiors,
and (iii) provide clear guidelines for store operations, supported by frequent online and offline
trainings.
Market Segmentation of China’s Freshly-made Tea Store Market
Cities in China are classified into (i) first-tier, (ii) new first-tier, (iii) second-tier, (iv)
third-tier, and (v) fourth-tier and below based on criteria, such as the availability of commercial
resources and transportation and logistics infrastructure, residents’ activities, lifestyle diversity
and future outlooks.
Due to their underserved consumer demands for freshly-made tea beverage, second-tier
and below cities have been the fastest-growing city tiers in China’s freshly-made tea store
market in terms of GMV between 2018 and 2023, and are expected to continue being the
fastest-growing city tiers between 2024 and 2028. The following diagram sets forth the GMV
of China’s freshly-made tea store market, broken down by city tiers, from 2018 to 2028. The
CAGRs between 2024 and 2028 for the market sizes of first-tier cities, new first-tier cities, and
second-tier and below cities are 14.5%, 15.5%, and 21.2%, respectively. In the long term
(2028-2033), with the expected growth of China’s economy and consumer spending, the
freshly-made tea store market is projected to further expand at a CAGR around 15%, with
CAGRs for first-tier cities, new first-tier cities, and second-tier and below cities projected to
be approximately 10%, approximately 10%, and approximately 15%, respectively.
INDUSTRY OVERVIEW
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GMV of China’s freshly-made tea store market,
broken down by city tiers, 2018-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
70.2 87.3 97.6
135.9
168.0
211.5
257.3
310.9
373.2
441.4
RMB (billion)
First-tier cities
New first-tier cities
Second-tier cities
Second-tier and below cities
20.2 30.5 39.6
17.6%
CAGR
(2018-2023)
CAGR
(2024E-2028E)
20.1%
24.6%
14.5%
15.5%
18.5%
28.7% 21.2%
52.4 66.4 82.9 103.5 125.319.9 21.7
28.3
33.7
41.0
48.6
57.3
66.5
76.4
18.7
24.3
28.8
34.0
39.4
45.9
52.8
60.0
17.915.1
Third-tier cities
Fourth-tier and below cities
Total 24.7% 19.2%
28.0%
33.2%
21.3%
22.9%
12.5
16.9 18.8
26.3
32.3
40.5
49.1
58.8
70.2
82.7
16.0 18.2 26.5 33.6 43.6
53.8
66.0
80.2
97.0
519.3
151.7
86.6
67.7
96.8
116.5
16.60
100
200
300
400
500
600
16.413.512.7
Source: The CIC Report, National Bureau of Statistics of the PRC, International Monetary Fund
With the emergence of delivery services and the increasing consumer demand for
convenience in purchasing, the GMV of China’s freshly-made tea store through delivery
services grew from RMB11.8 billion in 2018 to RMB95.2 billion in 2023, representing a
CAGR of 51.8%, and is expected to further increase to RMB265.4 billion in 2028, with a
CAGR of 22.1% from 2024 to 2028. This market segment accounted for 45.0% of the total
GMV of China’s freshly-made tea store market in 2023, and the market share is expected to
increase to 51.1% in 2028.
The following diagram sets forth the GMV of China’s freshly-made tea store market,
broken down by on-site dining and pick-up, and delivery, from 2018 to 2028.
GMV of China’s freshly-made tea store market,
broken down by on-site dining and pick-up, and delivery, 2018-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
70.2 87.3 97.6
135.9
168.0
211.5
257.3
310.9
373.2
441.4
RMB (billion)
On-site dining and pick-up
Delivery
Total
14.8%
CAGR
(2018-2023)
CAGR
(2024E-2028E)
51.8%
24.7%
16.5%
22.1%
19.2%
11.8 17.3 30.6 50.1 75.0 95.2 119.5 147.3 181.9 220.5
67.0
85.8
93.0
116.3
137.8
163.6
191.3
220.9
519.3
265.4
253.9
70.058.4
0
100
200
300
400
500
600
Source: The CIC Report, National Bureau of Statistics of the PRC, International Monetary Fund
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In general, freshly-made tea stores in China are categorized as: (i) high-priced
freshly-made tea stores with an average product list price no less than RMB20, (ii) mid-priced
freshly-made tea stores with an average product list price less than RMB20 but greater than
RMB10, and (iii) low-priced freshly-made tea stores with an average product list price no
greater than RMB10.
The mid-priced freshly-made tea store market represents the largest segment of China’s
freshly-made tea store market in terms of GMV in 2023 and the fastest-growing segment in
terms of expected GMV growth from 2024 to 2028. Compared with the low-priced brands,
mid-priced freshly-made tea store brands generally use more quality ingredients such as fresh
fruits and fresh milk in their beverages, meeting a rising consumer demand for high-quality
beverages. Compared with the high-priced brands, mid-priced freshly-made tea store brands
provide better value for money, giving consumers a more suitable alternative for daily
consumptions. According to the CIC Report, the GMV of China’s mid-priced freshly-made tea
store market grew from RMB36.4 billion in 2018 to RMB108.6 billion in 2023, representing
a CAGR of 24.4%, and is expected to further increase to RMB280.9 billion in 2028, with a
CAGR of 20.8% from 2024 to 2028. This market segment accounted for 51.3% of the total
GMV of China’s freshly-made tea store market in 2023, and the market share is expected to
grow to 54.1% in 2028.
The following diagram sets forth the GMV of China’s freshly-made tea store market,
broken down by price segments, from 2018 to 2028.
GMV of China’s freshly-made tea store market,
breakdown by price segments, 2018-2028E
2018 2019 2020 2021 2022 2023
70.2 87.3 97.6
135.9
168.0
2024E
211.5
2025E
257.3
2026E 2027E 2028E
310.9
373.2
441.4
51.9% 48.2% 47.3% 49.0% 51.5% 51.3% 51.2% 51.9% 52.8% 53.5% 54.1%
RMB (billion)
Mid-priced freshly-made tea stores as % of total freshly-made tea store market in terms of GMV
High-priced freshly-made tea stores
Mid-priced freshly-made tea stores
Low-priced freshly-made tea stores
Total
35.2%
CAGR
(2018-2023)
CAGR
(2024E-2028E)
24.4%
22.1%
9.4%
20.8%
20.1%
24.7% 19.2%
27.6 32.1 34.0 47.0 59.8 74.9 90.4 110.6 133.7 158.7
36.4 42.1 46.2
66.6 86.5
108.6
131.7
161.5
196.9
236.3
6.2 13.1 17.4
22.3
21.7
28.0
35.2
38.8
42.6
46.4
519.3
188.0
280.9
50.4
0
100
200
300
400
500
600
Source: The CIC Report, National Bureau of Statistics of the PRC, International Monetary Fund
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Drivers and Trends of China’s Freshly-made Tea Store Market
The following are the key drivers and trends influencing the market of freshly-made tea
stores:
 Growing purchasing power and expansion of consumer base. With China’s rising
disposable income and purchasing power, the number of China’s freshly-made tea
drinkers has increased from 224.8 million in 2018 to 320.0 million in 2023, with a
CAGR of 7.3%. With the improvement of living standards, an increasing number of
consumers are opting for freshly-made tea beverages to meet their demands for fresh
drinks. Therefore, the number of China’s freshly-made tea drinkers is expected to
reach 482.7 million in 2028, indicating a CAGR of 8.5% from 2024 to 2028.
 Innovation and product differentiation. As the freshly-made tea store industry
becomes increasingly competitive, freshly-made tea store brands have started to
diversify and innovate their products by incorporating advancements in tea base
extraction technologies, introducing new scents, and exploring niche fruits. They are
also focusing on enhancing product quality to ensure value for money and foster
consumer loyalty. Additionally, freshly-made tea store brands are improving
consumer experience by creating a welcoming in-store environment, offering
superior product designs, and providing convenient sales channels.
 Development of chain stores. Compared to independent freshly-made tea stores,
freshly-made tea chain stores benefit from economies of scale, which foster rapid
expansion and drive the overall growth of the freshly-made tea store market in
China. The freshly-made tea chain stores as a percentage of total freshly-made tea
stores in China is expected to increase from 56.1% in 2023 to 72.0% in 2028. The
increase could facilitate the standardization of store operations and improve product
and service quality, leading to higher average store-level performance in China’s
freshly-made tea store market.
 Expanded consumer accessibility thanks to food delivery services. Evolving
consumer purchase behaviors are leaning towards channels that offer greater
convenience. The development of food delivery services in China aligns with this
trend, enlarging the service radius of freshly-made tea stores and potentially
increasing consumers’ purchase frequency. Meanwhile, due to this development,
poorly managed brands face increased risk of cannibalization. Food deliveries
accounted for approximately 45.0% of the GMV of China’s freshly-made tea stores
in 2023, and this figure is expected to increase to 51.1% in 2028.
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Entry Barriers of China’s Freshly-made Tea Store Market
 Established store network. For freshly-made tea store brands, dense store networks help
achieve economies of scale which significantly enhances brand awareness, store
accessibility, and warehousing and logistics efficiency. Without the support of a
comprehensive supply chain infrastructure and in-depth know-how for store network
expansions, new market entrants may find it hard to establish extensive store networks.
 Widely acknowledged brand reputation. Consumers tend to select freshly-made tea
beverages from brands familiar to them, therefore new entrants may struggle to attract
enough consumers in the early stages of operation. In addition, freshly-made tea store
brands with widely acknowledged brand reputation are more attractive to franchisees, as
the brand reputation is a guarantee of consumer traffic. New entrants may find it difficult
to recruit quality franchisees due to the lack of brand recognition.
 Capabilities of product quality control. Consumers are becoming more cautious and
selective about product safety and taste when selecting freshly-made tea beverages.
Leading brands have established rigorous internal quality standards and operational
procedures, creating competitive pressure on new entrants, as new entrants’ product
quality control systems are generally at an early stage and may not ensure product quality
in an effective manner.
Market Challenges and Threats of China’s Freshly-made Tea Store Market
 Food safety and hygiene compliance risks. Food safety and hygiene compliance risks are
typical problems in the freshly-made tea store market and other catering sectors.
Freshly-made tea store brands must proactively manage food safety and hygiene
compliance issues by controlling store environment, beverage manufacturing process and
employee personal hygiene. Failures to effectively comply with food safety requirements
may result in consumer loss, brand reputation damage, or even legal risks.
 Product consistency and stability. It is difficult for freshly-made tea store brands to serve
diverse product offerings of consistent quality and taste while having a large number of
stores. Ensuring product consistency not only needs strong supply chain capabilities and
standardized in-store operating procedures, but also comprehensive digital capabilities to
enhance overall operational efficiency and to adapt to changing product offerings and
innovations. Brands may struggle to concurrently balance store network expansion,
product offering diversity, and product quality and consistency.
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Competitive Landscape of China’s Freshly-made Tea Store Market
China’s freshly-made tea store market was historically fragmented and has been
continuously consolidating. According to the CIC Report, the top five freshly-made tea store
brands’ market share, in terms of GMV , increased from 38.5% in 2020 to 46.8% in 2023.
The following table set forth China’s top five freshly-made tea store brands by GMV in
2023 and by store count as of December 31, 2023. The “ Good me ” brand ranked second in
China’s freshly-made tea store brands in terms of GMV in 2023, with a 9.1% market share.
Additionally, the “ Good me ” brand stood second in terms of store count as of December 31,
2023.
Ranking of leading freshly-made tea store brands in China by GMV in 2023 and
by store count as of December 31, 2023
Ranking Brand GMV in 2023
Market share in terms
of GMV in 2023
(RMB in billions) (%)
1 Brand A (1) 42.7 20.2
2 Good me 19.2 9.1
3 Brand B (2) 16.9 8.0
4 Brand C (3) 10.5 5.0
5 Brand D (4) 9.7 4.6
Subtotal 99.0 46.8
Total 211.5 100.0
Ranking Brand Store count as of December 31, 2023
1 Brand A (1) ~30,300
2 Good me 9,001
3 Brand B (2) 7,801
4 Brand D (4) ~7,800
5 Brand E (5) ~7,000
Subtotal ~61,900
Total ~463,800
Source: The CIC Report
Notes:
(1) Launched in 1999, Brand A is operated by a private multi-brand freshly-made beverage company
headquartered in Henan. The company had approximately 33,200 freshly-made beverage stores in China
as of December 31, 2023, among which approximately 30,300 were freshly-made tea stores. This
company has submitted listing application to the Stock Exchange.
(2) Launched in 2008, Brand B is operated by a Hong Kong listed freshly-made tea store company
headquartered in Sichuan. The company had over 7,800 freshly-made tea stores in China as of December
31, 2023.
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(3) Launched in 2017, Brand C is operated by a private freshly-made tea store company headquartered in
Sichuan. The company had approximately 3,400 freshly-made tea stores in China as of December 31,
2023.
(4) Launched in 2013, Brand D is operated by a private freshly-made tea store company headquartered in
Shanghai. The company had approximately 7,800 freshly-made tea stores in China as of December 31,
2023. This company has submitted listing application to the Stock Exchange.
(5) Launched in 2007, Brand E is operated by a private freshly-made tea store company headquartered in
Sichuan. The company had approximately 7,000 freshly-made tea stores in China as of December 31,
2023.
CHINA’S MID-PRICED FRESHLY-MADE TEA STORE MARKET
Geographical Distribution of Mid-priced Freshly-made Tea Stores
Cities ranked second-tier and below are critical for the future growth of the mid-priced
freshly-made tea store market, due to their large populations and relatively low penetration of
freshly-made tea stores at the current stage. It is vital for mid-priced freshly-made tea store
brands to establish a strong presence in these cities to achieve market leadership.
 Given their population size, second-tier and below cities are the largest segment of
China’s mid-priced freshly-made tea store market. According to the CIC Report, in
2023, mid-priced freshly-made tea stores located in second-tier and below cities
constituted 61.8% of the market’s total GMV .
 There is significant growth potential in second-tier and below cities due to the
relatively low penetration of mid-priced freshly-made tea stores. According to the
CIC Report, in 2023, there were approximately 122 mid-priced freshly-made tea
stores for every million people in second-tier and below cities, while there were
approximately 214 mid-priced freshly-made tea stores for every million people in
first-tier and new first-tier cities.
 Second-tier and below cities are forecasted to have the highest growth rate in the
coming years and contribute to the majority of the market’s overall growth.
According to the CIC Report, the GMV of mid-priced freshly-made tea stores in
second-tier and below cities is expected to grow from RMB84.0 billion in 2024 to
RMB189.0 billion in 2028, representing a CAGR of 22.5%. This growth is expected
to contribute 70.4% to the expansion of China’s mid-priced freshly-made tea store
market in the same period in terms of GMV .
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The following diagram sets forth the GMV of China’s mid-priced freshly-made tea store
market, broken down by city tiers, from 2018 to 2028.
GMV of China’s mid-priced freshly-made tea store market,
breakdown by city tiers, 2018-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
20.6 23.9 26.7 39.4 52.0 67.1 84.0 104.3 129.2 156.3 189.0
GMV of mid-priced freshly-made tea stores in second-tier and below cities (RMB billion)
56.6% 56.8% 57.8% 59.2% 60.1% 61.8% 63.8% 64.6% 65.6% 66.1% 67.3%
GMV of mid-priced freshly-made tea stores in second-tier and below cities as % of total GMV
RMB (billion)
First-tier cities
New first-tier cities
Second-tier cities
Total
18.8%
CAGR
(2018-2023)
CAGR
(2024E-2028E)
22.5%
23.1%
16.6%
18.3%
20.3%
Third-tier cities
Fourth-tier and below cities
26.3%
30.9%
23.0%
23.9%
24.4% 20.8%
6.0 7.3 8.4 17.1 23.1 29.5 36.9 46.2 56.7 69.510.6 12.4 13.5
18.9
24.1
29.2
33.6
40.3
47.8
56.6
65.8
5.2 5.8 6.0
8.3
10.4
12.3
14.1
16.9
19.9
23.4
26.1
36.4 42.1 46.2
66.6
86.5
108.6
131.7
161.5
196.9
236.3
280.9
7.7 8.6 9.4
13.5 17.6
21.8
26.9
32.8
39.7
47.4
56.4
6.9 8.0 8.9 13.1 17.3 22.2 27.6 34.6
43.3
52.2
63.1
0
50
100
150
200
300
250
Second-tier and below cities 26.6% 22.5%
12.8
Source: The CIC Report, National Bureau of Statistics of the PRC, International Monetary Fund
Towns ( ᕄ) and townships ( ඊ), which are administrative areas typically located away
from downtown urban areas of cities, generally have the majority of the population and
significant unmet demand for freshly-made tea beverages due to a lack of supply. According
to the Chinese population census conducted in 2020, approximately 840 million individuals
resided in towns and townships, which constituted nearly 60% of the population nationwide.
In particular, lower-tier cities generally have a higher population proportion resided in towns
and townships. Nonetheless, logistics infrastructure in towns and townships is generally
underdeveloped, creating supply chain and cost challenges for freshly-made tea stores. Only a
few leading brands have successfully penetrated towns and townships, leaving a significant
portion of the market untapped. As of December 31, 2023, there were 3,448 “ Good me ” stores
in towns and townships, representing approximately 38.3% of the brand’s total store count,
while China’s other top five mid-priced freshly-made tea store brands, as measured by store
count as of December 31, 2023, generally had below 25% of their stores located in towns and
townships.
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Drivers and Trends of China’s Mid-priced Freshly-made Tea Store Market
The following are the key drivers and trends influencing the market of mid-priced
freshly-made tea stores:
 Formation of consumption habit for freshly-made tea beverages. Several interrelated
factors have spurred the consumption of freshly-made tea beverages: (i) it has
become increasingly convenient for consumers to enjoy freshly-made tea beverages
with a continuous increase in the number of freshly-made tea stores; (ii) young
people, the primary consumers of freshly-made tea beverages in China, have gained
increasing purchasing power and have increasingly accepted freshly-made tea
beverage consumption as a pleasant and relaxing component of their daily life, fully
expecting such consumption to continue as they grow older; and (iii) there has been
a constant expansion of the consumer base of freshly-made tea beverages, as per
capita disposable income and purchasing power of the Chinese population grow and
as diversified product offerings attract a wider age group. As a result, the frequency
of the consumption of freshly-made tea beverages is expected to increase. According
to the CIC Report, the annual per capita consumption of freshly-made tea beverages
in mid-priced freshly-made tea stores is expected to increase from 4.2 cups in 2023
to 11.4 cups in 2028.
 Heightened consumer emphasis on product quality and value for money. As
consumers consume freshly-made tea beverages more frequently and integrate them
into their daily routines, they increasingly seek products of both high quality and
high value for money. In addition, as freshly-made tea beverages became more
accessible and their marketing campaigns become more widespread in second-tier
and below cities, consumers in these cities have placed a similar emphasis on
product quality and value for money. The overall value proposition of freshly-made
tea beverages has become a pivotal aspect of consumers’ purchasing decisions.
Brands of mid-priced freshly-made tea stores that can provide quality products and
services at a comparatively affordable price are gaining popularity among
consumers. Even some of the more expensive freshly-made tea store brands are
adjusting their pricing strategies to lean more towards the mid-priced segment. This
trend reaffirms the growing significance of providing products of high quality and
high value for money.
 Growing demand for fresh ingredients. As consumers’ health awareness grows,
many brands start to invest more in product freshness and nutritiousness. This has
led to (i) innovations in fruit preservation and processing techniques, flavor
combining techniques and fresh fruits and tea extraction techniques, and (ii) a
growing emphasis on supply chain capabilities. Tea beverages made with fresh fruits
and fresh milk have received significant consumer attention due to the health
benefits associated with consuming fresh fruits and fresh milk.
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 Increased proportion of franchised stores and enhanced standardization. The
proportion of franchised stores within the freshly-made tea store market is growing.
More leading brands are gravitating towards expansion via the franchise model. A
key component of this model is store standardization, including the streamlining and
automation of the beverage-making process, and the bolstering of training and
oversight. These measures help brands ensure the consistency of products and
services, attract more consumers, and boost consumer loyalty and repurchase rates,
leading to overall market growth.
Key Success Factors in China’s Mid-priced Freshly-made Tea Store Market
Brands that possess the following key success factors have generally achieved better
results in the market of mid-priced freshly-made tea stores:
 Store network expansion capabilities. Opening new stores directly boosts the sales
growth of freshly-made tea store brands. A widespread and dense store network not
only enhances brand image but also fortifies consumer loyalty. However, brands
adopting a franchise model might struggle to densify their store network after
achieving a certain level of geographical coverage. Brands that effectively address
concerns from existing franchisees and increase store density via a strategic store
expansion plan are poised for enduring success.
 Penetration in second-tier and below cities. Second-tier and below cities in China
have a population exceeding 1.1 billion in 2023, yet the density of freshly-made tea
stores in these areas lags behind that of first-tier and new first-tier cities. As
purchasing power grows in these areas, they offer significant growth potential. The
ability to penetrate through these second-tier and below cities, especially the towns
and townships, is a critical factor for achieving sustainable growth for mid-priced
freshly-made tea store brands. In general, these cities also have lower population
densities and less frequent population inflows, making it harder for freshly-made tea
store brands to attract new consumers. Brands that attend to the price-sensitive
nature of these cities’ residents stand a better chance at success. Moreover, brands
that have established consumer recognition and loyalty can attract and retain
consumers in these areas more effectively.
 Insistence on product freshness and quality. The mid-priced freshly-made beverage
market in China has evolved from using heavily-processed ingredients towards the
increasing adoption of fresh and natural ingredients such as fresh fruits and fresh
milk. To establish a competitive barrier and stand out from competitions in the long
run, freshly-made tea store brands should strive to serve fresh and high-quality
beverages to consumers across their extensive store networks. To do so, brands need
to invest in many aspects of their operations, including supply procurement, product
development, supply chain management (particularly the warehousing and logistics
infrastructure for short-shelf-life ingredients), store operation, and quality control.
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 Robust supply chain capabilities. Mid-priced freshly-made tea stores rely on
ingredients including fresh fruits, tea leaves and fresh milk, which significantly
influence beverage taste. Brands need to strengthen their supply chain capabilities,
including enhancing ingredient procurement, processing, storage and logistics,
particularly in relation to cold-chain capabilities, in order to maintain their product
quality and stable supply, sustain positive consumer perceptions and enhanced
consumer loyalty. In addition, increasing the density of their store network can
result in significant cost advantages through enhanced supply chain efficiency.
 Franchisee management proficiency. The performance at the store level is vital for
both the franchisees and the brand owner. Favorable store-level profitability attracts
quality franchisees, ensuring long-term growth and facilitating network expansion.
However, the management skills of franchisees can vary. High-caliber franchisees
can significantly elevate a brand’s sales and image. Therefore, a harmonious and
long-term relationship with franchisees, underpinned by stringent selection
processes, effective management mechanism and comprehensive training and
support, is vital for the brands adopting a franchise model.
 Digitalized operation and management. The development of an advanced
technology infrastructure and the continuous application of new technologies are
critical for the efficient management of large-scale store networks. For example,
some brands have established digital supply chain management systems and
incorporated connected appliances in stores to heighten operating efficiency.
 Expertise in product development. As the mid-priced freshly-made tea store market
rapidly evolves, brands need the capability to launch new products across their
extensive store networks. Mid-priced freshly-made tea store brands need to have
robust research and analytical capabilities to understand latent consumer demands,
and to rapidly develop high-quality products that appeal to consumers.
 Strong brand image. Brand is an important factor when consumers choose
mid-priced freshly-made tea stores. Mid-priced freshly-made tea stores with
exceptional brand reputations supported by consistently high-quality products are
able to continuously attract new consumers and retain existing ones, improve
consumer loyalty and increase consumer repurchase rate, thereby granting the brand
a competitive edge against competitors.
Competitive Landscape of China’s Mid-priced Freshly-made Tea Store Market
The following table sets forth China’s top five mid-priced freshly-made tea store brands
by GMV in 2023 and by store count as of December 31, 2023. The “ Good me ” brand is China’s
largest mid-priced freshly-made tea store brand in terms of GMV in 2023, with a 17.7% market
share. The “ Good me ” brand is also China’s largest mid-priced freshly-made tea store brand in
terms of store count as of December 31, 2023.
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Ranking of leading mid-priced freshly-made tea store brands in China by GMV
in 2023 and by store count as of December 31, 2023
Ranking Brand GMV in 2023
Market share in terms
of GMV in 2023
(RMB in billions) (%)
1 Good me 19.2 17.7
2 Brand B (1) 16.9 15.6
3 Brand C (2) 10.5 9.7
4 Brand D (3) 9.7 8.9
5 Brand F (5) 8.7 8.0
Subtotal 65.0 59.9
Total 108.6 100.0
Ranking Brand Store count as of December 31, 2023
1 Good me 9,001
2 Brand B (1) 7,801
3 Brand D (3) ~7,800
4 Brand E (4) ~7,000
5 Brand F (5) ~4,300
Subtotal ~35,900
Total ~198,500
Source: The CIC Report
Notes:
(1) Launched in 2008, Brand B is operated by a Hong Kong listed freshly-made tea store company headquartered
in Sichuan. The company had over 7,800 freshly-made tea stores in China as of December 31, 2023.
(2) Launched in 2017, Brand C is operated by a private freshly-made tea store company headquartered in Sichuan.
The company had approximately 3,400 freshly-made tea stores in China as of December 31, 2023.
(3) Launched in 2013, Brand D is operated by a private freshly-made tea store company headquartered in
Shanghai. The company had approximately 7,800 freshly-made tea stores in China as of December 31, 2023.
This company has submitted listing application to the Stock Exchange.
(4) Launched in 2007, Brand E is operated by a private freshly-made tea store company headquartered in Sichuan.
The company had approximately 7,000 freshly-made tea stores in China as of December 31, 2023.
(5) Launched in 1997, Brand F is operated by a private freshly-made tea store company headquartered in Taiwan
province, and entered the mainland China market in 2007. The company had approximately 4,300 freshly-made
tea stores in mainland China as of December 31, 2023.
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The “ Good me ” brand competes with mid-priced freshly-made tea store brands across all
city tiers. In particular, within second-tier and below cities, the “ Good me ” brand had
approximately 22% market share in the mid-priced freshly-made tea store market in 2023 in
terms of GMV . The following table sets forth the store distribution, by city tiers, of the top five
mid-priced freshly-made tea store brands by store count as of December 31, 2023 listed above.
The “ Good me ” brand had 78.8% of stores located in second-tier and below cities, the largest
share among the top five mid-priced freshly-made tea store brands by store count as of
December 31, 2023. Furthermore, as of the Latest Practicable Date, the “ Good me ” brand was
the only brand to adopt a regional densification strategy among the top five mid-priced
freshly-made tea store brands in China.
Store distribution by city tiers of top five mid-priced freshly-made tea store brands
in China by store count as of December 31, 2023
Brand First-tier cities New first-tier cities
Second-tier and
below cities
(%) (%) (%)
Good me 3.0 18.2 78.8
Brand B (1) 10.6 26.9 62.5
Brand D (2) ~8 ~22 ~70
Brand E (3) ~4 ~31 ~65
Brand F (4) ~16 ~31 ~53
Source: The CIC Report
Notes:
(1) Launched in 2008, Brand B is operated by a Hong Kong listed freshly-made tea store company headquartered
in Sichuan. The company had over 7,800 freshly-made tea stores in China as of December 31, 2023.
(2) Launched in 2013, Brand D is operated by a private freshly-made tea store company headquartered in
Shanghai. The company had approximately 7,800 freshly-made tea stores in China as of December 31, 2023.
This company has submitted listing application to the Stock Exchange.
(3) Launched in 2007, Brand E is operated by a private freshly-made tea store company headquartered in Sichuan.
The company had approximately 7,000 freshly-made tea stores in China as of December 31, 2023.
(4) Launched in 1997, Brand F is operated by a private freshly-made tea store company headquartered in Taiwan
province, and entered the mainland China market in 2007. The company had approximately 4,300 freshly-made
tea stores in mainland China as of December 31, 2023.
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Our Competitive Advantages
 Largest brand in the mid-priced freshly-made tea store market in China. The brand “ Good
me” is China’s largest mid-priced freshly-made tea store brand and the second largest
freshly-made tea store brand across all price ranges, as measured by both GMV in 2023
and store count as of December 31, 2023.
 Leading presence in lower-tier cities and towns and townships. As of December 31, 2023,
38.3% of the Group’s stores located in towns and townships, while China’s other top five
mid-priced freshly-made tea store brands generally had below 25% of their stores located
in towns and townships. Meanwhile, the Group had 78.8% of stores located in second-tier
and below cities, the largest share among the top five mid-priced freshly-made tea store
brands by store count as of December 31, 2023. Logistics infrastructures in these regions
are generally underdeveloped, creating supply chain and cost challenges for freshly-made
tea stores. Only a few leading brands have the ability to penetrate into these areas,
indicating the first-mover advantage for the Group.
 Supply chain efficiency based on the regional densification strategy. Through its regional
densification strategy, the Group is able to efficiently establish and expand its supply
chain, optimize its logistics cost and ensure the quality of its ingredients, which supports
its quality beverage offerings and its industry-leading consumer repurchase rate. For the
three years ended 31 December 2023, the logistics cost for delivery from the Group’s
warehouses to stores was less than 1% of the Group’s total GMV on average, due to the
Group’s higher logistics efficiency benefiting from its regional densification strategy.
In addition, the Group’s industry-leading cold-chain warehousing and logistics
infrastructure enables it to deliver short-shelf-life fresh fruits, tea leaves and/or fresh milk
to lower-tier cities as well as towns and townships frequently. Among the top 10
freshly-made tea store brands in China in terms of GMV in 2023, the Directors are of the
view that the Group is the only brand capable of frequent deliveries every two days of
short-shelf-life fresh fruits and fresh milk to stores in lower-tier cities. Most of the top 10
freshly-made tea store brands in China do not have such capabilities because (i) they have
to generally rely on third-party logistics providers whereas the Group has developed an
in-house logistics infrastructure, and/or (ii) some of them usually do not use short-shelf-
life ingredients. As a result, they generally only provide delivery to stores every four
days.
Meanwhile, the Directors are of the view that the Group has one of the largest cold-chain
warehousing and logistics infrastructure in the industry as of December 31, 2023. In
2023, the Group completed cold-chain delivery of over RMB4 billion worth of
ingredients, and the value of ingredients that it stores and delivers through cold-chain
infrastructure is one of the largest in the industry, while (i) most other tea store brands’
store networks are not as large as the Company’s and/or (ii) the majority of their
ingredients are stored and delivered under room temperature rather than cold chain.
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Supported by the above strengths, the Company provides fresh and consistent beverage
offerings and enjoys a loyal membership base with high repurchase rate. In 2023, the
Group’s average quarterly repurchase rate reached 53%, compared to the average of
below 30% among mid-priced freshly-made tea store brands in China*. The Directors are
of the view that the higher repurchase rate as compared to the industry average is
primarily because the Group has cultivated a loyal customer base, which, in turn, is
primarily attributable to:
 the Group regularly updated lineup of fresh, tasty and value-for-money beverages
with consistently high quality. The Group’s warehousing and logistics infrastructure
allows it to prepare substantially all of the beverages with short-shelf-life fresh
fruits, tea leaves and/or fresh milk. The Group has also been able to regularly launch
new beverages to keep its offerings appealing and to capture emerging opportunities
presented by evolving industry trends; and
 the Group’s leading presence in second-tier and below cities, which tend to be more
community-based and more dominated by repeat customers. Specifically, as of
December 31, 2023, the Group’s store count in second-tier and below cities
accounted for 79% of its total store count, which was the highest percentage as
compared to those of the other top five mid-priced freshly-made tea store brands in
China, and slightly increased to 80% as of September 30, 2024.
 Track record of franchisee profitability and enduring franchisee relationships. In 2023,
the Group’s franchisees’ per-store operating profit reached RMB376,000 and franchisees’
per-store operating profit margin reached 20.2%, whereas the estimated per-store
operating profit margin is generally in the low teens in the mid-priced freshly-made tea
store market in China during the same period*. The Directors are of the view that the
Group has a higher per-store operating profit margin compared with the industry average
primarily due to the Group’s higher per-store net proceeds from product sales and lower
rental cost and labor cost as percentages of the per-store net proceeds from product sales.
Specifically, the Directors are of the view that the Group’s higher per-store net proceeds
from product sales is primarily attributable to the Group’s high brand awareness and
popularity among consumers, as well as operating efficiency due to its in-house
developed store management modules and connected appliances integrated with IoT.
While its lower rental cost and labor cost as percentages of the per-store net proceeds
from product sales is primarily attributable to the Group’s leading presence in second-tier
and below cities, which typically enjoy lower rental cost and labor cost. The Group’s
track record of franchisee profitability is helpful to attract and retain quality franchisees,
fostering close and enduring franchisee relationships.
 Store management software . The Group’s store management software can empower tens
of thousands of stores. In particular, the Group has the largest information technology
team as of December 31, 2023, with over 320 engineers, and the majority of peers have
fewer than 150 engineers in the information technology team*.
* The information has been verified by CIC through public information and expert interviews. Specifically, since
most of the market players are private companies without sufficient publicly available information, CIC
collected certain information about the market players through interviews with reputable industry experts, who
typically have over 10 years of working experience in the freshly-made tea store industry usually. CIC has
performed cross-checking on such information through interviews with different industry experts.
INDUSTRY OVERVIEW
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CHINA’S FRESHLY-MADE COFFEE BEVERAGE MARKET
Freshly-made coffee beverages are drinks prepared on-site using coffee extracts or other
coffee-centric ingredients. Freshly-made coffee beverages are predominantly available in
freshly-made coffee shops, but can also be offered by freshly-made tea stores, bakeries, and
restaurants. Given the similarities in the consumer demographic for freshly-made tea and
coffee beverages, coupled with the synergy in the consumption occasions for both, a growing
number of well-established freshly-made tea stores with extensive store networks and robust
supply chain capabilities have incorporated freshly-made coffee beverages into their offerings.
China’s freshly-made coffee beverage market is at an early stage of development when
compared to more mature markets such as that of the United States. As freshly-made coffee
beverages continuously improves in quality and becomes more widely available, their
consumption shows steady increases. According to the CIC Report, the GMV of China’s
freshly-made coffee beverage market grew from RMB36.6 billion in 2018 to RMB172.1 billion
in 2023, representing a CAGR of 36.3%. With continuous product innovations and a surge in
habitual coffee consumers, the GMV of China’s freshly-made coffee beverage market is
expected to grow to RMB424.2 billion in 2028, with a CAGR of 18.5% from 2024 to 2028.
The following diagram sets forth the GMV of China’s freshly-made coffee beverage
market from 2018 to 2028.
GMV of China’s freshly-made coffee beverage market, 2018-2028E
2018 2019 2020 2021 2022 2023 2024E 2025E 2026E 2027E 2028E
36.6
RMB (billion)
Freshly-made coffee beverages
CAGR
(2018-2023)
36.3%
60.0 73.8
106.8
134.8
172.1
215.1
262.5
313.3
368.4
424.2
0
100
200
300
500
400
CAGR
(2024E-2028E)
18.5%
Source: The CIC Report, National Bureau of Statistics of the PRC, International Monetary Fund, United States
Department of Agriculture
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Drivers and Trends of China’s Freshly-made Coffee Beverage Market
The following are the key drivers and trends influencing the market of freshly-made
coffee beverage:
 Growing purchasing power and expansion of consumer base. As the Chinese
people’s disposable income and purchasing power continue to increase, the
popularity of freshly-made coffee beverage is on the rise among consumers . The
number of freshly-made coffee drinkers grew from 41.4 million in 2018 to 131.9
million in 2023, representing a CAGR of 26.1% during this period. Looking ahead,
it is anticipated that this trend will persist, with projections indicating that
freshly-made coffee drinkers in China will reach 257.0 million by 2028, with a
CAGR of 13.4% from 2024 to 2028, highlighting the enduring appeal and expanding
market potential of freshly-made coffee beverages.
 Product diversification and innovation. The trend of flavored freshly-made coffee
beverages is gaining traction in China, driven by a desire for innovative and unique
taste experiences among consumers. This shift reflects a growing appreciation for
diverse flavor profiles beyond traditional coffee offerings. As coffee culture
continues to evolve in China, flavored freshly-made coffee beverages emerge as a
popular choice, catering to the increasingly sophisticated palates of consumers and
fueling further product diversification and innovation in the market.
 Expansion of sales channels. In China, more and more catering venues, including
freshly-made tea stores, bakeries, convenience stores, and other places, are starting
to sell freshly-made coffee beverage to cater to the evolving preferences of their
consumers, enhancing their competitiveness and attracting a broader consumer base.
Additionally, selling freshly-made coffee beverage provides these venues with an
opportunity to increase revenue streams and capitalize on the growing market for
freshly-made coffee beverages in China.
COST OF RA W MATERIALS AND LABOR
Cost of Raw Materials
For freshly-made beverage stores in China, one of the primary cost factors is the expense
associated with raw materials, including fruits, tea, and dairy products. The consumer price
index for fruits in China has experienced fluctuations over the past few years, increasing from
105.6 in 2018 to 112.3 in 2019, decreasing to 88.9 in 2020, rebounding to 112.9 in 2022, and
decreasing to 104.9 in 2023. The consumer price indexes for tea and dairy products have been
relatively stable. The consumer price index for tea decreased slightly from 101.7 in 2018 to
101.3 in 2023, while dairy products witnessed a minor decrease from 101.4 in 2018 to 100.4
in 2023.
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The following diagram illustrates changes in the consumer price index for these key raw
materials for the years indicated.
Consumer price index (1) for tea, dairy products, and fruits, China, 2018-2023
Consumer price index
Tea Consumer Price Index
2018
105.6
101.4 101.5
101.6
112.3
101.0
100.6 101.1
102.8
112.9
102.4
100.8
2019 2020 2021 2022 2023
80
90
100
110
120
Dairy Products Consumer Price Index
Fruits Consumer Price Index
101.7
101.8
88.9
104.9
100.4
101.3
Source: The CIC Report, National Bureau of Statistics of the PRC
Note:
(1) Consumer price index, or CPI of the previous year is denominated as 100.
Cost of Labor
In line with the rapid growth of China’s economy, the average annual salary for
employees in China’s private sector catering industry increased from RMB39,632 in 2018 to
RMB49,681 in 2023 (private sector refers to businesses operated by private individuals or
groups, usually for profit, and are not controlled by a government). Labor cost is expected to
continue to grow at a moderate rate, driven by factors such as the overarching economic
growth, urban development, and inflation.
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The following diagram illustrates changes in the average annual salary in China’s private
sector catering industry for the years indicated.
Average annual salary of employees in the private sector catering industry,
China, 2018-2023
2018 2019 2020 2021 2022 2023
39.6
42.4 42.3
46.8 47.5
49.7
RMB (thousand)
20
40
60
Source: The CIC Report, National Bureau of Statistics of the PRC
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OVERVIEW
We are a leading and fast-growing freshly-made beverage company in China, dedicated
to serving fresh, tasty and value-for-money beverages of consistently high quality. Over a
decade ago, Mr. Y un’an Wang, our founder, opened the first “ Good me (̚প)” store in
Zhejiang. Over the years, we have successfully attained industry-leading position through our
regional densification strategy. Our brand, “ Good me ,” is China’s largest mid-priced
freshly-made tea store brand and the second largest freshly-made tea store brand across all
price ranges, in terms of both GMV in 2023 and store count as of December 31, 2023.
KEY MILESTONES
The following is a summary of our key development milestones:
Y ear Event
2010 Mr. Wang opened the first store under the “ Good me ” brand in Zhejiang.
2018 We established Guming Technology, which became our principal operating entity.
2019 Our store count in Zhejiang reached approximately 1,000 and our store network
in Fujian reached a critical mass.
We sold approximately 280 million cups of beverages within the year.
2020 Our total store count exceeded 4,000.
Our store network in Jiangxi reached a critical mass.
We launched our in-house developed mini programs and accumulated 13 million
registered members within the year.
2021 Our store network in Guangdong reached a critical mass.
Our own fleet of freight vehicles with cold-chain capabilities reached
approximately 200.
2022 Our total store count exceeded 6,000.
We sold over 850 million cups of beverages within the year.
Our registered members exceeded 50 million.
We operated more than 15 warehouses.
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Y ear Event
2023 Our total store count exceeded 9,000.
Our store count in Zhejiang exceeded 2,000 and store count in Fujian exceeded
1,000.
Our store networks in Hubei, Jiangsu, Hunan and Anhui reached a critical mass.
We sold approximately 1.2 billion cups of beverages within the year.
Our registered members exceeded 90 million.
We operated more than 20 warehouses, and our own fleet of freight vehicles with
cold-chain capabilities reached approximately 300.
OUR MAJOR SUBSIDIARIES
The following table sets forth certain information of each of our major subsidiaries as of
the Latest Practicable Date.
No. Company
Principal business
activities
Shareholding
controlled by
our Company
Date and
jurisdiction of
establishment
1. Guming Technology Management of our
franchised stores;
research and
development
100% June 12, 2018,
PRC
2. Zhejiang Qiding Supply Chain
Co., Ltd. ( एϪփཻԶᏐᗡϞ
ʮ̡)
Provision of supply
chain services; sale
of goods and
equipment
100% August 27,
2020, PRC
3. Zhejiang Qiming Trading Co.,
Ltd. (ʮ̡)
Provision of supply
chain services; sale
of goods and
equipment
100% October 8,
2022, PRC
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No. Company
Principal business
activities
Shareholding
controlled by
our Company
Date and
jurisdiction of
establishment
4. Zhejiang Guming Supply Chain
Management Co., Ltd. ( एϪ
ʮ̡)
Provision of supply
chain services; sale
of goods and
equipment
100% October 10,
2022, PRC
5. Zhejiang Meiming Trading Co.,
Ltd. (ʮ̡)
Provision of supply
chain services; sale
of goods and
equipment
100% May 8, 2023,
PRC
6. Zhejiang Mingxingpei Supply
Chain Co., Ltd. (ৣ
ʮ̡)
Warehousing and
logistics
management
100% April 8, 2022,
PRC
Note:
(1) During the Track Record Period, Zhejiang Guming Trading Co., Ltd. (ʮ̡) and Wenling
Guming Trading Co., Ltd. (ʮ̡) were our subsidiaries with material revenue contributions.
To streamline the corporate structure of our Group, Zhejiang Guming Trading Co., Ltd. was deregistered on
December 25, 2023 and Wenling Guming Trading Co., Ltd. was deregistered on December 21, 2023. Their
respective businesses had been undertaken by other subsidiaries of our Company in 2023. As advised by our
PRC Legal Advisor, Zhejiang Guming Trading Co., Ltd. and Wenling Guming Trading Co., Ltd. were not
involved in any material non-compliance, claims or litigations during the Track Record Period and up to their
respective deregistration.
ESTABLISHMENT AND DEVELOPMENT OF OUR GROUP
Establishment of Guming Technology
In 2010, Mr. Wang opened the first “ Good me ” store in Zhejiang and operated the
business in the form of a sole proprietorship. On June 12, 2018, Guming Technology (formerly
known as Zhejiang Guming Technology Co., Ltd. (ʮ̡)) was established as
a limited liability company under the laws of the PRC with an initial registered capital of
RMB20,000,000 and became our principal operating entity. Guming Technology was wholly
owned by Zhejiang Jiali Investment Co., Ltd. (ʮ̡)( “ Guming
Investment ,” formerly known as Zhejiang Guming Investment Co., Ltd. (ʮ
̡)) at the relevant time. Guming Investment was collectively owned by Mr. Wang and other
initial shareholders of our Group, namely Mr. Qi, Mr. Ruan and Ms. Pan. Mr. Wang, Mr. Qi,
Mr. Ruan and Ms. Pan were introduced to each other through mutual acquaintance.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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In 2019, Guming Investment subscribed for additional registered capital of
RMB80,000,000 in Guming Technology. In 2020, all registered capital of Guming Technology
was transferred to a number of limited partnerships controlled by Mr. Wang, Mr. Qi, Mr. Ruan
and Ms. Pan at a consideration of approximately RMB145,000,000.
Equity Financings of Guming Technology
In 2020, Guming Technology completed certain equity financings, pursuant to which
certain pre-IPO investors invested in our business. See “— Pre-IPO Investments” below for
further details of the Pre-IPO Investments.
MAJOR ACQUISITIONS, DISPOSALS AND MERGERS
During the Track Record Period and until the Latest Practicable Date, we did not conduct
any major acquisitions, disposals, or mergers.
REORGANIZATION
In preparation for the Listing, we underwent a reorganization of our corporate structure
(the “ Reorganization ”). The following chart
(1) sets forth the simplified corporate structure of
our Group immediately prior to the commencement of the Reorganization:
Guming Technology
43.98% 19.08% 13.74% 10.00% 13.20%
Ningbo Qizhi Enterprise
Management Partnership
(Limited Partnership)
䥊ʘΆุ၍ଣΥྫ
Υྫ

(“Ningbo Qizhi”)(3)
Ningbo Yuncha Enterprise
Management Partnership
(Limited Partnership)
ථ঩Άุ၍ଣΥྫ
Υྫ

(“Ningbo Yuncha”)(4)
Ningbo Hou’an Business
Management Partnership
(Limited Partnership)
Άุ၍ଣΥྫ
Υྫ

(“Ningbo Hou’an”)(5) Pre-IPO
investors(6)
Ningbo Guming Enterprise
Management Partnership
(Limited Partnership)
̚পΆุ၍ଣΥྫ
Υྫ

(“Ningbo Guming”)(2)
Zhejiang Qiding Supply Chain
Co., Ltd.
100%
Zhejiang Lichuan Food
Technology Co., Ltd.(7)
70%
Hangzhou Guoru Food
Technology Co., Ltd.(8)
65%
Notes:
(1) Zhejiang Guming Trading Co., Ltd. (ʮ̡) and Wenling Guming Trading Co., Ltd. ( ๝Ꮚ̚
ʮ̡) were our subsidiaries with material revenue contributions prior to the Reorganization and
were subsequently deregistered on December 25, 2023 and December 21, 2023, respectively. See “— Our
Major Subsidiaries” for details.
(2) Ningbo Guming is a limited partnership established in the PRC, the general partner of which is Mr. Wang and
its limited partnership interests are owned as to 93.72% and 6.28% by Mr. Wang and Ms. Pan, respectively.
(3) Ningbo Qizhi is a limited partnership established in the PRC, the general partner of which is Mr. Qi and its
limited partnership interests are owned as to 99.0% and 1.0% by Mr. Qi and Ms. Jianxia Y ang, the spouse of
Mr. Qi, respectively.
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(4) Ningbo Y uncha is a limited partnership established in the PRC, the general partner of which is Mr. Ruan and
its limited partnership interests are owned as to 99.0% and 1.0% by Mr. Ruan and Ms. Jing Zhang, the spouse
of Mr. Ruan, respectively.
(5) Ningbo Hou’an, being an onshore employee shareholding platform, is a limited partnership established in the
PRC, the general partner of which is Mr. Wang.
(6) The pre-IPO investors of Guming Technology consist of Changsha Xiangjiang Long-Z Private Equity
Investment Fund Partnership (Limited Partnership) (Άุ(Υྫ)),
Shenzhen Long-Z Equity Investment Fund Partnership (Limited Partnership) (ΥྫΆุ
(Υྫ)), Shenzhen HongShan Hanchen Equity Investment Partnership (Limited Partnership) (ӄ
ᛆҳ༟ΥྫΆุ(Υྫ)), Coatue PE Asia 34 LLC and Tumi Consulting (Beijing) Co., Ltd. ( ௄ஜፔ
༔(̏ԯ)ʮ̡), which are affiliates of our Pre-IPO Investors. See “— Pre-IPO Investments — Information
on the Pre-IPO Investors” for details.
(7) The remaining 30% equity interest of Zhejiang Lichuan Food Technology Co., Ltd. (ࠢ
ʮ̡) is held by Hangzhou Qiyu Enterprise Management Partnership (Limited Partnership) (Άุ၍
ଣΥྫΆุ(Υྫ)), of which Mr. Y u Wu is the general partner and the limited partnership interests of
which are owned as to 99% and 1% by Mr. Y u Wu and Ms. Fuying Lin, respectively. (i) Mr. Y u Wu is the
director of Zhejiang Lichuan Food Technology Co., Ltd., Zhejiang Shuicang Food Technology Co., Ltd. ( ए
ʮ̡) and Lishui Shuicang Trading Co., Ltd. (ʮ̡) and the supervisor
of Guangxi Hengxian Sanhe Tea Co., Ltd. (ʮ̡), each a subsidiary of our Group; and
(ii) Ms. Fuying Lin is not a connected person of our Company.
(8) The remaining 35% equity interest of Hangzhou Guoru Food Technology Co., Ltd. (ʮ
̡) is held by Lishui Qisheng Enterprise Management Partnership (Limited Partnership) ( ᘆ˥փ᳅Άุ၍ଣ
ΥྫΆุ(Υྫ)), of which Mr. Xuanhao Chen is the general partner and the limited partnership interests
of which are owned as to 99% and 1% by Mr. Xuanhao Chen and Mr. Wenjun Mao, respectively. Mr. Xuanhao
Chen is the director of Zhejiang Guoru Food Technology Co., Ltd. (ʮ̡) and
Hangzhou Guoru Food Technology Co., Ltd., each a subsidiary of our Group. Mr. Wenjun Mao is an employee
of the Company.
Establishment of Offshore Corporate Structure
Our Company was incorporated as an exempted company with limited liability in the
Cayman Islands on August 31, 2021 with an authorized share capital of US$50,000 divided into
5,000,000,000 shares of a par value of US$0.00001 each. Upon incorporation, one Ordinary
Share of US$0.00001 was allotted and issued to the initial subscriber at par value, and was
subsequently transferred at par value, on the same date, to Ancient Leaves Limited, a limited
liability company incorporated in BVI, which is wholly owned by Mr. Wang. On the same date,
a total of 1,669,565,219 Ordinary Shares were issued and allotted at par value to companies
wholly owned by each of Mr. Wang, Mr. Qi, Mr. Ruan and Ms. Pan, respectively.
On September 13, 2021, Guming Holdings (BVI) Limited was incorporated in BVI as a
limited liability company and a direct wholly-owned subsidiary of our Company. On
November 22, 2021, Guming (Hong Kong) Limited (“ Guming HK ”) was incorporated in Hong
Kong as a limited liability company and a direct wholly-owned subsidiary of Guming Holdings
(BVI) Limited.
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Allotment and Issuance of Shares and Warrants by Our Company
On May 18, 2022, the then shareholders of Guming Technology, directly or through their
affiliates, entered into a share subscription agreement and a warrant subscription agreement
with our Company to subscribe for shares or warrants, as the case may be, of our Company.
On the same date, our Company redesignated its authorized share capital into 4,713,043,460
Ordinary Shares and 286,956,540 Series A Preferred Shares, which were further designated as
Series A-1 Preferred Shares, Series A-2 Preferred Shares, Series A-3 Preferred Shares and
Series A-4 Preferred Shares. Our Company also issued warrants for subscription of Series A
Preferred Shares to certain Pre-IPO Investors or their affiliates. Pursuant to the terms of the
respective warrants, the total exercise prices of the warrants are equal to the total amount
received by the respective shareholders of Guming Technology pursuant to the capital
reduction as described below.
Capital Reduction of Guming Technology and Exercise of Warrants by Pre-IPO Investors
On June 21, 2022, as part of the Reorganization, Guming Technology and its then
shareholders entered into a capital reduction agreement, pursuant to which the registered
capital subscribed by the affiliates of the Pre-IPO Investors in Guming Technology were
repurchased by Guming Technology. The consideration payable for such capital reduction was
used by the Pre-IPO Investors to subscribe for the Preferred Shares as described in the
subsection headed “— Reorganization — Allotment and Issuance of Shares and Warrants by
Our Company” above.
On October 19, 2022, Guming Technology passed a shareholders’ resolution in relation
to a reduction of its registered capital, pursuant to which the respective registered capital
subscribed by Ningbo Guming, Ningbo Qizhi, Ningbo Y uncha and Ningbo Hou’an in Guming
Technology was repurchased by Guming Technology. Following the completion of the
above-mentioned capital reduction, Guming Technology became a wholly owned subsidiary of
Guming HK.
From May 2022 to September 2023, the Pre-IPO Investors exercised their warrants and
were issued an aggregate of 286,956,540 Series A Preferred Shares.
For the corporate structure of our Group after completion of the Reorganization and
immediately prior to the Global Offering, see “— Corporate and Shareholding Structure —
Corporate structure immediately before completion of the Global Offering” in this section.
Compliance with PRC laws
Our PRC Legal Advisor confirmed that: (i) Guming Technology has obtained or made all
necessary regulatory approvals, permits, licenses or filings required under PRC Laws in
relation to the Reorganization in all material respects; and (ii) all changes in registered capital
of Guming Technology as part of the Reorganization has complied with all applicable PRC
Laws in all material respects.
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ACTING-IN-CONCERT ARRANGEMENT
With a view to consolidating the control of our Group, on June 27, 2020, Mr. Wang, Mr.
Qi, Mr. Ruan, Ms. Pan, among others, entered into an acting-in-concert agreement in relation
to voting for corporate matters of Guming Technology and its subsidiaries. In view of the
Reorganization, on April 14, 2022, Mr. Wang, Mr. Qi, Mr. Ruan and Ms. Pan and their
respective intermediate holding companies through which they are interested in the Shares,
namely Modern Leaves Limited, Ancient Leaves Limited, Chivalrous Lancers Limited,
Chivalrous Cavalry Limited, Cousin Tea Limited, Uncle Tea Limited, Spring Equinox Drinks
Limited and Winter Solstice Drinks Limited, further entered into an acting-in-concert
agreement (the “ Acting-in-Concert Agreement ”), pursuant to which, the parties acknowledge
and confirm that from April 14, 2022, at any meeting of our Group where each of them and/or
the directors appointed by them is entitled to vote on corporate matters as shareholders or
directors, each of them shall discuss and reach consensus on such corporate matters and act in
concert, provided that, if no consensus can be reached after full discussions, they will act
according to the decision of Mr. Wang. The Acting-in-Concert Agreement shall be terminated
under mutual agreements of all parties to the agreement. On December 27, 2023, Nascent
Leaves Limited, Chivalrous Knights Limited, Nephew Tea Limited and Summer Solstice
Drinks Limited, each an intermediate holding company for the family trust established by Mr.
Wang, Mr. Qi, Mr. Ruan and Ms. Pan respectively, entered into a deed of adherence, pursuant
to which, Nascent Leaves Limited, Chivalrous Knights Limited, Nephew Tea Limited and
Summer Solstice Drinks Limited agreed to comply with the terms of the Acting-in-Concert
Agreement as if they were parties to the Acting-in-Concert Agreement (the Acting-in-Concert
Agreement and deed of adherence together as the “ Acting-in-Concert Arrangement ”). As of
the Latest Practicable Date, the parties to the Acting-in-Concert Arrangement together
controlled 1,728,260,872 Shares, representing approximately 79.5% of our issued Shares.
EMPLOYEE SHAREHOLDING PLATFORMS
In recognition of the contributions of our employees and to incentivize them to further
promote our development, Thriving Leafbuds Limited and Nascent Sprouts Limited were
established as our employee shareholding platforms in December 2023. Thriving Leafbuds
Limited was held by Futu Trustee Limited in its capacity as trustee of a trust established to hold
Shares for the benefits of Mr. Hailing Meng, the chief financial officer of our Company, Mr.
Y u Qiang, the chief technology officer of our Company, and certain employees of our Group
(who are not directors, senior management or connected persons of our Group). Futu Trustee
Limited, a professional trustee company which provides wealth management services, is
wholly owned by Futu Holdings Limited (NASDAQ: FUTU). Nascent Sprouts Limited was
held by Kastle Limited in its capacity as trustee of a trust established to hold Shares for the
benefits of Ms. Y ayu Jin and Mr. Y unjiang Cai, each an executive Director, Mr. Jifeng Li, the
chief operating officer of our Company, and certain employees of our Group (who are not
directors, senior management or connected persons of our Group). Our Company is the settlor
of both trusts.
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In preparation for the Listing, our Company restructured our employee shareholding
platforms in December 2024 (the “ Employee Shareholding Platform Restructuring ”),
pursuant to which:
 10,855,073 Shares held by Thriving Leafbuds Limited, representing the Shares held
by Futu Trustee Limited as trustee for the benefit of Mr. Hailing Meng, the chief
financial officer of the Company, and a number of employees of the Group, were
surrendered to the Company and an equivalent number of Shares were issued to
Flourishing Leaves Limited, a newly established employee shareholding platform,
to be held by The Core Trust Company Limited as trustee for their benefit. Our
Company is the settlor of the trust. The Core Trust Company Limited, a professional
trustee company which provides trustee and fiduciary services, is wholly owned by
Mr. Shih Jung Chang; and
 1,376,812 Shares held by Nascent Sprouts Limited, representing the Shares
currently held by the Kastle Limited as trustee for the benefit of Ms. Y ayu Jin and
Mr. Y unjiang Cai, each an executive Director, and an employee of the Group, were
surrendered to the Company and an equivalent number of Shares were issued to
Flourishing Leaves Limited to be held by The Core Trust Company Limited as
trustee for their benefit.
Following completion of the Employee Shareholding Platform Restructuring, none of the
remaining beneficiaries in each of the trusts holding Shares through Nascent Sprouts Limited
and Thriving Leafbuds Limited respectively is a core connected person of the Company and the
Shares held by Nascent Sprouts Limited and Thriving Leafbuds Limited will count towards the
public float.
PRE-IPO INVESTMENTS
Overview
In 2020, we carried out the Pre-IPO Investments. The table below summarizes the
principal terms of the Pre-IPO Investments:
Principal Terms of the Pre-IPO Investments
Date of investment
agreements /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
March 31, 2020 and June 27, 2020
Date of full settlement /H1118/H1118/H1118November 26, 2020
Approximate amount of
consideration paid /H1118/H1118/H1118/H1118
RMB674,128,047
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Cost per share paid (1) /H1118/H1118/H1118RMB2.33 (in respect of Long-Z and Coatue 34), RMB2.40 (in
respect of HongShan) and RMB2.20 (in respect of New
Budding)
Discount to the Offer
Price
(2) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
72.8% (in respect of Long-Z and Coatue 34), 72.0% (in respect
of HongShan) and 74.3% (in respect of New Budding)
Basis of consideration /H1118/H1118/H1118The basis of consideration of the Pre-IPO Investments was
determined through our arm’s length negotiations with the
relevant parties, based on the valuation of our Group at the time
of the investment, taking into account the timing of the
investment, the then status of the businesses and financial
performance of our Group, the inherent risks of investing in our
Group at the relatively early stage of the establishment and
development of our Group, the outlook/growth potential of our
Group, and the industry in which we operate.
Use of proceeds from the
Pre-IPO Investments /H1118/H1118
We utilized the proceeds from the Pre-IPO Investments for the
operations of our Group and in accordance with the business
plan or budget as approved by the Board. As of the Latest
Practicable Date, we have utilized all of the proceeds from the
Pre-IPO Investments.
Lock-up /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118The Pre-IPO Investors agreed under the Shareholders
Agreement (as defined below) that, if so requested by the
managing underwriters, the Shares held by them will be subject
to lock-up arrangements for the period commencing on the date
of this prospectus and ending on the date specified by the
Company and the managing underwriters. For details of lock-up
arrangements in respect of the Pre-IPO Investors, please refer to
the subsection headed “Underwriting — Lock-up Arrangements
— (E) Undertakings by Certain Existing Shareholders pursuant
to Lock-up Deeds”.
Strategic benefits of the
Pre-IPO Investments /H1118/H1118
At the time of the Pre-IPO Investments, our Directors were of
the view that in addition to providing additional capital for our
Group’s continued growth, our Group could also benefit from
the knowledge and experience of our Pre-IPO Investors.
Moreover, our Directors were of the view that our Group could
benefit from the Pre-IPO Investments as the Pre-IPO Investors’
investments demonstrated their confidence in the operations of
our Group and served as an endorsement of our Group’s
performance, strengths and prospects.
Notes:
(1) This is calculated based on the approximate amount of consideration paid by the Pre-IPO Investors, taking into
account the effect of the Reorganization.
(2) The discount to the Offer Price is calculated based on the assumption that the Offer Price is HK$9.31 per
Share, being the midpoint of the indicative Offer Price range of HK$8.68 to HK$9.94.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Special rights of the Pre-IPO Investors
Certain special rights were granted to our Pre-IPO Investors under the relevant
agreements, such as preemptive rights, redemption rights, liquidation preferences, right to
appoint directors or observers on the board, rights of first refusal, and information and
inspection rights. The redemption rights were terminated prior to our first submission of the
listing application by our Company to the Stock Exchange (the “ First Filing ”) for the purpose
of the Global Offering in accordance with the guidance in chapter 4.2 of the Guide for New
Listing Applicants issued by the Stock Exchange, provided that such rights shall resume to be
exercisable upon the earliest of (i) the withdrawal or abandonment of such listing application
by our Company; (ii) the rejection of such listing application by the Stock Exchange; (iii) the
lapse of such listing application and such listing application is not renewed by our Company
within six (6) months; (iv) the expiry of eighteen (18) months from the day of the First Filing
if no qualified IPO (as defined in the Shareholders Agreement (as defined below)) has been
consummated by then (or such later dates as the parties to the Shareholders Agreement
unanimously agree in writing); or (v) the earlier of (a) September 30, 2027, or (b) the
twenty-four (24) months after the day of the First Filing if no qualified IPO has been
consummated by then. All other special rights will terminate upon the completion of the Listing
and no special rights granted to the Pre-IPO Investors will survive after the Listing, in
compliance with the guidance in chapter 4.2 of the Guide for New Listing Applicants issued
by the Stock Exchange.
In addition, pursuant to the shareholders’ agreement entered into between our Company
and, among others, the Pre-IPO Investors on December 26, 2023 (the “ Shareholders
Agreement ”), the Pre-IPO Investors shall have an anti-dilution option to purchase all or part
of the Pro Rata Ratio (as defined below) of total securities issued in a qualified IPO at the Offer
Price. A Pre-IPO Investor’s Pro Rata Ratio is the ratio of (i) the aggregate number of Ordinary
Shares held by such Pre-IPO Investor to (ii) the total number of Ordinary Shares then
outstanding immediately prior to the closing of the qualified IPO, each calculated on an
as-converted and fully-diluted basis.
All of the Preferred Shares will be converted into Ordinary Shares on a one-for-one basis
by way of repurchasing the relevant Preferred Shares by the Company out of the proceeds made
from the issue of the equivalent number of new Ordinary Shares to the relevant Pre-IPO
Investors immediately upon the completion of the Global Offering, at which our share capital
will comprise of one class of shares, namely the Ordinary Shares.
Public float
Upon the completion of the Global Offering (assuming the Offer Size Adjustment Option
and the Over-allotment Option are not exercised), the Shares held by (i) Modern Leaves
Limited, Chivalrous Lancers Limited, Cousin Tea Limited and Spring Equinox Drinks Limited,
which are our Controlling Shareholders by virtue of the Acting-in-Concert Arrangement; and
(ii) Flourishing Leaves Limited, which is our employee shareholding platform held by The
Core Trust Company Limited in its capacity as trustee of a trust established to hold Shares for
the benefits of certain core connected persons of our Company and employees of our Group,
will not be counted towards the public float. No Pre-IPO Investor is a core connected person
of our Company as defined under the Listing Rules. Therefore, the Shares held by all the
Pre-IPO Investors will count towards the public float.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Compliance with Pre-IPO Investment Guidance
On the basis that (i) the consideration for the Pre-IPO Investments was settled more than
28 clear days before the date of the First Filing, (ii) the redemption rights granted to the
Pre-IPO Investors were terminated prior to the First Filing, and (iii) all other special rights
granted to the Pre-IPO Investors shall be terminated upon Listing, the Joint Sponsors have
confirmed that the Pre-IPO Investments are in compliance with the guidance in chapter 4.2 of
the Guide for New Listing Applicants issued by the Hong Kong Stock Exchange.
Information on the Pre-IPO Investors
Set our below is a description of all of our Pre-IPO Investors. To the best knowledge of
the Company, each of the Pre-IPO Investors, together with their respective ultimate beneficial
owners, is an independent third party.
Long-Z
Each of Beijing Meiming Enterprise Management Consulting Partnership (Limited
Partnership) (পΆุ၍ଣፔ༔ΥྫΆุ(Υྫ)) (“ Meiming ”) and Beijing Meiyan
Enterprise Management Consulting Partnership (Limited Partnership) (Άุ၍ଣፔ༔
ΥྫΆุ(Υྫ)) (“ Meiyan ”, together with Meiming, “ Long-Z ”) is a limited partnership
established under the partnership laws of the PRC. Ningbo Meishan Bonded Port Area Meixing
Private Fund Management Co., Ltd. (ʮ̡)( “Ningbo
Meixing ”) is the general partner of Meiming, and Shenzhen Meizhu Enterprise Management
Co., Ltd. (ப΂ʮ̡)( “ Shenzhen Meizhu ”) is the general partner of
Meiyan. Shenzhen Meizhu is wholly-owned by Ningbo Meixing, which is in turn controlled by
Mr. Y onghua Zhu ( ϡኹശ), an independent third party. As of the Latest Practicable Date,
Meiming and Meiyan held in aggregate approximately 8.00% of the total issued shares of our
Company.
HongShan
Max Mighty Limited (“ HongShan ”) is a limited liability company incorporated under the
laws of Cayman Islands, which is owned by Beijing HongShan Jingming Management
Consulting Center (Limited Partnership) (ӄዽপ၍ଣፔ༔ʕː(Υྫ))
(“HongShan Jingming ”), a limited partnership incorporated under the laws of the PRC. The
general partner of HongShan Jingming is Shenzhen HongShan Antai Equity Investment
Partnership (Limited partnership) (ᛆҳ༟ΥྫΆุ(Υྫ)), whose general
partner is Shenzhen HongShan Huanyu Investment Consulting Co., Ltd. (ρҳ༟
ʮ̡)( “ HongShan Huanyu ”). HongShan Huanyu is ultimately controlled by Mr.
Zhou Kui ( մඃ), an independent third party. As of the Latest Practicable Date, Max Mighty
Limited held approximately 4.00% of the total issued shares of our Company.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Coatue 34
Coatue PE Asia 34 LLC (“ Coatue 34 ”) is a limited liability company formed under the
laws of Delaware. It is controlled and managed by Coatue Management, L.L.C., which is an
investment advisor registered with the SEC. Coatue Management, L.L.C. is controlled by
Philippe Laffont, an independent third party. As of the Latest Practicable Date, Coatue PE Asia
34 LLC held approximately 1.00% of the total issued shares of our Company.
New Budding
New Budding Capital Inc (“ New Budding ”) is a limited liability company incorporated
under the laws of Cayman Islands, which is wholly owned by Star Budding Capital Limited,
a limited liability company incorporated in BVI. Star Budding Capital Limited is ultimately
controlled by Wang Yimiao, an independent third party. As of the Latest Practicable Date, New
Budding Capital Inc held approximately 0.20% of the total issued shares of our Company.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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CAPITALIZATION OF OUR COMPANY
The following table sets out the shareholding structure of our Company as of the Latest Practicable Date and immediately upon the completion
of the Global Offering, assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised.
Shareholders
Ordinary
Shares
Series A-1
Preferred
Shares (1)
Series A-2
Preferred
Shares (1)
Series A-3
Preferred
Shares (1)
Series A-4
Preferred
Shares (1) Subtotal
Shareholding
percentage
as of the
Latest
Practicable
Date
Shareholding
percentage
upon
completion
of the Global
Offering
Controlling Shareholders (2)
Modern Leaves Limited (2)(3) /H1118/H1118/H1118/H1118/H1118/H1118/H1118939,441,461 –––– 939,441,461 43.21% 40.28%
Chivalrous Lancers Limited (2)(4) /H1118/H1118/H1118/H1118/H1118429,999,961 –––– 429,999,961 19.78% 18.43%
Cousin Tea Limited (2)(5) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118298,782,650 –––– 298,782,650 13.74% 12.81%
Spring Equinox Drinks Limited (2)(6) /H1118/H1118 60,036,800 –––– 60,036,800 2.76% 2.57%
Pre-IPO Investors
Coatue PE Asia 34 LLC
(7) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 21,739,140 – – – 21,739,140 1.00% 0.93%
New Budding Capital Inc (7) /H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 4,347,820 – – 4,347,820 0.20% 0.19%
Beijing Meiming Enterprise
Management Consulting Partnership
(Limited Partnership) and Beijing
Meiyan Enterprise Management
Consulting Partnership (Limited
Partnership)
(7)(11) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 173,913,040 – 173,913,040 8.00% 7.74%
Max Mighty Limited (7) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––– 86,956,540 86,956,540 4.00% 3.73%
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Shareholders
Ordinary
Shares
Series A-1
Preferred
Shares (1)
Series A-2
Preferred
Shares (1)
Series A-3
Preferred
Shares (1)
Series A-4
Preferred
Shares (1) Subtotal
Shareholding
percentage
as of the
Latest
Practicable
Date
Shareholding
percentage
upon
completion
of the Global
Offering
Others
Thriving Leafbuds Limited (8) /H1118/H1118/H1118/H1118/H1118/H1118/H111873,231,878 –––– 73,231,878 3.37% 3.14%
Nascent Sprouts Limited (9) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111873,231,885 –––– 73,231,885 3.37% 3.14%
Flourishing Leaves Limited (10) /H1118/H1118/H1118/H1118/H1118/H111812,231,885 –––– 12,231,885 0.56% 0.52%
Other public shareholders /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118––––––– 6.51%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,886,956,520 21,739,140 4,347,820 173,913,040 86,956,540 2,173,913,060 100% 100%
Notes:
(1) Each Series A-1 Preferred Share, Series A-2 Preferred Share, Series A-3 Preferred Share and Series A-4 Preferred Share shall be converted into one Ordinary Share with effect
from the Listing Date.
(2) Mr. Wang, Mr. Qi, Mr. Ruan, Ms. Pan, Modern Leaves Limited, Ancient Leaves Limited, Nascent Leaves Limited, Chivalrous Lancers Limited, Chivalro us Cavalry Limited,
Chivalrous Knights Limited, Cousin Tea Limited, Uncle Tea Limited, Nephew Tea Limited, Spring Equinox Drinks Limited, Winter Solstice Drinks Limit ed and Summer Solstice
Drinks Limited are parties acting in concert with each other pursuant to the Acting-in-Concert Arrangement. For details, see “— Acting-in-Concert A rrangement” in this section.
(3) Modern Leaves Limited is owned by (i) Nascent Leaves Limited, which is in turn wholly-owned by a trust established by Mr. Wang as the settlor with his family members being
the beneficiaries, as to 99.0% and (ii) Ancient Leaves Limited, which is wholly owned by Mr. Wang, as to 1.0%.
(4) Chivalrous Lancers Limited is owned by (i) by Chivalrous Knights Limited, which is in turn wholly-owned by a trust established by Mr. Qi as the settl or with his family members
being the beneficiaries, as to 99.0% and (ii) Chivalrous Cavalry Limited, which is wholly owned by Mr. Qi, as to 1.0%.
(5) Cousin Tea Limited is owned by (i) Nephew Tea Limited, which is in turn wholly-owned by a trust established by Mr. Ruan as the settlor with his family m embers being the
beneficiaries, as to 99.0%; and (ii) Uncle Tea Limited, which is wholly owned by Mr. Ruan, as to 1.0%.
(6) Spring Equinox Drinks Limited is owned by (i) Summer Solstice Drinks Limited, which is in turn wholly-owned by a trust established by Ms. Pan as the s ettlor with her family
members being the beneficiaries, as to 99.0%; and (ii) Winter Solstice Drinks Limited, which is wholly owned by Ms. Pan, as to 1.0%.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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(7) For details of our Pre-IPO Investors, see “— Pre-IPO Investments — Information on the Pre-IPO Investors” in this section.
(8) Thriving Leafbuds Limited is an employee shareholding platform held by Futu Trustee Limited in its capacity as trustee of a trust established to ho ld Shares for the benefits
of Mr. Y u Qiang, the chief technology officer of our Company, and certain employees of our Group (who are not directors, senior management or connected persons of our Group)
and our Company is the settlor of the trust. None of such individuals held 30% or more interest in such shareholding platform as at the Latest Practicabl e Date. The relevant
Shares held by Thriving Leafbuds Limited were issued by our Company as incentive and for the benefit of the employees.
(9) Nascent Sprouts Limited is an employee shareholding platform held by Kastle Limited in its capacity as trustee of a trust established to hold Share s for the benefits of Mr. Jifeng
Li, the chief operating officer of our Company, and certain employees of our Group (who are not directors, senior management or connected persons of ou r Group) and our
Company is the settlor of the trust. None of such individuals held 30% or more interest in such shareholding platform as at the Latest Practicable Date. The relevant Shares
held by Nascent Sprouts Limited were issued by our Company as incentive and for the benefit of the employees.
(10) Flourishing Leaves Limited is an employee shareholding platform held by The Core Trust Company Limited in its capacity as trustee of a trust estab lished to hold Shares for
the benefits of Ms. Y ayu Jin and Mr. Y unjiang Cai, each an executive Director, Mr. Hailing Meng, the chief financial officer of our Company, and certain employees of our
Group (who are not directors, senior management or connected persons of our Group) and our Company is the settlor of the trust. The relevant Shares held by Flourishing Leaves
Limited were issued by our Company as incentive and for the benefit of the employees.
(11) Long-Z Fund I, LP , a controlled corporation of Mr. Y onghua Zhu, will subscribe for 6,694,000 Offer Shares (based on a final Offer Price of HK$9.31 p er Share (being the
mid-point of the indicative Offer Price range)) under the Global Offering pursuant to the exercise of an anti-dilution right granted to Meiming and Me iyan (or their affiliates)
on December 26, 2023. For more information on this subscription, see the section headed “Cornerstone Investors”.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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PRC REGULATORY REQUIREMENTS
SAFE Registration
Pursuant to the Circular of the SAFE on Foreign Exchange Administration of Overseas
Investment, Financing and Round-trip Investments Conducted by Domestic Residents through
Special Purpose V ehicles (೻
ٝthe “ SAFE Circular 37 ”), promulgated by SAFE and which
became effective on July 4, 2014, which replaced the Notice on Issues Relating to the
Administration of Foreign Exchange in Fund-Raising and Round-Trip Investment Activities of
Domestic Residents Conducted via Offshore Special Purpose Companies (͏ஷཀྤ
ٝthe “ SAFE Circular 75 ”), (i) a
PRC resident must register with the local SAFE branch before he or she contributes assets or
equity interests to an overseas special purpose vehicle (the “ Overseas SPV ”) that is directly
established or indirectly controlled by the PRC resident for the purpose of conducting
investment or financing; and (ii) following the initial registration, the PRC resident is also
required to register with the local SAFE branch for any major change, in respect of the
Overseas SPV , including, among other things, a change of Overseas SPV’s PRC resident
shareholder(s), the name of the Overseas SPV , terms of operation, or any increase or reduction
of the Overseas SPV’s capital, share transfer or swap, and merger or division. Pursuant to
SAFE Circular 37, failure to comply with these registration procedures may result in penalties.
Pursuant to the Circular of the SAFE on Further Simplification and Improvement in
Foreign Exchange Administration on Direct Investment (ආɓӉᔊʷձҷ
ٝthe “ SAFE Circular 13 ”), promulgated by SAFE and which
became effective on 1 June 2015, the power to accept SAFE registration was delegated from
local SAFE to local banks where the assets or interests in the domestic entity are located, and
the SAFE and its branches shall perform indirect regulation over the direct investment-related
foreign exchange registration via banks.
As advised by our PRC Legal Advisor, as of the Latest Practicable Date, Mr. Wang, Mr.
Qi, Mr. Ruan and Ms. Pan, the main ultimate individual owners of our Company who are PRC
residents, have completed the required registration with the local SAFE branch under the SAFE
Circular 37.
M&A Rules
Pursuant to Article 11 of the Regulations on Mergers and Acquisitions of Domestic
Enterprises by Foreign Investors () (the “ M&A
Rules ”) jointly issued by MOFCOM, the State-owned Assets Supervision and Administration
Commission of the State Council, the STA, the CSRC, the SAIC (currently known as the
SAMR) and the SAFE on August 8, 2006, effective as of September 8, 2006 and amended on
June 22, 2009 with immediate effect, approval from MOFCOM is required where a domestic
company or enterprise, or a domestic natural person, through an overseas company established
or controlled by it, acquires a domestic company which is related to or connected with it. As
confirmed by our PRC Legal Advisor, since Guming Technology was a foreign-invested
enterprise immediately prior to the Reorganization and the Reorganization did not involve any
acquisition of domestic enterprises, Article 11 of the M&A Rules is not applicable to the
Reorganization.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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CORPORATE AND SHAREHOLDING STRUCTURE
Corporate structure immediately before completion of the Global Offering
The following diagram illustrates the simplified corporate and shareholding structure of our Group immediately prior to the completion of the
Global Offering:
Our Company
(Cayman Islands)
100%
Guming Holdings (BVI) Limited
(BVI)
100%
Guming (Hong Kong) Limited
(Hong Kong)
100%
Guming Technology Group Co., Ltd.
(ʮ̡)
Offshore
Onshore
Zhejiang
Mingxingpei
Supply Chain
Co., Ltd.
(ৣ
ʮ̡)
Zhejiang
Lichuan Food
Technology
Co., Ltd.(4)
(ۜ࠮
ʮ̡)
Zhejiang
Shuicang Food
Technology
Co., Ltd.(5)
(ۜ࠮ࡑ
ʮ̡)
Zhejiang
Guoru Food
Technology
Co., Ltd.(6)
(ۜ࠮
ʮ̡)
Zhejiang Qiding
Supply Chain
Co., Ltd.
(एϪփཻԶᏐᗡ
ʮ̡)
Zhejiang Qiming
Trading Co., Ltd.
(׸
ʮ̡)
Zhejiang Guming
Supply Chain
Management
Co., Ltd.
(एϪ̚পԶᏐᗡ
ʮ̡)
Hangzhou
Guoru Food
Technology
Co., Ltd.(7)(8)
(ۜ࠮
ʮ̡)
100% 100%
100%
100% 100% 70% 70% 70% 65%
Zhejiang Meiming
Trading Co., Ltd.
(׸
ʮ̡)
43.21% 2.76%
100% 100%
99.0% 1.0%
19.78% 13.74%
Thriving
Leafbuds
Limited(2)
3.37%
Flourishing
Leaves Limited (2)
0.56%
Nascent
Sprouts
Limited(2)
Pre-IPO
Investors(3)
13.2%3.37%
Mr. Wang(1) Ms. Pan(1) Mr. Qi(1) Mr. Ruan(1)
Modern
Leaves
Limited(1)
Spring
Equinox Drinks
Limited(1)
Chivalrous
Lancers
Limited(1)
Cousin Tea
Limited(1)
Nascent
Leaves
Limited(1)
Ancient
Leaves
Limited(1)
100% 100%
99.0% 1.0%
Summer
Solstice Drinks
Limited(1)
Winter
Solstice Drinks
Limited(1)
100% 100%
99.0% 1.0%
Chivalrous
Knights
Limited(1)
Chivalrous
Cavalry
Limited(1)
100% 100%
99.0% 1.0%
Nephew
Tea
Limited(1)
Uncle
Tea
Limited(1)
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Notes:
(1) These Shares are held by Modern Leaves Limited, Chivalrous Lancers Limited, Cousin Tea Limited and Spring Equinox Drinks Limited respectively, w hich is controlled by
Mr. Wang, Mr. Qi, Mr. Ruan and Ms. Pan, respectively. See “— Capitalization of our Company” for details. Mr. Wang, Mr. Qi, Mr. Ruan, Ms. Pan and among othe rs, are parties
acting in concert with each other pursuant to the Acting-in-Concert Arrangement.
(2) Each of Thriving Leafbuds Limited, Nascent Sprouts Limited and Flourishing Leaves Limited is an employee shareholding platform. See “— Employee Shareholding Platforms”
and “— Capitalization of our Company” for details.
(3) See “— Pre-IPO Investments — Information on the Pre-IPO Investors” for details.
(4) The remaining 30% equity interest of Zhejiang Lichuan Food Technology Co., Ltd. (ʮ̡) is held by Hangzhou Qiyu Enterprise Management Partnership
(Limited Partnership) (Άุ၍ଣΥྫΆุ(Υྫ)), of which Mr. Y u Wu is the general partner and the limited partnership interests of which are owned as to 99%
and 1% by Mr. Y u Wu and Ms. Fuying Lin, respectively. (i) Mr. Y u Wu is the director of Zhejiang Lichuan Food Technology Co., Ltd., Zhejiang Shuicang Food T echnology
Co., Ltd. (ʮ̡) and Lishui Shuicang Trading Co., Ltd. (ʮ̡) and the supervisor of Guangxi Hengxian Sanhe Tea Co., Ltd. ( ᄿГዑ
ʮ̡), each a subsidiary of our Group; and (ii) Ms. Fuying Lin is not a connected person of our Company.
(5) The remaining 30% equity interest of Zhejiang Shuicang Food Technology Co., Ltd. (ʮ̡) is held by Hangzhou Qiyu Enterprise Management Partnership
(Limited Partnership), of which Mr. Y u Wu is the general partner and the limited partnership interests of which are owned as to 99% and 1% by Mr. Y u Wu and M s. Fuying
Lin, respectively. (i) Mr. Y u Wu is the director of Zhejiang Lichuan Food Technology Co., Ltd., Zhejiang Shuicang Food Technology Co., Ltd. and Lishui Shuicang Trading
Co., Ltd. and the supervisor of Guangxi Hengxian Sanhe Tea Co., Ltd., each a subsidiary of our Group; and (ii) Ms. Fuying Lin is not a connected person of o ur Company.
(6) The remaining 30% equity interest of Zhejiang Guoru Food Technology Co., Ltd. (ʮ̡) is held by Lishui Qisheng Enterprise Management Partnership
(Limited Partnership) ( ᘆ˥փ᳅Άุ၍ଣΥྫΆุ(Υྫ)), of which Mr. Xuanhao Chen is the general partner and the limited partnership interests of which are owned as
to 99% and 1% by Mr. Xuanhao Chen and Mr. Wenjun Mao, respectively. Mr. Xuanhao Chen is the director of Zhejiang Guoru Food Technology Co., Ltd. and Hangz hou Guoru
Food Technology Co., Ltd. (ʮ̡), respectively, each a subsidiary of our Group.
(7) The remaining 35% equity interest of Hangzhou Guoru Food Technology Co., Ltd. (ʮ̡) is held by Lishui Qisheng Enterprise Management Partnership
(Limited Partnership), of which Mr. Xuanhao Chen is the general partner and the limited partnership interests of which are owned as to 99% and 1% by Mr. X uanhao Chen
and Mr. Wenjun Mao, respectively. Mr. Xuanhao Chen is the director of Zhejiang Guoru Food Technology Co., Ltd. and Hangzhou Guoru Food Technology Co., Ltd.,
respectively, each a subsidiary of our Group.
(8) Hangzhou Guoru Food Technology Co., Ltd. has no longer been engaged in any business operation and is currently in the process of voluntary deregist ration.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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Corporate structure immediately following the Global Offering
The following diagram illustrates the simplified corporate and shareholding structure of our Group immediately following the completion of
the Global Offering (assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised):
Our Company
(Cayman Islands)
100%
Guming Holdings (BVI) Limited
(BVI)
100%
Guming (Hong Kong) Limited
(Hong Kong)
100%
Guming Technology Group Co., Ltd.
(ʮ̡)
Offshore
Onshore
Zhejiang
Mingxingpei
Supply Chain
Co., Ltd.
(ৣ
ʮ̡)
Zhejiang
Lichuan Food
Technology
Co., Ltd.(4)
(ۜ࠮
ʮ̡)
Zhejiang
Shuicang Food
Technology
Co., Ltd.(5)
(ۜ࠮ࡑ
ʮ̡)
Zhejiang
Guoru Food
Technology
Co., Ltd.(6)
(ۜ࠮
ʮ̡)
Zhejiang Qiding
Supply Chain
Co., Ltd.
(एϪփཻԶᏐᗡ
ʮ̡)
Zhejiang Qiming
Trading Co., Ltd.
(׸
ʮ̡)
Zhejiang Guming
Supply Chain
Management
Co., Ltd.
(एϪ̚পԶᏐᗡ
ʮ̡)
Hangzhou
Guoru Food
Technology
Co., Ltd.(7)(8)
(ۜ࠮
ʮ̡)
100% 100% 100% 100% 70% 70% 70% 65%
100%
Zhejiang Meiming
Trading Co., Ltd.
(׸
ʮ̡)
40.28% 2.57% 18.43% 12.81% 12.59%3.14% 3.14%
Pre-IPO
Investors(3)(9)
6.51%
Thriving
Leafbuds
Limited(2)
Other Public
Shareholders
Nascent
Sprouts
Limited(2)
0.52%
Flourishing
Leaves Limited (2)
100% 100%
99.0% 1.0%
Mr. Wang(1) Ms. Pan(1) Mr. Qi(1) Mr. Ruan(1)
Modern
Leaves
Limited(1)
Spring
Equinox Drinks
Limited(1)
Chivalrous
Lancers
Limited(1)
Cousin Tea
Limited(1)
Nascent
Leaves
Limited(1)
Ancient
Leaves
Limited(1)
100% 100%
99.0% 1.0%
Summer
Solstice Drinks
Limited(1)
Winter
Solstice Drinks
Limited(1)
100% 100%
99.0% 1.0%
Chivalrous
Knights
Limited(1)
Chivalrous
Cavalry
Limited(1)
100% 100%
99.0% 1.0%
Nephew
Tea
Limited(1)
Uncle
Tea
Limited(1)
Notes:
(1) to (8) Please refer to the details contained in the preceding page.
(9) Long-Z Fund I, LP , a controlled corporation of Mr. Y onghua Zhu, will subscribe for 6,694,000 Offer Shares (based on a final Offer Price of HK$9.31 pe r Share (being
the mid-point of the indicative Offer Price range)) under the Global Offering pursuant to the exercise of an anti-dilution right granted to Meiming an d Meiyan (or their
affiliates) on December 26, 2023. For more information on this subscription, see the section headed “Cornerstone Investors”.
HISTORY, REORGANIZATION AND CORPORATE STRUCTURE
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OVERVIEW
We are a leading and fast-growing freshly-made beverage company in China. Our brand,
“Good me (̚প),” is China’s largest mid-priced freshly-made tea store brand and the second
largest freshly-made tea store brand across all price ranges, in terms of both GMV in 2023 and
store count as of December 31, 2023. In 2023, we generated a gross merchandise value, or
GMV , of RMB19.2 billion, representing an increase of 37.2% from 2022. In the nine months
ended September 30, 2024, we generated a GMV of RMB16.6 billion, representing an increase
of 20.4% from the same period in 2023. Our store network encompassed 9,001 stores as of
December 31, 2023, representing an increase of 35.0% from December 31, 2022, and expanded
to 9,778 stores as of September 30, 2024.
Over a decade ago, Mr. Y un’an Wang, our founder, opened the first “ Good me ” store in
his hometown Daxi, a small town in Zhejiang. There, consumers had limited access to
freshly-made tea beverages with fresh fruits and other quality ingredients, largely due to the
underdeveloped supply chain infrastructure in these typical lower-tier markets. With a firm
belief that the freshly-made beverage industry will evolve towards greater preference for fresh
ingredients, Mr. Wang embarked on a journey to serve freshly-made tea beverages made from
quality ingredients with short shelf-life distributed through cold-chain delivery. Along our way,
the persistent efforts to serve lower-tier markets have given us deep consumer and market
insights, which, together with our leading operating efficiency, enabled us to serve quality
beverages at affordable prices for the daily consumption of consumers.
We have steadily expanded our store network under what we refer to as the regional
densification strategy. We believe that operating a network of at least 500 stores in a province
signifies a critical mass. Leveraging our experience and advantage in provinces with a critical
mass, we strategically venture into neighboring provinces. We first reached a critical mass in
Zhejiang, where we continued to grow and now have over 2,000 stores. We have established
provincewide networks with a critical mass in eight provinces, which collectively accounted
for 87% of our GMV in 2023, and led us to become one of China’s largest freshly-made tea
store brands. In each of Zhejiang, Fujian and Jiangxi where we established store networks with
a critical mass the earliest, we achieved the highest market share in terms of GMV in the
freshly-made tea store markets across all price ranges. As we expand our store network, we
maintained positive period-over-period same-store GMV growth in these eight provinces with
dense store networks and nationwide during each of the three years ended December 31, 2023.
Under our regional densification strategy, we strategically allocate resources towards
building store networks with high geographical density across all city tiers in target provinces.
As of December 31, 2023, our store count in second-tier and below cities accounted for 79%
of our total store count, the highest percentage as compared to those of the other top five
mid-priced freshly-made tea store brands in China, and slightly increased to 80% as of
September 30, 2024. In addition, as of December 31, 2023, 38% of our stores were located in
towns ( ᕄ) and townships ( ඊ), which are administrative areas typically located away from
downtown urban areas of cities. The percentage of our stores in these areas was the highest
among the top five mid-priced freshly-made tea store brands in China as of December 31, 2023,
and this percentage slightly grew to 40% as of September 30, 2024.
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The great density of our stores in a geographical area allows us to benefit from economies
of scale. For example, our dense store network significantly enhances our warehousing and
logistics efficiency. For the three years ended December 31, 2023, the logistics cost for
delivery from our warehouses to stores was less than 1% of our total GMV on average. The
improvements in warehousing and logistics efficiency can also be seen by comparing our own
warehouses. As of September 30, 2024, we operated a total of 22 warehouses. For the nine
months ended September 30, 2024, among these warehouses, 13 warehouses on average served
fewer than 500 stores per month during the operation period, and nine warehouses on average
served more than 500 stores per month during the operation period. In the nine months ended
September 30, 2024, on a per-store and monthly basis, the warehousing and logistics cost for
stores covered by such nine warehouses was 9% lower than that for stores covered by such 13
warehouses. These cost savings are primarily due to the density of our stores and their
proximity to our warehouses. As of September 30, 2024, approximately 76% of our stores are
located within 150 kilometers of one of our warehouses. As a result, we can also provide
cold-chain supply delivery to approximately 97% of our stores every two days upon request as
of September 30, 2024. In comparison, other China’s freshly-made tea store brands generally
provide delivery to stores every four days and often without the support of cold-chain supply
delivery. Among the top 10 freshly-made tea store brands in China in terms of GMV in 2023,
we are the only brand capable of frequent deliveries every two days of short-shelf-life fresh
fruits and fresh milk to stores in lower-tier cities. Substantially all beverages on our menu are
made from short-shelf-life fresh fruits, tea leaves and/or fresh milk that are stored and
distributed through our cold-chain warehousing and logistics infrastructure, which, our
Directors are of the view that, is one of the largest in the industry as of December 31, 2023.
We believe that the shared success of our franchisees is crucial for our business. In 2023,
our franchisees’ per-store operating profit reached RMB376,000 and franchisees’ per-store
operating profit margin reached 20.2%, whereas the estimated per-store operating profit margin
is generally in the low teens in the mid-priced freshly-made tea store market in China during
the same period. The strong performance of our stores leads to franchisees’ strong willingness
to open more “ Good me ” stores. As of September 30, 2024, among the franchisees that had
operated “ Good me ” stores for over two years, each on average operated 2.9 stores and 71%
operated two or more franchised stores. Sharing the perspective of longtermism, we have built
close and enduring franchisee relationships. These relationships enable effective and efficient
store operations and consistent high-quality product and service offerings, which further
enhance consumer experience and improve store-level performance, thereby attracting more
franchisees and solidifying franchisee relationships, forming a virtuous cycle.
Consistent with our slogan, “one cup a day, always enjoy it (ఀʔጰ),” we
provide our consumers with a variety of product offerings of consistent quality. Leveraging our
strong product development capabilities, we regularly launch new beverages to keep our
offerings appealing. In 2023 and for the nine months ended September 30, 2024, we launched
130 and 85 beverages. While we frequently update our menu, we are capable of having tens of
thousands of stores serve product offerings of consistent quality and taste, enabling “ Good me ”
to become a popular brand among consumers. We have accumulated a loyal member base and
recorded industry-leading repurchase rates. We had accumulated approximately 94 million and
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135 million registered members on our mini programs as of December 31, 2023 and
September 30, 2024, respectively, with over 36 million and over 43 million quarterly active
members in the three months ended December 31, 2023 and September 30, 2024, respectively.
In 2023, our average quarterly repurchase rate reached 53%, compared to the average of below
30% among mid-priced freshly-made tea store brands in China.
Our store management software can empower tens of thousands of stores. In particular,
we built the largest information technology team in China’s freshly-made tea beverage industry
as of December 31, 2023. Underpinned by our store management software, we have
concurrently expanded our store network, achieved a track record of franchisee profitability,
and offered a broad range of high-quality products. Moreover, our store management software,
the franchisee relationships and consumer satisfaction reinforce each other. The diagram below
illustrates the positive feedback loop.
Enduring Franchisee
Relationships
Excellent Consumer
Satisfaction
Store Management
Software
 Higher operating efficiency
 More information feedback
 More investments enabled by
larger scale
 Better brand reputation
 Higher consumer repurchase rate
 Expanding consumer base
 Solid store network expansion
 Track record of franchisee
profitability
 Consistently high-quality product
offering
We generate revenue mainly from the sales of goods and equipment and the provision of
services to our franchisees. We have experienced substantial growth during the Track Record
Period. Our revenue increased by 26.8% from RMB4,383.9 million in 2021 to RMB5,559.2
million in 2022, and further increased by 38.1% to RMB7,675.7 million in 2023. Our revenue
increased by 15.6% from RMB5,570.9 million in the nine months ended September 30, 2023
to RMB6,441.3 million in the same period in 2024. Our profit for the year was RMB24.0
million, RMB372.0 million and RMB1,096.4 million in 2021, 2022 and 2023, respectively. Our
profit for the period was RMB1,002.0 million and RMB1,119.8 million in the nine months
ended September 30, 2023 and 2024, respectively. Our adjusted profit (non-IFRS measure) was
RMB769.6 million, RMB788.1 million and RMB1,459.0 million in 2021, 2022 and 2023,
respectively, and was RMB1,044.5 million and RMB1,148.7 million in the nine months ended
September 30, 2023 and 2024, respectively. For more details, see “Financial Information —
Description of Major Components of Our Results of Operations — Non-IFRS Measures.”
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OUR COMPETITIVE STRENGTHS
We believe the following strengths position us well to capitalize on the opportunities in
China’s freshly-made tea store market.
Largest Brand in the Fast-growing Mid-priced Freshly-made Tea Store Market in China
Our “ Good me ” brand is China’s largest mid-priced freshly-made tea store brand and the
second largest freshly-made tea store brand across all price ranges, as measured by both GMV
in 2023 and store count as of December 31, 2023. Our GMV increased by 37.2% to RMB19.2
billion in 2023 from RMB14.0 billion in 2022, which represented approximately 18% market
share of the mid-priced freshly-made tea store market in China in 2023, and increased by
20.4% to RMB16.6 billion in the nine months ended September 30, 2024 from RMB13.8
billion in the same period in 2023. Our store count increased by 35.0% to 9,001 as of December
31, 2023 from 6,669 as of December 31, 2022, and further increased to 9,778 as of
September 30, 2024.
The mid-priced segment of China’s freshly-made tea store market is the largest and the
fastest-growing segment. The GMV of China’s mid-priced freshly-made tea store market
reached RMB108.6 billion in 2023 and is expected to further increase to RMB280.9 billion in
2028, with a CAGR of 20.8% from 2024 to 2028. In particular, second-tier and below cities
are expected to have the highest growth rate from 2024 to 2028 and contribute to the majority
of the market’s overall growth. We have successfully established our leading presence in
second-tier and below cities. As of December 31, 2023, our store count in second-tier and
below cities accounted for 79% of our total store count, the highest percentage as compared to
those of the other top five mid-priced freshly-made tea store brands in China, and slightly
increased to 80% as of September 30, 2024. In 2023, the GMV generated by “ Good me ” stores
in second-tier and below cities reached RMB14.7 billion, which represented approximately
22% market share, making us the largest brand of the mid-priced freshly-made tea store market
in these cities. At the same time, as of December 31, 2023, 38% of our stores were located in
towns and townships, where the majority of China’s population reside. The presence of our
stores in towns and townships is significantly higher than those of other top five mid-priced
freshly-made tea store brands in China, both in terms of absolute store count and the percentage
within our total store count as of December 31, 2023. This percentage slightly grew to 40% as
of September 30, 2024.
We are well positioned to capture the growth opportunities and maintain our leading
position. Enabled by our effective regional densification strategy, the close and enduring
franchisee relationships we formed under the perspective of longtermism, the consistently
high-quality product offerings, and our store management software, we expanded our consumer
base and recorded excellent consumer reviews and repurchase rates. Our average quarterly
repurchase rate reached 53% in 2023, compared to the average of below 30% among
mid-priced freshly-made tea store brands in China. As such, we believe we can maintain our
leadership in China’s freshly-made tea store market going forward.
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Solid Store Network Expansion under Our Regional Densification Strategy
We achieved our industry-leading position with solid store network expansion. We have
managed to expand our store network under the regional densification strategy while
simultaneously enhancing store performance. Under our disciplined expansion approach, we
strategically allocate resources towards building store networks with high geographical density
across all city tiers in target provinces to achieve economies of scale, and then steadily venture
into nearby provinces.
We have built provincewide networks with a critical mass in eight provinces in China,
which collectively accounted for 87% of our GMV in 2023, and led us to become China’s
largest mid-priced freshly-made tea store brand. By capitalizing on our accumulated
operational experience and the natural spread of our brand reputation among consumers and
franchisees, we have consistently replicated our regional densification strategy to neighboring
provinces. In 2017, we first reached a critical mass in Zhejiang, where we continued to grow
and now have over 2,000 stores. We then reached a critical mass in Fujian in 2019 and Jiangxi
in 2020. As of September 30, 2024, we had also established a store network with a critical mass
in each of Guangdong, Hubei, Jiangsu, Hunan and Anhui. As of September 30, 2024, we had
presence in 17 provinces in China where we will continue to densify our store network, and we
will also prudently and efficiently expand into other provinces. The following graphs illustrate
the steady expansion footprint of our store network and ample room for our further growth.
Zhejiang
Province
As of December 31, 2018 As of December 31, 2020 As of September 30, 2024
Zhejiang
Province
Zhejiang
Province
<10 10-200 200-500 500-1,000 >1,000
Store count
We have accomplished the following under our regional densification strategy:
 In 2023, we captured over 25% of the overall GMV of the mid-priced freshly-made
tea store markets in the eight provinces where our store networks reached a critical
mass. Furthermore, during the same period, we achieved the highest market share in
terms of GMV in the freshly-made tea store markets across all price ranges in each
of Zhejiang, Fujian and Jiangxi where we established store networks with a critical
mass the earliest, and in each prefecture-level area of these three provinces. In
addition, we achieved over 25% market share in the overall freshly-made tea store
market and over 45% market share in the mid-priced market in each of these three
provinces.
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 During each of the three years ended December 31, 2023, we maintained positive
period-over-period same-store GMV growth nationwide while we continually
densified our store network. In particular, we also maintained positive period-over-
period same-store GMV growth in these periods in each of Zhejiang, Fujian and
Jiangxi where we established store networks with a critical mass the earliest. For the
nine months ended September 30, 2024, our same-store GMV decreased by 0.7%
due to the general industry slowdown and increased competition. Nonetheless, we
continued to grow our total GMV by 20.4% as compared to the same period in 2023.
 Our dense store network significantly enhances our warehousing and logistics
efficiency. We provide cold-chain supply delivery to approximately 97% of our
stores every two days upon request as of September 30, 2024. Among the top 10
freshly-made tea store brands in China in terms of GMV in 2023, we are the only
brand capable of frequent deliveries every two days of short-shelf-life fresh fruits
and fresh milk to stores in lower-tier cities. For the three years ended December 31,
2023, the logistics cost for delivery from our warehouses to stores was less than 1%
of our total GMV on average.
Track Record of Franchisee Profitability and Enduring Franchisee Relationships
We believe that achieving shared success with our franchisees is crucial to our business.
Embracing longtermism, we seek to sustain franchisee profitability and foster close and
enduring franchisee relationships, which enable us to attract and retain capable franchisees that
stand shoulder to shoulder with us to deliver high-quality products and services to consumers
over the long run.
We have maintained strong franchisee profitability. In 2023, our franchisees’ per-store
operating profit reached RMB376,000 and franchisees’ per-store operating profit margin
reached 20.2%, whereas the estimated per-store operating profit margin is generally in the low
teens in the mid-priced freshly-made tea store market in China during the same period. In
particular, in fourth-tier and below cities, our franchisees’ per-store operating profit was
RMB386 thousand in 2023, bringing significant income to our franchisees’ household. The
strong performance of our stores leads to franchisees’ strong willingness to open more “ Good
me” stores. As of September 30, 2024, among the franchisees that had operated “ Good me ”
stores for over two years, each operated 2.9 stores on average and 71% operated two or more
franchised stores.
We aim to foster close and enduring franchisee relationships by cultivating a franchisee
culture grounded in values such as unity, sincerity, and continuous pursuit of excellence. We
are the first freshly-made tea store company in China that established a franchisee committee
to gather franchisees’ feedbacks on potential major business decisions. To promote transparent
communication, the annual “ Good me ” nationwide franchisee conferences were held in the past
11 years consecutively. The close and enduring franchisee relationships enable effective and
efficient store operations and consistent high-quality product and service offerings, which
enhance consumer experience and improve store-level performance, thereby attracting more
franchisees and solidifying franchisee relationships, forming a virtuous cycle.
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Diverse, Consistent and High-quality Product Offerings, Broadly Embraced by
Consumers
Consistent with our slogan, “one cup a day, always enjoy it (ఀʔጰ),” we
provide our consumers with a variety of product offerings of consistent quality. Our store menu
typically contains approximately 30 beverages at a time, offering three categories of beverages,
namely (i) fruit tea beverages, (ii) milk tea beverages, and (iii) coffee beverages and others.
Our industry-leading cold-chain warehousing and logistics infrastructure allows us to prepare
substantially all of these beverages with short-shelf-life fresh fruits, tea leaves and/or fresh
milk. Leveraging our product development capabilities, we regularly launch new beverages to
keep our offerings appealing and to capture emerging opportunities presented by evolving
industry trends. In 2021, 2022 and 2023 and for the nine months ended September 30, 2024,
we launched 94, 82, 130 and 85 beverages, respectively. While we frequently update our menu,
we are capable of having tens of thousands of stores serve product offerings of consistent
quality and taste. In particular, at the recipe development stage, we factor in the impact of
potential variances in store operations, implement store systems to standardize operating
procedures, adopt centralized supply chain management, and provide comprehensive training
to and supervision of our franchisees. We also maintain an unwavering commitment to food
quality and safety. Backed by a dedicated quality control team of over 130 professionals as of
September 30, 2024, and leveraging our team of approximately 470 supervisors and inspectors
as of the same date, our quality control measures cover the entire operating process, including
product development, procurement, warehousing and logistics, and store operations.
Thanks to the consistently high quality of our store offerings, “ Good me ” has grown to
be a broadly embraced brand among consumers. We engage with our consumers through both
online social media platforms and offline marketing channels. For example, in the “First Cup
of Milk Tea in Autumn” campaign on August 7, 2024, integrating both online and offline
marketing efforts, we achieved a daily GMV of over RMB160 million. Moreover, we have been
crafting and launching creative and diverse marketing campaigns that resonate well with our
consumers. In June 2024, we launched a brand collaboration event with “ Love and Deepspace
(٤a popular Chinese mobile game, under which we opened our first store in
Shanghai in the form of a pop-up store and achieved single-store GMV of over RMB290,000
on the first day of the event.
Enabled by our consistently high-quality products and effective and diverse marketing
campaigns, we effectively enhance our brand awareness among consumers. We received
excellent consumer reviews, accumulated a loyal member base, and recorded industry-leading
repurchase rates. We had accumulated approximately 94 million and 135 million registered
members on our mini programs as of December 31, 2023 and September 30, 2024, respectively,
with over 36 million and over 43 million quarterly active members in the three months ended
December 31, 2023 and ended September 30, 2024, respectively. In 2023, our average quarterly
repurchase rate reached 53%, compared to the average of below 30% among mid-priced
freshly-made tea store brands in China.
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Our efficient and flexible store management, product research and development, and
supply chain capabilities
We believe in introducing and applying technologies to improve the efficiency and
flexibility of the traditional catering service stores. To that end, we have established store
management software which can empower tens of thousands of stores.
We leverage technology to improve operating efficiency. We have been actively building
our information technology team since 2018. As of December 31, 2023, this team has grown
to include over 320 engineers, being the largest information technology team in China’s
freshly-made tea beverage industry, and further grew to over 340 engineers as of September 30,
2024. For our stores, we have implemented store systems that encompass in-house developed
store management modules and connected appliances integrated with IoT, to digitalize their
operations and enhance their operating efficiency. For instance, our proprietary tea brewer can
automatically adjust brewing parameters based on our centralized inputs, delivering a
consistent, optimal tea flavor across our stores. For our franchisees, our online management
system offers comprehensive support, such as site selection recommendations based on our
expanding database of over 22,000 store sites as of September 30, 2024. The system also
generates tailored routes and store-specific checklists for our store supervisors to ensure
comprehensive and efficient supervision. For consumer engagement, we have accumulated a
large and loyal member base through our membership program and are able to dynamically
customize our user engagement strategies.
We take a food-science-centric approach to product research and development. We are
one of the first companies in the freshly-made tea store industry that engaged in the research
on food sciences in China’s freshly-made tea store market and possesses comprehensive
research and development capabilities. Our product research and development team includes
“connoisseurs,” who continually originate product inspirations and monitor the latest consumer
preference trends, and “engineers,” who rigorously analyze ingredients, usually with degrees
in fields such as food science, agriculture and tea science. Our “engineers” quantify the flavors
of different ingredients in terms of, for instance, aroma, acidity and sweetness. In this way, we
have accumulated flavor profiles of over 1,000 ingredients of different varieties and/or from
different suppliers as of September 30, 2024. With this approach, we are able to consistently
launch new beverages that are popular among consumers. In each of the three years ended
December 31, 2023, our top 10 best-selling beverages included two to three completely new
beverages we launched in the same or prior year, and these beverages continue to be popular
over time. Our emphasis on food science also extends to supply chain management. We
process, pack and ship fruits with various advanced technologies to ensure their freshness. For
example, by promptly processing mangoes at source and strictly controlling their packaging,
delivery and ripening processes, we decreased the ripening spoilage rate to 10% in 2023, far
below the industry average of approximately 20%.
Our supply chain management provides robust support to our stores. We require
franchisees to procure all materials from us to ensure quality and consistency, making us one
of the very few companies in the industry that enforce such requirements. We procured
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approximately 85,000 tons of fresh fruits spanning across 36 kinds in 2023. The large volume
of our fresh fruit procurement offers substantial economies of scale, allowing us to supply
ingredients to our stores at competitive prices, well below market averages. In response to
supply chain disruptions, our closely collaborating product research and development team and
supply chain management team can quickly adjust product mix to alleviate the change’s impact
on our inventory and supplies. We also operate one of the largest cold-chain warehousing and
logistics infrastructure among China’s freshly-made tea store brands as of December 31, 2023,
enabling cold-chain supply delivery to approximately 97% of our stores every two days upon
request as of September 30, 2024. In 2023, we completed cold-chain delivery of over RMB4
billion worth of ingredients, the highest in China’s freshly-made tea store industry. As of
September 30, 2024, approximately 76% of our stores are located within 150 kilometers of one
of our warehouses. Our proprietary logistics distribution system harnesses advanced algorithms
to intelligently match our available resources with the logistics demand, optimizing delivery
route to substantially reduce delivery costs.
Diverse Management Pursuing Open and Inclusive Culture
Our founder, Mr. Y un’an Wang, is a young and visionary entrepreneur. Since he opened
the first store under the “ Good me ” brand in 2010, Mr. Wang has acutely observed the changes
and opportunities in the freshly-made beverage industry, in particular in lower-tier cities, and
led us to maintain our industry-leading position as the industry continuously evolves. Growing
up in an entrepreneurial culture, Mr. Wang empathizes with sole proprietors and have in-depth
understanding of our franchisees’ typical needs, which helps foster close and enduring
franchisee relationships. With an engineering background, Mr. Wang’s commitment to
constantly refining product quality and strengthening our platform, along with his firm belief
in long-term mutually beneficial relationship with franchisees, have guided our business to this
day.
Led by Mr. Wang, our talented management team encompasses company veterans,
accomplished experts recognized in their respective fields, and home-grown young talents
attuned to evolving consumer trends. This combination of diverse professional backgrounds
and age groups fosters multi-perspective feedback during decision-making. Guided by our
entrepreneurial spirit valuing openness, our management team swiftly adapts to changing
market environments, engaging in rapid upgrades and refinement. We adhere to a simple and
candid communication style, fostering a humble and honest atmosphere that cultivates strong
bonds among our people and extending to our partners. We embrace an inclusive and open
corporate culture, which allows us to continually attract talented individuals with diverse
backgrounds and perspectives. We are committed to being responsible corporate citizens,
continuously fulfilling corporate social responsibility. For details, see “— Environmental,
Social and Governance”.
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OUR GROWTH STRATEGIES
We will continue to pursue the following strategies which will drive further growth.
Expand Our Store Network and Solidify Our Position in the Industry
Guided by our regional densification strategy, an efficient and replicable expansion
strategy which has been proven effective, we plan to continue increasing the spread and density
of our store network in China, achieve further revenue growth and solidify our leadership
position in the industry through the following measures.
 Increasing our store density in existing markets. We expect to continue increasing
our store density in the 17 provinces where we have presence. We expect that our
products of consistently high quality and strong store performance will help extend
our consumer reach and drive our growth in these markets.
 Expanding our store network to new markets. Leveraging our rich experience
executing the regional densification strategy, we intend to expand into new areas and
capture the untapped market opportunities. As of September 30, 2024, there were 17
provinces in China where we had yet to have presence, providing us with ample
room for growth. We will strategically venture into provinces adjacent to where we
have presence.
We will also continually evaluate opportunities to enter overseas markets. The GMV of
the global freshly-made beverage market reached US$779.1 billion in 2023, and is expected to
reach US$1,103.9 billion in 2028, with a CAGR of 7.1% from 2024 to 2028. We will prioritize
markets where freshly-made beverages have large growth potential. We will also factor in the
development of supply chain infrastructures and the extension of our platform to support our
overseas store network.
Enhance Our Technologies to Improve Operating Efficiency
We intend to increase investment in our proprietary technologies to further strengthen our
adaptive platform, thereby continuously empowering and digitalizing our operations. We plan
to focus on the following areas:
 Business management . We will continue to invest in technologies related to our
business management, such as our cloud server facilities, accounting management
system, office software and other third-party applications, enabling efficient
coordination internally and with our franchisees and other business partners.
 Store operation . We have implemented our store systems that integrate software and
connected appliances for our store operations. We will further enhance these
technologies to improve our stores’ operating efficiency and ensure the consistency
of offerings across our stores.
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 Intelligent decision-making . Leveraging our accumulated business insights, we aim
to strengthen our business intelligence tools to optimize various aspects of our
operation, including product development, procurement, warehousing and logistics,
and sales and marketing, among others.
 Talent recruitment. We plan to continue to recruit and cultivate technology talents.
Continue to Invest in Product Research and Development to Refine and Expand Our
Product Offerings
We will continue to focus on research on food science and strengthen our product
development capabilities. In the past, we have been able to capture evolving freshly-made tea
beverage market trends, optimize our offerings accordingly and regularly launch new tea
beverages to meet consumers’ needs. Going forward, we will continue to refine our existing
products and launch beverages that cater to evolving consumer preferences and attract a
broader consumer base. We will also deepen our collaborations with universities and research
institutions, including Zhejiang University, to further enhance our research capabilities.
As we solidify our position in the freshly-made tea beverage market, we plan to enrich
our product mix and expand into new categories, such as further enriching freshly-made coffee
beverage offerings, to capture more cross-selling opportunities and fulfill more diversified
consumer needs. We believe these new offerings will help expand consumer base and increase
consumer purchase frequencies, which will further drive our revenue growth.
Strengthen Our Branding and Consumer Engagement Efforts
We plan to continue investing in branding and consumer engagement activities to upgrade
our brand image and strengthen our reputation. We plan to upgrade the interior design of our
stores, and will launch diverse consumer engagement activities to elevate our brand image and
enhance consumer recognition. At our stores, we will continue to intensify engagement with
our consumers. We plan to further leverage online marketing methods such as developing
creative online promotional content related to trending topics and events and collaborating with
key opinion leaders. We will enhance consumer interaction through online social media and
content platforms, and we will also create new collaborations with popular media content, such
as anime and television shows.
In addition, we will further develop our membership program by offering more tailored
member engagement activities and marketing campaigns to improve consumer experience and
enhance consumer loyalty.
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Enhance Our Supply Chain Capabilities
We will further invest in our industry-leading supply chain infrastructure, which will
support our store network expansion and enable us to consistently deliver fresh and quality
ingredients to our stores. We plan to focus on the following areas:
 Procurement. As our business continues to scale up and our brand receives greater
recognition, we expect to enjoy greater bargaining power when procuring our
supplies. We will continue to procure quality ingredients, such as tea leaves and
fresh fruits, directly from their source to ensure their freshness.
 Ingredient processing. We expect to continue investing in our processing facilities,
including one facility recently constructed in Zhuji, Zhejiang, which will enhance
our ingredient processing capacity and capabilities.
 Warehousing and logistics. As we expand our store network to new regions or
increase our presence in existing markets, we will holistically evaluate our
warehousing cost and delivery efficiency, and strategically invest in our
warehousing and logistics infrastructure. We intend to invest in intelligent
equipment and software for our warehouses, which will support automatic storage,
packaging, inventory management and information tracking. We also plan to
strengthen our logistics infrastructure by increasing and upgrading our freight
vehicles. We will continue to refine our cold-chain capabilities to deliver short-
shelf-life ingredients, such as fresh fruits, to our stores, including those in lower-tier
cities, and maintain the stability of our deliveries and the quality of our ingredients.
BRAND AND PRODUCT OFFERINGS
Our Brand
Our brand “ Good me ” is derived from our Chinese brand name “ ̚প,” which refers to
fine tea from ancient times. Our Chinese brand name, adopted since our inception, reflects our
long-held commitment to the time-honored craft of tea. We draw inspirations from the
meticulous methods of tea-making in ancient China and seek to embody the traditional
craftsmanship in our freshly-made beverages. Our English brand, “ Good me ,” was derived
from our Chinese brand name due to their similar pronunciations. It also brings new meanings
to our brand, representing our goal to bring joy and happiness into our consumers’ daily lives.
Consistent with our slogan, “one cup a day, always enjoy it (ఀʔጰ),” we endeavor
to deliver a regularly updated lineup of fresh, tasty and value-for-money beverages of
consistently high quality, aiming to attract and retain consumers across all city tiers in China.
Our beverages are broadly embraced by consumers and have received excellent consumer
reviews. We had accumulated approximately 94 million and 135 million registered members on
our mini programs as of December 31, 2023 and September 30, 2024, respectively, with over
36 million and over 43 million quarterly active members in the three months ended December
31, 2023 and September 30, 2024, respectively. In 2023, our average quarterly repurchase rate
reached 53%, compared to the average of below 30% among mid-priced freshly-made tea store
brands in China.
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Product Offerings at “Good me ” Stores
“Good me ” stores generated a GMV of RMB19.2 billion in 2023, representing an increase
of 37.2% from RMB14.0 billion in 2022, and generated a GMV of RMB16.6 billion in the nine
months ended September 30, 2024, representing an increase of 20.4% from RMB13.8 billion
in the same period in 2023. We focus on three categories of beverage offerings at “ Good me ”
stores: (i) fruit tea beverages, (ii) milk tea beverages, and (iii) coffee beverages and others.
Fruit Tea Beverages
Our fruit tea beverages are made with tea and a variety of fresh fruits, many with short
shelf-life, and are characterized by their vibrant, refreshing tastes. In 2021, 2022, 2023 and the
nine months ended September 30, 2024, our fruit tea beverages recorded total sales of 298.0
million cups, 365.3 million cups, 499.3 million cups and 402.6 million cups, respectively. In
the nine months ended September 30, 2024, our fruit tea beverages collectively accounted for
41% of the total number of cups sold. Illustrated below are some of our representative fruit tea
beverages.
Fruit Tea Beverages
Superb Grape and Cheese
(௒௒A෤ಒ)
Superb Peach and Cheese
(௒A౧౧)
Full of Waxberries
(ᕝഋ༶ക)
Fragrant Lemon
(ਫᓅ)
 Superb Grape and Cheese ( ൴Aɻ໧ൃ) has consistently been one of our
best-selling beverages, achieving total sales of over 180 million cups during the
Track Record Period. We have continually fine-tuned its recipe over the years and
have upgraded the recipe 11 times since its initial launch in June 2019. To optimize
the taste and consistency of our beverages all year round, we make use of different
types of grapes in different seasons and, leveraging our food-science-centric product
development capabilities, matches various grape types with particular tea bases for
better flavor.
 Superb Peach and Cheese ( ൴Aࣹࣹmade use of fresh, premium peaches,
procured from 22 different sources in seven provinces in 2023, that have consistent
sweetness, ripeness and firmness. Our product research and development team also
tested 210 types of Oolong teas and evaluated over 100 tea blending formulas to
select the final tea base for the beverage.
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 Fragrant Lemon (˥ᓠ) is a beverage built around Taiwan citrus lemons ( ၽ
˥ᓠᓝ), a particular type of lemon. We source our lemons from Y unnan, the
only lemon-producing area in mainland China with a rainforest climate. The
rainforest climate provides the right condition to ensure the fragrant aroma of these
lemons. We also customized a tea base using premium tea leaves to complement the
citrus lemons’ taste.
 Full of Waxberries (เૠ) attests to our commitment to maintaining the
freshness of a delicate fruit with very short shelf-life with the support of our
industry-leading supply chain capabilities. Striving to enable our consumers to have
waxberries with freshly-harvested taste, we distribute them to stores with end-to-end
cold-chain delivery, covering as long as 2,300 kilometers from the source to our
stores.
Milk Tea Beverages
Our milk tea beverages generally have a smooth and creamy flavor and can be served with
tapioca pearls, or boba, and/or a range of other additional toppings. In 2021, 2022, 2023 and
the nine months ended September 30, 2024, our milk tea beverages recorded total sales of
267.2 million cups, 344.6 million cups, 508.6 million cups and 466.8 million cups,
respectively. In the nine months ended September 30, 2024, our milk tea beverages collectively
accounted for 47% of the total number of cups sold. The images below showcase some of our
representative milk tea beverages.
Yunling Jasmine Blossom
(ӢྮᣈᣦനӢྮᣈᣦന)
Milk Tea Beverages
Longjing with Qingtuan
(੨ᅶ)
All-in-one Milk Tea
(ॄኄ౎༗)
Good me Milk Tea
(ᣕ䑊஡ᣕ䑊஡)
li
 J
 i
 B
l
 Good me Milk Tea ( ̚প̲঩), created since the early days of our brand, has
consistently been our best-selling beverage in terms of annual cups sold in 2021,
2022 and 2023, with over 436 million cups sold during the Track Record Period. We
continually refined its recipe to maintain its competitive edge. For example, our
product research and development team has carefully curated black teas from India,
Sri Lanka and Y unnan, China to create a blended tea base with stable and rich
flavors.
 All-in-one Milk Tea ( ʡჿேϞ) has also been a long-time consumer favorite thanks
to its one-litre size, rich ingredients, and high value for money with a typical list
price of RMB14. The beverage makes use of multiple ingredients requiring on-site
cooking, which demonstrates the in-store ingredient processing capabilities of our
stores.
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 Longjing with Qingtuan (ྠ) innovatively replaces boba with a traditional
Chinese sticky rice ball, Qingtuan. The “connoisseurs” in our product research and
development team were drawn to Qingtuan as part of their market research efforts
and realized how well it complements the flavor of Longjing, a classic fine tea from
Zhejiang. This finding led us to consider combining the two ingredients. The
“engineers” in our product research and development team then explored the optimal
mix of Longjing tea leaves from different sources to find the ideal tea base for the
beverage.
 Y unling Jasmine Blossom (஁ͣ) is an example of our light milk tea series
(ჀԪ঩ӻΐ) launched in 2023 in response to market demand. With ingredients
including premium tea base sourced from Y unnan and scented with jasmine
blossoms from Guangxi, and quality fresh milk, the beverage was widely embraced
by our consumers and consistently ranked as one of our top 3 beverages in the first
few months after launch. In the one year following its launch, the beverage became
the best-selling product among our product portfolio.
Coffee Beverages and Others
We also serve coffee beverages, including traditional coffee beverages, beverages that
combine coffee with tea or fresh fruits, and other offerings such as yogurt shake, classic tea,
bakery products and branded merchandise at our stores. These products enrich our product
offerings, allowing us to serve a wider consumer base and cater to more diversified
consumption scenarios. In 2021, 2022, 2023 and the nine months ended September 30, 2024,
our beverages sold under this category amounted to total sales of 115.4 million cups, 160.3
million cups, 176.8 million cups and 120.1 million cups, respectively. In the nine months ended
September 30, 2024, the beverages sold under this category collectively accounted for 12% of
the total number of cups sold. The images below showcase some of our favored products in this
category.
Coffee Beverages and Others
Avocado Milk Shake
(༉Ռ䑊ੲ༉Ռ䑊ੲ)
Aromatic Coconut Latte
(ਫᒀᒀ፤᭿)
Orange-infused Americano
(ࣜ)
Pure Jasmine Tea
(ᣈᣦ)
 Orange-infused Americano (ό) is made with carefully selected, freshly-
harvested oranges from premium sources. We leverage our HPP technology to retain
the freshness and sweetness of orange juices, and combine them with citrus lemons
for a rich flavor. We also use award-winning dark roasted espresso blend to
complement the fruit juices for a balanced taste.
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 Aromatic Coconut Latte (᚛) makes use of high-quality, aromatic
coconut from Thailand, with just the right level of ripeness, to bring out a
pronounced fragrance and ensure a sweet and full-bodied taste. The coconut water
is paired with our award-winning espresso blend for a light and smooth texture and
a lingering finish.
 Avocado Milk Shake (׷makes use of quality avocados sourced from
Peru, Chile and Mexico. Even with a long travel distance, we insist on delivering
avocados with cold-chain transportation to ensure their quality.
 Pure Jasmine Tea (஁) is our take on the classic jasmine tea that leverages our
extensive tea leaf knowledge and capability to source premium tea leaves. We work
closely with our jasmine tea suppliers and provide stringent requirement for their
preparation process.
Pricing Strategy for Our Product Offerings
We focus on the mid-priced freshly-made tea beverage market. During the Track Record
Period, our product offerings’ prices remained relatively stable, typically between RMB10 and
RMB18. We currently do not have any plan to adjust the price range of our products.
We intend to set prices that reflect our value propositions. Our pricing decisions for
specific beverages take into account various pertinent factors. These include the purchasing
power of local consumers, prevailing market prices, ingredient and supply costs, market
demand and the competitive landscape, among other factors. During the Track Record Period,
we did not sell pre-paid packages to our consumers.
While we serve our beverages to end consumers primarily through our franchised stores,
our direct customers are primarily our franchisees. For details of our products and services to
our franchisees, including our pricing policy for such products and services, see “— Our
Franchisees — Products and Services to Our Franchisees.”
OUR STORE NETWORK
We manage an extensive network of stores with steadily increasing GMV and a track
record of profitability. We have established this store network with our regional densification
strategy. Our stores offer high-quality products and services to our consumers.
Overview of Our Store Network
We had an extensive store network comprising 9,778 stores covering over 200 cities
across all city tiers in China as of September 30, 2024. Our stores are primarily operated under
a franchise model. Our franchised stores contributed to approximately 99.9% of our GMV for
the years ended December 31, 2021, 2022 and 2023 and the nine months ended September 30,
2024. To a much lesser extent, we directly manage a few company-operated stores. As of
September 30, 2024, we directly managed seven company-operated stores. For details of our
franchisees, see “— Our Franchisees.”
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The following map illustrates our store network as of September 30, 2024.
Store Distribution by City Tier
As of September 30, 2024
<10 10-200 200-500 500-1,000 >1,000
Store count
Zhejiang
Shandong
Jiangsu
Fujian
GuangdongGuangxi Yunnan
Guizhou
Sichuan
Chongqing
Henan
Anhui
Jiangxi
Hunan
Hubei
3%
17%
29% 27%
24%
First-tier New
first-tier
Second-tier Third-tier Fourth-tier
and below
Hainan
Hebei
The following table sets forth our store count across various city tiers and as a percentage
of our total store count as of the dates indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
Store
count %
Store
count %
Store
count %
Store
count %
First-tier cities /H1118/H1118/H1118/H1118/H1118/H1118/H111893 2 165 3 272 3 288 3
New first-tier cities /H1118/H1118/H11181,165 20 1,362 20 1,634 18 1,694 17
Second-tier and below
cities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,436 78 5,142 77 7,095 79 7,796 80
– Second-tier cities /H1118/H1118/H11181,884 33 2,140 32 2,690 30 2,853 29
– Third-tier cities /H1118/H1118/H1118/H1118/H11181,307 23 1,581 24 2,349 26 2,606 27
– Fourth-tier and below
cities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,245 22 1,421 21 2,056 23 2,337 24
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,694 100 6,669 100 9,001 100 9,778 100
As of December 31, 2023, our store count in second-tier and below cities accounted for
79% of our total store count, the highest percentage as compared to those of the other top five
mid-priced freshly-made tea store brands in China, and slightly increased to 80% as of
September 30, 2024. In 2023, the GMV generated by “ Good me ” stores in second-tier and
below cities reached RMB14.7 billion, which represented approximately 22% market share,
making us the largest brand of the mid-priced freshly-made tea store market in these cities.
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We have successfully established our leading presence not only in second-tier and below
cities, but also in towns and townships, which are administrative areas typically located away
from downtown areas, across all city tiers. As of December 31, 2023, 38% of our stores were
located in towns and townships. The presence of our stores in towns and townships, both in
terms of absolute store count and in terms of the percentage within our total store count as of
December 31, 2023, is significantly higher than those of the other top five mid-priced
freshly-made tea store brands in China, attesting to our strong capability to reach these
markets. This percentage grew to 40% as of September 30, 2024.
We believe that second-tier and below cities and towns and townships represent large
untapped markets with significant potential. In terms of second-tier and below cities, in 2023,
there were approximately 122 mid-priced freshly-made tea stores for every million people in
second-tier and below cities, while there were approximately 214 mid-priced freshly-made tea
stores for every million people in first-tier and new first-tier cities. The GMV of mid-priced
freshly-made tea stores in second-tier and below cities is expected to grow from RMB84.0
billion in 2024 to RMB189.0 billion in 2028, representing a CAGR of 22.5%. This growth is
expected to contribute to 70.4% of the expansion of China’s mid-priced freshly-made tea store
market in the same period in terms of GMV . In terms of towns and townships, according to the
Chinese population census conducted in 2020, approximately 840 million individuals resided
in towns and townships, which constituted nearly 60% of the population nationwide. For
details, see “Industry Overview — China’s Mid-priced Freshly-made Tea Store Market —
Geographical Distribution of Mid-priced Freshly-made Tea Stores.” Not only have we
established a leading presence in second-tier and below cities and in towns and townships, our
stores have had strong performance in these areas. In 2023 and the nine months ended
September 30, 2024, our per-store GMV was RMB2.3 million and RMB1.7 million in
fourth-tier and below cities, respectively, and RMB2.4 million and RMB1.8 million in towns
and townships, respectively.
We have steadily expanded our store network. The following table sets forth movement
in the number of our stores for the periods indicated. Reasons for our store closures during the
periods include (i) store location upgrades, usually when the stores’ surrounding commercial
zones experience declines in popularity and consumer traffic, (ii) termination of property lease
agreements, or (iii) termination of franchisee relationships, among others.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Store count at the beginning
of the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,091 5,694 6,669 9,001
Stores opened during
the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,808 1,317 2,597 1,218
Stores closed during
the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118205 342 265 (1) 441(2)
Store count at the end of
the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,694 6,669 9,001 9,778
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Notes:
(1) The number of stores closed in 2023 is less than the number of franchisees terminated in the same period,
primarily because for 367 franchisees terminated in 2023, their stores were taken up by other franchisees for
continuous operation and thus not considered to be closed in this period.
(2) The number of stores closed in the nine months ended September 30, 2024 is less than the number of
franchisees terminated in the same period, primarily because for 445 franchisees terminated in the nine months
ended September 30, 2024, their stores were taken up by other franchisees for continuous operation and thus
not considered to be closed in this period.
For the nine months ended September 30, 2024, we opened new stores at a slower pace
than we did in 2023 and closed more stores than we did in 2023, primarily because (i) the
freshly-made tea store market experienced a slowdown in growth, and (ii) there was increased
competition within the industry, with some players launching low-priced products. In response
to these changes, we adjusted our business strategy to focus on improving the operating
efficiency and business performance of our existing stores, while slowing down the pace of
new store openings. In particular, (i) we promoted the sale of coffee machines to existing
franchisees (including offering flexible payment terms for the machines) to help our stores
diversify their product offerings and increase overall GMV; (ii) we increased our spending on
promotional activities to build brand awareness; (iii) we enhanced our standards during store
inspections with respect to the quality of beverages made on-site; and (iv) we placed greater
importance on expected store performance when evaluating new store openings. In addition, a
greater number of stores were closed in the nine months ended September 30, 2024, as (i) some
of our per-store operating metrics experienced decreases during this period and more
franchisees decided to close their stores and (ii) for certain stores that fail to meet our operating
standards and/or are located in sites we deem to be less ideal, we proactively discussed with
the relevant franchisees and reached mutual agreements to close the relevant stores.
Our Store Performance
The following table sets forth certain key performance indicators of our stores:
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
Total GMV (RMB in thousands) /H1118/H1118/H1118/H111810,593,182.6 14,004,430.4 19,213,723.3 13,792,517.5 16,607,526.0
Per-store GMV (RMB in thousands) /H1118/H1118 2,189.2 2,262.8 2,466.4 1,857.6 1,776.3
Per-store daily GMV (RMB in
thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186.0 6.2 6.8 6.8 6.5
Total number of cups sold
(in thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118680,583.3 870,131.3 1,184,648.7 847,707.5 989,536.7
Per-store number of cups sold
(in thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118140.6 140.6 152.1 114.2 105.8
Per-store daily number of cups sold /H1118/H1118 385 385 417 417 386
Total number of orders (in thousands) /H1118 397,816.6 500,215.6 690,665.8 489,673.6 599,801.7
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For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
Average GMV per order (RMB) /H1118/H1118/H1118/H111826.6 28.0 27.8 28.2 27.7
Average number of orders per store
per day /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118225 221 243 241 234
Average store equipment expenditure
per newly opened franchised store
(RMB in thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111895.2 100.8 109.2 110.3 110.8
Average daily GMV per newly opened
franchised store (RMB in
thousands) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185.3 5.3 5.8 5.8 5.2
Our GMV and number of cups sold have been generally increasing during the Track
Record Period. However, when calculating per-store daily GMV and per-store daily number of
cups sold, we use the number of days that our stores could be open for business as the
denominator, which is measured by the number of days from (i) the latter of a store’s launch
day and the first day of the period, to (ii) the earlier of a store’s closure day and the last day
of the period. This number is usually larger than the actual number of days that our stores are
open for business. In 2022, due to the impact of COVID-19, the gap between the above two
numbers was larger than usual, which contributed to the lack of growth in our per-store daily
GMV and per-store daily number of cups sold from 2021 to 2022.
For the nine months ended September 30, 2024, as a result of the general industry
slowdown and increased competition as discussed above, we recorded smaller per-store GMV ,
per-store daily GMV , per-store number of cups sold, per-store daily number of cups sold,
average GMV per order, average number of orders per store per day, and average daily GMV
per newly opened franchised store as compared to the same period in 2023. Nonetheless, as we
continued our store network expansion and opened a number of new stores, we continued to
grow our total GMV and total number of cups sold. As confirmed by our industry consultant,
the decrease rate of our per-store GMV is also less than the majority of the other top ten
freshly-made tea store brands. Our Directors are of the view that our business will inevitably
be affected by the general macroeconomic conditions in China and the freshly-made tea store
market in general. In the medium and long term, with the expected growth of China’s economy
and consumer spending as well as the projected expansion of the freshly-made tea store market,
we believe we can capture opportunities in the industry as one of the leading players and regain
growth momentum in various operating metrics.
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The following table sets forth the per-store daily GMV of our stores by years of opening
during the Track Record Period.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
Per-store daily GMV (RMB in
thousands)
Stores opened in 2021 and before /H1118/H1118 6.0 6.3 7.1 7.0 7.1
Stores opened in 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 5.3 6.5 6.4 6.6
Stores opened in 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 5.8 5.8 5.6
In 2023, our franchisees’ per-store operating profit reached RMB376,000 and
franchisees’ per-store operating profit margin reached 20.2%, whereas the estimated per-store
operating profit margin is generally in the low teens in the mid-priced freshly-made tea store
market in China during the same period. In particular, in fourth-tier and below cities, our
franchisees’ per-store operating profit was RMB386 thousand in 2023, bringing significant
income to our franchisees’ household. Among our stores existing as of December 31, 2023 that
had been launched prior to the first day of 2023, 99%, or 6,335 stores, had positive per store
operating profit in 2023. Among our stores existing as of September 30, 2024 that had been
launched on or after the first day of 2023, 98%, or 3,550 stores, had accomplished breakeven
(as measured by recording positive operating profit in a consecutive 30-day period). The
average breakeven period for these stores was 0.25 months, assuming each 30 calendar days
after a store is launched to be one month. For the purpose of calculating this breakeven period,
stores that accomplish breakeven within the first month are taken to accomplish breakeven in
month 0.
The following table sets forth certain operating data of existing franchised stores and
newly opened franchised stores for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
Total GMV (RMB in thousands)
Existing franchised stores /H1118/H1118/H1118/H1118/H1118/H1118/H11189,002,135.0 12,719,148.9 16,558,989.1 12,394,771.6 15,807,029.0
Newly opened franchised stores /H1118/H1118/H11181,578,536.6 1,270,869.8 2,637,523.8 1,384,578.6 784,646.8
Total number of cups sold (in
thousands)
Existing franchised stores /H1118/H1118/H1118/H1118/H1118/H1118/H1118582,045.5 791,016.1 1,019,474.9 761,088.9 940,786.7
Newly opened franchised stores /H1118/H1118/H111897,717.1 78,196.5 164,080.2 85,783.1 47,794.2
Per-store GMV (RMB in thousands)
Existing franchised stores /H1118/H1118/H1118/H1118/H1118/H1118/H11182,244.4 2,300.8 2,534.7 1,893.8 1,798.8
Newly opened franchised stores /H1118/H1118/H11181,917.9 1,939.8 2,107.7 1,584.0 1,412.1
Per-store daily GMV (RMB in
thousands)
Existing franchised stores /H1118/H1118/H1118/H1118/H1118/H1118/H11186.1 6.3 6.9 6.9 6.6
Newly opened franchised stores /H1118/H1118/H1118 5.3 5.3 5.8 5.8 5.2
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The following table sets forth a breakdown of our revenue from existing franchised stores
and newly opened franchised stores in an absolute amount and as a percentage of total revenue
for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
Existing franchised stores /H1118 3,454,056 78.8 4,766,111 85.8 6,064,024 79.1 4,572,467 82.1 5,802,278 90.0
Newly opened franchised
stores /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118838,933 19.1 674,286 12.1 1,384,921 18.0 849,898 15.3 463,139 7.2
Total franchised stores /H1118/H11184,292,989 97.9 5,440,397 97.9 7,448,945 97.1 5,422,365 97.4 6,265,417 97.2
Corporate customers /H1118/H1118/H1118/H111885,574 2.0 109,038 1.9 214,412 2.8 139,049 2.5 165,014 2.6
Self-operated stores /H1118/H1118/H1118/H11185,338 0.1 9,787 0.2 12,308 0.1 9,468 0.1 10,857 0.2
Total Revenue /H1118/H1118/H1118/H1118/H1118/H11184,383,901 100.0 5,559,222 100.0 7,675,665 100.0 5,570,882 100.0 6,441,288 100.0
The following table sets forth a breakdown of our gross profit and gross profit margin of
the existing franchised stores and newly opened franchised stores for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
Existing franchised
stores /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,045,539 30.3 1,350,706 28.3 1,914,155 31.6 1,413,734 30.9 1,782,073 30.7
Newly opened
franchised stores /H1118/H1118/H1118255,249 30.4 200,648 29.8 468,277 33.8 290,367 34.2 156,036 33.7
Total franchised stores /H11181,300,788 30.3 1,551,354 28.5 2,382,432 32.0 1,704,101 31.4 1,938,109 30.9
Corporate customers /H1118/H1118 11,055 12.9 9,757 8.9 18,596 8.7 20,435 14.7 24,722 15.0
Self-operated stores (1) /H1118/H1118 1,862 34.9 1,821 18.6 2,303 18.7 1,877 19.8 1,551 14.3
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,313,705 30.0 1,562,932 28.1 2,403,331 31.3 1,726,413 31.0 1,964,382 30.5
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Note:
(1) In 2022, our self-operated stores hired a higher number of staff to provide more training to staffs from
franchised stores. Between December 31, 2021 and 2022, the number of staff at our self-operated stores
increased from 42 to 59. Cost associated with these staff are recorded under cost of sales, which led to the
decrease in gross profit margin from 2021 to 2022 and also explains why the gross profit margin for
self-operated stores is consistently lower than that of franchised stores in 2022, 2023 and the nine months
ended September 30, 2024.
In the nine months ended September 30, 2024, gross profit margin for self-operated stores experienced a
further decrease, primarily because (i) during a special IP collaboration event, we opened a self-operated
pop-up store in Shanghai, which recorded relatively low gross profit margin, and (ii) our self-operated stores
engaged in more promotional activities that lowered their gross profit margin.
Store Network Expansion
We adopt a regional densification strategy to build up the density and scale of our store
network. Under the guide of this strategy, we go through meticulous planning processes for
new store openings.
Our Regional Densification Strategy
We have adopted a unique regional densification strategy for our store expansion, under
which we strategically select target provinces for expansion and prioritize resources to focus
on building store networks with high geographical density with coverage across all city tiers
in such provinces. By building these dense store networks, we are able to rapidly bolster our
brand recognition and market share in the target provinces. This strategy also enables us to
focus our management team’s effort and enhance efficiency through centralized franchisee
management. We are able to coordinate our store network expansion with the development of
our warehousing and logistics infrastructure, improving our warehousing and logistics
efficiency, which in turn supports further expansion of our store network. With our advanced
and efficient supply chain capabilities, we are able to successfully penetrate second-tier and
below cities, and towns and townships of all tiers of cities, both of which are hard to reach for
many other brands. By capitalizing on our accumulated operational expertise and leveraging
the natural spread of our brand reputation among consumers and franchisees, we have
consistently replicated our regional densification strategy to neighboring provinces.
We have been executing our regional densification strategy since the early days of our
business and have built almost all aspects of our operations towards its implementation. To
achieve a desired level of density, we have opened stores not only in downtown areas of large
cities but also in less developed areas in lower-tier cities. We have tailored our product
offerings to cater to consumers of all types, curating a range of diverse product offerings with
a balance of classic and innovative items at various price points. Moreover, we have steadily
built up our supply chain infrastructure factoring in the location of our expected store openings,
ensuring optimal infrastructure distribution to deliver stable supply of fresh, high-quality
ingredients at competitive prices. For the three years ended December 31, 2023, the logistics
cost for delivery from our warehouses to stores was less than 1% of our total GMV on average,
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demonstrating how the regional densification strategy enhances our warehousing and logistics
efficiency. The improvements can also be seen by comparing our own warehouses. As of
September 30, 2024, we operated a total of 22 warehouses. For the nine months ended
September 30, 2024, among these warehouses, 13 warehouses on average served fewer than
500 stores per month during the operation period, and nine warehouses on average served more
than 500 stores per month during the operation period. In the nine months ended September 30,
2024, on a per-store and monthly basis, the warehousing and logistics cost for stores covered
by such nine warehouses was 9% lower than that for stores covered by such 13 warehouses.
These cost savings are primarily due to the density of our stores and their proximity to our
warehouses. As of September 30, 2024, approximately 76% of our stores are located within 150
kilometers of one of our warehouses. As a result, we can also provide cold-chain supply
delivery to approximately 97% of our stores every two days upon request as of September 30,
2024. In comparison, other China’s freshly-made tea store brands generally provide delivery
to stores every four days and often without the support of cold-chain supply delivery. Among
the top 10 freshly-made tea store brands in China in terms of GMV in 2023, we are the only
brand capable of frequent deliveries every two days of short-shelf-life fresh fruits and fresh
milk to stores in lower-tier cities. Substantially all beverages on our menu are made from
short-shelf-life fresh fruits, tea leaves and/or fresh milk that are stored and distributed through
our cold-chain warehousing and logistics infrastructure, which, our Directors are of the view
that, is one of the largest in the industry as of December 31, 2023.
Our Accomplishments Under the Strategy
The first “ Good me ” store was opened in Zhejiang, China in 2010. Since then we have
steadily built up our store network through our regional densification strategy. As of
September 30, 2024, we had presence in 17 provinces in China. In particular, we have been
building provincewide store networks with more than 500 stores, which indicates a critical
mass to enjoy the benefits of regional densification. We first reached a critical mass in
Zhejiang, where we continued to grow and now have over 2,000 stores. Our store network in
Fujian reached a critical mass in 2019 and store network in Jiangxi reached a critical mass in
2020. Subsequently, our store networks in Guangdong, Hubei, Jiangsu, Hunan and Anhui also
achieved a critical mass. As of September 30, 2024, we had established provincewide networks
with a critical mass in eight provinces in China, which collectively accounted for 87% and 84%
of our GMV in 2023 and the nine months ended September 30, 2024, respectively. As we
continually accumulated experiences in our strategy’s execution, our provincewide store
networks achieved a critical mass with an accelerating pace. We also continue to densify our
store network in provinces where we have reached a critical mass, as we believe there is still
significant room for growth.
Riding on our unmatched success in the eight provinces with a critical mass, we have
become China’s second largest freshly-made tea store brand across all price ranges. We
achieved the highest market share in the freshly-made tea store markets in terms of GMV
across all price ranges in each of Zhejiang, Fujian and Jiangxi, and in each prefecture-level
area of these three provinces in 2023.
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As we continually densified our store networks in various provinces, we had positive
same-store GMV growth during each of the three years ended December 31, 2023. For the nine
months ended September 30, 2024, our same-store GMV decreased by 0.7% due to (i) a general
industry slowdown and (ii) intensifying market competition, with some players launching
low-priced products. Nonetheless, we continued to grow our total GMV by 20.4% as compared
to the same period in 2023. The following table sets forth our store count and same-store GMV
growth in the periods indicated, grouped by the time period that we achieved a critical mass
in these provinces.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Zhejiang (1)
Store count at year/period end /H1118 1,725 1,868 2,054 2,117
Same-store GMV growth (%) /H1118/H1118 15.2 3.3 5.1 (0.8)
Fujian and Jiangxi (1)
Store count at year/period end /H1118 1,590 1,641 1,914 2,039
Same-store GMV growth (%) /H1118/H1118 7.4 3.2 12.0 1.1
Other five provinces with a
critical mass (1)
Store count at year/period end /H1118 1,689 2,349 3,317 3,643
Same-store GMV growth (%) /H1118/H1118 14.9 4.1 11.6 (1.4)
Nationwide
Store count at year/period end /H1118 5,694 6,669 9,001 9,778
Same-store GMV growth (%) /H1118/H1118 12.0 2.8 9.4 (0.7)
Note:
(1) Zhejiang’s store network reached a critical mass the earliest. The store networks in Fujian and Jiangxi reached
a critical mass in 2019 and 2020. The store networks in other five provinces reached a critical mass between
2021 and 2023.
Case Study: Our Store Network in Zhejiang
Our store network in Zhejiang is an example of the effectiveness of our regional
densification strategy. We began our journey in Zhejiang. It is the first province where we
reached a critical mass. We also had the largest number of stores in Zhejiang among the
provinces where we had presence as of September 30, 2024.
As of September 30, 2024, there were 2,117 “ Good me ” stores in Zhejiang distributed
across all city tiers. The store network included 710 in new first-tier cities, 1,153 in second-tier
cities, 108 in third-tier cities and 146 in fourth-tier and below cities. The store network
included 681 stores located in towns and townships.
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With our dense store network, we enjoy significant brand recognition leading to
outstanding store performances. In 2023, in terms of GMV , we had over 30% market share in
the overall freshly-made tea store market of Zhejiang. We have also secured the highest market
share across each prefecture-level area in the province. As we continually increased our store
count in Zhejiang, we maintained positive period-over-period same-store GMV growth during
each of the three years ended December 31, 2023.
Our dense store distribution in Zhejiang facilitates efficient and cost-effective cold-chain
supply delivery. As of September 30, 2024, we had 3 warehouses and 62 freight vehicles with
cold-chain capabilities supporting the 2,117 stores in Zhejiang, with 94% of the stores located
within 150 kilometers of one of our warehouses.
As our franchised stores have experienced consistent profitability in Zhejiang over the
years, many of the franchisees in Zhejiang are keen to open more stores with us and join our
business expansions towards nearby provinces. They also frequently refer us to their contacts
in adjacent provinces, thus greatly enriching our pool of prospective franchisees.
Our Path Forward
Looking ahead, we believe our expansion strategy positions us well for sustained success.
We expect to deepen our footprint in existing provinces while exploring potential opportunities
in nearby ones, leveraging our accumulated operational expertise and the natural extension of
our brand reputation.
We expect to continue strengthening our presence in the eight provinces where we had
reached a critical mass and in other provinces where we had yet to reach a critical mass. We
have been experiencing rapid growth in all provinces where we operate. In Guangdong, a
province where we had reached a critical mass, our store count increased rapidly from 690 to
975 between December 31, 2022 and 2023, representing a growth rate of 41.3%, and further
increased to 1,075 as of September 30, 2024. We achieved same-store GMV growth of 16.4%
in 2023, and became one of the largest freshly-made tea store brands in Guangdong in terms
of GMV in 2023. In Guangxi, a more recently entered province, we established the first “ Good
me” store in December 2022 and have become one of the largest freshly-made tea store brands
there in terms of monthly GMV since July 2023. Furthermore, there were still 17 provinces in
China where we had yet to have presence as of September 30, 2024. We choose target provinces
each year based on a number of factors including market momentum, competitive landscape
and other strategic considerations. Capitalizing on the organic growth and word-of-mouth
referrals facilitated by our franchisees and consumers, we will strategically venture into
provinces that are adjacent to the provinces that we had presence.
Store Location Selection Process
Every year, within our targeted provinces, we prioritize specific cities for store openings.
We evaluate a number of factors including: (i) population density and level of economic
development of the area; (ii) capacity of our warehousing and logistics infrastructure within or
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nearby the area to the extent that such capacity may be leveraged; (iii) the density of our store
network both within and adjacent to the area, since our reputation among consumers and
franchisees in one place often drives the organic growth of our store network in nearby regions;
and (iv) the preferences of our franchisees and prospective franchisees.
When we enter a new city, we typically leverage our supply chain capabilities in nearby
cities in the beginning. We also assign dedicated teams to conduct on-site surveys to develop
our database before engaging with franchisees. As we build up our presence in that city, we
concurrently invest in our supply chain capabilities within that city to support our stores. In
addition, they may be leveraged to support our expansion into nearby cities, leading to
sustainable growth.
Within the targeted cities, we work closely with our franchisees on site selection, helping
them identify sites with the appropriate location and size. We had developed a database of over
22,000 store sites as of September 30, 2024 based on our insights gained from years of local
operation experience and third-party information, enabling us to make recommendations to our
franchisees based on their expertise and preferences, significantly enhancing site selection
efficacy and precision. For details on how we collaborate with our franchisees on site selection
and other steps of our franchisee onboarding process, see “— Our Franchisees — Our
Franchisee Selection Process.” Our store site database covered a large number of cities,
including their towns and townships, and tracks multifaceted parameters including the
potential sites’ size, rental cost, nearby pedestrian traffic, features of surrounding environment.
We can utilize these parameters to estimate the GMV and profitability of stores to be opened
at the potential store sites. After we complete site selection recommendations, we also track the
performance of relevant stores at the recommended locations to continually refine our site
recommendation capabilities. Due to the density of our stores in targeted cities, we can
accumulate significant insight into local circumstances, further enhancing the efficacy of our
site recommendations at a local level. In case that the franchised stores experience early
termination of their leases, we also help them identify new locations following similar
procedures.
The benefits of our regional densification strategy, such as better brand recognition and
our scientific planning for store openings, also allow us to mitigate the potential
cannibalization effect, and we have managed to achieve positive same-store GMV growth
during each of the three years ended December 31, 2023.
In particular, we mitigate the potential of cannibalization among our stores or among our
stores and our competitors’ stores through pre-emptive planning at the store location selection
stage, which takes into account nearby pedestrian traffic, consumer profiles and purchasing
power, and the number of nearby “ Good me ” and competitor stores. Many stores in the
freshly-made tea store market are in close proximity to each other, resulting in heightened
competition. At the store location selection stage, we generally consider the distance between
our stores (including our franchised stores and company-operated stores) and the presences of
our competitors’ stores, as one part of a holistic evaluation. While the presence of our
competitors’ stores is one of the factors that we use to estimate the demand of our products in
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the neighborhood, we neither establish a protective distance between our potential new store
and the competitors’ stores, nor consider the distance between our potential new store and the
competitors’ stores when determining the store sites. Under our franchise agreement, we
undertake not to open new franchised stores that are within certain distance (typically being 50
meters) of existing stores without the existing franchisees’ consent. However, even in the city
with the highest density of “ Good me ” stores, the average distance among these stores still
significantly exceeds the minimum distance provided in the franchise agreements.
Despite our anti-cannibalization measures, we may not effectively limit cannibalization
among our stores or between our stores and our competitors’ stores in areas where there are
limited consumer demand and excess supply of products similar to ours. To manage the
limitations of our measures, we continuously track our stores’ key performance indicators to
allow for timely guidance and intervention. We are also dedicated to enhancing the competitive
edge of our stores and beverages so that they may out-compete our competitors’ stores. For
risks associated with potential cannibalization, see “Risk Factors — Risks Relating to Our
Business and Industry — We may not be able to maintain or increase the sales and profitability
of our stores.” During the Track Record Period, our anti-cannibalization measures have not had
any material negative impact on our financial performance.
During the Track Record Period, as we expanded into new regional markets, we engaged
a total of 19 external consultants who were familiar with local conditions and assisted with our
site selection process in new markets. As we have developed greater site selection capabilities
internally, we gradually reduced our collaboration with external consultants. As of the Latest
Practicable Date, we did not have any external consultants and had no plans to engage new
external consultants going forward. Under our agreements with these external consultants, they
are typically paid a base monthly salary and bonus payments related to their site
recommendations. The agreements typically last for one year and automatically terminate upon
expiration unless both parties reach an agreement to renew at least one month in advance. For
risks associated with these external consultants who had previously been engaged by us, see
“Risk Factors — Risks Relating to Our Business and Industry — Any illegal actions or
misconduct, alleged illegal actions or misconduct, or any failure or alleged failure by
employees, franchisees, staff in the franchised stores, third-party suppliers or other business
partners to provide satisfactory products or services could materially and adversely affect our
business, reputation, financial condition and results of operations. Additionally, we may not be
able to secure adequate compensation from these parties for the damages they cause.”
Features of Our Stores
Our stores adopt a uniform design style to ensure a consistent consumer experience and
bolster our brand image. In addition, some of our stores adopt more tailored store decorations
to suit their local surroundings. Our stores’ interior design aims to convey a warm and relaxing
ambiance. We believe the design of our stores plays a pivotal role in establishing brand
recognition and offering a welcoming space for our consumers. To ensure our stores’ interior
decorations meet our standard, we designate furnishing and decorating service providers for
our franchised stores.
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As our stores are located throughout all city tiers and may be located in towns and
townships, our stores’ format varies in size and internal set-up, among others, depending on
their locations. Our stores mainly comprise standard stores with a gross floor area of around
30 to 50 square meters and large stores with a gross floor area of around 70 to 80 square meters.
Our large stores typically feature spacious layouts, tables and seats for dine-in experiences, and
display of branded merchandises, whereas the standard stores do not have tables and seats, and
are more limited in space yet maintain the warm ambience that our stores share. As of
September 30, 2024, 5,011 of our 9,778 stores, or approximately 51%, had dine-in areas.
The following image exemplifies our store formats and the various decorations of our
stores.
Store Formats with Uniform Design Style
Standard store
 Large store
Tailored Store Decorations
Order Placement at Our Stores
Our stores offer consumers various convenient methods for order placement. Consumers
can directly place orders at our store counters, or use our in-house developed mini programs
to order pick-ups. We generally encourage our consumers to order through our mini programs,
as it is more convenient and efficient for them and facilitates ongoing consumer engagement
to retain them as members. Regardless of their order placement channels, our store-level order
processing module promptly sends order information to our in-store kitchens for efficient
fulfillment. The order processing module is able to track our order fulfillment status. For
consumers that placed orders through our mini programs, the module can send notifications
once their orders are ready for pick-up. Our store staff follow our specific protocols to provide
high quality service when serving our consumers. After we fulfill consumer orders, we also
solicit consumer feedback via our mini programs to continually refine our product and service
quality.
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Many of our stores also offer beverage delivery services in collaboration with third-party
delivery platforms. Our consumers can order deliveries using our in-house developed mini
programs or through third-party food delivery platforms with which we collaborate. Our
delivery service to consumers increases our stores’ service radius and expands the potential
consumer base. Approximately 241.5 million, 373.9 million, 510.8 million and 418.3 million
cups were sold through delivery services in 2021, 2022, 2023 and the nine months ended
September 30, 2024, respectively, representing 35.5%, 43.0%, 43.1% and 42.3% of the total
cups sold in these periods, respectively.
OUR FRANCHISEES
We operate our store network primarily in collaboration with our franchisees. Leveraging
our franchisees’ local knowledge, including their insights into local consumer preferences, our
franchise model drives efficient and high-quality growth. We aim to foster a mutually
beneficial relationship with our franchisees, working closely together to deliver high-quality
products and services to our consumers. Beginning with franchisee selections, we adopt a
rigorous process to ensure we onboard individuals who resonate with our longtermist
philosophy. When opening new stores, we offer various supports, such as site selection and
comprehensive trainings, to ease the process. For day-to-day operations, we help optimize
franchisee profitability by centrally sourcing and supplying quality ingredients at competitive
prices and bearing a majority of the warehousing and logistics expenses to reduce their cost.
Overview of Our Franchisees
As of December 31, 2021, 2022 and 2023 and September 30, 2024, we collaborated with
2,381, 2,949, 4,614 and 4,842 franchisees, respectively.
During the Track Record Period, the number of our franchisees steadily increased as we
expanded our operation. The following table sets forth movement in the number of our
franchisees for the periods indicated.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Number of franchisees at the
beginning of the year/period /H1118/H1118 1,987 2,381 2,949 4,614
Number of franchisees enrolled
during the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118551 781 2,085 (1) 871
Number of franchisees terminated
during the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118157 213 420 643
Number of franchisees at the
end of the year/period /H1118/H1118/H1118/H1118/H1118/H11182,381 2,949 4,614 4,842
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Note:
(1) In 2023, we enrolled a large number of new franchisees primarily because (i) we opened 2,597 new stores in
2023, as compared with 1,317 new stores in 2022, and (ii) we expanded our operation in regions where we had
limited presence, such as Shandong, Guangxi and Guizhou, and opened 730 new stores in these three regions.
Stores in these regions are typically opened by newly-enrolled franchisees. For reference, 39% of all new
stores in 2022 were opened by newly-enrolled franchisees, whereas 82% of new stores in Shandong, Guangxi
and Guizhou in 2023 were opened by newly-enrolled franchisees.
We seek to foster long-term and robust relationships with our franchisees. Reasons for the
termination of our relationship with franchisees include, among others, mutual agreement to
terminate after discussions, breaches of franchise agreements, our decision not to renew our
agreements with certain franchises based on our evaluation of their performance and
suitability, and our franchisees’ decisions to pursue different career paths after our agreements
expire. We generally seek to reach mutual agreement before terminating any franchise
agreements, including when certain franchised stores do not meet our operating standards,
although in case of material violations we are contractually entitled to terminate the agreement.
In 2021, 2022, 2023 and the nine months ended September 30, 2024, 72%, 73%, 83% and 92%
of our terminated franchisee relationships were due to mutual agreement to terminate; 14%,
22%, 12% and 4% were due to breaches of franchise agreements; and 14%, 5%, 5% and 4%
were due to non-renewal of the franchise agreements. In 2021, 2022, 2023 and the nine months
ended September 30, 2024, our franchisee turnover rate was 6.2%, 6.7%, 8.3% and 11.7%,
respectively, where franchisee turnover rate is calculated as the number of franchisees
terminated in a given year divided by the sum of the number of franchisees at the beginning
of the year and the number of franchisees enrolled in the year. Our franchisee turnover rate
slightly increased during these years as (i) there is generally a higher turnover rate among
newly-enrolled franchisees, and we had an increasing number of newly-enrolled franchisees
from 2021 to 2023, and (ii) our industry experienced slowdown and increased competition in
the nine months ended September 30, 2024. In 2021, 2022, 2023 and the nine months ended
September 30, 2024, franchisees terminated within the period contributed a total GMV of
RMB161.0 million, RMB215.1 million, RMB671.3 million and RMB584.8 million,
respectively, and franchisees newly-enrolled within the period contributed a total GMV of
RMB422.9 million, RMB618.0 million, RMB1,949.6 million and RMB487.9 million,
respectively. After experiencing the benefits of our comprehensive support mechanisms, many
of our franchisees are keen on managing additional stores with us. As of September 30, 2024,
among the franchisees that had operated “ Good me ” stores for over two years, each on average
operated 2.9 stores and 71% operated two or more franchised stores.
During the Track Record Period, we were not subject to any material risk of store
concentration among a small number of franchisees. For the years ended December 31, 2021,
2022 and 2023 and the nine months ended September 30, 2024, our largest franchisee customer
in each period accounted for less than 1% of our total revenue, respectively.
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Products and Services to Our Franchisees
During the Track Record Period, our franchisees were our primary customers, and we
generated substantially all of our revenue from them. We offer our franchisees a range of
products and services, including supplying goods and equipment, providing various franchise
management services that encompass multifaceted operational support, and conducting
comprehensive and regular training.
Sales of products. We provide our franchisees with fresh and high-quality goods primarily
including ingredients such as fresh fruits, fruit juices, tea leaves and dairy products, and
packaging materials. We also supply equipment including our connected appliances, such as tea
brewers, refrigerators, freezers, water purifiers and other electronic appliances. Guided by our
commitment to fostering long-term, mutually beneficial relationships with our franchisees and
leveraging our robust supply chain, we price our products competitively, helping our
franchisees achieve a healthy profit margin. Using Men Dian Bao (ᘒ), or the MDB
system, our proprietary store operating system, our franchisees can conveniently place supply
orders with us. Their order information is transmitted to our internal technology modules for
warehousing and transport management, enabling us to efficiently fulfill our franchisee orders.
Our swift supply order fulfillment enables our stores to serve beverages with ingredients of
short shelf-life. For details of our supply chain and logistics capabilities, see “— Supply Chain
Management.” In practice, we will not deliver supplies to franchisees that have not made
payment in full for any prior supply order.
Multifaceted operational support. We provide a variety of operational support to our
franchisees, ensuring consistent operation across all stores and enabling them to deliver
superior service to consumers. For new stores, we assist in identifying suitable locations and
connect them with designated furnishing and decorating service providers to ensure interiors
align with our branding and quality standard. We equip our franchisees with centrally sourced
automated appliances to standardize service quality and reduce labor cost. For example, we
procure, sell to our stores and require them to use automated tea brewers, water purifiers, grape
processers and lemon processers, among others. Our central system can remotely monitor our
connected appliances’ operating parameters, track their operating status and provide automatic
alerts when it identifies data anomaly. We provide easy-to-follow standardized operating
procedures, such as carefully crafted beverage-making recipes, enabling our stores to
efficiently serve quality products to consumers. During regular operations, our dedicated store
supervisors routinely visit to assist franchisees in refining their management and operational
practices. We work with franchisees to formulate effective marketing strategies both online and
offline, and help them deliver personalized marketing campaigns to our members. Furthermore,
we offer our suite of integrated proprietary technology systems, such as the MDB system, to
streamline their operations, enhance efficiency, and maintain our quality standards.
Comprehensive and regular trainings. We have implemented a comprehensive franchisee
training system. As of September 30, 2024, we operated two training centers and designated
approximately 140 stores for on-site training. We had a team of over 140 employees dedicated
to the training and evaluation of our franchisees. We have curated our proprietary training
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material. We require our franchisees and their employees to attend mandatory training sessions
prior to opening their stores, which cover operations, management, product information,
appliance usage, and our technological systems. We also mandate additional training before the
launch of new products. Franchisees must complete the prescribed trainings, typically in the
form of video tutorials accessible on the MDB system, and pass relevant evaluations before
serving our new products to consumers. During the Track Record Period, we had provided
offline training to over 29,000 individuals who were either our franchisees or their employees.
In 2023, our online training sessions, such as video tutorial for newly launched beverages, was
completed for approximately 2.3 million times.
Pricing for Our Products and Services to Franchisees
Guided by our commitment to fostering long-term, mutually beneficial relationships with
franchisees, we price our products and services to franchisees with a view towards helping
them achieve a healthy profit margin. We set prices of the products and services for our
franchisees considering a number of factors such as procurement and processing cost,
warehousing and logistics cost, and the pricing of comparable products in the market. During
the Track Record Period, there are no material differences in terms of the franchise agreements
among our franchisees, or the selling prices of our products sold to franchisees. The prices of
goods, equipment and services we provide are standardized for all franchised stores, and we
charge the same for all franchised stores regardless of their locations.
Pursuant to our franchise agreements, our franchisees typically pay us an initial franchise
fee of RMB98,800, covering licensing, marketing advisory and operation support services of
RMB73,800 (recorded under “income from initial franchise fees”), and training services of
RMB25,000 (recorded under “income from the provision of training and other services”). In
practice, we offer flexible payment terms to mitigate uncertainties faced by new franchisees.
On a monthly basis, the franchisees also pay us continuing support services fees, which consist
of two parts: a fixed amount of RMB500 per store, and a floating amount that equals to 15%
to 20% of their stores’ total procurement amounts. In addition, our franchisees may incur
additional expenses as we provide additional training or marketing support from time to time.
For accounting purposes, we categorize revenues generated from our products and
services to franchisees under (i) sales of goods and equipment or (ii) provision of franchise
management services, which includes “income from initial franchise fees,” “income from
continuing support services fees,” and “income from the provision of training and other
services.” For details, see “Financial Information — Critical Accounting Policies and
Estimates — Material Accounting Policy Information — Revenue Recognition.” The initial
franchise fee of RMB98,800 is mostly recorded under “income from initial franchise fees,” but
its training component is recorded under “income from the provision of training and other
services.” The monthly continuing support services fees are recorded under “income from
continuing support services fees.” And the additional expenses for training or marketing
support are recorded under “income from the provision of training and other services.”
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When a newly onboarded franchisee opens the first store with us, he or she can expect to
incur a total upfront investment up to over RMB330,000 (excluding rent) that consists of the
following expenses: a safety deposit of RMB10,000, store decoration fees of RMB100,000,
other one-off service fees (including training and marketing) of RMB33,000 (recorded under
“income from the provision of training and other services”), initial franchise services fees
(including licensing, marketing advisory and operation support) of RMB73,800 (recorded
under “income from initial franchise fees”), and initial equipment expenses of approximately
RMB100,000 and initial ingredient expenses of approximately RMB20,000 to RMB40,000
(recorded under “sales of goods and equipment”).
Management of Our Franchisees
We provide a series of protocols covering all aspects of our franchised stores’ operations
to ensure that they deliver high quality products and services. We discuss with our franchisees
to formulate these protocols to ensure practicality. Beginning with our franchisee’s mandatory
pre-opening trainings, we clearly explain our protocols. We maintain active, frequent and
transparent communications with our franchisees, and candidly discuss where we see areas for
improvement to support their business endeavor.
We formulated a comprehensive suite of protocols for our franchisees, including
standardized beverage-making procedures and policies for store management and operation,
marketing, and compliance. We require franchisees to purchase all food ingredients, packaging
materials and connected appliances from us to ensure consistent quality of our beverages,
making us one of the very few companies in the industry that enforce such requirements. We
typically require franchisees to stay physically on site during set periods of store operations to
ensure optimal store management. Our proprietary policies for operation management set out
various specifics such as the required licenses and permits franchisees must obtain before
commencing operation, best practices for managers to improve store performance, best
practices for staff in terms of recipe execution and consumer service, how inventory should be
properly handled, and penalties for non-compliance.
We take a variety of approaches to monitor the business activities and daily operations of
our franchisees. To ensure compliance with our protocols, we require our franchised stores to
operate under the view of in-store cameras at all times, and arrange for store-specific
supervisors to visit regularly to review the store’s management and operation. Our information
technology system can automatically generate tailored routes and store specific checklists for
store inspections to improve efficiency. We continuously monitor our franchisees’ operations,
including their stores’ quality, service, adherence to our quality control and food safety
protocols, interior presentation (cleanness, hygiene issues, etc.), consumer feedback and
compliance status. As of September 30, 2024, we had a team of approximately 470 employees
dedicated to supervising and inspecting our franchisees’ store operation and management. In
addition, we leverage technologies to efficiently monitor our store operations. For example, to
ensure our stores do not use ingredients purchased from third parties, our system tracks the
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sales of our stores and checks if the amount of required ingredients to fulfill those sales is in
line with our stores’ actual orders for ingredients. In this way, the system automatically detects
anomalies, which help prompt further checks by our supervisors.
We also design protocols to incentivize our franchisees to take initiatives and improve
store performance. We encourage well-performing franchisees to open new stores. We also
have policies to deter non-compliance. We may terminate our relationship with franchisees that
are found to be in material violation of our operating standards. Those who consistently fail to
rectify operational inadequacies over a prolonged period will also face termination.
We listen to our franchisees and seek to address their feedback promptly. Being aware of
the challenges that small business owners face, we have a deep understanding of our
franchisees’ perspectives and needs. To promote transparent communication, the annual “ Good
me” nationwide franchisee conferences were held in the past 11 years consecutively. We are the
first brand to establish a franchisee committee in the market of freshly-made tea stores. Our
franchisee committee consists of representatives from various regions, and we encourage our
franchisee committee members to regularly provide feedback about our business. Owing to our
multifaceted support for and close relationship with our franchisees, our franchisees appreciate
our franchisee management capabilities and are willing to have long-term collaborations with
us.
When a franchised store suspends its operation due to non-compliance or other events, the
purchasing and operating functions for the store in the MDB system will be suspended. When
a franchised store is permanently closed, the decision goes through our internal closure
approval process. Upon process completion, we terminate the relevant franchisee’s access to
all related accounts and settle all outstanding receivables and payables. For related terms in the
franchise agreement, see “— Our Agreements with Franchisees.”
Our Franchisee Selection Process
We adopt a rigorous franchisee selection process. We carefully evaluate prospective
franchisees in order to identify capable applicants that are also good fits with our organization,
as we look to maintain long-term mutually-beneficial relationship with our franchisees. Our
ideal candidates are those who demonstrate a commitment to long-term efforts, are amenable
to our guidance, and are dedicated to refining their store management skills.
Our new franchisee onboarding process typically involves the following principal steps:
 Initial inquiry/application. We primarily rely on applications submitted through our
mini programs to identify potential franchisees, and have been able to organically
attract a large number of talented franchisees applicants thanks to our strong
store-level performance. Many of our prospective franchisees became interested in
joining us through seeing the performance of our stores first-hand or through
word-of-mouth referrals by our existing franchisees. During the Track Record
Period, we did not purchase any advertisement for franchisee recruitment, engage
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any marketing firm, or introduce any commission/bonus system for franchisee
referrals. To attract potential franchisees, we publicly announce the geographical
regions where we are expanding, and our franchisee development team holds
information sessions to introduce our franchise opportunities. Interested franchisee
applicants can find more information related to our franchisee opportunities on our
website and mini programs. They can then submit an application to us through our
mini programs. In the application, we require candidates to provide basic
information, where they would like to open a store, and prior work experiences. We
also encourage applicants to get in touch with us to discuss any questions they may
have.
 Preliminary screening, talent pool and interviews. We have a dedicated team that
conducts the first round of screening based on the information submitted by
franchisee applicants. We assess a number of factors such as the applicants’ past
experience and background. Those who pass the preliminary screening are placed
into our talent pool, and are usually invited for online or offline interviews shortly
thereafter. Through the interviews both the applicants and us get to learn more about
each other.
 Site selection at interested regions. After the interview, if both parties are interested
in further collaborations, we work with the applicants to identify appropriate sites
to open their stores. The applicants can propose their preferred store location, in
which case we can leverage our proprietary database of store locations to evaluate
their proposals and suggest alternatives. For those who do not have a specific store
location in mind, we leverage our database to make recommendations. In both cases,
we work closely with the applicants to identify appropriate locations based on their
preferences and our experience.
 Final review and entry into franchise agreement. After the applicants confirm their
proposed store locations, we perform another round of review on their proposals. If
the proposals are approved, we invite them to enter into franchise agreement with
us and formally become our franchisees.
Our Agreements with Franchisees
Our relationship with franchisees is primarily governed under our franchise agreement,
which typically includes the following material terms.
 Nature of relationship. Our franchise agreement explicitly stipulates that there is no
principal/agent relationship between us and our franchisees. In our relationship with
franchisees, we act as a seller and they act as a buyer.
 Licensing of intellectual properties. We license our franchisees to use certain
intellectual properties for the operation of their stores, including our trademarks,
recipes, standard operating procedures, technologies, etc.
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 Training and support. We agree to provide various training and operational support
to our franchisees, including the provision of an operation manual, pre-opening
trainings and consultations, and regular trainings throughout the terms of the
agreement.
 Franchise fees . Our franchisees typically pay us an initial franchise fee of
RMB98,800, covering licensing, marketing advisory, operation support, and
training. In practice, we offer flexible payment terms to mitigate uncertainties faced
by new franchisees. On a monthly basis, the franchisees also pay us continuing
support services fees, which consist of two parts: a fixed amount of RMB500 per
store, and a floating amount that equals to 15% to 20% of their stores’ total
procurement amounts. In addition, our franchisees may incur additional expenses as
we provide additional training or marketing support from time to time.
 Operational standard. We have the right to determine various facets of our stores’
operation, including interior design, product offerings, appliances, technology
systems, marketing materials, etc. To ensure stores are operated up to our standards,
we have the right to send supervisors to visit our stores at any time during normal
business hours and to monitor store operations remotely via camera as well. In
addition, our franchisees pay us an upfront deposit, from which we are entitled to
deduct any penalties imposed if they violate the terms of our agreement.
 Sourcing of ingredients, packing materials and connected appliances. We have the
right to determine the choice of suppliers for all of our franchised stores to fulfill
their need for ingredients, packaging materials and connected appliances. In
practice, we require our franchised stores to procure the aforementioned supplies
directly from us. Our franchisees are generally not allowed to return products
purchased from us unless there are clear product quality defects. Our return policy
is generally in line with industry practice. The value of returned products accounted
for less than 1% of the total value of products we sold to our franchisees in 2021,
2022, 2023 and the nine months ended September 30, 2024.
 Penalties . We have the right to impose penalties if our franchisees violate our
operation protocols, including those set out in our franchised store compliance
handbook. For first-degree violations including actions that violate laws and
regulations or constitute material breaches of contract, we may impose fines ranging
from RMB10,000 to RMB200,000, block the franchisee from opening new stores,
suspend a store’s operation, or require a store to be transferred or closed. For
second-degree violations such as those that constitute breaches of contract or causes
risks to neighboring franchisees, we may impose fines between RMB2,000 and
RMB50,000, among other measures. For third-degree violations including when
franchisees attain the lowest category of ratings on our supervisors’ scorecard
during on-site inspections, we may impose fines up to RMB10,000, among other
measures. We generally do not impose early termination cost on our franchisees
under the franchise agreement.
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 Operation of delivery platform. We have the right to operate the online delivery
service of our stores and our franchisees bear the cost associated with using the
delivery services, such as paying commission fees to third-party delivery platforms.
 Anti-cannibalization. Our franchisees are required to operate their franchised stores
in the designated premises as specified under the relevant agreement. Meanwhile,
we undertake not to open additional stores within a certain proximity to our
franchisees’ existing stores, with details to be specified in the relevant agreement.
In addition, we have implemented a number of anti-cannibalization measures in
practice that take into account factors beyond the distance between our stores. For
details, see “— Our Store Network — Store Network Expansion — Store Location
Selection Process.”
 Sales target. We generally do not set any sales target for our franchisees under the
franchise agreement.
 Minimum purchase amount. We generally do not set any minimum purchase amount
for our franchisees under the franchise agreement.
 Mandate selling prices. Our franchisees must follow the selling prices set by us.
 Non-competition. Our franchisees shall not operate any business, on their own or
through partnership with others, to sell products identical or similar to ours within
the term of the franchise agreement and for three years after the termination of the
franchise agreement. We request existing franchisees to disclose and refrain from
engaging in any competing activities during the onboarding procedure and deter
such behavior by classifying competing activities within the most severe category of
violations under our franchised store operational and compliance handbooks on
store inspections. To monitor ongoing compliance, we rely on regular inspection by
store supervisors and reporting from other franchisees in the past. Upon discovering
suspected competing activities, our risk and compliance personnel is responsible for
following up to gather evidence and ensuring any violating franchisees have
terminated the competing activities as instructed. Other parties, such as suppliers,
can also report to us if they know that any franchisees violate the non-competition
clause, and we will investigate the circumstances. We have the right to terminate the
franchise relationships with any franchisees engaging in competing activities. For
terminated franchisees, we will also conduct follow-up measures if other parties
report these matters to us.
 Term, renewal and termination. Our franchise agreement typically has an initial term
of three years and is renewed with one-year terms. In the last three months before
an agreement expires, our franchisees can submit a written request to renew and we
can decide whether to renew based on our internal standards and evaluations. If our
franchisees do not submit written requests or if we decide not to renew, our franchise
agreement will be automatically terminated.
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Non-independent Franchisees
During the Track Record Period, certain of our franchisees were our former employees or
relatives of our employees. As of December 31, 2021, 2022 and 2023 and September 30, 2024,
13, 18, 29 and 45 of our franchisees, who collectively operated 48, 57, 92 and 112 franchised
stores during the respective year/period, were our former employees or relatives of our
employees. These non-independent franchised stores accounted for approximately 1% of our
5,689, 6,664, 8,995 and 9,771 franchised stores as of December 31, 2021, 2022 and 2023 and
September 30, 2024, respectively. The GMV generated by these stores accounted for 0.8%,
0.9%, 1.0% and 1.0% of our GMV for the years ended December 31, 2021, 2022 and 2023 and
the nine months ended September 30, 2024, respectively. The revenue contributed by these
stores accounted for 0.8%, 0.9%, 0.9% and 1.0% of our total revenue for the years ended
December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024,
respectively. To the best of our knowledge, other than as described above, our franchisees
during the Track Record Period were independent third parties that do not have any other past
or present relationships (including, without limitation, family, business, financing, trust or
otherwise) with us or our substantial shareholders, directors or senior management, or any of
their respective associates.
We treat these non-independent franchisees in the same way that we treat our other
franchisees. We applied the same selection criteria when enrolling the franchisees and the
franchise agreements that we entered into with these franchisees contained the same terms and
conditions that we offered to independent franchisees. We sell goods and equipment and
provide franchise management services to the non-independent franchisees at the same price
that we serve our independent franchisees. Therefore, there is no material difference between
our gross profit margin attributable to the non-independent franchisees and independent
franchisees.
The following table sets forth certain operating data of non-independent franchised stores
and independent franchised stores for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
Total GMV (RMB in thousands)
Non-independent franchised stores /H1118/H1118/H111886,662.9 141,799.5 194,252.0 143,145.8 173,352.7
Independent franchised stores /H1118/H1118/H1118/H1118/H1118/H111810,494,008.7 13,848,219.2 19,002,260.9 13,636,204.3 16,418,323.2
Total number of cups sold (in
thousands)
Non-independent franchised stores /H1118/H1118/H1118 5,320.5 8,584.1 11,808.0 8,668.1 10,184.3
Independent franchised stores /H1118/H1118/H1118/H1118/H1118/H1118674,442.1 860,628.5 1,171,747.1 838,203.9 978,396.6
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For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
Per-store GMV (RMB in thousands)
Non-independent franchised stores /H1118/H1118/H1118 2,561.5 2,515.3 2,704.3 2,023.2 1,894.7
Independent franchised stores /H1118/H1118/H1118/H1118/H1118/H11182,186.2 2,260.2 2,463.8 1,855.7 1,774.6
Per-store daily GMV (RMB in
thousands)
Non-independent franchised stores /H1118/H1118/H1118 7.0 6.9 7.4 7.4 6.9
Independent franchised stores /H1118/H1118/H1118/H1118/H1118/H11186.0 6.2 6.8 6.8 6.5
The following table sets forth a breakdown of our revenue from non-independent
franchised stores and independent franchised stores in an absolute amount and as a percentage
of total revenue generated from franchised stores for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
Non-independent franchised
stores /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111835,111 0.8 50,230 0.9 72,363 0.9 54,182 1.0 63,683 1.0
Independent franchised
stores /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,257,878 97.1 5,390,167 97.0 7,376,582 96.2 5,368,183 96.4 6,201,734 96.2
Total franchised stores /H1118/H11184,292,989 97.9 5,440,397 97.9 7,448,945 97.1 5,422,365 97.4 6,265,417 97.2
The following table sets forth a breakdown of our gross profit and gross profit margin of
the non-independent franchised stores and independent franchised stores for the periods
indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
Gross
profit
Gross
profit
margin
RMB % RMB % RMB % RMB % RMB %
(in thousands, except percentages)
Non-independent
franchised stores /H1118/H1118/H111810,379 29.6 13,948 27.8 22,107 30.6 16,382 30.2 19,387 30.4
Independent franchised
stores /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,290,409 30.3 1,537,406 28.5 2,360,325 32.0 1,687,719 31.4 1,918,722 30.9
Total franchised stores /H11181,300,788 30.3 1,551,354 28.5 2,382,432 32.0 1,704,101 31.4 1,938,109 30.9
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The following table sets forth the balance of trade receivables for our non-independent
and independent franchised stores.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Non-independent /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118225 225 447 518
Independent /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111822,996 24,425 50,619 116,137
Total/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,221 24,650 51,066 116,655
As of the Latest Practicable Date, RMB0.5 million and RMB107.0 million of the trade
receivables for our non-independent and independent franchised stores as of September 30,
2024 had been settled, respectively. Credit terms granted the non-independent franchised stores
are fair, reasonable and no more favorable than those offered to the independent franchised
stores.
SUPPLY CHAIN MANAGEMENT
We developed sophisticated protocols to manage all stages of our supply chain, from
supply procurement, to ingredient processing, to warehousing and then to transportation to
stores. Our supply chain capabilities, combined with our regional densification strategy, enable
us to consistently deliver fresh and quality ingredients to our thousands of stores at competitive
prices.
Product Flow within Our Supply Chain
We usually require our suppliers to ship their supplies to our warehouses or processing
facilities for inspection and acceptance, and the suppliers are responsible for ensuring the
quality of delivered goods. In some cases our procurement agreement obligates us to pick up
the supplies from a location designated by the supplier, in which case we utilize our own fleet
of freight vehicles or leverage third-party logistics service providers to transport the supplies
to our warehouses or processing facilities. Some of our ingredients, such as tea leaves and fruit
juices, go through our processing facilities where we leverage our proprietary recipes to create
tea leave mixes and blended fruit juices, which are subsequently transported and stored in our
warehouses. To transport products from our warehouses or processing facilities to our other
warehouses or our stores, we primarily use our own fleet of freight vehicles although we also
use third-party logistics service providers during peak seasons. Our stores also use third-party
delivery services to serve beverages and other product offerings to consumers. For details of
product flow from our stores to consumers, see “— Our Store Network — Features of Our
Stores — Order Placement at Our Stores.”
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Procurement and Supplier Management
We adopt a centralized approach for supply procurement. Given our significant business
scale, we enjoy strong bargaining power at the supply procurement stage, which enables us to
procure a large quantity of supplies at below-market prices. We carefully select our suppliers
to ensure our supplies’ premium quality, including directly procuring certain fresh fruits and
tea leaves from their sources to acquire top-notch ingredients.
Our Procurement
We procure a variety of goods and equipment, including ingredients such as fresh fruits,
fruit juices, tea leaves, dairy and sugar products, packaging materials, and equipment such as
tea brewers, ice machines and freezers.
We procure supplies in significant quantities. We procured approximately 85,000 tons of
fresh fruits spanning across 36 kinds in 2023. We also procure significant quantities of fruit
juices, tea leaves and dairy products. Our large procurement size enables us to purchase
supplies at below-market prices, which subsequently lowers the price at which we deliver
goods and equipment to our franchisees. For example, the price at which we supplied mangoes
to our stores was approximately 30% below their prevailing market price in 2023. We procure
from a variety of sources including overseas. For example, we source premium avocados from
Peru, Chile and Mexico.
We carefully select our suppliers to procure quality supplies. For certain fresh fruits such
as lemons and mangoes, tea leaves, and other key ingredients for our beverages, we directly
purchase from their producers rather than purchasing through intermediary distributors so that
we have more control over their availability, quality and price. Our direct contact with
producers also enables us to influence, to some extent, how producers cultivate their products.
Leveraging our research on food sciences, for example, we work with some of our suppliers
to determine the right time for them to harvest their products to better suit our needs. In 2023,
we procured approximately 4,000 tons of citrus lemon (˥ᓠᓝ) directly from their
producers, representing 89.9% of our total procurement of this fruit.
In addition, directly sourcing key ingredients and establishing long-term collaborations
with trusted suppliers facilitate consistent quality and stable supply. By effectively forecasting
ingredient types and quantities, we can preemptively lock in key terms of our procurement
agreement, thereby optimizing costs and ensuring uninterrupted supplies. Our dynamic supply
chain management also allows for flexibility; should product requirements change, we can
quickly adjust recipes to mitigate inventory wastage.
We do not believe that we face material supplier concentration risks. As of September 30,
2024, we had a total of over 1,100 suppliers. In general, we worked with multiple suppliers for
each type of ingredient. During the Track Record Period, we did not experience any material
incidents of supply interruption, early termination of contracts with suppliers, or failure to
secure sufficient quantities of supplies.
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Selection Process for Suppliers
We have a standardized protocol to identify our procurement needs, select suppliers and
enter into procurement agreement.
Our procurement center is responsible for the selection of our suppliers. As of September
30, 2024, our procurement center consisted of over 110 dedicated employees. Senior members
of our procurement center generally have worked in our product research and development
team before, which enables seamless collaboration between supply chain team and product
research and development team, thereby ensuring fresh, high-quality and stable supply from
the field to the cup.
As early as during the idea generation stage of product development, our procurement
center is involved in providing input in terms of the availability and recent market condition
of relevant ingredients, and as such what ingredients may be more suitable for new product
development.
Once we have a general concept of our new products, our procurement center starts
identifying appropriate suppliers, with the help of our quality assurance team which ensures the
suppliers meet our product safety and quality requirements. We maintain a list of eligible
suppliers based on our internal assessment of their product quality, relevant qualifications,
employee expertise, among other factors. Our product research and development team,
procurement center and quality assurance team are all involved in these evaluations, and
collectively identify the most suitable suppliers based on criteria such as their certificates and
qualifications, production capacity, quality control systems, sources of raw materials, sales
volume, reliability and market reputation. Our procurement center works closely with eligible
suppliers to not only examine options proposed by the suppliers but also discuss innovative
solutions based on our deep understanding of many ingredients.
After we finalize the choice of suppliers, our supply planning team make projections
about our future need of the relevant products and work with relevant suppliers to reserve the
required production capacities. We take an analytic approach to forecast our future needs,
taking into account historical sales statistics and future demand projections. We enter into
procurement agreement based on these forecasts and our business insight, and seek to
preemptively lock in our procurement quantity and price to mitigate risks of market
fluctuations, particularly for certain seasonal fruits whose prices may vary significantly
throughout the year. We review and evaluate the performance of our suppliers on an ongoing
basis to ensure the quality of our supplies. For details, see “— Quality Control and Safety
Protocols.”
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Our Major Suppliers
For the years ended December 31, 2021, 2022 and 2023 and the nine months ended
September 30, 2024, purchases from our five largest suppliers in each year amounted to
RMB601.3 million, RMB751.7 million, RMB810.8 million and RMB756.0 million,
representing 18.1%, 20.9%, 16.5% and 18.8% of our total purchase amount for the respective
periods. For the years ended December 31, 2021, 2022 and 2023 and the nine months ended
September 30, 2024, purchases from our largest supplier in each year amounted to RMB252.8
million, RMB265.1 million, RMB224.3 million and RMB193.9 million, representing 7.6%,
7.4%, 4.5% and 4.8% of our total purchase amount for the respective periods.
The following table sets forth certain information of our five largest suppliers in each
relevant time period during the Track Record Period.
Rank Supplier
Products/Services
Provided
Purchase
Amount
Percentage of
Total
Purchase
Business
Relationship
Since
(RMB in
millions) (%)
For the Y ear Ended December 31, 2021
1 Supplier A/B (1) Cream 252.8 7.6 2019
2 Supplier C (2) Syrups and other
ingredients
120.8 3.6 2020
3 Supplier D (3) Milk tea ingredients 92.1 2.8 2018
4 Supplier E (4) Topping ingredients 69.9 2.1 2019
5 Supplier F (5) Milk tea ingredients 65.8 2.0 2021
For the Y ear Ended December 31, 2022
1 Supplier A/B (1) Cream 265.1 7.4 2019
2 Supplier F (5) Milk tea ingredients 181.1 5.0 2021
3 Supplier G (6) Packaging materials 121.3 3.4 2021
4 Supplier H (7) Topping ingredients 104.7 2.9 2021
5 Supplier D (3) Milk tea ingredients 79.5 2.2 2018
For the Y ear Ended December 31, 2023
1 Supplier A/B (1) Cream 224.3 4.5 2019
2 Supplier H (7) Topping ingredients 169.7 3.5 2021
3 Supplier I (8) Packaging materials 161.6 3.3 2019
4 Supplier D (3) Milk tea ingredients 130.9 2.7 2018
5 Supplier J (9) Sugar 124.3 2.5 2022
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Rank Supplier
Products/Services
Provided
Purchase
Amount
Percentage of
Total
Purchase
Business
Relationship
Since
(RMB in
millions) (%)
For the Nine Months Ended September 30, 2024
1 Supplier I (8) Packaging materials 193.9 4.8 2019
2 Suppler A/B (1) Cream 171.4 4.3 2019
3 Supplier C (2) Syrups and other
ingredients
163.3 4.1 2020
4 Supplier K (10) Coffee machine 130.4 3.2 2023
5 Supplier F (5) Milk tea ingredients 97.0 2.4 2021
Notes:
(1) Supplier A is headquartered in Shanghai and engages in the sale of ingredients. Supplier B is headquartered
in Xiamen and provides logistics services for Supplier A. We have signed a tripartite contract with Supplier
A and B under which Supplier B acts as an agent of Supplier A, as requested by Supplier A following
customary practices.
(2) Supplier C is headquartered in Guangzhou and engages in the sale of ingredients and beverages.
(3) Supplier D is a company listed on the Shanghai Stock Exchange and headquartered in Suzhou and engages in
the sale of ingredients and beverages.
(4) Supplier E is headquartered in Suzhou and engages in the sale of ingredients and beverages.
(5) Suppler F is headquartered in Shanghai and engages in the sale of ingredients and beverages.
(6) Supplier G is headquartered in Taizhou and engages in the sale of packaging materials.
(7) Supplier H is headquartered in Guilin and engages in the sale of ingredients.
(8) Supplier I, Zhejiang Mingxing Packaging, is headquartered in Taizhou and engages in the sale of packaging
materials. For details of our transactions with Zhejiang Mingxing Packaging, see “Connected Transactions.”
(9) Supplier J is headquartered in Chongzuo and engages in the sale of ingredients.
(10) Supplier K is headquartered in Switzerland and engages in the sales of fully automated coffee machines.
To the best of our knowledge, except for Supplier I, our five largest suppliers in each year
of the Track Record Period were all independent third parties. During the Track Record Period
and up to the Latest Practicable Date, none of our Directors, their respective associates, or any
shareholders of our Company (who or which to the knowledge of the Directors owned more
than 5% of the Company’s issued share capital) had any interest in any of our five largest
suppliers in each year of the Track Record Period, except for Supplier I.
During the Track Record Period, we sold unused ingredients and raw materials (mainly
including fresh fruit, canned fruit, and fruit juice) to certain suppliers while we purchased
ingredients and raw materials (mainly including topping ingredients, syrups, and milk tea
ingredients) from such suppliers as well, which is a customary practice in the industry,
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according to CIC. The ingredients and raw materials that we sold to suppliers are generally
different from those that the we purchased from such suppliers. These transactions are mainly
due to commercial reasons such as demand on the specific products and satisfactory quality.
Except for Supplier H, none of our five largest suppliers in each period during the Track
Record Period was also our customer during the Track Record Period. In 2022, 2023 and the
nine months ended September 30, 2024, we sold certain unused raw materials to Supplier H.
The sale amount was RMB19.5 million, RMB43.2 million and RMB13.5 million in 2022, 2023
and the nine months ended September 30, 2024, respectively, representing approximately
0.4%, 0.6% and 0.2% of our revenue in these periods, respectively. Our sales and purchases
with Supplier H were not inter-conditional with each other. All of our sales to and purchases
from Supplier H were conducted in the ordinary course of business under normal commercial
terms and on an arm’s length basis. Except for Supplier H, which was also one of our five
largest customers in 2023, none of our five largest customers in each year of the Track Record
Period was also our supplier during the Track Record Period.
Material Terms of Our Procurement Agreement
Our procurement agreements with suppliers typically include the following material
terms.
 Product specifications and order placement procedures. We specify what we are
buying, how orders are placed and how suppliers will fulfill our orders.
 Quality requirements. We provide detailed requirements on the quality of our
ingredients. We require the products to satisfy all relevant national and industry
standards as well as our internal standard laid out in the agreement. We typically
reserve the right to conduct random quality inspections when receiving the products,
and require that the remaining shelf-life of products we receive to be at least one
half of the standard shelf-life as specified on the packaging. Shipments with quality
issues are typically rejected and returned. In some cases, we demand suppliers to
compensate us in the amount of twice the book value of all defective products.
 Transportation and delivery requirements. We also impose requirements in relation
to how goods are packaged and stored during transportation, the timeliness of
deliveries, and the amount of permissible shipment size inaccuracies. We may reject
and return shipments because they do not meet our transportation and delivery
requirements. We may also impose fines if there are significant deviations from our
requirement.
 Settlement. We settle transactions with most of our suppliers monthly. For some of
our suppliers, we settle weekly. Most of our settlement are completed electronically.
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Our Ingredient Processing Capabilities
Guided by our food-science-centric research and development, we process fruits with
various advanced technologies to ensure their freshness. For example, by promptly processing
mangoes at source and strictly controlling their packaging, delivery and ripening processes, we
decreased the ripening spoilage rate to 10% in 2023, far below the industry average of
approximately 20%. Our research also led our attention to the high pressure processing (HPP)
technology that helps retain the rich and fresh flavor of our fruit juices. We are a pioneer that
introduced it to our industry for ingredient processing. Our stores consumed the largest volume
of HPP-processed fruit juices in the freshly-made tea store market in China for the year ended
December 31, 2023. In addition, to our knowledge, as of September 30, 2024, we owned the
only Hyperbaric 525i HPP system in mainland China, which is the highest standard HPP
equipment among its supplier’s product portfolio.
We apply our proprietary recipes and techniques to process ingredients for our
franchisees’ use. Leveraging our research on food sciences, we are able to craft tea leaf mixes
and blended fruit juices with balanced tastes. We seek to retain the freshness of our ingredients
as much as possible and blend the flavor of various ingredients to craft rich and palatable flavor
profiles by taking into account a mix of factors including seasonality, ingredients’ sources and
tastes, cost, and ease of transportation, among others.
As of September 30, 2024, we operated three processing facilities to process our
ingredients. In 2021, 2022, 2023 and the nine months ended September 30, 2024, in terms of
sales amount, approximately 11%, 13%, 13% and 13% of the ingredients that we supplied to
our franchisees were processed through our processing facilities. In addition to supplying our
processed ingredients to our franchised stores, we also sell some of the processed ingredients,
primarily blended tea leaves, to corporate customers some of whom use the tea leaf mixes to
prepare their own freshly-made tea beverages. Subsequent to September 30, 2024, we
completed the construction of another processing facility in Zhuji, Zhejiang, which consists of
two separate sections. We have moved processing tasks that used to be completed at two of our
existing processing facilities as of September 30, 2024 to the two sections of the new
processing facility, respectively. This change has enabled us to (i) increase our processing
capacity and (ii) reduce cost over the long-term, since we own, instead of lease, the land parcel
for the new processing facility and are no longer exposed to risks of the land owner increasing
the rent on or refusing to extend our existing leases. In particular, the two existing processing
facilities had a combined processing capacity for approximately RMB1.0 billion worth of
products, whereas the new facility in Zhuji has a processing capacity for approximately
RMB1.5 billion worth of products. Although our two existing facilities were not at full capacity
when we moved the processing tasks to the new facility, we believe this change is appropriate
considering the rate of our business expansion and our need to preemptively prepare for the
expected demand for increased processing facilities. Moving to a facility for which we own the
land also grants us more flexibility to expand the facility in the future, since any significant
modification to the leased facilities may require owners’ approval.
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The following table sets forth certain details regarding our processing facilities, where
utilization rate is calculated as the ratio of actual production volume to maximum potential
capacity. The utilization rates of our processing facilities are averaged throughout the period
to accommodate for peak seasons and we believe that the utilization rates are in line with the
average level in the industry. The utilization rate for the processing facility in Zhuji, Zhejiang
is not reflected below since it was not in operation during the Track Record Period.
Utilization Rate
For the Y ear Ended
December 31,
For the Nine
Months Ended
September 30,
Products Location 2021 2022 2023 2024
Lichuan Processing
Facility /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Tea leave
mixes Hangzhou 45% 50% 69% 81%
Guoru Processing
Facility /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Blended fruit
juices Hangzhou 74% 56% (1) 69% 51% (2)
Guangxi Processing
Facility /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Tea leave
mixes Guangxi 45% 46% 63% 79%
Note:
(1) Guoru processing facility’s utilization rate decreased from 2021 to 2022 as it adopted new processing
equipment in May 2022, which led to an increase in overall capacity. The old processing equipment that were
replaced had an annual processing capacity of 6,048 tons whereas the new equipment have an annual
processing capacity of 17,472 tons.
(2) Guoru processing facility’s utilization rate was lower in the nine months ended September 30, 2024 since it
experienced a slowdown in operations in September 2024 as we moved processing tasks that used to be
completed therein to the new processing facility in Zhuji.
Our Warehousing and Logistics Management
We possess strong warehousing and logistics capabilities that support efficient delivery to
our stores.
Warehousing and Logistics Infrastructure
As of September 30, 2024, we operated 22 warehouses for our business operation,
substantially all of which were leased or contracted from third parties. These warehouses have
an aggregate floor area of approximately 220,000 square meters, including cold storage spaces
of over 60,000 cubic meter supporting various temperature ranges. As of September 30, 2024,
approximately 76% of our stores are located within 150 kilometers of one of our warehouses.
We operate one of the largest cold-chain warehousing and logistics infrastructure among
China’s freshly-made tea store brands as of December 31, 2023. In 2023, we completed
cold-chain delivery of over RMB4 billion worth of ingredients, the highest in China’s
freshly-made tea store industry.
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The below graph illustrates the distribution of our warehouses as of September 30, 2024.
Warehouses
Jingzhou
Nanchang
Kunming
Meishan
Zhaoqing
Nanning
Zhangzhou
Ganzhou
Huizhou
Hefei
Guiyang
Hangzhou
Fuzhou
Taizhou
Wuxi
Wuhan Huzhou
Changsha
Chongqing
Qingdao
Jinan
Zhumadian
According to the CIC Report, while many of our peers in the industry use third-party
storage services operated by third parties, we are able to directly operate our warehouse
network to better suit our business need. For example, our warehouses support cold storage in
different temperature intervals, including one from negative 20°C to negative 15°C, one from
1°C to 5°C, one from 8°C to 13°C and one from 10°C to 15°C. These more specific cold
storage areas ensure the optimal freshness for many of our fruits, and we believe it is hard to
find third parties capable of providing comparable storage services at similar costs to suit our
business needs. In addition, as we operate the warehouses ourselves, the warehouses are more
agile at reacting to our business needs. Furthermore, having greater regional store density
makes investing in warehouses and logistics more cost-efficient.
We also possess strong logistics capabilities to transport products between our
warehouses and from our warehouses to our stores. As of September 30, 2024, we directly
owned and operated 362 vehicles to make deliveries between our warehouses and from our
warehouses to our stores. Our vehicles are equipped with specialized equipment that can
accomplish precise control over the temperature of our delivered products, thereby enabling
effective and quality cold-chain delivery from our warehouses to our stores. We also use
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third-party vehicles to fulfill our delivery needs. In 2023, third-party vehicles accounted for
37% to 44% of our monthly vehicle deployments, providing effective support to our own
vehicles particularly during peak seasons. We believe our cold-chain logistics capabilities sets
us apart from many others in the industry, as we directly own and operate many of the vehicles
used for cold-chain delivery and are able to ensure that our products are well-stored in cold
environments throughout the delivery trips.
Delivery Service to Our Stores
Our strong warehousing and logistics capabilities enable us to fulfill the delivery needs
of our stores across all city tiers efficiently. Not only can we reach stores in second-tier and
below cities, we can efficiently reach stores that are located outside of the downtown of various
cities and are dispersed throughout the peripheral towns and townships. We believe this
inventory fulfillment capability would not be possible if we did not preemptively follow a
regional densification strategy and focused on increasing the density of our stores.
Thanks to our cold-chain warehousing and logistics infrastructure, we can ship diversified
and fresh ingredients to our stores, including those with a short shelf-life such as strawberries
and waxberries. We operate one of the largest cold-chain warehousing and logistics
infrastructure among China’s freshly-made tea store brands as of December 31, 2023, enabling
cold-chain supply delivery to approximately 97% of our stores every two days upon request as
of September 30, 2024. In comparison, China’s freshly-made tea store brands generally provide
delivery to stores every four days and often without the support of cold-chain supply delivery.
Among the top 10 freshly-made tea store brands in China in terms of GMV in 2023, we are the
only brand capable of frequent deliveries every two days of short-shelf-life fresh fruits and
fresh milk to stores in lower-tier cities. As a result, our stores, including those in lower-tier
markets, can still serve consistently fresh, tasty and value-for-money beverages to consumers.
With our regional densification strategy, combined with our extensive warehousing and
logistics infrastructure, we supply our franchised stores at relatively low cost. For the three
years ended December 31, 2023, the logistics cost for delivery from our warehouses to stores
was less than 1% of our total GMV on average.
Our franchisees can easily place orders for ingredient and other supply deliveries using
the MDB system. The orders are automatically transmitted to our warehouse management
module, which generates real-time work requests such as packing orders to our warehouse
workers. The warehouse management module also transmits the relevant information to our
transportation management module, which arranges for appropriate drivers, vehicles and
delivery routes based on a number of parameters including cost, time-effectiveness, and
responsible parties. The module harnesses advanced algorithms to optimize delivery route,
thereby reducing delivery costs. It then returns the arrangements to the warehouse management
system to be passed to the relevant warehouse workers so that they can coordinate with
delivery drivers.
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PRODUCT DEVELOPMENT
Our product development framework is firmly rooted in continuous research, analysis,
and accumulation of fundamental food science knowledge. As of September 30, 2024, we had
a team of approximately 120 employees dedicated to product research and development, of
which over 40 employees specialized in the research of tea leaves and extraction. Within the
team, approximately half possess a master’s or more advanced degree.
Our Product Development Philosophy
We take a systematic approach to product development and focus on cultivating our
fundamental capabilities. We are one of the first companies in the industry that engaged in
research on food sciences. This fundamental knowledge, such as in-depth understanding of tea
base preparations, forms the basis of our product development efforts. As part of our research
on food sciences, we engage in joint research on quantitative methods of agriculture product
quality control with Zhejiang University, Jiangnan University and the Tea Research Institute at
Chinese Academy of Agricultural Sciences.
During product development, our front-end product developers, or “connoisseurs,”
collaborate closely with our ingredient “engineers” to continually introduce fresh flavors of
various ingredients to our products and ensure consistent results. Our “connoisseurs”
continuously monitor the latest market trends and consumer preferences, looking for product
inspirations from a variety of sources. At the same time, our “engineers” quantify the flavors
of different ingredients in terms of, for instance, aroma, acidity and sweetness, and provide
such analytics to our “connoisseurs.” The collaboration between our “connoisseurs” and
“engineers” enables us to consistently introduce quality offerings on a regular basis, and do not
rely on the occasional, one-off successes of individual products as a result of random
innovative ideas. In addition, our “engineers” enable us to have a dynamic supply chain
management framework that allows for flexibility. They help us quickly fine-tune our recipes
and adjust product mix to alleviate the impact of any supply chain disruptions.
Our Product Development Capabilities
We have accumulated flavor profiles of over 1,000 ingredients of different varieties
and/or from different suppliers as of September 30, 2024, factoring in details such as each
ingredient’s place of origin, availability throughout the year, taste features, close substitutes
and complementary ingredients. With a wide selection of ingredients, we can mix and match
to create new recipes that cater to the latest trends efficiently. We can also develop beverages
that meet specific consumers’ preferences on taste in certain regions. For example, we
perceived that consumers in different regions favor distinct tastes of tea bases, and launched
multiple tea bases for our lemon teas. In addition, to support our need to manage across
thousands of stores distributed across various regions, and taking into account the regional and
seasonal nature of many of our ingredients, we tailor our recipes of the same drink for specific
regions and for certain time periods of the year, based on the availability of ingredients and our
supply chain coverage, to ensure that our beverages are always made with fresh and
high-quality ingredients and to achieve taste consistency.
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We regularly launch new beverages to keep our offerings fresh and to capture emerging
opportunities presented by evolving industry trends. Our store menus typically contain around
30 beverages at a time. Meanwhile, in 2021, 2022 and 2023 and for the nine months ended
September 30, 2024, we launched 94, 82, 130 and 85 beverages, respectively. Our newly
launched beverages are generally well-received by consumers. In 2021, 2022 and 2023, our top
10 best-selling beverages included two to three completely new beverages we launched in the
same or prior year, and these beverages continue to be popular over time, demonstrating our
ability to continually develop and launch popular products and to keep up with evolving market
trends.
Our Product Development Process
The principal steps of our product development process are set out below.
Step 1: Idea generation and screening. Our “connoisseurs” continuously look for product
inspirations from a variety of sources, including (i) original ideas from our product research
and development team, including innovations based on their experience working with our
ingredients, (ii) market research to identify latest market trends, including evolving consumer
preferences in terms of taste and price, any region-specific preferences and the popularity of
different types of freshly-made beverages, through analyzing online media and conducting
on-the-ground surveys, (iii) review of our existing products feedback from consumers, and (iv)
proposals and market analysis from our existing suppliers who are familiar with the latest
availability of ingredients and changes in processing techniques.
Step 2: Identification of appropriate suppliers and ingredients. We source quality
ingredients for our products. To this end, we carefully consider our suppliers and the specific
types of ingredients that they supply whenever we develop new products. We endeavor to
identify appropriate suppliers and ingredients such that all ingredients can be timely delivered
through our supply chain infrastructure to our stores and retain excellent quality. In addition,
we go beyond merely choosing from a number of fixed options provided by our suppliers, and
work closely with them to consider potential upstream improvements such as how the
ingredients are to be harvested and processed.
Step 3: Recipe development . Based on the specific ingredients that we have selected, our
“connoisseurs” and “engineers” work closely together to experiment with their pairings,
respective ratios, blending techniques, among others, to identify the best possible recipe that
meet our exacting standards. To ensure taste consistency, we preemptively adjust our recipes,
based on our understanding of the ingredients and our knowledge of potential factors that may
influence our beverages’ taste, including the ingredients’ air exposure time and external
temperature during transportation and storage, to lower the likelihood of taste variations after
prepared on-site. We believe one of our differentiating strengths is the ability to deliver high
quality, fresh ingredients to our stores. In recipe development, we take into account this
strength and seek to highlight our ingredients’ fresh flavors.
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Step 4: Internal sample testing and in-store testing. Our sample products go through
rigorous internal testing followed by in-store testing. During internal testing, our sample
products are reviewed directly by our founder, Mr. Wang, and senior members of the product
research and development team. Following the internal testing, our sample products are also
tested at selected stores to evaluate how well the recipe can be executed at our stores during
normal business operations and to solicit feedback from our franchisees and consumers.
Step 5: Pre-launch preparation. After plans to launch new products are finalized, we
begin various pre-launch preparations. We coordinate with our supply chain management team
to procure relevant ingredients, design a holistic promotion plan which may cover a product’s
positioning, packaging design and marketing channels, and prepare training materials for our
franchisees to learn the recipe and standardized preparation procedures. All our franchisees are
required to complete the relevant online trainings and pass an evaluation before new products
can be launched at their stores.
Step 6. Post-launch feedback collection. After our new products are launched, we
continually track their performance and collect consumer feedback, in order to evaluate and
refine our product development process and improve our fundamental capabilities.
OUR TECHNOLOGIES
We place great importance on harnessing the power of technology to improve our
operating efficiency, enhance our management of franchisees and drive our long-term growth.
We have been actively building our information technology team since 2018. As of December
31, 2023, this team has grown to include over 320 engineers, being the largest team in China’s
freshly-made tea beverage industry, and further grew to over 340 engineers as of September 30,
2024.
We have consistently invested in the digitalization of our business, and have developed
a suite of proprietary IT modules that are tailored to our specific business needs. These
modules improve the efficiency of information transmission among various internal
departments, between us and our suppliers, and between us and our franchisees. In addition, the
modules digitalize various aspects of our stores’ operation, such as consumer order placement,
beverage preparation, franchisee training and supervision, inventory management and
fulfillment request placements. We have developed our proprietary IT modules with the goal
of having them form a fully integrated, closed-loop IT system that covers all aspects of our
business operation, which would significantly increase our operating efficiency. We believe our
digitalized systems have laid a solid foundation for us to effectively manage our business as
we continue to scale up our operations. The benefits of our digitalization effort are expected
to become increasingly pronounced as we continue our business growth.
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Our Store-level Technologies
We have implemented store systems across our stores that digitalize, standardize and
automate the operating procedures to improve our stores’ operating efficiency and enhance
product and service quality.
We provide our stores with various modules to efficiently process transactions, digitalize
orders, track sales and manage inventory. Our modules ensure accurate and up-to-date
reporting of operating metrics, enabling us to engage in real-time information analysis and
guidance provision to our network of thousands of stores, covering aspects including sales and
marketing, inventory fulfillment, among others. Our ingredient expiration management module
can track and update our ingredient’s best-before time after each step of ingredient processing
such as washing, cutting and boiling, as illustrated in the graphs below.
Ingredient Expiration Management Module
Ingredient
type
and
required
storage
condition
Management module can generate
best-before time labels and update
ingredient best-before time
along processing
Labels to be placed on the packaging of the
ingredients to remind best-before time and,
in some cases, the time when ingredients
must be disposed
Ingredient type
Best-before
time
Required
storage condition
Sample of printed label
Ingredient
type and
best-before
time
Expiration
reminder
and status
Prompt reminder through
voice reminder and pop-up
in the module
Expiration reminder function
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We have also developed connected appliances that can improve the operating efficiency
of our stores and maintain the quality of our beverages. All our connected appliances can be
connected to the Internet of Things, or IoT, and managed digitally and centrally. As of
September 30, 2024, we had deployed eight proprietary connected appliances, providing
automation and tracking of store equipment operations. For example, based on our in-depth
knowledge of the tea brewing process and solid research, we have developed a proprietary tea
brewer that can automatically adjust parameters like brewing time based on our centralized
inputs through IoT. We tailor these parameters taking into accounts factors such as water
acidity and tea leaf varieties, delivering a consistent, optimal tea flavor across our stores.
Besides receiving our centralized inputs through IoT, the connected appliances also enable
real-time upload of operating information. In this way, we can remotely monitor the connected
appliances’ operating status and receive automatic alerts when there is parameter anomaly.
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Thanks to our continued investment in connected appliances, we have been able to supply our
stores with increasingly sophisticated equipment. In 2021, 2022 and 2023, the average
equipment expenses of each of our newly-opened stores were RMB95,224, RMB100,763 and
RMB109,230, respectively. In the nine months ended September 30, 2023 and 2024, the
average equipment expenses of each of our newly-opened stores were RMB110,269 and
RMB110,856, respectively.
Our Franchisee-facing Technologies
We adopt various modules to manage our franchisees efficiently. Our online system for
franchisee management and supervision covers a range of functions including recruitment, site
selection, comprehensive training, and store visits and inspections. Built upon our database of
over 22,000 store sites as of September 30, 2024, our algorithm make intelligent store site
recommendations to our franchisees that match the expertise and preferences of our
franchisees. We manage information about our franchisees in our proprietary customer
relationship management module, which maintains their details as well as information about
their franchise agreements. The customer relationship module feeds into our MDB system, our
main module for franchisee interactions, which integrates a suite of functions to help facilitate
communication between us and our franchisees. Through the MDB system, our franchisees can
place orders for ingredients, complete trainings before new product launches and submit
feedbacks to and seek assistance from us. We generate daily tasks to be performed by
franchisees through the MDB system so that we can enforce our store operation standards and
regularly share knowledge with them related to store management and operation, recipe
execution, and other matters. Our modules can also automatically generate tailored inspection
routes and store-specific checklists for our store supervisors, ensuring thorough risk
identification and timely rectification.
Our Consumer-related Technologies
Our in-house developed mini programs provide consumers with convenient ways of order
placement. We encourage our consumers to place orders through our mini programs to avoid
the trouble of waiting in lines, which also helps us accumulate consumer base and retain
consumer traffic. We apply smart analytics to engage our consumers by tracking their past
orders and analyze their consumption pattern. As we learn our consumers’ preferences, such as
their preferred beverage types, we are able to recommend products to them with precision and
personalize our promotion content, including distributing customized marketing campaigns and
adopting tailor-made approaches to increase consumer engagement on our mini programs. In
addition, we also developed modules that connect with the system of third-party food delivery
platforms so that we can efficiently track the performance of our stores in terms of their food
delivery orders.
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Our Supply Chain Technologies
To efficiently deliver goods and equipment to our franchisees, we have digitalized
numerous aspects of our supply chain to improve operating efficiency. We adopt a supplier
relationship management module to send procurement orders to our suppliers, and utilize our
quality management module to automatically decide whether quality inspections are needed
based on the type of incoming products. Accepted products are entered into our warehouses and
recorded within our warehouse management module. We manage our warehouses and logistics
with our warehouse and transportation management modules. The transportation management
module uses intelligent algorithms to generate optimized delivery routes based on preset
parameters including budget, impact on delivery drivers and franchisees, and real-time
constraints such as available vehicles and time limitations. The algorithm significantly reduces
our logistics cost and increases our fulfillment efficiency and capability. In addition, we have
realized full-process monitoring of key metrics, such as route, temperature and speed, during
trips from our suppliers to our warehouses and from our warehouses to stores.
QUALITY CONTROL AND SAFETY PROTOCOLS
We understand that ensuring the highest standards of product safety is of paramount
importance to our consumers. We have therefore implemented a stringent quality control
system, backed by a team of over 130 professionals as of September 30, 2024, to maintain
quality at every step of our business operation.
Our commitment to quality begins with the selection of our suppliers. We employ a
rigorous process that includes thorough background checks and continuous evaluation. We
understand that a significant risk to food safety originates from its source. Therefore, we
require our suppliers to provide randomly selected samples for quality testing before large
batch shipments. We conduct regular on-site visits to our suppliers, which allows us to monitor
their processes and adherence to quality standards closely. In the event of any quality issues,
we take swift action, including returning shipments that do not meet our stringent quality
criteria.
We have also set out a number of detailed internal policies relating to various critical
aspects of our logistics process. These policies include the guidelines for verifying and
receiving shipments, the standards for dealing with defective ingredients, the standards for
managing materials, the protocols for ensuring the quality of fresh fruits during storage in
warehouses, among many others. We conduct sample tests for the products that our warehouses
receive to confirm that their quality meets our safety standards.
At the store-operation level, although we do not directly operate our franchised stores, we
clearly communicate our expectations with respect to product safety to our franchisees. Our
training to franchisees encompasses our ingredient acceptance procedures and standards, under
which the franchisees are required to evaluate ingredients upon delivery and reject any
unqualified ingredients. In particular, we emphasize to our franchisees that they must pay
attention to the ingredients’ shelf life and reject all ingredients with expiration time below the
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prescribed thresholds. In addition, we provide training to franchisees on proper procedures to
handle various kinds of ingredients. In general, our store staff must inspect the quality of all
ingredients before use, especially refrigerated or frozen ingredients, which are not allowed to
be used if any anomalies are found. We require all defective ingredients to be disposed and
customer complaint incidents of defective ingredients to be reported to us in accordance with
our policies. Beyond training, we require our store staff to check in morning and evening every
business day, including taking photos of various parts of the store, related to personnel hygiene,
equipment cleaning and disinfection, equipment calibration, ingredient storage status, towel
disinfection, etc., and upload the photos to our system. Our proprietary ingredient expiration
management module helps store staff track and update our ingredient’s expiration time after
each step of ingredient processing. Our supervisors conduct routine inspections where they
evaluate and score our stores’ performances based on specific checklists. Beyond site visits, we
ask our franchisees to always conduct their business operations under camera within business
hours. We have developed a digital system that tracks certain features of our store operations,
including sales volume, changes in inventory and the shelf-life of ingredients. Although the
system does not monitor the exact current inventory of our franchised stores, it can detect
anomalies by tracking the sales of Good me stores in real time, calculate the theoretical amount
of ingredients required to fulfill those sales. If we notice that there exists significant difference
between the theoretical amount and the amount of ingredients purchased by a store during a
period of time, we will conduct further investigations to see if the stores have purchased
ingredients from third parties or used expired ingredients. In addition, franchisees are required
to complete the prescribed trainings (typically in the form of video tutorials accessible on our
system) and pass relevant evaluations before serving new products to consumers, and
franchisees can also submit feedback to and seek assistance from us through the system. These
measures would help the franchisees to better understand and follow our quality control and
food safety protocols.
Our stores deliver some of our products to consumers with the help of third-party delivery
platforms. While we do not exercise direct control over this last step of the process, we
carefully select the third-party delivery platforms that we work with and closely monitor any
consumer complaints relating to food quality issues. To address the consumer complaints
relating to food quality issues, including those received by our franchised stores, we have
established a professional customer service team and implemented a series of procedures,
including (i) communicating with the consumers in a timely manner and actively negotiating
solutions; (ii) identifying the reasons for the complaints, and initiating an investigation of the
store(s) involved in the complaint if necessary; and (iii) recording consumer feedback to
enhance future supervision of our franchised stores. During the Track Record Period and up to
the Latest Practicable Date, we had not received any consumer complaints that could have a
material adverse impact on our business operations and financial performance, and we had not
been subject to any material penalties as a result of food safety incidents.
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MARKETING AND PROMOTION
Our marketing strategy centers around building a brand image associated with fresh, tasty
and value-for-money beverages of consistently high quality. Following our regional
densification strategy, we typically consolidate resources to build up our brand awareness
region-by-region. We enjoy strong brand recognition in the regions where we already have a
significant presence, and can continually attract new consumers through organic word-of-
mouth referrals and targeted marketing activities when we enter adjacent regions.
We engage in targeted marketing activities through both online and offline channels. As
we typically build up a dense network of stores in select regions, the marketing of the “ Good
me” brand and our products has proven effective at attracting consumers and building our brand
image. We promote our brand and products using various mainstream online platforms,
including in collaboration with key opinion leaders, or KOLs. For example, in the “First Cup
of Milk Tea in Autumn” campaign on August 7, 2024, integrating both online and offline
marketing efforts, we achieved a daily GMV of over RMB160 million.
Moreover, we have been crafting and launching creative and diverse marketing campaigns
that resonate well with our consumers. In October 2023, our collaboration with “ Heaven
Official’ s Blessing (ሮ၅),” a popular fantasy anime showcasing Chinese culture, was an
instant hit among consumers. The beverages under this collaboration achieved sales of
approximately 6.7 million cups within three days after launch. On launch day, “ Good me ”
achieved the highest ranking for Douyin keyword search index (ᅰ) and
Weixin index (ᅰ) among the freshly-made tea store brands in China, and was ranked
among the top five in Weibo’s Hot Search list. In December 2023, we launched a collaboration
with “ Mysterious Lotus Casebook (ᅽ),” a popular Chinese TV series. “ Good me ” reached
No. 1 on Weibo’s Hot Search list after the launch.
In June 2024, we launched a brand collaboration event with “ Love and Deepspace (ᛸၾ
٤a popular Chinese mobile game, under which we opened our first store in Shanghai in
the form of a pop-up store and achieved single-store GMV of over RMB290,000 on the first
day of the event. On July 12 and 13, 2024, we livestreamed a launch event for our upgraded
light milk tea series with “zero non-diary creamer, zero hydrogenation, and zero trans fatty
acids (0 ಔই͋e0૫ʷe0ა)” on a short-video platform, which was recommended to
platform users for over 153 million times; the promotions we unveiled during the livestream
attracted over 12.6 million participants throughout the promotional period. The following
graph illustrates our marketing activities.
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Online and Offline Marketing
“First Cup of Milk Tea in
Autumn” campaign
Livestreaming event for
upgraded light milk tea
series
Branded merchandise
Pop-up store for
collaboration with
“Love and Deepspace
(٤”)
Our Membership Program
We have launched our membership program through our mini programs and Weixin
official account and accumulated a large and loyal member base. We encourage our consumers
to use our mini programs when they visit our stores to place orders and have accumulated a
significant membership base through our mini programs.
We have designed various programs to engage our members and create a sense of
community. For example, we have implemented a tiered membership system where members
can accumulate membership points based on their cumulative expenditures and join higher
membership tiers that give them extra rewards if their membership points pass certain
thresholds. We also encourage our members to join certain member-only social media groups,
and seek to foster close-knit environments that enhance our members’ loyalty. We host monthly
“Members’ Day” when our members can receive additional benefits and accumulate more
membership points for their orders. We had accumulated approximately 29 million, 51 million,
94 million, and 135 million registered members on our mini programs as of December 31,
2021, 2022 and 2023 and September 30, 2024, respectively. We had approximately 12 million,
19 million, 36 million, and 43 million quarterly active members in the quarters ended
December 31, 2021, 2022 and 2023 and September 30, 2024, respectively.
As we learn about our members’ preferences, we are able to recommend products to them
with precision and personalize our promotion content, including distributing customized
marketing campaigns and adopting tailor-made approaches to increase consumer engagement
on our mini programs. In 2023, our average quarterly repurchase rate reached 53%, compared
to the average of below 30% among mid-priced freshly-made tea store brands in China.
Consumer Feedback
We place great importance on our consumers’ feedback and actively collect consumer
opinions to improve our product offerings and our service qualities. We collect consumer
feedback through different channels, including in-store surveys and online review solicitations,
and evaluate the responses to continually optimize our business operations. We also encourage
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our franchisees to communicate consumer feedback that they have received with us. For
consumer complaints received, we have a dedicated team to continually track the complaints
and promptly take remedial measures when necessary. During the Track Record Period and up
to the Latest Practicable Date, we were not aware of any material consumer complaints or other
claims which may cause a material and adverse effect on our business and results of operations.
OUR CUSTOMERS
Our customers are primarily our franchisees who operate our franchised stores and also
include corporate customers that purchase the products from our processing facilities such as
blended tea leaves. These corporate customers are not our franchisees, and they are mainly
engaged in food production business where they use our ingredients to produce other food
products, or tea beverage and trade business where they use our ingredients for their own
beverage business or trading. They procure ingredients from us because we have our own
processing facilities and the products that we produce can satisfy their requirements for quality.
For the years ended December 31, 2021, 2022 and 2023 and the nine months ended September
30, 2024, revenue from our corporate customers in each period amounted to 2.0%, 1.9%, 2.8%
and 2.6% of our total revenue for the respective periods. During the Track Record Period, our
revenue consisted primarily of proceeds from the sales of goods and equipment to our
franchisees, and fees associated with the franchise management services we provided to our
franchisees. For the years ended December 31, 2021, 2022 and 2023 and the nine months ended
September 30, 2024, revenue from our five largest customers in each period amounted to
RMB141.2 million, RMB169.6 million, RMB242.7 million and RMB169.8 million,
representing 3.2%, 3.1%, 3.2% and 2.6% of our total revenue for the respective periods. During
the Track Record Period, we were not subject to any material customer concentration risk. In
addition, except for one of our five largest customers in 2023, which supplied topping
ingredients to us in 2022, 2023 and the nine months ended September 30, 2024, none of our
five largest customers in each period during the Track Record Period was also our supplier
during the Track Record Period. For details of the customer that was also our supplier in 2022,
2023 and the nine months ended September 30, 2024, see “— Supply Chain Management —
Procurement and Supplier Management — Our Major Suppliers” where the customer is
disclosed as Supplier H.
DATA PRIV ACY AND SECURITY
We are committed to the protection of data privacy and data security and have
implemented a comprehensive set of internal policies on network security, data security, data
backup and recovery, data protection, security emergency plan, and information security
incident management.
In order to effectively provide our services, we may collect and use basic user data from
our consumers, franchisees and their employees as: (i) when consumers register for our
membership program or place orders for drinks through our mini programs, we may collect
their user codes, phone numbers, transaction information and delivery addresses and (ii) during
the franchisee onboarding process, we collect franchisees’ basic information, such as their
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names, ID numbers and phone numbers. For both of consumers and franchisees, we only
collect the personal information and data necessary for the use of our operation. We desensitize
data with encryption, masking, or replacement techniques.
To ensure that we, our franchisees and third-party service providers comply with our data
protection policy and the relevant PRC laws and regulations, our franchisees and we only
collect and use personal data for the stated purpose in both privacy polices of our mini
programs and MDB system as authorized by users, including our consumers, franchisees and
their employees, or with other legal bases as provided by laws and regulations. We have also
in place internal policies to provide our employees with the guidelines for data sharing,
transmission, and processing. Furthermore, we implement an access control mechanism.
Besides, we have confidentiality and data protection arrangements with our franchisees and
third-party service providers, including that (i) the rights and obligations of both the third-party
service providers and us regarding personal information involved, protection measures (such
as processing personal information only to the minimum extent necessary) and processing
purposes have been specified in our cooperation agreements; (ii) we have confidentiality
agreements (or provisions) with our franchisees and third-party service providers, and they are
subject to liability in case of the breach of confidentiality; and (iii) our franchisees only have
access to the personal data of their respective consumers to process relevant orders. We do not
share with, transfer, or disclose personal data to any third parties except under certain limited
circumstances, including when it is expressly authorized by users, necessary to fulfill our main
services to users, or in compliance with the applicable laws and regulations. With respect to
using the data collected, we adopt encrypted storage and backup measures to store and protect
consumers’ personal data. In addition, we comprehensively classify the data in our systems by
the level of confidentiality. During the Track Record Period and up to the Latest Practicable
Date, all consumers’ personal data collected during our daily business operations within the
PRC had been stored within the PRC, and our operations do not involve in any cross-border
transmission of users’ data.
During the Track Record Period and up to the Latest Practicable Date, we had not
received any third-party claim against us on the ground of infringement of the party’s right to
data protection as provided by any applicable laws and regulations. In addition, during the
Track Record Period and up to the Latest Practicable Date, our Directors, as advised by our
PRC Legal Advisor, confirm that we had complied with the applicable laws and regulations
regarding personal information privacy and data security in all material aspects.
COLLABORATION WITH THIRD-PARTY PAYMENT AND DELIVERY PLATFORMS
To help our stores accept payment from consumers, we collaborate with established
third-party online payment platforms including Weixin Pay, Alipay and Union Pay, among
others. Consistent with the industry norm, under our agreements with these payment platforms,
they are entitled to a small percentage of the payments they facilitate. As non-cash payments
have become increasingly common, and considering the substitutability of services provided
by the payment platforms, we do not believe that we have a material reliance on any particular
third-party payment platform.
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To help our stores deliver beverages and other product offerings to consumers, we also
collaborate with third-party delivery platforms including Meituan and Ele.me. We enter into
framework agreements with third-party online delivery platforms that set forth the unified
standards for terms applied to delivery orders placed on such platforms for all of our stores
(including franchised stores and company-operated stores). Consistent with the industry norm,
under our agreements with the platforms, the platforms provide delivery service for our stores
in exchange for a commission fee for each successful order of our products generated through
the platforms. Set forth below are key contractual terms of our agreements with third-party
online delivery platforms:
 Fund flow between the platforms and our stores . For customers’ orders placed via
third-party delivery platforms, the delivery platforms collect customer payments on
our stores’ behalf first, and then settle the payments with our stores within the
agreed period (generally on a T+3 basis), net of service fees due to the delivery
platforms.
 Payment settlement . Our stores (including franchised stores and company-operated
stores) are responsible for the commission fees owed to the delivery platforms
specified under our agreement with the delivery platforms.
 Delivery services. Third-party delivery platforms are generally responsible for their
failure to achieve the specified delivery completion rate or losses arising from their
faults in the delivery process. Delivery persons of the third-party delivery platforms
are required to secure quality and safety of our products in transit.
 Product quality . Generally, we are responsible for securing food safety and product
quality of our products to be delivered. We have implemented a variety of quality
control measures to ensure the quality of our stores’ offerings. For details, see “—
Quality Control and Safety Protocols.”
 Liability . If third-party delivery platforms suffer losses attributable to our fault or
our stores’, such as the quality or safety issues of our products or services, the
third-party delivery platform has the right to claim compensation from us.
In 2021, 2022, 2023 and the nine months ended September 30, 2024, approximately 35%,
43%, 42% and 41% of our total cups sold were attributable to third-party delivery platforms.
Considering the substitutability of services provided by the delivery platforms, we do not
believe that we have a material reliance on any particular third-party delivery platform. For
risks related to our collaboration with these third-party delivery platforms, see “Risk Factors
— Risks Relating to Our Business and Industry — We depend on a limited number of
third-party service providers for order delivery to our consumers.”
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SEASONALITY
We have been subject to certain levels of seasonal fluctuations with respect to consumer
orders. We typically see more consumer traffic and generate higher sales during the summer
when the weather is warmer. We typically also experience higher sales during holiday seasons.
In addition, the cost of ingredients of our tea beverages, such as fresh fruits, fruit juices and
tea leaves, also fluctuates throughout the year, although we preemptively limit the extent of the
fluctuations by locking in purchase prices of some of our ingredients in our procurement
agreement with suppliers, sometimes as far as one year in advance.
EMPLOYEES
We had a total of 2,720 employees as of September 30, 2024. Substantially all of our
employees were located in mainland China.
The following table sets forth the numbers of our employees categorized by function as
of September 30, 2024.
Function
Number of
Employees
Store management, franchisee development and training /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,158
Supply chain operation and management /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118760
Information technology /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118342
General and administrative /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118203
Branding and marketing /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118140
Product research and development /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118117
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,720
We recruit our employees primarily from the open market through recruitment
advertisements, agencies, online platforms and referrals. We attract and retain suitable
personnel by offering competitive wages and benefits. We provide our frontline store staff with
training in various skills, including with respect to food safety and work safety.
We enter into standard labor contracts with our employees. We also enter into
non-compete and confidentiality agreements with senior management and key personnel.
We maintain a collaborative culture that helps us recruit talent from diverse backgrounds.
We strive to foster an environment where our employees can feel supported and contribute
effectively, as we believe that encouraging varied perspectives and fostering collaboration
across all levels are key driving forces behind our continued growth. Specifically, our policy
states that under no circumstances shall employees be discriminated against based on race,
gender, religion, age, ethnicity, or disability. We have also adopted various policies and
measures to support employee diversity. For example, we offer maternity and paternity leaves
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to our employees and have dedicated nursing rooms within our office building, and
substantially all of our job postings are gender-blind. As of September 30, 2024, 46% of our
employees are female. We believe that we maintain a good working relationship with our
employees, and we have not experienced any major labor disputes.
During the Track Record Period, we had not made social insurance and housing provident
funds for some of our employees in full in accordance with the relevant PRC laws and
regulations. For details, see “— Legal Proceedings and Compliance — Compliance — Social
Insurance and Housing Provident Funds.” For risks associated with our underpayment of social
insurance and housing provident funds and our use of third-party service providers to pay
social insurance and housing provident funds, see “Risk Factors — Risks Relating to Our
Business and Industry — We may be subject to additional contributions of social insurance and
housing provident funds and late payments and fines imposed by relevant governmental
authorities, which may materially and adversely affect our business and results of operations.”
PROPERTIES AND FACILITIES
Our principal place of business is located in Zhejiang, China. As of the Latest Practicable
Date, we leased 44 properties in various cities in China, with a gross floor area of over 210,000
square meters. Our leased properties are used for non-property activities as defined under Rule
5.01(2) of the Listing Rules and are principally used as storage or office spaces for our business
operations. We believe that there is sufficient supply of properties in China, and thus we do not
rely on any single existing lease for our business operations.
As of the Latest Practicable Date, landlords of 10 of 44 leased properties in mainland
China, which are used as storage, ingredient processing, or office spaces, have not provided us
with valid title certificates or relevant authorization documents evidencing their rights to lease
the properties to us. These properties, with an aggregate gross floor area of approximately
48,000 square meters, represent approximately 23% of the total gross floor area of our leased
properties in China. Additionally, five leased properties, with an aggregate gross floor area of
approximately 220 square meters, representing approximately 0.1% of our total leased gross
floor area, their actual use does not fit into the prescribed scope of usage shown on the relevant
certificates. As advised by our PRC Legal Advisor, for the leased properties that were subject
to title defects or with inconsistent usage, the property owners and the relevant lessors shall
take the responsibility to obtain valid title certificates and ensure the actual usage complies
with the prescribed usage of the properties and the lands. As the tenants, we would not be
subject to any administrative penalties pursuant to the relevant laws and regulations. However,
if any of these leases is terminated as a result of challenges by third parties, we may not be able
to continue to use the properties. Nevertheless, considering these properties’ uses, we believe
there is a sufficient supply of similar properties and do not expect any material adverse effect
on our business due to these potential terminations and the potential costs of relocation would
not have a material adverse effect on our daily operation. In addition, as of the Latest
Practicable Date, we had not completed lease registration or lease registration modification for
43 of the 44 properties we leased, primarily due to the difficulty of procuring the relevant
landlords’ cooperation to register their leases. Our PRC Legal Advisor has advised us that the
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lack of registration for the lease contracts will not affect the validity of the lease contracts
under PRC law, and has also advised us that the relevant PRC authorities may request us to
complete the registration and if we still fail to do so, we may be imposed a fine ranging from
RMB1,000 to RMB10,000 for each of such lease agreements. For a detailed discussion of risks
relating to property interest defects, see “Risk Factors — Risks Relating to Our Business and
Industry — We encounter risks related to leased properties, which could negatively impact our
business operations and financial outcomes.”
As of the Latest Practicable Date, we had a total of 10 leased properties, with an aggregate
gross floor area of approximately 51,000 square meters, representing 24% of the aggregate
gross floor area of all our leased properties, for which we failed to complete the required
record-filing of fire safety acceptance check. As advised by our PRC Legal Advisor, with
respect to these properties that we failed to complete the required record-filing of fire safety
acceptance check, the maximum administrative fine for us will be no more than
RMB3,050,000. For a detailed discussion relating to our non-compliance and rectification on
fire safety issues, see “Business — Legal Proceedings and Compliance — Compliance — Fire
Safety.” As of the Latest Practicable Date, with respect to one leased property in Guangxi, we
failed to obtain the required approval for the environmental impact assessment before
commencing the construction and production, which could subject us to a fine ranging from
RMB50,000 to RMB250,000 and we could be required to restore the processing facility to its
original state. For a detailed discussion relating to our non-compliance and rectification on
environmental impact assessment approval, see “Business — Legal Proceedings and
Compliance — Compliance — Environmental Impact Assessment Approval.”
We had obtained the land use certificates for four parcels of land with a total site area of
over 113,000 square meters. We have constructed a processing facility in Zhuji, Zhejiang. The
processing facility consists of two sections that were built on two separate land parcels. For the
years ended December 31, 2021, 2022 and 2023 and the nine months ended September 30,
2024, we incurred capital expenditures related to the construction of the processing facility of
nil, RMB54.0 million, RMB190.4 million and RMB196.9 million, respectively. The two
sections of the processing facility have commenced operations subsequent to September 30,
2024. In addition, we have constructed a warehouse and are constructing an office building on
two land parcels in Taizhou, Zhejiang. For the years ended December 31, 2021, 2022 and 2023
and the nine months ended September 30, 2024, we incurred capital expenditures related to the
warehouse’s construction of nil, RMB45.9 million, RMB96.5 million and RMB71.3 million,
respectively. The warehouse commenced operations in July 2024. For the years ended
December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024, we
incurred capital expenditures related to the office building’s construction of nil, RMB25.1
million, RMB73.1 million and RMB51.0 million, respectively. We expect construction of the
office building to finish in the first half of 2025.
As of September 30, 2024, each of our property interests had a carrying amount less than
15% of our consolidated total assets. Therefore, according to Chapter 5 of the Listing Rules and
section 6(2) of the Companies (Exemption of Companies and Prospectuses from Compliance
with Provisions) Notice (Chapter 32L of the Laws of Hong Kong), this prospectus is exempted
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from compliance with the requirements of section 342(1)(b) of the Companies (Winding Up
and Miscellaneous Provisions) Ordinance in relation to paragraph 34(2) of the Third Schedule
to the Companies (Winding Up and Miscellaneous Provisions) Ordinance, which require a
valuation report with respect to all our interests in land or buildings.
INTELLECTUAL PROPERTY
Our intellectual property includes trademarks, trademark applications, patents, and patent
applications related to our brands and services, software copyrights, trade secrets and other
intellectual property rights and licenses. We seek to protect our intellectual property assets and
brands through a combination of trademark, patent, copyright and trade secret protection laws
in the PRC and other jurisdictions, as well as through confidentiality agreements and other
measures as set forth below:
 We have formulated and implemented a comprehensive intellectual property
management framework, consisting of the protective registration of trademarks,
dynamic inspection of trademark registration by third parties, and regular
communication with franchisees, to protect our own trademarks and other
intellectual property rights;
 To prevent illegal use of our trademarks and brands, we have standardized the
management of our trademarks in relation to registration, renewal, transfer, use and
protection;
 We proactively register trademarks similar to our core trademarks to prevent
potential malicious registration by third parties;
 We encourage franchisees to report to us any trademark misuse or infringement they
found through a smooth communication mechanism;
 We engaged an external trademark consultant to (i) continuously monitor trademark
protection matters such as the update of trademark registration status and renewal of
registered trademarks to ensure that our registered trademarks are effective and
cover the business we engaged in, and (ii) to regularly search the trademark office’s
announcements and other public information related to our trademarks and brand in
order to timely detect unauthorized use of and infringement on our trademarks and
brand and promptly take remedial actions; and
 We designated dedicated personnel to monitor the market for unauthorized use of the
identical or similar trademarks by third parties, manage the disputes and legal
proceedings regarding our trademarks and trade names, and prevent infringement by
third parties through legal means such as litigation.
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During the Track Record Period and up to the Latest Practicable Date, we had initiated
over 40 legal proceedings against certain third parties. These legal proceedings had been
settled in ways satisfactory to us, in which the infringing parties had stopped the infringement.
During the Track Record Period and up to the Latest Practicable Date, we did not experience
any material infringement of our intellectual property rights.
As of the Latest Practicable Date, we held 7 registered trademarks, 11 patents and 7
registered domain names in China, which are material to our business. As of the Latest
Practicable Date, we have obtained all the necessary trademarks and IP rights that are material
for our tea drink stores and products.
For more information about the risks we face relating to our intellectual property, see
“Risk Factors — Risks Relating to our Business and Industry — We may not be able to
adequately protect our intellectual property, which could harm our brand value and adversely
affect our business and results of operation.” During the Track Record Period and up to the
Latest Practicable Date, we had not been subject to any material intellectual property claims
which could have a material adverse effect on our business or operations.
ENVIRONMENTAL, SOCIAL AND GOVERNANCE
Our ESG subject areas mainly include supply chain management, energy consumption
and waste generation. We are dedicated to improve the ESG performance of ourselves and, to
the extent practicable, our stakeholders such as franchisees and suppliers. With respect to our
own operation, we have identified specific metrics and set performance targets based on their
historical levels. Upon our Listing, our Board will take overall responsibility of our ESG
strategy, become directly involved in setting up and periodically reviewing our ESG policies,
and evaluate our ESG strategies, priorities and targets.
Our Governance
Since our founding, we have adopted as our long-term strategic goal to promote
environmental sustainability, support and participate in socially responsible projects, and
adhere to a high standard of corporate governance. To effectively manage environmental,
social, governance and climate-related (collectively, “ ESG”) issues, upon our Listing, we will
establish a two-tier ESG governance framework, comprising of our Board and an ESG
committee.
Our Board will take the overall responsibility for our ESG strategy and reporting. Our
Board will be directly involved in setting up our overall ESG governance management policies,
strategies, priorities and targets, reviewing our ESG policies on an annual basis to ensure its
effectiveness, and fostering a culture of acting in accordance with our core ESG values.
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Our ESG committee, consisting of our senior management and staff with a solid
understanding of current and emerging ESG issues and our business, will directly report to the
Board on ESG issues. Set forth below are the key responsibilities of our ESG committee:
 ensure that we abide by the latest ESG laws and regulations, including the applicable
sections of the Listing Rules, and keep the Board informed of any changes in the
laws and regulations and update our ESG policies accordingly;
 assess ESG risks on a regular basis according to applicable laws, regulations and
policies, and formulate strategic plans and mitigating measures to ensure our
responsibilities with respect to ESG matters are met;
 monitor local environmental, social, and climate changes in regions where we
operate and take timely measures to mitigate the risks associated with volatile
changes during our daily business operations;
 monitor the implementation of our ESG policies and engage third-party consultants
to support us in fulfilling our ESG goals if the ESG committee considers it
necessary;
 identify our key stakeholders based on our business operations and understand the
stakeholders’ influences and dependence with respect to ESG matters;
 hold meetings on a regular basis to identify, assess, and manage our progress in
achieving our key ESG targets; and
 prepare annual ESG report, report to our Board on our ESG performance and the
effectiveness of our ESG policy, and provide our Board recommendations relating
to ESG matters.
Identification, Assessment, Management and Mitigation of ESG Risks
We have identified the following ESG risks which we consider material and may have an
impact on our business, strategy or financial performance, and have formulated strategies and
implemented systems to manage and mitigate these risks.
Product Safety
Our product safety guidelines and policies, standards and procedures, inspections and
checks, and training on property product safety practices, among others, may not be adequate,
which may increase the chance of tea beverage contamination and associated illnesses. As a
result, we may be subject to risks of receiving administrative or criminal penalties and our
reputation may be adversely impacted.
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We have developed a stringent quality control system to mitigate risks relating to product
safety and quality at every step of our operations, from procurement and storage of ingredients,
to distribution to stores, to store-level processing, to delivery to consumers. For details, see
“— Quality Control and Safety Protocols.”
Supply Chain Management
Responsible sourcing and sound supply chain management are essential for us to ensure
reliable tea beverage quality and sustainability along our supply chain. If we are unable to
select quality third-party suppliers or monitor, audit and manage different parties in the supply
chain, we may be exposed to risks of suppliers’ non-compliance with applicable laws and
regulations and unethical practices, which could diminish our competitiveness and harm our
reputation.
We have established a rigorous supplier vetting and approval process, as well as detailed
protocols for ongoing monitoring and review of our suppliers, to mitigate risks relating to our
supply chain and build a more environmentally friendly supply chain. For details, see
“— Supply Chain Management — Procurement and Supplier Management” and “— Quality
Control and Safety Protocols.”
Energy Consumption
Floods, typhoons, storms, and other extreme weather conditions and natural disasters may
cause price volatility of raw materials, fluctuation in supply and physical damage to our
warehouses, stores and offices, pose safety risks to our staff and lead to delayed product
delivery to our franchised stores, among other consequences. Besides, against the backdrop of
the PRC’s carbon peak and neutrality goals, we may incur additional costs to reduce our carbon
footprint.
We are committed to conserving energy and reducing our carbon footprint. Through
improving operating efficiency, we will reduce the use of energy and other natural resources
in order to enhance our environmental performance and reduce the negative impact of our
operations in relation to climate change. We continuously look for effective ways to reduce
energy use and thus our carbon footprint. Our connected appliances, such as our proprietary tea
brewer, allow for significant electricity savings. Before we introduced the tea brewers, our
stores had to maintain the temperature of boiled water with induction cookers. Our proprietary
tea brewers are more effective at heat insulation, and thus require less electricity to maintain
the temperature of boiled water. We estimate that our tea brewers are able to save over 10
million kWh of electricity every year. In addition, our warehouses and office buildings are
equipped with intelligent electricity saving systems. Through our transportation management
system which optimizes our freight vehicles’ delivery routes, we reduce the total travel
distance of our freight vehicles, thereby reducing our energy consumption.
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Waste Generation
We are subject to relevant environmental laws and regulations. For details, please refer
to “Regulations — Regulations on Environmental Protection.” Regulators may impose more
stringent environmental requirements and standards on us. For example, we may have to switch
to cleaner energy and more energy efficient operating equipment, and further reduce emissions
of wastewater and solid pollutants, which may increase our operating costs.
We comply with national regulations to reduce plastic pollution and promote circular
economy. We continuously work on alternative packaging solutions and spread food waste
prevention message to minimize waste. Since 2020, we have gradually adopted the use of
environmentally friendly materials for our cups, straws and product stickers. We have also used
packaging bags made with low-density polyethylene, a reusable material with good insulation
properties, and made with paper and polylactic acid materials, which are biodegradable
materials, for our delivery orders. During the Track Record Period, we had cumulatively
provided our franchisees with approximately 1.8 billion cups, 3.9 billion straws, 2.4 billion
bags and 5.7 million forks and spoons made with environmentally friendly materials such as
low-density polyethylene and polylactic acid materials. We also adopt online, paperless
training methods for our franchisees. In 2023, our online training sessions, such as video
tutorial for newly launched beverages, was completed for approximately 2.3 million times. In
terms of food waste prevention, our ingredient expiration management system allows for
efficient tracking of ingredient shelf-life. We leverage various advanced technologies to reduce
fruit spoilage. For example, by promptly processing mangoes at source and strictly controlling
their packaging, delivery and ripening processes, we decreased the ripening spoilage rate to
10% in 2023, far below the industry average of approximately 20%. We also maintain
compliance with laws and regulations governing environmental protection.
Health and Work Safety
We are subject to relevant health and safety laws and regulations. For details, please refer
to “Regulations — Regulations on Labor Right and Interests — Work Safety.” During the Track
Record Period, we complied with the relevant applicable occupational health and safety laws
and regulations in all material respects in the PRC. We strive to provide a safe working
environment for our employees and implement work safety guidelines for all of our employees.
Metrics and Reduction Targets
We are committed to operating our business in a environmentally sustainable manner. We
have formulated a set of key performance indicators that are relevant to our ESG subject areas
and identified targets based on the historical level of our key performance indicators.
We evaluate our power and water usage level and intensity by tracking our two main
office buildings’ annual total electricity and water consumption and annual average electricity
and water consumption per RMB1 million of revenue. We also operate a fleet of freight
vehicles which results in the emissions of air pollutants including nitrogen oxides (“NO
x”),
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sulphur oxides (“SO x”) and particulate matters (“PM”). The vehicles’ operations also result in
carbon dioxide (“CO 2”) emissions, of which we track both the absolute amount and intensity.
The following table sets forth the historical level of our key performance indicators during the
Track Record Period.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Total electricity consumption
(kWh) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,486,765 2,436,263 2,680,733 2,103,411
Intensity of electricity
consumption (kWh/RMB1
million of revenue) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118339.1 438.2 349.3 326.6
Total water consumption (ton) /H1118 18,672 32,315 43,228 32,853
Intensity of water consumption
(ton/RMB1 million of
revenue) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184.3 5.8 5.6 5.1
NO
x emission (kg) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111837,010 58,418 76,328 67,003
SOx emission (kg) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111848 75 97 69
PM emission (kg) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,718 2,843 3,813 3,409
CO2 emission (ton) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187,822.8 12,114.5 15,736.8 11,255.9
Intensity of CO 2 emission
(ton/RMB1 million of
revenue) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.8 2.2 2.1 1.7
The intensity of our electricity consumption, water consumption and CO
2 emission have
all decreased from 2022 to 2023 and from 2023 to the nine months ended September 30, 2024,
following an increase from 2021 to 2022. Our ESG performance is currently in line with our
peers. Going forward, while our power and water usage level may increase in line with our
expected business expansions, we intend to reduce our power and water usage intensity by
cultivating a culture of conversation within our Company through internal trainings and
awareness campaigns. To reduce our freight vehicles’ emissions in the future, we intend to
continue upgrading our proprietary transportation management module which optimizes our
vehicles’ delivery routes and reduces their emission levels. We will also evaluate the adoption
of electric vehicles to reduce the environmental impact of our vehicle fleet.
We have identified certain quantitative reduction targets for our key performance
indicators discussed above to guide our operations. As our business has been undergoing rapid
expansion and may continue such growth going forward, we expect to revisit our reduction
targets after our business development becomes more stabilized and potentially adjust them
based on our actual business conditions at the time. The following table sets forth our
quantitative reduction targets based on information currently available to us.
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Reduction Targets by 2025
Intensity of electricity consumption
(kWh/RMB1 million of revenue) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Approximately 5% from 2023 level
Intensity of water consumption
(ton/RMB1 million of revenue) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Approximately 5% from 2023 level
Intensity of CO 2 emission (ton/RMB1 million
of revenue) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Approximately 5% from 2023 level
Corporate Social Responsibilities
We are committed to being responsible corporate citizens, continuously fulfilling
corporate social responsibility. We recognize the size and influence of our platform, and seek
to utilize our influence in a socially responsible manner. We actively encourage and support
socially responsible initiatives and promote the concept of corporate social responsibility
throughout our company.
Community Outreach
We actively engage with stakeholders in our community. As of September 30, 2024, our
franchisees and we collectively and cumulatively created employment opportunities for over
230,000 people, and our efforts to directly procure ingredients from the sources have benefited
many producers in the agriculture sector. We procured approximately 85,000 tons of fresh
fruits spanning across 36 kinds in 2023. In 2023, we co-founded the “new tea beverages charity
fund” with the China Foundation for Rural Development to facilitate rural area development,
provide industrial support for farmers and explore sustainable paths for rural area
revitalization.
Employee Well-being and Diversity
We believe a core part of our corporate social responsibility is to take care of our
employees. We value our people and respect the dignity, character, privacy, and personal
interest of each of our employees. We place strong emphasis on well-being in the workplace.
Activities are organized regularly to facilitate our employees to explore and pursue their
hobbies and interests, and achieve a healthy work-life balance. In 2023, we organized nine
large-scale activities that involved almost all of our employees.
Our management team adheres to a simple and candid communication style, fostering a
humble and honest atmosphere among all employees that cultivates strong bonds among our
people. We embrace an inclusive and open corporate culture, which allows us to continually
attract talented individuals with diverse backgrounds and perspectives. We actively work to
create an environment where every employee feels valued and empowered to contribute to their
fullest potential, as we believe that encouraging varied perspectives and fostering collaboration
across all levels are key driving forces behind our continued growth. We also foster inclusion
and equality among employees from all backgrounds, regardless of age, gender, disability, and
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citizenship status, among others. We have adopted various policies and measures to support
employee diversity. For example, we offer maternity and paternity leaves to our employees and
have dedicated nursing rooms within our office building, and substantially all of our job
postings are gender-blind. As of September 30, 2024, 46% of our employees are female. We
believe that diversity, including but not limited to gender diversity, is important to us in
thriving in the business environment.
Professional Development
We encourage everyone within our organization to pursue professional development
opportunities. In furtherance of this goal, we have been offering trainings and career
development programs to our employees to support their growth and upward mobility. We
encourage our young employees to take leadership roles. We provide a large variety of
professional development training. In 2023, we provided approximately 28,000 hours of
training with over 13,500 cumulative attendees. We conduct employee assessments at the end
of each year to provide feedback and guidance, and, depending on their performance and
responsibilities, provide promotion and training opportunities.
Business Ethics
We are committed to shaping our corporate governance and culture to a high standard. We
believe good governance and healthy culture are essential to our employees’ well-being as well
as our business development. To this end, we have put in place a series of internal regulations
to set forth the guidelines for compliance with laws and regulations and promote honest and
ethical conduct, including our code of business conduct and ethics, anti-corruption compliance
policy, and internal control manual.
Anti-corruption, Anti-money Laundering and Anti-bribery
To protect our reputation and integrity, we have implemented an anti-corruption,
anti-money laundering and anti-bribery policy to safeguard against any corruption, money
laundering or bribery acts within our Company. We provide training sessions to our employees
to ensure that our employees’ awareness of such policy and their compliance with applicable
laws and regulations in the course of conducting business. Additionally, we have a variety of
complaint and reporting channels, such as reporting hotline and e-mail address that are open
to both internal employees and the public to report any bribery or corruption acts, and our
employees can also make anonymous reports to our internal audit committee. Our legal and
internal control teams accept the reports of fraud and bribery and hold special investigations
against such incidents. We maintain strict confidentiality of all whistleblower information.
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We require our franchisees to sign integrity agreements in which they undertake to
comply with our anti-bribery and corruption requirements. For instance, the integrity
agreement prohibits our franchisees from giving and taking any bribes, as well as making or
receiving any improper payment. We also emphasize ethical value and commitment when
picking suppliers, and we have implemented relevant policies forbidding our employees from
receiving any kickbacks from our suppliers. We request our suppliers to comply with all the
applicable laws and regulations relating to the procurement transactions. Our suppliers shall
not make any payment to us out of the ordinary scope of our business collaboration. In the
event that we find our suppliers are in breach of the foregoing arrangements, we are entitled
to report the illegal acts to applicable authorities or terminate the supply agreement.
Our Franchisees and Suppliers
We continuously improve the franchisee management system and support franchisees in
improving their ESG management level and performance through management assessments,
training and empowerment. For example, we actively provide ESG-related training and
educational programs to our franchisees. By equipping our franchisees with knowledge about
sustainable practices, we empower them to actively abide by our ESG policies and contribute
to our ESG goals in their day-to-day activities. We also take a variety of measures to monitor
the daily operations of our franchisees, such as regular store visits by our supervisors and
inspectors, to ensure that our franchisees follow our ESG policies and strategies. In our
franchisee evaluation process, we consider franchisees’ ESG efforts as a key factor in assessing
their performance. For example, we check for hygiene within and around our franchised stores
to prevent environmental pollution, require standardized beverage preparation to prevent
waste, prohibit the use of expired food ingredients to ensure food safety, and prohibit the use
of child labor. Failure to meet our standards may result in penalties such as fines.
In addition, to engage our suppliers in our environmental protection endeavors, we
encourage our suppliers to establish sound quality management systems and obtain
professional system certifications in ESG areas. We also encourage our suppliers to use
environmental-friendly packaging materials and promote innovation and environmental-
friendliness in packaging.
INSURANCE
As of the Latest Practicable Date, we maintained various insurance policies relating to our
business operations. For our operations, we mainly purchase property insurance and
employer’s liability insurance. We consider that the coverage from the insurance policies
maintained by us is adequate for our present operations and is in line with industry norms. For
more information, please see “Risk Factors — Risks Relating to Our Business and Industry —
The insurance policies we have might not offer sufficient coverage for all risks related to our
business operations.”
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RISK MANAGEMENT AND INTERNAL CONTROL
We have devoted ourselves to establishing and maintaining risk management and internal
control systems consisting of policies and procedures that we consider to be appropriate for our
business operations, and we are dedicated to continuously improving these systems. We have
adopted and implemented comprehensive risk management policies in various aspects of our
business operations as set out below.
Control of Third-Party Payment Arrangements
From January 1, 2021 and up to November 22, 2023 (the “ Relevant Period ”), we
accepted payment made on behalf of certain of our franchisees (the “ Relevant Franchisees ”)
through the accounts of third parties designated by the Relevant Franchisees (the “ Third-party
Payment Arrangement ”). Subsequent to November 22, 2023, we had ceased accepting
third-party payments and updated our system such that our franchisees can only pay with their
own bank accounts. As advised by our PRC Legal Advisor, the Third-party Payment
Arrangement is not in breach of mandatory requirements of the current applicable laws and
regulations in China. We believe that the cessation of Third-party Payment Arrangement did
not and will not have a material adverse effect on our business, results of operations and
financial condition.
During the Relevant Period, we have duly booked all payments received under the
Third-party Payment Arrangement according to our internal accounting policies and tax related
laws and regulations. In 2021, 2022 and 2023, we received third-party payments from 729, 573
and 614 franchisees, and the aggregate amount of third-party payments we received was
RMB867.9 million, RMB1,017.8 million and RMB856.8 million, respectively, representing
approximately 18.0%, 16.9% and 10.3% of the total payments we received from our
franchisees, respectively. During the Relevant Period, no individual Relevant Franchisee had
a material impact on our revenue.
During the Relevant Period, to the best of our knowledge, the third parties designated by
the Relevant Franchisees primarily include the Relevant Franchisees’ family members and
employees. To the best of our knowledge, none of the third parties designated by the Relevant
Franchisees is our connected person and all designated third parties are independent from each
of our Directors, senior management and Shareholders.
During the Relevant Period, (i) we had not proactively initiated any Third-party Payment
Arrangement or participated in other forms in any of such arrangement; (ii) we had not
provided any discount, commission, rebate or other benefit to any of the Relevant Franchisees
to facilitate or incentivize the Third-party Payment Arrangement; and (iii) the pricing and
payment terms of the agreements we entered into with the Relevant Franchisees were generally
in line with franchisees not involved in the Third-party Payment Arrangement.
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Reasons for the Third-party Payment Arrangements
As confirmed by CIC, it is not uncommon for franchisees in the freshly-made tea store
market to settle their corporate transactions through third-party payors such as their family
members. Our use of the Third-party Payment Arrangements was primarily due to the
following reasons:
 Payment convenience. Many of our franchisees are small-sized private businesses.
For convenience, some of them prefer the settlement arrangement of payment
through designated third parties, such as family members, which may offer more
flexibility in terms of handling transactions.
 Managing multiple stores. For some of our franchisees that manage multiple
franchised stores, they prefer to use multiple banks accounts to track the individual
financial performance of each store. In doing so, they use accounts of third parties
such as their employees.
Implication and Termination of the Third-party Payment Arrangements
To ascertain the implications of the third-party payment arrangements, we communicated
with the Relevant Franchisees and their designated third-party payors and obtained
confirmations from 770 Relevant Franchisees, and their designated third-party payors, whose
payments under the Third-party Payment Arrangements represented approximately 76%, 79%
and 80% of total payments we received pursuant to the Third-Party Payment Arrangements in
2021, 2022 and 2023, respectively. The confirmations include:
 The third-party payment arrangement was a voluntary arrangement between the
Relevant Franchisees and their designated third parties. We did not propose any such
arrangement and, except for accepting the payments, did not participate in such
arrangement in any other way;
 The Relevant Franchisees’ delegation of payment obligations to their designated
third-party payors involve genuine underlying business transactions between the
Relevant Franchisee and us. The third-party payments are not used for bribery or
other illegitimate purposes;
 The Relevant Franchisees and their designated third parties did not receive any
financial aid from us. Funds involved in the third-party payments were from legal
sources and such third-party payment arrangement was not used for illegal activities
such as money laundering;
 All risks arising from the above third-party payment shall be borne by the Relevant
Franchisees and their designated third-party payors and not us;
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 The payment obligation of the Relevant Franchisees shall be deemed to be fully
performed after the designated third-party payors paid the amount due;
 The designated third-party payors have not and will not request for the return of
funds paid to us under the Third-Party Payment Arrangement;
 We are entitled to seek payment from the Relevant Franchisees in the event that the
designated third-party payors failed to perform the payment obligation in full or in
part; and
 We shall not be involved in any risks or disputes arising from the payment
arrangement between the Relevant Franchisees and their designated third-party
payors, and are not obligated to return the payment received from the designated
third-party payors regardless of any disputes between the Relevant Franchisees and
their designated third-party payors.
To our best knowledge, the third parties payors designated by the Relevant Franchisees
do not have any other past or present relationships (including, without limitation, family,
business, financing, trust or otherwise) with us or our substantial shareholders, directors or
senior management, or any of their respective associates. Moreover, during the Track Record
Period and up to the Latest Practicable Date, we were not aware of any commercial bribery,
money laundering, tax evasion or existing or potential disputes existed under the Third-party
Payment Arrangement and were not subject to any administrative notice, investigation or
penalty related to the Third-party Payment Arrangement. As advised by our PRC Legal
Advisor, in light of the above, (i) the Third-party Payment Arrangement is not in breach of
mandatory requirements of current applicable laws and regulations in China; (ii) with respect
to the Relevant Franchisees and their designated third parties who have duly made the
confirmations above, the risks for our Group to be obligated to return the payments under the
Third-party Payment Arrangement to the Relevant Franchisees and their designated third
parties are remote; (iii) considering the written compliance confirmations for all of our
subsidiaries that received third-party payments during the Relevant Period, which are issued by
the competent authorities in the respective regulatory regions at which these subsidiaries are
located, and the fact that during the Track Record Period and up to the Latest Practicable Date,
none of these subsidiaries had been subject to any investigation or penalties from the relevant
branches of PBOC due to third-party payments, the risks that we were deemed as committing
the crime of money laundering and subject to relevant criminal liability thereto are remote; and
(iv) the risks of such arrangement being deemed as circumventions of relevant PRC laws and
regulations or the risks that we would be committed as covering up or concealing the source
and nature of illegally obtained proceeds or gains under Article 191 of the Criminal Law are
remote. In light of the above, our Directors concur with the PRC Legal Advisor’s view. Based
on the independent due diligence undertaken by the Joint Sponsors, nothing material has come
to the attention of the Joint Sponsors that would reasonably cause them to disagree with the
aforementioned views of the PRC Legal Advisor. In addition, although our PRC Legal Advisor
has advised us that there is a risk that we may be obligated to return some payments made under
the Third-party Payment Arrangement, especially with respect to those Relevant Franchisees
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and their designated third parties who have not provided us duly executed confirmations,
considering such payments constituted a very insignificant proportion of the total payments we
received from our franchisees, our Directors believe that it would not have any material
adverse effect on our overall business.
We had ceased accepting third-party payments subsequent to November 22, 2023. We
believe that the cessation of Third-party Payment Arrangement did not and will not have a
material impact on our business. No franchisees terminated their relationships with us as a
result of the cessation of Third-party Payment Arrangement. Nevertheless, we face certain risks
relating to the Third-party Payment Arrangement. For details, see “Risk Factors — Risks
Relating to Our Business and Industry — We face risks in connection with Third-party
Payment Arrangements.”
Our Enhanced Internal Control measures
We have adopted internal control measures to mitigate risks relating to, and prevent future
occurrences of, the Third-party Payment Arrangement.
All of our franchisees are required to register for accounts on our MDB system to place
orders for supplies, and to link their accounts to certain payment methods. Previously, on the
MDB system, franchisees were allowed to link their accounts to third-party bank accounts and
pay for their orders with these accounts. We have since updated our system to only allow
franchisees to pay with their own bank accounts and automatically reject any payment made
with third-party accounts. To confirm that the bank accounts used belong to the relevant
franchisees, we have developed our MDB system to interface with the payment system of
financial institutions such as banks to verify key elements of the bank account information,
including account owners’ names, ID numbers, cell phone number and bank card number. The
MDB system offers payment options through two financial institutions in China, namely
Zhejiang E-Commerce Bank and China CITIC Bank. Franchisees are required to open a virtual
account at one of these financial institutions with their own verified identity to transact with
us. Payments initiated from other accounts will not be accepted in our system. In this way, we
can effectively prevent all potential third-party payments.
We are not required to obtain any license, certificates or registration for the operation of
our MDB system. With respect to the compliance of data privacy and protection laws in
relation to the collaboration with financial institutions, based on the opinion of our PRC Legal
Adviser, according to the confidentiality obligation under the cooperation agreement between
the Company and each of the financial institutions, the financial institution shall only use the
Company’s information and transaction records within the scope permitted by laws and
regulations, and keep confidential the fund dynamics and related transactions of the Company
and its franchisees. In light of these, as advised by our PRC Legal Advisor, we have complied
with all applicable laws and regulations in the PRC in relation to data privacy and protection
in all material aspects.
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Subsequent to November 22, 2023, we had completely ceased accepting third-party
payments. We do not have any plan to adopt third-party payment arrangement again in the
future, and intend to continuously monitor the effectiveness of our internal control measures
to prevent third-party payments and promptly address any identified deficiencies. Our
Directors are of the view that the foregoing internal control measures are sufficient and can
substantially mitigate any risk we face relating to future use of third-party payments. Our
internal control consultant has performed a follow-up review of our internal control measures,
and did not identify any issues. No further recommendations were made for the samples tested.
Based on the independent due diligence undertaken by the Joint Sponsors, in particular, having
considered the work and procedures undertaken by the internal control consultant to the
Company, nothing material has come to the attention of the Joint Sponsors that would
reasonably cause them to disagree with the aforementioned view of our Directors.
Use of Licensed Software
We adopt stringent policies and rules to prevent unauthorized or other illegal use of
third-party software. We require all of our employees to use legally purchased software for
business purposes. Any software purchase must go through prescribed procurement processes
and the purchased licenses are required to be recorded. We prohibit our employees from, among
others, knowingly downloading unlicensed software. We require each department to designate
specific persons to be responsible for overseeing the use of licensed software in their
department and, in cases where a misuse of copyrighted software causes material impact to the
Company’s image, the persons directly responsible for the misuse and the designated persons
in charge of oversight will both be held responsible.
Financial Reporting Risk Management
We have in place a set of accounting policies in connection with our financial reporting
risk management, such as financial reporting management policies, budget management
policies, treasury management policies, financial statements preparation policies and finance
department and staff management policies. We have various procedures and IT systems in place
to implement our accounting policies, and our finance department reviews our management
accounts based on these procedures. We also provide regular training to our finance department
employees to ensure that they understand our financial management and accounting policies
and implement them in our daily operations.
Internal Control Risk Management
We have designed and adopted strict internal procedures to ensure the compliance of our
business operations with the relevant rules and regulations. Our legal, finance and other
departments work closely together to: (a) perform risk assessments and give advice on risk
management strategies; (b) improve business process efficiency and monitor internal control
effectiveness; and (c) promote risk awareness throughout our company.
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In accordance with our internal procedures, our in-house legal and finance departments
review due diligence materials and contracts of suppliers and franchisees, and work with
relevant business units to obtain and maintain requisite governmental approvals or consents,
including preparing and submitting all necessary documents for filing with relevant
government authorities within the prescribed regulatory timelines.
We continually review the implementation of our risk management policies and measures
to ensure our policies and implementation are effective and sufficient.
Audit Committee Experience and Qualification and Board Oversight
We have established an audit committee to monitor the implementation of our risk
management policies across our company on an ongoing basis to ensure that our internal
control system is effective in identifying, managing and mitigating risks involved in our
business operations.
The audit committee consists of three members, namely Mr. Y ue Zhuo, Mr. Jianbo Li and
Mr. Y aoxin Huang, all of whom are non-executive directors. Mr. Y ue Zhuo is the chairperson
of the audit committee. For the professional qualifications and experiences of the members of
our audit committee, see “Directors and Senior Management.”
We also maintain an internal audit department which is responsible for reviewing the
effectiveness of internal controls and reporting to the audit committee and senior management
on any issues identified. Our internal audit department members hold regular meetings with
management to discuss any internal control issues we face and the corresponding measures to
implement toward resolving the issues. The internal audit department reports to the audit
committee to ensure that any major issues identified are channeled to the committee on a timely
basis. The audit committee then discusses the issues and reports to the board of directors, if
necessary.
Ongoing Measures to Monitor the Implementation of Risk Management Policies
Our audit committee, internal audit department and senior management together monitor
the implementation of our risk management policies on an ongoing basis to ensure our policies
and implementation are effective and sufficient.
LICENSES AND REGULATORY APPROV ALS
In accordance with the laws and regulations in the jurisdictions in which we operate, we
are required to obtain various licenses and regulatory approvals to operate our business. Please
refer to the section entitled “Regulation” in this prospectus for details about the regulations that
apply to us.
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During the Track Record Period and up to the Latest Practicable Date, we had obtained
all necessary licenses that are material to our business operations from the relevant government
authorities. All of our licenses are valid and subsisting. Our Directors do not expect any
impediment in the renewal of our licenses.
The table below sets forth a summary of the material licenses and regulatory approvals
that we have obtained for our business operations as of the Latest Practicable Date:
Type of License or Regulatory Approval
Number of
Licenses
Record-filing for Commercial Franchise (ࣩ)H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181
Food Operation License (຾ᐄ஢̙ᗇ) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111810
Food Production License (͛ପ஢̙ᗇ) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185
Road Transportation Operation Permit ( ༸༩༶፩຾ᐄ஢̙ᗇ) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111813
Record-filing for the Sale of Prepackaged Food Only
(ࣩ)H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814
LEGAL PROCEEDINGS AND COMPLIANCE
Legal Proceedings
From time to time, we may become a party to various legal or administrative proceedings
arising in the ordinary course of our business, including actions with respect to intellectual
property infringement, violation of third-party licenses or other rights, breach of contract and
labor and employment claims. We are currently not a party to, and we are not aware of any
threat of, any legal or administrative proceedings that, in the opinion of our management, are
likely to have any material adverse effect on our business, financial condition, cash-flow or
results of operations.
Compliance
Save for the non-compliance incidents disclosed below, which we do not believe have had
or will have a material adverse impact on our business operations or financial results, during
the Track Record Period and up to the Latest Practicable Date, we had complied with all
relevant laws and regulations applicable to us in all material respects concerning our
operations. For more information about the laws and regulations applicable to us, please see
“Regulations.”
Historical Tax Non-Compliance
In December 2021, the investigation division of the tax bureau of Taizhou city (the
“Investigation Authority ”) found that Guming Technology had underpaid taxes and
surcharges for the period from June 14, 2018 to January 31, 2020 (the “ Historical Period ”) in
a total amount of RMB23.6 million, and imposed on it a fine of RMB11.6 million and a late
payment fee of RMB6.5 million. Guming Technology fully settled the underpaid taxes and
surcharges, the fine and the late payment fee by January 2022.
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Guming Technology was established in June 2018. Back then, our business experienced
a period of rapid expansion. However, in the early stage of its establishment, Guming
Technology did not have sophisticated internal control systems in place to cope with its rapid
business growth and ensure that all its tax reporting obligations were duly performed. In
particular, there was a lack of manpower and experience at Guming Technology’s finance
department and a lack of comprehensive and automated IT system for order placement and
financial management. As a result, although revenue had been recognized in our accounting
books in corresponding periods, some of Guming Technology’s revenue during the Historical
Period, which was prior to the Track Record Period, was not recognized for tax reporting and
Guming Technology underpaid the relevant taxes.
We believe the tax non-compliance incident mentioned above did not and will not have
any material adverse effect on our business operations or financial results. We have obtained
a confirmation from the Investigation Authority dated August 15, 2023 that confirms (i)
Guming Technology had fully and timely settled the underpaid taxes, the fine and the late
payment fee; (ii) no aggravating factors were found in respect of the tax non-compliance; (iii)
the investigation of the tax non-compliance had concluded; and (iv) from the date of
establishment of Guming Technology and up to the date of such confirmation, save for the tax
non-compliance incident mentioned above, the Investigation Authority has not found any other
tax non-compliances of Guming Technology that may lead to the imposition of penalties or
recovery of tax by the Investigation Authority, and there were no existing or potential disputes,
arbitration or litigations between Guming Technology and the Investigation Authority. As
advised by our PRC Legal Advisor, the Investigation Authority is the competent authority for
providing the above confirmation, because it was the tax authority for supervision and
penalties with respect to Guming Technology and had the authority to inspect its tax-related
affairs. We have also obtained a tax compliance certificate from the tax bureau of Wenling,
Taizhou, which confirms that up to September 30, 2023, save for the tax non-compliance
incident mentioned above, (i) Guming Technology had duly filed its tax returns and fully paid
the amount of tax due in compliance with relevant PRC laws and regulations, and (ii) Guming
Technology had not been subject to any other tax related investigations or penalties. As advised
by our PRC Legal Advisor, the tax bureau of Wenling, Taizhou is the competent authority for
issuing the above certificate, because it is the tax administration authority of Guming
Technology and was fully aware of the routine tax filings and relevant information of Guming
Technology. The Investigation Authority is a branch of the tax bureau of Taizhou city, and the
tax bureau of Taizhou city is the superior tax authority of the tax bureau of Wenling, Taizhou.
In addition, pursuant to the enterprise special credit report of Guming Technology issued by the
Zhejiang Credit Center, from October 1, 2023 to September 30, 2024, Guming Technology did
not have any record of illegality or irregularity related to its taxes. As confirmed by our PRC
Legal Advisor, Zhejiang Credit Center is the competent authority in providing such information
considering that: (i) Zhejiang Province has been promoting the use of special credit reports to
replace the written compliance certificates since December 2023; and (ii) as confirmed by
Zhejiang Credit Center, it is responsible for collecting information and providing a unified
inquiry channel for enterprises in Zhejiang, and the source of the information in special credit
reports originated from the relevant local government authorities.
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In addition, we believe the tax non-compliance did not involve any fraud, dishonesty or
willful intent to evade tax on the part of our Group, our directors or senior management,
considering that, among others, (i) the Investigation Authority has conducted a thorough
investigation of the incident and neither the Investigation Authority nor any other competent
authority in the PRC has imposed any penalty on the directors or senior management or
indicated that there was any element of fraud, dishonesty, willful intent to evade tax and/or
negligence on the part of our Group, our directors or senior management; and (ii) the incident
primarily resulted from the unsophisticated corporate governance structure and inadequacy in
the internal control system of Guming Technology during the Historical Period. As advised by
our PRC Legal Advisor, it is highly unlikely that the incident involved any fraud, dishonesty,
willful intent to evade tax and/or gross negligence on the part of our Group, our directors or
senior management, based on the foregoing and considering that (i) no allegation of fraud,
dishonesty, willful intent to evade tax and/or negligence on the part of our Group, our directors
and/or our senior management was made in the tax non-compliance incident by the
Investigation Authority; and (ii) as of the Latest Practicable Date, none of our directors and/or
our senior management has received any notice of investigation from the Investigation
Authority or any other competent governmental authority in the PRC, or was subject to any
penalty imposed by any of the aforementioned relevant authorities with respect to the tax
non-compliance.
We have implemented a series of enhanced internal control measures to prevent the
recurrence of similar non-compliance incidents and we have not experienced any incident
similar to the tax non-compliance incident mentioned above during the Track Record Period.
We have strengthened the composition of our finance department and Mr. Hailing Meng, who
has extensive experience in finance, accounting and internal control, has assumed the role of
our chief financial officer. In addition, we have put in place a sophisticated IT system to
manage the receipt of orders and funds. We require all franchisees to place orders through our
electronic ordering system which automatically generate invoices and transmit transaction
information to our financial systems. Based on a review of our internal control policies for the
most recent year and sampling work conducted by our internal control consultant, no material
deficiencies have been identified in our current internal control policies for tax reporting,
accounting control and bank account management. For details of our risk management and
internal control policies, see “— Risk Management and Internal Control.”
Having considered the nature and reasons for the non-compliance incident above and the
internal control measures adopted by us, our Directors are of the view that the non-compliance
incident would not affect the suitability of our Directors to act as directors of a listed issuer.
Based on the independent due diligence undertaken by the Joint Sponsors, in particular, having
considered the PRC regulatory confirmations obtained and the views of the PRC Legal
Advisor, nothing material has come to the attention of the Joint Sponsors that would reasonably
cause them to disagree with the aforementioned view of our Directors.
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Social Insurance and Housing Provident Funds
During the Track Record Period, we had not made social insurance and housing provident
fund contributions for some of our employees in full in accordance with the relevant PRC laws
and regulations, primarily because (i) consistent with the industry norm, our labor force is
highly mobile, which has made it infeasible for us to make full contributions in time for the
relevant employees that left us shortly after joining; and (ii) certain employees were not willing
to bear their share of social insurance and housing provident funds strictly in portion to their
salary. In 2021, 2022, 2023 and the nine months ended September 30, 2024, the aggregate
shortfall of social insurance and housing provident fund contributions amounted to RMB4.9
million, RMB6.1 million, RMB9.8 million and RMB9.3 million, respectively.
As advised by our PRC Legal Advisor, an employer that has not made social insurance
contributions at a rate and based on an amount prescribed by the law, or at all, may be ordered
to rectify the non-compliance and pay the required contributions within a stipulated deadline
and be subject to a late fee of up to 0.05% of the outstanding amount for each day of delay.
If the employer still fails to rectify the failure to make social insurance contributions within the
stipulated deadline, it may be subject to a fine ranging from one to three times the amount
overdue. Pursuant to relevant PRC laws and regulations, if there is a failure to pay the full
amount of the housing provident fund as required, the housing provident fund management
center may require payment of the outstanding amount within a prescribed period. If the
payment is not made within such time limit, an application may be made to the PRC courts for
compulsory enforcement.
Our PRC Legal Advisor has further advised us that the risk of us being imposed of fine
is remote provided that we pay the unpaid amount for social insurance and housing provident
funds in full amount in a timely manner after receiving notices to rectify the non-compliance
from the relevant PRC authorities. As advised by our PRC Legal Advisor, the potential
maximum penalty with respect to fines that we may be exposed to due to shortfall of social
insurance during the Track Record Period would be approximately RMB14.7 million,
RMB18.3 million, RMB29.4 million and RMB27.9 million in 2021, 2022, 2023 and the nine
months ended September 30, 2024, respectively.
As of the Latest Practicable Date, we had not received any notification from the relevant
PRC authorities requiring us to pay any shortfall with respect to social insurance and housing
provident funds or imposing any administrative penalties on us, nor were we aware of any
material employee complaints or involved in any material labor disputes with our employees
with respect to social insurance and housing provident fund.
We have taken the following internal control rectification measures to prevent future
occurrences of such non-compliance. As of the Latest Practicable Date, we have enhanced our
human resources management policies, requiring social insurance and house provident fund
contributions to be made in full in a timely manner upon request by any competent government
authorities. We have also designated our human resources department to review and monitor
the reporting and contributions of social insurance and housing provident fund on a monthly
basis. We are also keeping abreast of the latest developments in PRC laws and regulations in
relation to social insurance and housing provident funds so that we could promptly adjust our
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social insurance and housing provident fund policies in accordance with the requirements of
the competent authorities. We will consult our PRC legal counsel from time to time for advice
on relevant PRC laws and regulations to keep us abreast of relevant regulatory developments.
As of the Latest Practicable Date, we were still in the process of communicating with our
employees with a view to seek their understanding and cooperation in complying with the
applicable payment base, which may require additional contribution from our employees.
Certain of our employees were not willing to bear the costs associated with social insurance
and housing provident funds that are required to be borne by the employees, and certain of our
employees prefer to participate in the local social insurance and housing fund schemes in their
respective place of residency. We have begun to work with our employees to contribute social
insurance and housing provident fund in a manner in accordance with relevant PRC laws and
regulations. We undertake to make full contributions of social insurance and housing provident
funds in accordance with relevant PRC laws and regulations as soon as practicable, and
disclose the status in our annual report(s) in due course.
In addition, as of the date of this document, except for those of our PRC subsidiaries that
did not have any employee as of September 30, 2024, we have obtained written confirmations
from the local governmental authorities in charge of social insurance and housing provident
funds or their authorized offices, or special credit reports from the credit institutions authorized
by relevant local government authorities. These written confirmations and special credit
reports covered the Track Record Period for substantially all of the subsidiaries, each stating
that the subsidiary is not subject to any administrative penalty. As confirmed by our PRC Legal
Advisor, the relevant confirmations were issued by the competent authorities. In view of the
above, our PRC Legal Advisor is of the view that (i) the risk of us being required by relevant
PRC authorities to pay the shortfall of social insurance and housing provident fund
contributions is remote and (ii) the risk of us being penalized for failing to make social
insurance and housing provident funds in full is remote.
Having considered the foregoing, our Directors believe that such non-compliance would
not have a material adverse effect on our business, results of operations or financial condition
or the Global Offering, considering that: (i) as of the Latest Practicable Date, we had not
received any notification from the relevant PRC authorities requiring us to pay any shortfall
with respect to social insurance and housing provident funds or imposing any administrative
penalties on us, (ii) we were not aware of any material employee complaints or involved in any
material labor disputes with our employees with respect to social insurance and housing
provident fund, (iii) as advised by our PRC Legal Advisor, considering the relevant regulatory
assurances and the facts stated above, the risk of us being required by relevant PRC authorities
to pay the shortfall of social insurance and housing provident fund contributions or being
penalized for failing to make social insurance and housing provident funds in full is remote.
As a result, we had not made any provision for the shortfall in our social insurance and housing
provident fund contributions during the Track Record Period and up to the Latest Practicable
Date. Furthermore, as advised by our PRC Legal Advisor, once we fulfill the rectification
measures and undertakings as stated above, the likelihood that we would be subject to any
material penalties due to being deemed as in violation of the applicable laws, regulations and
policies in relation to social insurance and housing provident fund by the relevant authorities
is remote.
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Environmental Impact Assessment Approval
During the Track Record Period, we invested in a processing facility (“ Guangxi
Processing Facility ”) on a leased property built on a parcel of agricultural-use land in Guangxi
and commenced the construction and production without obtaining the approval of the relevant
authority concerning the required environmental impact statement (ڌ“,EIS”).
The non-compliance incident occurred primarily due to the lack of sufficient
understanding of the requirements of relevant laws and regulations by the relevant employees.
Specifically, the Guangxi Processing Facility is a leased property solely used for tea blending
and roughing, and the relevant employees mistakenly concluded that such a processing facility
would not be subject to the environmental impact assessment requirements of construction
projects. We became aware of such non-compliance upon being advised by our PRC Legal
Advisor we engaged for the purpose of our listing application that investment in the Guangxi
Processing Facility and commencement of the construction and production without obtaining
the approval of the EIS would violate the applicable laws and regulations with respect to
environmental protection.
As advised by our PRC Legal Advisor, according to the PRC Environmental Impact
Assessment Law () and the Regulations on
Environmental Protection Management of Construction Projects (ᚐ၍ଣૢ
Է), commencing the construction of the Guangxi Processing Facility and the production
without preparing the required EIS and without obtaining the approval of the relevant
authorities could subject us to a fine ranging from 1% to 5% of the overall investment amount,
i.e. from RMB50,000 to RMB250,000, depending on the materiality and consequences of such
violations, and we may be ordered to restore the construction site to its original state. If it
causes significant environmental pollution or ecological damage, its production or usage shall
be suspended, or the project shall be closed until approval by the relevant government
authorities is obtained.
Upon the awareness of the non-compliance incident, we had actively consulted with
Hengzhou Ecological Environment Bureau of Nanning, Guangxi (ྐྵ̹ዑψ͛࿒ᐑྤ҅)
regarding the application for and the approval of the EIS for the Guangxi Processing Facility.
However, as instructed by Hengzhou Ecological Environment Bureau, the EIS with respect to
the Guangxi Processing Facility would not be accepted or approved because the leased property
is located on an agricultural-use land. As confirmed by our PRC Legal Advisor, Hengzhou
Ecological Environment Bureau of Nanning, Guangxi is the competent authority to provide this
confirmation, considering that Hengzhou Ecological Environment Bureau is the authority
responsible for reviewing and approving the environmental impact assessment documents of
the construction projects in Hengzhou. During the Track Record Period and up to the Latest
Practicable Date, we have not received any notification, administrative investigation, or
penalties from the relevant PRC authorities due to failing to obtain the approval of the relevant
authority with respect to the required EIS, and no significant environmental pollution or
ecological damage occurred due to the Guangxi Processing Facility. In addition, we also had
another tea leaves processing facility in operation, which could fulfill the production activities
of the Guangxi Processing Facilities. Based on the above, our PRC Legal Advisor is of the view
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that the risk of us being subject to any material administrative penalties by the relevant
governmental authorities due to the non-compliance incident relating to the EIS of the Guangxi
Processing Facility is relatively low and such non-compliance will not have a material adverse
impact on our overall business or results of operations. Therefore, our Directors believe that
there will not be any material adverse effects on our overall business, financial conditions or
results of operations.
We will closely monitor the production activities in Guangxi Processing Facility, to avoid
the occurrence of any significant environmental pollution. In order to ensure strict compliance
of PRC laws and regulation in the future and further strengthen our internal control system, we
have also taken certain measures to ensure on-going compliance. For example, we have been
establishing and will continuously perfect internal procedures which aims to ensure that our
subsidiaries will obtain all necessary permits, licenses and regulatory approvals prior to
commencing any construction work in the future. We will also consult our external PRC legal
counsel with respect to reviewing the necessary permits, licenses and regulatory approvals for
our projects in order to ensure compliance with applicable PRC laws and regulations, as well
as to ensure the understanding of our employees regarding the latest developments in those
applicable laws and regulations are accurate and comprehensive. In addition, for potential new
processing facilities in the future, we have designated dedicated personnel to handle the
application of environmental impact assessment documents and consult with relevant
authorities from time to time, making sure that we are up to date with the latest policies and
obtaining the approval of relevant authorities in a timely manner.
As advised by our PRC Legal Advisor, other than the non-compliance incident of the
Guangxi Processing Facility as described above, the other processing facilities we operated
complied with the applicable environmental laws and regulations in all material aspects,
including the requirements relating to environmental impact assessment, during the Track
Record Period and up to the Latest Practicable Date.
Fire Safety
As of the Latest Practicable Date, we were unable to complete the record-filing of fire
safety acceptance check (ࣩto the competent department of housing and
urban-rural development with respect to ten construction projects in our leased properties, the
aggregate gross floor area of which are approximately 51,000 square meters, accounting for
about 24% of the aggregate gross floor area of all the leased properties of our Group. The ten
construction projects are composed of:
 Decorating Projects of Six Company-Operated Stores . We failed to complete the
record filing of the fire safety acceptance check for the six decorating projects,
primarily because the prescribed uses of the leased properties for these stores are of
residential use or the owner of the leased properties has not completed the required
as-built acceptance check, causing an infeasibility in acceptance by the competent
local departments of our record-filing of fire safety acceptance check with respect
to the decorating projects.
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 Cold Storage Projects of Four Leased Warehouses . As of the Latest Practicable Date
we are in the process of completing the record-filing of the fire safety acceptance
check for three of the four cold storage projects. With respect to the cold storage
projects in the fourth warehouse, we are still in the process of finding appropriate
fire engineer company in the local area to conduct fire drawing audit.
As advised by our PRC Legal Advisor, according to the relevant laws and regulations,
failure to complete the record-filing of the fire safety acceptance check might subject us to (i)
the order for effecting rectification and a fine of no more than RMB5,000 for each project, and
(ii) the cessation of our operation of the stores and the warehouses with cold storage if such
project does not pass a spot check, and a fine of RMB30,000 to RMB300,000 if we fail to
suspend the use of such project upon notification by the relevant government authorities in the
worst scenario. Therefore, the maximum penalty is a fine of no more than RMB3,050,000. Our
PRC Legal Advisor has made inquiries with the local governmental authorities in charge of the
application for record-filing of the fire safety acceptance check. According to the local
governmental authorities, if we fail to complete the record-filing of the fire safety acceptance
check, we may be imposed penalties by competent governmental authorities pursuant to
relevant laws and regulations.
Nevertheless, our PRC Legal Advisor also advised us that the risks that we would be
subject to any material administrative penalties by the relevant governmental authorities due
to non-compliance relating to fire safety with respect to the ten construction projects are
remote, provided that, if requested by the relevant government authorities to rectify the
non-compliance, we could fully comply with the orders, with measures including but not
limited to, completing the record-filing of fire safety acceptance check to the extent feasible,
taking any other fire safety rectification measures, or proactively terminate the use of the
leased properties if none of the other measures works, in a timely manner.
Moreover, during the Track Record Period, revenues generated from our self-operated
stores that failed to complete the record-filing of the fire safety acceptance check is negligible.
In case any of these stores and warehouses were ordered to be closed down, we believe we can
relocate to alternative properties within a reasonable period of time and at reasonable costs as
(i) the substitutability of our self-operated stores and warehouses is high without special
requisite conditions, and (ii) there are sufficient alternative leased properties available in the
applicable regions. Therefore, we believe that even if the failure to complete the record-filing
of the fire safety acceptance check subject us to the cessation of our operation of the stores and
the warehouses with cold storage, such administrative penalties would not have a material and
long-lasting adverse effect on our operation.
As of the Latest Practicable Date, with respect to the three warehouses which were in the
process of completing the record-filing of the fire safety acceptance check, although the time
of application review process of the relevant local governmental authorities may be
unpredictable and the expected time of completion may be out of our control, we have been and
will continue using all commercially reasonable efforts to communicate with the lessors to
obtain necessary documents and cooperate with relevant local governmental authorities and
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complete such procedures as soon as possible. As advised by our PRC Legal Advisor, for those
three warehouses, provided that we submit all the requisite documents to the relevant
governmental authorities and pass the spot check (if any) in accordance with the relevant PRC
laws, regulations, government policies and specific requirements of the relevant governmental
authorities, there will not be any substantial legal impediment for us to complete the required
record-filing of fire safety acceptance check. Once we have completed the required fire safety
record-filing, the risk of us being subject to the administrative penalties by the relevant
governmental authorities due to the historical non-compliance is remote.
With respect to the other seven construction projects which we failed to complete the
record-filing of the fire safety acceptance check, we will continue to pay close attention to the
requirements of relevant laws, regulations and local policies and follow the guidance from
local governmental authorities.
In addition, despite our failure to complete in time the necessary fire safety procedures
due to the various reasons outlined above during the Track Record Period, we nonetheless
placed significant importance on the fire safety, with a goal to mitigate our risk exposure to
potential fire safety accidents and public safety concerns. To this end, we have taken a series
of internal control measures, which include: (i) designating experienced personnel to identify
risks and design safeguards that aid in preventing, controlling and mitigating the effects of fires
when building new stores and warehouses with cold storage; (ii) providing trainings on fire
safety to our employees, which cover key aspects of our daily operations, and organizing fire
drills from time to time to increase our employees’ fire safety awareness; (iii) installing the
necessary fire safety equipment as required by applicable PRC laws and regulations, including
fire extinguishers, smoke detectors and automatic water spray in our stores, warehouses and
processing facilities, etc.; (iv) installing proper evacuation route indication signs and where
applicable, proper emergency exits; and (v) consulting our external PRC legal counsel from
time to time to make sure our employees are aware of the latest laws, regulations and local
policies regarding fire safety and do our reasonable best efforts to complete the record-filing
of fire safety acceptance check before the start of business in accordance with the relevant laws
and regulations.
COMPETITION
China’s freshly-made beverage stores market is highly competitive with approximately
660 thousand freshly-made beverage stores as of December 31, 2023. We had a market share
of 4.8% in China’s freshly-made beverage store market in terms of GMV in 2023. China’s
freshly-made tea store market was historically fragmented and has been continuously
consolidating. The top five freshly-made tea store brands’ market share, in terms of GMV ,
increased from 38.5% in 2020 to 46.8% in 2023.
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We target the mid-priced freshly-made tea store market which has a large consumer base
across China. Our market share in China’s mid-priced freshly-made tea store market was 17.7%
in terms of GMV in 2023, making us the largest in the China’s mid-priced freshly-made tea
store market. We believe that our leading position in the mid-priced freshly-made tea store
market is a testament to the competitive strength of our products.
The “ Good me ” brand competes with mid-priced freshly-made tea store brands across all
city tiers. Specifically, the “ Good me ” brand enjoys greater presence in second-tier and below
cities. As of December 31, 2023, 79% of “ Good me ” stores were located in second-tier and
below cities, the largest share among the top five mid-priced freshly-made tea store brands by
store count. In these cities, the “ Good me ” brand had approximately 22% market share in the
mid-priced freshly-made tea store market in 2023 in terms of GMV . As of December 31, 2023,
38% of the “ Good me ” brand stores were located in towns and townships, while China’s other
top five mid-priced freshly-made tea store brands generally had below 25% of their stores
located in towns and townships. Furthermore, as of the Latest Practicable Date, we were the
only brand to adopt a regional densification strategy among the top five mid-priced
freshly-made tea store brands in China.
Players in China’s freshly-made tea store market compete on product quality and
consistency, value for money, consumer experience, store network coverage, consumer
acquisition and retention, supply chain capabilities and other factors. We compete against other
freshly-made tea stores brands, some of which operate or have franchised stores in close
proximity to our stores and compete directly with us.
In the nine months ended September 30, 2024, the growth of China’s freshly-made tea
store market slowed down compared with the same period of 2023. In addition, competition
within the market is intensifying. Specifically, (i) the top market players are competing for
appropriate locations, franchisees and consumers as they expand their store network; (ii)
underperforming stores, especially those of smaller brands, cannot compete with top
stores/brands and were forced to close; and (iii) several players launched low-priced products.
As a result of the above, we experienced a slowdown in our GMV growth rate as well as
decreases in a number of our per-store operating metrics including per-store GMV and
per-store number of cups sold. In the medium and long term, with the expected growth of
China’s economy and consumer spending as well as projected increases in the overall size of
the freshly-made tea store market, we continue to believe that we are well-positioned to
capitalize on the industry’s future growth.
For more information about our industry and the risks we face, please refer to the sections
headed “Industry Overview” and “Risk Factors — Risks Relating to Our Business and Industry
— We operate in a highly competitive and rapidly changing market in China. We face intense
competition in China’s freshly-made beverage market. Any failure to compete effectively
might negatively impact our market share and profitability.”
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A W ARDS AND RECOGNITION
During the Track Record Period, we have received recognition for the quality and
popularity of our products and services. Some of the significant awards and recognition we
have received are set forth below.
Award/Recognition Award Y ear Awarding Institution/Authority
2023 Annual “Golden Shield” Product
Quality Award (2023ږ
Է) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
2023 China Product Quality Journal
(ٟand China
Quality News ( ʕ਷ሯඎอၲၣ)
2023 Top 100 Food and Beverage
Brand – the “Red Eagle Award”
(2023೐ɢϵ੶–᜻ᆤ) /H1118
2023 Hongcan.com (᎛ၣ)
2023 Top 100 High Quality Consumer
Product Award (2023ሯऊ൬
ϵ੶࿮) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
2023 Southern Metropolis Daily
(˙ே̹జ)
2022 Industry Leader – Tencent Smart
Retail All-channel Digital
Management Award
(2022Бุᅺ૖-ᙜৃ౽ᅆཧਯΌ
ਹᅰο຾ᐄ࿮) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
2022 Tencent – Tencent Smart Retail
(ᙜৃ-ᙜৃ౽ᅆཧਯ)
Kamen Annual Strategic Influential
Brand Award (኷ଫᅂᚤɢ
೐) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
2022 Kamen (ژ)
Douyin Annual Influential Brand
Award (೐) /H1118/H1118/H1118/H1118/H1118
2022 Douyin (ࠪ)
China’s Top 100 Restaurant Franchise
Brands ( ʕ਷᎛භ̋ຑ࿮)/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
2021 China Chain Store and Franchise
Association ( ʕ਷ஹᕁ຾ᐄ՘ึ)
and Meituan (ྠ)
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Our business activities are subject to extensive supervision and regulation by the PRC
government. This section sets forth a summary of the major laws, rules and regulations that are
applicable to our current business activities within the territory of the PRC.
REGULATIONS ON FOREIGN INVESTMENT IN THE PRC
The establishment, operation and management of companies in China are governed by the
PRC Company Law (), as amended in 1999, 2004, 2005, 2013,
2018 and 2023 respectively, and the newly revised PRC Company Law will be implemented
from 1 July 2024. According to the PRC Company Law, companies established in the PRC are
either limited liability companies or joint stock limited liability companies. The PRC Company
Law applies to both PRC domestic companies and foreign-invested companies. On December
30, 2019, MOFCOM and SAMR promulgated the Measures for the Reporting of Foreign
Investment Information () which came into effect on January 1,
2020, repealing the Provisional Administrative Measures on Establishment and Modifications
(Filing) for Foreign Investment Enterprises (၍ଣᅲБ፬
). Where foreign investors carry out investment activities directly or indirectly within
China, foreign investors or foreign-invested companies shall report investment information to
commerce departments. On September 6, 2024, MOFCOM and NDRC promulgated the Special
Administrative Measures (Negative List) for Foreign Investment Access (Edition 2024) ( ̮
݄(૶ఊ)(2024و)), or the Negative List (2024), which became
effective on November 1, 2024. The catering services and general food production and sales
were not included in the Negative List (2024). Fields that are not included in the Negative List
(2024) shall be regulated according to the principle of equal treatment of domestic and foreign
investments.
On March 15, 2019, the SCNPC approved the Foreign Investment Law of the PRC ( ʕ
), and on December 26, 2019, the State Council promulgated the
Implementing Rules of the Foreign Investment Law (ૢ
Է), or the Implementing Rules, to further clarify and elaborate the relevant provisions of the
Foreign Investment Law. The Foreign Investment Law and the Implementing Rules both took
effect on January 1, 2020 and replaced three previous major laws on foreign investments in
China, namely the Sino-foreign Equity Joint V enture Law ( ʕശɛ͏΍ձ਷ʕ̮Υ༟຾ᐄΆ
), the Sino-foreign Cooperative Joint V enture Law ( ʕശɛ͏΍ձ਷ʕ̮ΥЪ຾ᐄΆ
) and the Wholly Foreign-owned Enterprise Law (),
together with their respective implementing rules. Pursuant to the Foreign Investment Law,
“foreign investments” refer to investment activities conducted by foreign investors (including
foreign natural persons, foreign enterprises or other foreign organizations) directly or
indirectly in the PRC, which include any of the following circumstances: (i) foreign investors
setting up foreign-invested enterprises in the PRC solely or jointly with other investors, (ii)
foreign investors obtaining shares, equity interests, property portions or other similar rights
and interests of enterprises within the PRC, (iii) foreign investors investing in new projects in
the PRC solely or jointly with other investors, and (iv) investment of other methods as
specified in laws, administrative regulations, or as stipulated by the State Council. The
Implementing Rules introduce a see-through principle and further provide that foreign-invested
enterprises that invest in the PRC shall also be governed by the Foreign Investment Law and
the Implementing Rules.
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REGULATIONS ON BUSINESS OPERATION OF FOOD SERVICE INDUSTRY IN THE
PRC
Food Safety Law and Implementation Rules
In accordance with the Food Safety Law of the PRC (),
or the Food Safety Law, effective on June 1, 2009 and most recently amended on April 29,
2021, the State Council implemented a licensing system for food production and trading
activities. A person or entity that engages in food production, food selling or catering services
shall obtain the license in accordance with the Food Safety Law.
The Implementation Rules of the Food Safety Law (ૢ
Է), effective on July 20, 2009 and last amended on October 11, 2019, further specifies the
detailed measures to be taken for food producers and business operators and the penalties that
shall be imposed should these required measures not be implemented.
According to the Food Safety Law, the State Council shall establish a food safety
committee whose duties shall be defined by the State Council. The food safety administration
under the State Council shall exercise supervision and administration over food production and
trading activities according to the duties defined by the Food Safety Law and the State Council
itself. The health administrative department under the State Council shall organize the
implementation of risk monitoring and risk assessment of food safety according to the duties
defined by the Food Safety Law and the State Council, and shall formulate and issue national
food safety standards together with the food and drug administration under the State Council.
Other relevant departments under the State Council shall carry out relevant food safety work
according to the duties defined by the Food Safety Law and the State Council.
As penalties for violation, the Food Safety Law sets out various legal liabilities in the
form of warnings, orders to rectify, confiscations of illegal gains, confiscations of utensils,
equipment, raw materials and other articles used for illegal production and operation, fines,
recalls and destructions of food in violation of laws and regulations, orders to suspend
production and/or operation, revocations of production and/or operation license, and even
criminal punishment.
The Measures for Investigation and Punishment of Illegal Acts concerning the Safety of
Food Sold Online (), which were promulgated by China
Food and Drug Administration (currently merged into SAMR) on July 13, 2016 and last
amended on April 2, 2021, stipulate the rules for the investigation and punishment of the acts
of online food trading third-party platform providers or food producers or traders that trade
through their self-established websites violating food safety laws, regulations, rules or food
safety standards within the territory of the PRC.
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Food Operation Licensing
According to the Administrative Measures for Food Operation Licensing and Record
filing () promulgated by the SAMR on June 15, 2023 and
effective on December 1, 2023, entities involved in food selling and catering services within
the PRC shall obtain the food operation license which is valid for 5 years except for certain
circumstances. Applications of food operation license shall be filed according to food
operators’ types of operation and classification of operation projects. Food operators shall
display their paper original food operation licenses or their electronic certificate prominently
at their sites of operation. If the licensing items which are indicated on a food operation license
change, the food operator shall, within 10 business days after the changes take place, apply
with the market regulatory authority which originally issued the license for alteration of the
operation license. Those who engage in food operation activities but failed to obtain a required
food operation license shall be punished by the local market regulatory authorities at or above
the county level according to Article 122 of the Food Safety Law.
Product Quality
Pursuant to the Product Quality Law of the PRC ()
promulgated on February 22, 1993 and most recently amended on December 29, 2018 by the
SCNPC, the seller shall be responsible for the repair, replacement or return of the product sold
if (i) the product sold does not possess the properties for use that it should possess, and no prior
and clear indication is given of such a situation; (ii) the product sold does not conform to the
applied product standard as carried on the product or its packaging; or (iii) the product sold
does not conform to the quality indicated by such means as a product description or physical
sample. If a consumer incurs losses because of purchased product, the seller shall compensate
for such losses.
On May 28, 2020, the Civil Code of the PRC (Պ), or the Civil
Code, was adopted by the SCNPC, which became effective on January 1, 2021, according to
which, a manufacturer or a commercial seller is subject to liability for harm to persons or
property caused by the product defects. The infringed may seek compensation from the
manufacturer or the commercial seller. Where the infringed seeks compensation from the
commercial seller, the commercial seller shall have the right to make a claim against the liable
manufacturer after it has made compensation.
Food Recall
The Administrative Measures for Food Recall () was promulgated
by China Food and Drug Administration on March 11, 2015 and was most recently amended
on October 23, 2020. According to the Administrative Measures for Food Recall, a food
producer or business operator shall assume primary responsibilities for food safety by
establishing a sound management system, collecting and analyzing food safety information and
performing legal duties of the cease of production and operation as well as recall and disposal
of unsafe food. Where a food producer finds that its production of food does not comply with
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the food safety standards, it shall cease the production, recall the food on the market for sale,
notify the relevant producers and operators, as well as consumers, and record the recalling and
notification at once. Where a food operator finds that the food traded by it does not comply
with the food safety standards, it shall immediately cease the trading, notify the relevant
producers and operators, as well as consumers, and record the cessation of operation and
notification. Where the food producers consider that the food shall be recalled, the food shall
be recalled immediately. The food producers are required to take such measures as remedy,
destruction and harmless treatment for the recalled food, and report the recalling and treatment
of the recalled food to the quality supervision department at or above the county level. Where
the food producers or operators fail to recall or cease trading of the food and thus fail to comply
with the food safety standards in accordance with the provisions of the laws, the quality
supervision, administration for industry and commerce, food and drug supervision and
administration departments at and above the county level shall order them to recall or cease the
sale. Where any food operator violates the Administrative Measures for Food Recall and does
not suspend the operation or proactively recall unsafe food in a timely manner, the competent
authorities shall issue warnings to it and impose fines between RMB10,000 and RMB30,000.
Sanitation of the public assembly venue
The Regulation on the Administration of Sanitation in Public Places (ሊ͛၍
ଣૢԷ), effective on April 1, 1987 and as amended on February 6, 2016 and April 23, 2019,
December 6, 2024 and most recently effective on January 20, 2025 and the Implementation
Rules of the Regulation on the Administration of Sanitation in Public Places (ሊ͛
), effective on May 1, 2011 and as amended on January 19, 2016 and
December 26, 2017, were promulgated by the Ministry of Health (currently known as National
Health Commission of the People’s Republic of China), respectively. The regulations were
adopted to create favorable and sanitary conditions for the public assembly venues, prevent
disease transmission and safeguard people’s health. Depending on the requirements of the local
health and family planning administrations, a restaurant is required to obtain a public assembly
venue hygiene license from the local health authority after it applies for a business license to
operate its business. The Decision of the State Council on the Integration of Sanitary Permits
and Food Business Licenses in Public Places for Restaurant Services (዆Υሜ዆
), which was promulgated by
the State Council on February 3, 2016, cancels the hygiene permits issued by the local health
authorities for four kinds of public places, including restaurants, cafes, bars and teahouses, and
integrates the contents of the food safety into the food operation licenses issued by the food
and drug regulatory authorities.
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REGULATIONS ON FOOD IMPORT AND EXPORT INSPECTION AND
QUARANTINE IN THE PRC
Food Import and Export
Under the Food Safety Law as well as Implementing Rules on the Food Safety Law, the
imported food, food additives and food-related products shall be consistent with the national
food safety standards of China. A food importer shall apply for inspection with the import and
export inspection and quarantine authority for the imported food and food additives, make
truthful reports on the relevant information of products, and attach qualified documents as
provided by the laws and administrative regulations. The imported food, after arrival at the
port, shall be stored in the place designated or approved by the import and export inspection
and quarantine authority; where relocation is required, necessary safety protection measures
shall be taken in accordance with the requirements of the import and export inspection and
quarantine authority. Bulk imported food shall be subject to inspection at the port of discharge.
The Administrative Department of Health under the State Council shall, in compliance with the
provisions of Article 93 of the Food Safety Law, review the relevant national (regional)
standards or international standards submitted by overseas exporters, overseas production
enterprises or their entrusted importers, and then decide to tentatively apply and publish such
standards as found in line with food safety requirements. Before the publication of such
tentative applicable standards, no import shall be conducted regarding food without national
food safety standards yet.
Pursuant to the Measures for the Supervision and Administration of Inspection and
Quarantine of Inbound Fruits (), promulgated by the State
Administration of Quality Supervision Inspection and Quarantine (cancelled) on January 5,
2005 and effective from July 5, 2005, and most recently amended by the General
Administration of Customs on November 23, 2018 and effective from the same day, before
entering into a trading contract or agreement for inbound fruits, an application for quarantine
approval for inbound fruits shall be filed with the General Administration of Customs in
accordance with relevant regulations and the License for Import Animal and Plant Quarantine
of the PRC (஢̙ᗇ) shall be obtained. Inbound fruits
shall be consistent with the relevant inspection and quarantine requirements. For example,
other fruits not specified in the plant quarantine license shall not be mixed in or entrained; the
name, source, name or code of the packing factory of fruits shall be tagged on the packing box
in Chinese or English; quarantine pests, soil, and plant debris of branches and leaves prohibited
in China shall not be brought in; and the volume of toxic and harmful substances examined
shall not exceed as stipulated by relevant safety and health standards in China.
Foreign Trade
According to the Foreign Trade Law of the PRC (), or the
Foreign Trade Law, promulgated by the SCNPC on May 12, 1994 and amended on December
30, 2022, since December 30, 2022, no registration of foreign trade operators is required. The
PRC government allows the free import and export of goods and technologies, unless otherwise
provided by laws and administrative regulations. Before December 30, 2022, pursuant to the
pre-amendment Foreign Trade Law, a foreign trade operator who is engaged in the import and
export of goods or technologies shall process the filing and registration with the foreign trade
authority under the State Council or its entrusted agencies, unless otherwise provided by the
laws, administrative regulations and requirements of the foreign trade authority under the State
Council. Where a foreign trade operator fails to do so, Customs shall not handle the formalities
for declaration and clearance of the goods imported or exported by the operator.
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Customs Law
According to the Customs Law of the PRC (), adopted by the
SCNPC on January 22, 1987, most recently amended on April 29, 2021 and effective on the
same date, the Customs of the People’s Republic of China is the entry and exit customs
supervision and administration authority of PRC. According to the relevant laws and
administrative regulations, the Customs supervises the transportation vehicles, goods, luggage,
postal articles and other articles entering and leaving the country, collects customs duties and
other taxes and fees, prevents and counters smuggling, compiles customs statistics and handles
other customs operations.
According to the Regulations of PRC Customs on Administration of Recordation of
Declaration Entities (), adopted by the
General Administration of Customs on November 19, 2021 and effective on January 1, 2022,
customs declaration entities refer to the consignees and consignors of import and export goods
and customs declaration enterprises recorded with the customs. If the consignees and
consignors of import and export goods and customs declaration enterprises apply for
recordation, they shall obtain the qualification of market entities; among them, if the
consignees and consignors of import and export goods apply for recordation, they shall also
obtain the recordation of the foreign trade operators. The recordation of the customs
declaration entities is valid for a long period of time, while the temporary recordation is valid
for one year, after the expiry reapplication of recordation can be made.
REGULATIONS ON COMMERCIAL FRANCHISING
Pursuant to the Regulations on the Administration of Commercial Franchising ( ਠุत
஢຾ᐄ၍ଣૢԷ), or the Franchising Regulations, which promulgated by the State Council
on February 6, 2007, and became effective on May 1, 2007, commercial franchising refers to
the business activities where a franchisor, being an enterprise possessing registered trademarks,
corporate logos, patents, proprietary technology, or other business resources, licenses through
contracts its business resources to the franchisees, being other business operators, and the
franchisees carry out business operation under a uniform business model and pay franchising
fees to the franchisor pursuant to the contracts. The Franchising Regulations requires that any
enterprise engaging in trans-provincial franchise business shall register with the MOFCOM,
and any enterprise engaging in franchise business within one province shall register with the
provincial counterpart of the MOFCOM. The Franchising Regulations also set forth a number
of requirements for the franchisors and to govern the franchise agreements. For example, the
franchisors and franchisees are required to enter into franchising agreements containing certain
required terms, and the franchise term thereunder shall be no less than three years unless
otherwise agreed by the franchisee.
On December 12, 2011, the MOFCOM promulgated the Administrative Measures for the
Filing of Commercial Franchisees (), which became effective
on February 1, 2012, was most recently amended on December 29, 2023, and sets forth in detail
the procedures and documents required for such filing, including, among other things, within
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15 days after executing the first franchise agreement, the franchisor shall file with the
MOFCOM or its local counterparts for record, and if there occurs any change to the
franchisor’s business registration, business resources, and the distribution of all franchisee
outlets throughout China, the franchisor shall apply to the MOFCOM for alteration within 30
days after the occurrence of such change. Furthermore, within the first quarter of each year, the
franchisor shall report the execution, revocation, termination, and renewal of the franchise
agreements occurring in the previous year to the MOFCOM or its local counterparts, the failure
of which may subject the franchisor to an order of rectification and a fine up to RMB50,000.
Pursuant to the Administrative Measures on the Information Disclosure of Commercial
Franchising (), promulgated by the MOFCOM on April
30, 2007, amended on February 23, 2012 and effective on April 1, 2012, the franchisor shall
disclose to franchisees a list of information in writing at least 30 days prior to the execution
of the franchising agreements, such as basic information of the franchisor and the franchise
activities, basic information of business resources owned by the franchisor and basic
information on franchise expenses.
As of the Latest Practicable Date, we have already obtained the Record-filing for
Commercial Franchise, and have not been subject to any material administrative penalties,
mandatory rectifications, or other sanctions by any competent regulatory authorities in relation
to commercial franchising. Based on the above, our PRC Legal Advisor is of the view that we
had complied with the applicable laws and regulations regarding commercial franchising in all
material aspects.
REGULATIONS ON FIRE PREVENTION
Pursuant to the Fire Prevention Law of the People’s Republic of China ( ʕശɛ͏΍ձ
), promulgated by the SCNPC on April 29, 1998 and recently amended on April 29,
2021, and the Interim Provisions on the Administration of Examination and Acceptance of Fire
Prevention Design of Construction Projects (),
promulgated by the Ministry of Housing and Urban-Rural Development on April 1, 2020
effective on June 1, 2020 and most recently amended on August 21, 2023, fire acceptance
should be completed for special construction projects which meet certain conditions. The
construction project that fails to complete the required as-built acceptance check on fire
prevention shall be ordered by the relevant governmental authorities to close down and shall
be imposed a fine between RMB30,000 and RMB300,000. Special construction projects that
have not passed the fire prevention inspection or the fire prevention inspection are prohibited
from being put into use. Construction projects other than special construction projects shall go
through the fire safety acceptance filing, and the competent housing and urban-rural
development authorities shall conduct random inspections on the fire safety acceptance of
other construction projects filed. If the construction projects fail to pass the random inspection
on fire safety acceptance, such projects shall be suspended.
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On August 12, 2015, the Ministry of Public Security promulgated Eight Measures to
Deepen Reform and Serve Economic and Social Development (ਕ
), or the Eight Measures. According to the Eight Measures,
construction projects with an investment of less than RMB300,000 or a construction area of
less than 300 square meters is not required to obtain the as-built acceptance check on fire
prevention or fire safety filing, and competent authorities of housing and urban-rural
development at the provincial level may formulate detailed rules of implementation pursuant
to these measures.
REGULATIONS ON REAL ESTATE LEASING
According to the PRC Civil Code (Պ) which became effective
on January 1, 2021, an owner of immovable or movable property is entitled to possession, use,
earnings, and disposal of such property in accordance with the law. Subject to the consent of
the lessor, the lessee may sublease the leased premises to a third party. Where a lessee
subleases the premises, the lease contract between the lessee and the lessor remains valid. The
lessor is entitled to terminate the lease if the lessee subleases the premises without the consent
of the lessor. In addition, if the ownership of the leased premises changes during the lessee’s
possession in accordance with the terms of the lease contract, the validity of the lease contract
shall not be affected.
On December 1, 2010, the Ministry of Housing and Urban-Rural Development
promulgated the Administrative Measures on Leasing of Commodity Housing (ॡ
), which became effective on February 1, 2011. According to such measures, the
lessor and the lessee are required to complete property leasing registration and filing
formalities within 30 days from the execution of the property lease agreement with the
development authorities or real estate authorities of the municipality or county where the
leased property is located. If a company fails to do, it may be ordered to rectify within a
stipulated period, and if such company fails to rectify, a fine ranging from RMB1,000 to
RMB10,000 may be imposed on each lease agreement.
REGULATIONS ON ADVERTISING
The Advertising Law of the PRC (), or the Advertising Law,
was promulgated by the SCNPC on October 27, 1994, and was most recently amended on April
29, 2021, which applies to the commercial advertising activities conducted by business
operators or service providers within the territory of PRC to directly or indirectly introduce
their commodities or services through a certain medium and form.
According to the Advertising Law, advertisements shall not contain any false or
misleading information, and shall not deceive or mislead customers. Each advertiser,
advertising agent or advertisement publisher shall comply with laws and regulations, act in
good faith, and conduct the fair competition when engaging in advertising activities. In an
advertisement, the statements regarding the performance, function, place of origin, use, quality,
ingredients, price, producer, valid period and guarantees of the product, or the content,
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provider, form, quality, price and guarantees of the service, shall be accurate, clear and explicit.
Failure to comply with the Advertising Law may subject the violators to punishment, including
but not limited to fine, confiscating advertising fees, suspension of the advertisement
publishing business, revocation of business license, or revocation of advertisement censorship.
REGULATIONS ON ANTI-UNFAIR COMPETITION
Anti-Unfair Competition Law
The principal legal provisions governing market competition are set out in the Anti-unfair
Competition Law of the PRC (), or the Anti-Unfair
Competition Law, which was promulgated by the SCNPC on September 2, 1993, and amended
on November 4, 2017, and April 23, 2019, respectively. In accordance with the Anti-Unfair
Competition Law, operators should abide by the principles of voluntariness, equality, fairness,
honesty, and integrity, and abide by laws and recognized business ethics when trading in the
market. When an operator disrupts the competition order and infringes the legitimate rights and
interests of other operators or consumers in violation of the Anti-Unfair Competition Law, its
behavior constitutes unfair competition. When the legitimate rights and interests of an operator
are damaged by unfair competition, the operator may file a lawsuit with the people’s court. If
an operator violates the provisions of the Anti-Unfair Competition Law, engages in unfair
competition, and causes damage to another operator, it shall be liable for damages. If the
damage suffered by the injured operator is difficult to ascertain, it shall be determined in
accordance with the profit obtained by the infringer through the infringement. The infringer
shall also bear all reasonable expenses paid by the infringed operator to cease the infringement.
Price Law
According to the Price Law of the PRC (), or the Price Law,
which was promulgated by the SCNPC on December 29, 1997 and effective on May 1, 1998,
business operators are prohibited from engaging in unfair pricing activities, including
manipulating market prices, dumping commodities at a price lower than cost, manipulation of
prices, deception of consumers or other business operators by using false or misleading prices,
and price discrimination. If a business operator violates the Price Law, he/she shall be subject
to administrative penalties, such as warning, cessation of illegal activities, confiscation of
illegal gains, being fined not more than five times the illegal gains thereof, and the business
operator may be ordered to suspend business for rectification or the business license may be
revoked in severe circumstances.
REGULATIONS ON CONSUMER PROTECTIONS
The Law of the PRC on the Protection of the Rights and Interests of Consumers ( ʕശ
) was promulgated on October 31, 1993 and amended on
August 27, 2009 and October 25, 2013, to protect consumers’ rights when they purchase or use
goods and accept services. All business operators must comply with this law when they
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manufacture or sell goods and/or provide services to consumers. Under the amendments made
on October 25, 2013, all business operators must pay high attention to protecting consumers’
privacy and must strictly keep confidential any consumer information they obtain during their
business operations.
REGULATIONS ON CYBER SECURITY AND INFORMATION SECURITY
Cyber Security
According to the National Security Law of the PRC ()
promulgated by the SCNPC on July 1, 2015, which became effective on the same day, the state
shall establish systems and mechanisms for national security review and supervision, conduct
national security review on key technology and network information technology products and
services related to state security, so as to prevent and neutralize state security risks in an
effective way.
The PRC Cyber Security Law (), or the Cyber Security
Law, which was promulgated by the SCNPC on November 7, 2016 and became effective on
June 1, 2017, requires a network operator, including internet information services providers
among others, to adopt technical measures and other necessary measures in accordance with
applicable laws and regulations as well as compulsory national and industrial standards to
safeguard the safety and stability of network operations, effectively respond to network
security incidents, prevent illegal and criminal activities, and maintain the integrity,
confidentiality and availability of network data. The Cyber Security Law emphasizes that any
individual or organization that uses networks shall not endanger network security or use
networks to engage in unlawful activities such as those endangering national security,
economic order and social order or infringing the reputation, privacy, intellectual property
rights and other lawful rights and interests of others.
In addition, the CAC and the NDRC, the MIIT, the Ministry of Public Security, the
Ministry of State Security, the Ministry of Finance, or the MOF, the MOFCOM, the People’s
Bank of China, or the PBOC, the SAMR, the National Radio and Television Administration,
the CSRC and the National Administration of State Secrets Protection and State Cipher Code
Administration jointly promulgated the Measures for Cyber Security Review (ݟ
), or the Cyber Security Review, on December 28, 2021, which became effective on
February 15, 2022. The Cyber Security Review specifies that the procurement of network
products and services by critical information infrastructure operators and the activities of data
process carried out by online platform operators, that raise or may raise “national security”
concerns are subject to strict cyber security review by the Office of Cyber Security Review
established by the CAC. In addition, an online platform operator that possess the personal data
of at least one million users must apply for cyber security review by the Cyber Security Review
Office if it plans on listing companies in foreign countries. The Cyber Security Review Office
may voluntarily conduct a cyber security review if any network products and services,
activities of data process or listing of companies overseas affects or may affect national
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security. Pursuant to the Cyber Security Review, any violation shall be punished in accordance
with the Cyber Security Law, the sanctions under which include, among others, government
enforcement actions and investigations, fines, penalties and suspension of our noncompliant
operations.
Information Security
The Personal Information Protection Law of the PRC (ᚐ
), or the Personal Information Protection Law, was promulgated by the SCNPC on August
20, 2021 and became effective on November 1, 2021. Instead of relying solely on “notification
and consent” as established in the Cyber Security Law, the Personal Information Protection
Law reiterates the circumstances under which a personal information processor could process
personal information and the requirements for such circumstances, such as when (i) the
individual’s consent has been obtained; (ii) the processing is necessary for the conclusion or
performance of a contract to which the individual is a party; (iii) the processing is necessary
to fulfill statutory duties and statutory obligations; (iv) the processing is necessary to respond
to public health emergencies or protect a natural person’s life, health and property safety under
emergency circumstances; (v) the personal information that has been made public is processed
within a reasonable scope in accordance with this law; (vi) personal information is processed
within a reasonable scope to conduct news reporting, public opinion-based supervision and
other activities in the public interest; or (vii) under any other circumstance as provided by any
law or regulation. It also stipulates the obligations of a personal information processor. Any
violation of the provisions and requirements under the Personal Information Protection Law
may subject a personal information processor to rectifications, warnings, fines, suspension of
the related business, revocation of licenses, being entered into the relevant credit record or
even criminal liabilities.
In addition, on February 4, 2015, the CAC promulgated the Regulations on the
Administration of Internet User Account Names (), which
became effective on March 1, 2015 and requires that internet information service providers
shall implement security management responsibilities, improve user service agreements,
prevent users from having illegal and bad information in the registration information, such as
account name, avatar and profile, equip professionals appropriate to the service scale, review
the registration information, such as account name, avatar and profile submitted by internet
users, and refuse to register those containing illegal and bad information. Internet information
service providers shall consciously accept social supervision, and timely deal with illegal and
bad information in registration information such as account name, avatar and profile reported
by the public. Service providers shall also, in accordance with the principle of “real name at
the back and voluntary at the front” require users to register their account after passing the
authentication of real identity information.
Moreover, on June 10, 2021, the SCNPC promulgated the Data Security Law of PRC
(), or the Data Security Law, which became effective on
September 1, 2021. The Data Security Law mainly sets forth specific provisions regarding
establishing basic systems for data security management, including hierarchical data
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classification management system, risk assessment system, monitoring and early warning
system, and emergency disposal system. In addition, it clarifies the data security protection
obligations of organizations and individuals carrying out data activities and implementing data
security protection responsibility.
Further, on September 24, 2024, the State Council issued the Regulation on the
Administration of Cyber Data Security ( ၣഖᅰኽτΌ၍ଣૢԷ) (the “ Cyber Data
Security Regulation ”), which came into effect from January 1, 2025. The Cyber Data Security
Regulation stipulated certain requirements on network data processing activities, the security
and protection of network data, and the reasonable and effective use of network data, and
further shed light on the protection of personal information, security of important data,
management of cross-border security of network data and obligations of network platform
service providers. The Cyber Data Security Regulation required, among others, where network
data processing activities carried out by a network data processor affect or may affect national
security, national security review shall be conducted in accordance with relevant PRC
regulations. However, as the Cyber Data Security Regulation provided no further explanation
or interpretation for “affect or may affect national security”, if we were deemed having carried
our any network data processing activities that “affect or may affect national security”, we may
be subject to the national security review under article 13 of the Cyber Data Security
Regulation, failing which may subject us to fines, penalties, suspension of relevant business
and revocation of relevant business permits, and thus our business operations may be adversely
affected.
Collection and Use of Online Personal Information
On January 23, 2019, the CAC, the MIIT, the Ministry of Public Security, and the SAMR
jointly issued the Notice on Special Governance of Illegal Collection and Use of Personal
Information via Apps (࢝Appʮѓ), which
restates the requirement of legal collection and use of personal information, encourages app
operators to conduct security certifications, and encourages search engines and app stores to
clearly mark and recommend those certified apps.
On November 28, 2019, the CAC, MIIT, the Ministry of Public Security and SAMR
jointly issued the Measures to Identify Illegal Collection and Usage of Personal Information by
Apps ( App), which came into effect on the same
day and lists six types of illegal collection and usage of personal information, including
“non-disclosure of collection and use rules,” “failure to expressly state the purpose, method
and scope of collecting and using personal information,” “collection or use of personal
information without the consent of users,” “collection of personal information unrelated to the
services they provide in violation of the principle of necessity,” “provision of personal
information without consent,” “failure to provide the function of deleting or correcting
personal information in accordance with the law” and “failure to disclose the information such
as ways of filing complaints and whistleblowing reports.”
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On July 22, 2020, the MIIT issued the Notice of Ministry of Industry and Information
Technology on Carrying out Special Rectification Actions in Depth against the Infringement
upon Users’ Rights and Interests by Apps (ᐽଉપආAPP͜˒
), which lists four types of illegal collection and usage of personal
information, including “illegally processing personal information of users by the App and the
SDK,” “setting up obstacles and frequently harassing users,” “cheating and misleading users”
and “inadequate implementation of application distribution platforms’ responsibilities.”
On March 12, 2021, the CAC, the MIIT, the Ministry of Public Security, and the SAMR
jointly issued the Circular on Issuing the Rules on the Scope of Necessary Personal Information
for Common Types of Mobile Internet Applications (Ι೯<୅ਗʝᑌၣᏐ͜೻
֛>), according to which, Apps include apps pre-installed or
to be downloaded and installed on a smart mobile terminal, as well as mini programs developed
to connect to an open platform of a mobile app via its API that can be used without being
installed by users.
In December 2011, the MIIT issued Several Provisions on Regulating the Market Order
of Internet Information Services (), which
provides that an internet information service provider may not collect any user’s personal
information or provide any such information to third parties without such user’s consent.
Pursuant to the Several Provisions on Regulating the Market Order of Internet Information
Services, internet information service providers are required to, among others, (i) expressly
inform the users of the method, content and purpose of the collection and processing of such
users’ personal information and may only collect such information necessary for the provision
of its services; and (ii) properly maintain the users’ personal information, and in case of any
leak or possible leak of a user’s personal information, online lending service providers must
take immediate remedial measures and, in severe circumstances, make an immediate report to
the telecommunications regulatory authority.
Pursuant to the Decision on Strengthening the Protection of Online Information (׵
), issued by the SCNPC in December 2012, and the Order for the
Protection of Telecommunication and Internet User Personal Information (ձʝᑌၣ͜
) issued by the MIIT in July 2013, any collection and use of any user’s
personal information must be subject to the consent of the user, and abide by the applicable
law, rationality and necessity of the business and fall within the specified purposes, methods
and scopes in the applicable laws. Personal information processors shall take necessary
measures to ensure the security of the personal information processed, and the rights of data
subjects include the right to rectification and right to erasure.
Personal Information Protection in Criminal Law
Pursuant to the Ninth Amendment to the Criminal Law of the PRC ( ʕശɛ͏΍ձ਷Α
ࣩ(ɘ)), issued by the SCNPC on August 29, 2015 and effective on November 1,
2015, any network service provider that fails to fulfill the obligations related to internet
information security administration as required by applicable laws and refuses to rectify upon
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orders will be subject to criminal liability for causing (i) any dissemination of illegal
information in large scale; (ii) any leakage of the users’ information with serious consequences;
(iii) any loss of evidence of criminal activities with serious circumstances; or (iv) any other
serious circumstances. In addition, any individual or entity that (i) sells or provides personal
information to others unlawfully, or (ii) steals or illegally obtains any personal information,
will be subject to criminal liability in serious circumstances.
On May 8, 2017, the Supreme People’s Court and the Supreme People’s Procuratorate
released the Interpretations of the Supreme People’s Court and the Supreme People’s
Procuratorate on Several Issues Concerning the Application of Law in the Handling of
Criminal Cases Involving Infringement of Citizens’ Personal Information (৫e
༆ᙑ), or the
Interpretations, which became effective on June 1, 2017. The Interpretations clarify several
concepts regarding the crime of “infringement of citizens’ personal information” stipulated by
Article 253A of the Criminal Law of the PRC (), including “citizens’
personal information,” “violation of relevant national provisions,” “provision of citizens’
personal information” and “illegally obtaining any citizens’ personal information by other
methods.” In addition, the Interpretations specify the standards for determining “serious
circumstances” and “particularly serious circumstances” of this crime. On October 21, 2019,
the Supreme People’s Court and the Supreme People’s Procuratorate jointly issued the
Interpretations on Certain Issues Regarding the Applicable of Law in the Handling of Criminal
Case Involving Illegal Use of Information Networks and Assisting Committing Internet Crimes
(ਗഃΑ
༆ᙑ), which became effective on November 1, 2019, and further
clarifies the meaning of internet service operators and the serious circumstance of the relevant
crimes. Failure to comply with the above laws and regulations regarding cyber security,
information security, privacy and data protection may subject the internet service providers or
data processors to administrative penalties including, without limitation, warnings, fines,
suspension of business operation, the shutdown of websites or apps, revocation of licenses and
even criminal liabilities.
REGULATIONS ON ENVIRONMENTAL PROTECTION
Environmental Protection Law
The Environmental Protection Law of the PRC (), or the
Environmental Protection Law, became effective on December 26, 1989, and was most recently
amended on April 24, 2014. The Environmental Protection Law has been formulated for the
purpose of protecting and improving both the living and the ecological environment,
preventing and controlling pollution and other public hazards and safeguarding people’s health.
According to the Environmental Protection Law, in addition to other applicable laws and
regulations of the PRC, the Ministry of Environmental Protection and its local counterparts are
responsible for administering and supervising environmental protection matters. Pursuant to
the Environmental Protection Law, construction projects that have environmental impact shall
be subject to an environmental impact assessment. Installations for the prevention and control
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of pollution in construction projects must be designed, built and commissioned together with
the principal construction plan of the project. Such installations shall not be dismantled or left
idle without authorization from the competent government agencies. Consequences of
violations of the Environmental Protection Law include warnings, fines, rectification within a
time limit, forced shutdown, or criminal punishment.
Laws on Environment Impact Assessment
Pursuant to the Law of the People’s Republic of China on Environment Impact
Assessment (), issued on October 28, 2002 and most
recently amended on December 29, 2018, the State Council implemented an environmental
impact assessment, or EIA, to classify construction projects according to the impact of the
construction projects on the environment. Constructing entities shall prepare an environmental
impact report, or an EIR, or an environmental impact statement, or an EIS, or fill out the
environmental impact registration form, or the EIRF, according to the following rules: (i) for
projects with potentially serious environmental impacts, an EIR shall be prepared to provide
a comprehensive assessment of their environmental impacts; (ii) for projects with potentially
mild environmental impacts, an EIS shall be prepared to provide an analysis or specialized
assessment of the environmental impacts; and (iii) for projects with very small environmental
impacts, an EIS is not required but an EIRF shall be completed.
On November 30, 2020, the Ministry of Ecology and Environment of the PRC
promulgated the Classified Administration Catalog of Environmental Impact Assessments for
Construction Projects (2021 version) (ணධͦᐑྤᅂᚤ൙ᄆʱᗳ၍ଣΤ፽(2021و)),
or Classified Administration Catalog (2021 version), which became effective on January 1,
2021. According to Classified Administration Catalog (2021 version), projects that fall into
certain catalogue shall be included in the management of EIA of construction projects.
REGULATIONS ON INTELLECTUAL PROPERTY RIGHTS
Trademark Law
Registered trademarks are protected under the Trademark Law of the PRC ( ʕശɛ͏
) promulgated on August 23, 1982 and most recently amended on April 23,
2019, and related rules and regulations. Trademarks are registered with the Trademark Office
of China National Intellectual Property Administration. Where registration is sought for a
trademark that is identical or similar to another trademark which has already been registered
or given preliminary examination and approval for use in the same or similar category of
commodities or services, the application for registration of this trademark may be rejected.
Trademark registrations are effective for 10 years which may be renewed for consecutive
10-year periods upon request by the trademark owner, unless otherwise revoked.
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Patent Law
The Patent Law of the People’s Republic of China ()
promulgated by the SCNPC on March 12, 1984, most recently amended on October 17, 2020
and effective on June 1, 2021, and its implementation rules (୚
), which were promulgated by the China Patent Office on January 19, 1985 and most
recently amended by the State Council on December 11, 2023 and effective on January 20,
2024, provide for three types of patents: “invention,” “utility model” and “design.” “Invention”
refers to any new technical solution in relation to a product, or a process or improvement
thereof; “utility model” refers to any new technical solution relating to the shape, structure, or
their combination, of a product, which is suitable for practical use; “design” refers to a new
design that is aesthetic and suitable for industrial application for the overall or partial shape,
pattern or its combination of products, as well as the combination of color, shape and pattern.
The validity period of patent for an “invention” is 20 years, while the validity period of patent
for a “utility model” is 10 years and that of a “design” is 15 years, from the date of application.
Copyright Law
Pursuant to the Copyright Law of the People’s Republic of China ( ʕശɛ͏΍ձ਷ഹ
) promulgated by the SCNPC on September 7, 1990 and most recently amended on
November 11, 2020 and effective on June 1, 2021, Chinese citizens, legal persons or
unincorporated organizations shall, whether published or not, enjoy copyright in their works in
accordance with the law. Unless otherwise provided in the Copyright Law of the People’s
Republic of China and other related system, laws and regulations, reproducing, distributing,
performing, projecting, broadcasting or compiling a work or communicating the same to the
public via an information network without permission from the owner of the copyright therein
shall constitute infringements of copyrights. The infringer shall, according to the
circumstances of the case, undertake to cease the infringement, eliminate impact, and offer an
apology, pay damages and other civil liabilities. In exercising the rights, copyright owners and
copyright-related rights holders shall not be in violation to the Constitution and laws nor
prejudice to public interests. According to the Measures for the Registration of Computer
Software Copyright issued by the Ministry of Machine Building and Electronics Industry (ࠇ
) (currently incorporated into the Ministry of Industry and
Information Technology) on April 6, 1992 and most recently amended on June 18, 2004 and
effective on July 1, 2004, and the Regulations on Protection of Computer Software (ၑዚ
ᚐૢԷ) promulgated by the State Council on June 4, 1991 and most recently amended
on January 30, 2013 and effective on March 1, 2013, the State Copyright Administration shall
be responsible for the administration of software copyright registration nationwide, and the
China Copyright Protection Center is recognized as the software registration authority.
Applicants of computer software copyright satisfying the requirements of the Measures for the
Registration of Computer Software Copyright and the Regulations on Protection of Computer
Software will be issued a registration certificate by the China Copyright Protection Center.
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Domain Names
Pursuant to the Measures for the Administration of Internet Domain Names ( ʝᑌၣਹ
), promulgated by the Ministry of Industry and Information Technology on
August 24, 2017 and effective on November 1, 2017, the MIIT supervises and administers
domain services nationwide. The principle of “first come, first serve” is followed for the
domain name registration service. Applicants of domain name registration shall provide the
domain name registration authority with true, accurate and complete information about the
identity of the domain name holder for registration purpose, and sign a registration agreement
with it. After completing the domain name registration, the applicant becomes the holder of the
domain name registered by him/her/it.
REGULATIONS ON LABOR RIGHT AND INTERESTS
Labor Law and Labor Contracts Law
According to the Labor Law of the PRC () promulgated on
July 5, 1994 and amended on August 27, 2009 and December 29, 2018, enterprises shall
establish and improve their system of workplace safety and sanitation, strictly abide by state
rules and standards on workplace safety, and conduct employee training on labor safety and
sanitation in the PRC. Labor safety and sanitation facilities shall comply with statutory
standards. Enterprises and institutions shall provide employees with a safe workplace and
sanitation conditions which are in compliance with applicable laws and regulations of labor
protection. The Labor Contract Law of the PRC ()
promulgated on June 29, 2007 and amended on December 28, 2012, and the Implementation
Rules of the Labor Contract Law of the PRC (ૢԷ)
promulgated on September 18, 2008, set out specific provisions in relation to the execution,
terms and termination of a labor contract and the rights and obligations of the employees and
employers, respectively. At the time of hiring, the employers shall truthfully inform the
employees of the scope of work, working conditions, working place, occupational hazards,
work safety, salary and other matters which the employees request to be informed about.
Work Safety
Under relevant construction safety laws and regulations, including the PRC Work Safety
Law (), which was promulgated by the SCNPC on June 29,
2002, most recently amended on June 10, 2021, and effective on September 1, 2021, production
and operating business entities must establish objectives and measures for work safety and
improve the working environment and conditions for workers in a planned and systematic way.
A work safety protection scheme must also be set up to implement the work safety job
responsibility system. In addition, production and operating business entities must arrange
work safety training and provide their employees with protective equipment that meets the
national or industrial standards.
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Social Insurance
Pursuant to the Social Insurance Law of the PRC (),
which was promulgated on October 28, 2010, became effective on July 1, 2011 and most
recently amended on December 29, 2018, and the Interim Regulations on the Collection of
Social Insurance Fees (ᎈ൬ᅄᖮᅲБૢԷ) issued by the State Council on January
22, 1999 and most recently amended on March 24, 2019, employees shall participate in basic
pension insurance, basic medical insurance and unemployment insurance. Basic pension,
medical and unemployment insurance contributions shall be paid by both employers and
employees. Employees shall also participate in work-related injury insurance and maternity
insurance. Work-related injury insurance and maternity insurance contributions shall be paid
by employers rather than employees. Pursuant to the Notice of the General Office of the State
Council on Issuing the Plan for the Pilot Program of Combined Implementation of Maternity
Insurance and Basic Medical Insurance for Employees (Ι೯<ᎈձ
ࣩ>) and the Opinions of the General Office of the
State Council on Comprehensively Promoting the Implementation of the Combination of
Maternity Insurance and Basic Medical Insurance for Employees (પ
จԈ) promulgated on January 19, 2017 and
March 6, 2019, maternity insurance and basic medical insurance for employees shall be
consolidated. According to the Social Insurance Law of PRC, employers must carry out social
insurance registration at the local social insurance agency, provide social insurance and pay or
withhold the relevant social insurance premiums for or on behalf of employees. For employers
failing to conduct social insurance registration, the administrative department of social
insurance shall order them to make corrections within a prescribed time limit; if they fail to do
so within the time limit, employers shall have to pay a penalty over one time but no more than
three times of the amount of the social insurance premium payable by them. Where an
employer fails to pay social insurance premiums in full or on time, the social insurance
premium collection agency shall order it to pay or make up the balance within a prescribed time
limit, and shall impose a daily late fee at the rate of 0.05% of the outstanding amount from the
due date; if still failing to pay within the time limit prescribed, a fine of one time to three times
the amount in default will be imposed on them by the competent administrative department.
Housing Provident Fund
Pursuant to the Regulations on the Administration of Housing Provident Fund (ʮ
၍ଣૢԷ) which was promulgated on April 3, 1999 and amended on March 24, 2002
and March 24, 2019, employers shall timely pay the housing provident fund in full and overdue
or insufficient payment shall be prohibited. Employers shall process the housing provident
fund payment and deposit registration in the housing provident fund administrative center. For
enterprises which violate the above laws and regulations and fail to apply for housing provident
fund deposit registration or open housing provident fund accounts for their employees, the
housing provident fund administrative center shall order the relevant enterprises to make
corrections within a designated period. Those enterprises failing to process registration
provident fund accounts for their employees within designated period shall be subject to a fine
ranging from RMB10,000 to RMB50,000. When enterprises violate those provisions and fail
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to pay the housing provident fund in full amount as due, the housing provident fund
administrative center will order such enterprises to pay up the amount within a prescribed
period; if those enterprises still fail to comply with the regulations upon the expiration of the
above-mentioned time limit, further application will be made to the People’s Court for
mandatory enforcement.
REGULATIONS ON TAX IN THE PRC
Income Tax Law
According to the PRC Enterprise Income Tax Law (),
promulgated by the National People’s Congress on March 16, 2007, most recently amended on
December 29, 2018 and effective on the same date, and the Enterprise Income Tax
Implementation Regulations (ૢԷ), promulgated by
the State Council on December 6, 2007, most recently amended on December 6, 2024 and
effective on January 20, 2025, enterprises are divided into resident enterprises and non-resident
enterprises. Resident enterprises are enterprises which are set up in China in accordance with
the law, or which are set up in accordance with the law of a foreign country (region) whose
actual administration institution is in China. Non-resident enterprises are enterprises which are
set up in accordance with the law of a foreign country (region) and whose actual administrative
institution is not in China, but which have institutions or establishments in China, or have no
such institutions or establishments but have income generated from inside China. Resident
enterprises are subject to a uniform 25% enterprise income tax rate on their worldwide income.
The enterprise income tax rate is reduced to 20% for qualifying small low-profit enterprises.
The high-tech enterprises that need full support from the PRC’s government will enjoy a 15%
preferential tax rate for Enterprise Income Tax.
Value-Added Tax
Pursuant to the Provisional Regulations on V alue-Added Tax of the People’s Republic of
China (೼ᅲБૢԷ), which was promulgated by the State Council on
December 13, 1993, most recently amended on November 19, 2017 and effective on the same
date, and the Detailed Rules for the Implementation of the Interim Regulations of the People’s
Republic of China on V alue-added Tax (), which
was promulgated by the Ministry of Finance on December 25, 1993 most recently amended on
October 28, 2011, and effective on November 1, 2011, all entities or individuals in the PRC
engaged in the sale of goods, processing services, repair and replacement services, and the
provision of services, sales of intangible assets, real estate and importation of goods are
required to pay value-added tax, or the V A T. Unless otherwise provided, taxpayers engaged in
provision of services and sales of intangible assets are subject to a tax rate of 6%. On December
25, 2024, the SCNPC promulgated the V alue-Added Tax Law of the People’s Republic of China
(), which will become effective on January 1, 2026 and the
above provisional regulations will be abolished. According to the Notice on Implementing the
Pilot Program of Replacing Business Tax with V alue-Added Tax in an All-round Manner (Cai
Shui No. 36) ((ৌ೼ୋ36໮)), promulgated by
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the Ministry of Finance and the State Administration of Taxation on March 23, 2016, effective
on May 1, 2016, and amended on July 11, 2017, December 25, 2017 and March 20, 2019, with
the approval of the State Council, as of May 1, 2016, the pilot program of replacing business
tax with V A T shall be implemented across the country, all business tax taxpayers in the
construction industry, the real estate industry, the financial industry, and the living service
industry shall be included in the scope of the pilot program, and the payment of business tax
shall be replaced by the payment of V A T.
REGULATIONS ON M&A AND OVERSEAS LISTING IN THE PRC
Under the Rules on Mergers and Acquisitions of Domestic Enterprises by Foreign
Investors (), or the M&A Rules, which were jointly
adopted by six PRC regulatory authorities, including the CSRC, on August 8, 2006, and
became effective on September 8, 2006, and most recently amended on June 22, 2009, a foreign
investor is required to obtain necessary approvals when (i) such foreign investor acquires
equity in a domestic non-foreign invested enterprise thereby converting it into a foreign-
invested enterprise, or subscribes for new equity in a domestic enterprise via an increase of
registered capital thereby converting it into a foreign-invested enterprise; or (ii) a foreign
investor establishes a foreign-invested enterprise which purchases and operates the assets of a
domestic enterprise, or which purchases the assets of a domestic enterprise and injects those
assets to establish a foreign-invested enterprise. According to the M&A Rules, where a
domestic company or enterprise, or a domestic natural person, through an overseas company
established or controlled by it/her/him, acquires a domestic company which is related to or
connected with it/her/him, approval from MOFCOM is required.
On July 6, 2021, the General Office of the CPC Central Committee, or the Central
Committee, and the General Office of the State Council jointly published the Opinions on
Strictly Cracking Down Illegal Securities Activities in Accordance with the Law (ج
จԈ). These opinions indicate that the PRC government will take
measures to strengthen regulation over illegal securities activities and supervision on overseas
securities offerings and listings of China-based companies.
On February 17, 2023, with the approval of the State Council, the CSRC promulgated the
Trial Administrative Measures of Overseas Securities Offering and Listing by Domestic
Companies (), or the Trial Administrative
Measures, and relevant guidelines, which became effective on March 31, 2023.
According to the Trial Administrative Measures, PRC domestic companies that seek to
offer or list securities overseas, both directly and indirectly, should fulfill the filing procedure
and submit relevant information to the CSRC; if a domestic company fails to complete the
filing procedure or conceals any material fact or falsifies any major content in its filing
documents, such domestic company may be subject to administrative penalties, such as an
order to rectify, warnings, fines, and its controlling shareholders, actual controllers, the person
directly in charge and other directly liable persons may also be subject to administrative
penalties, such as warnings and fines. If the issuer meets both of the following conditions, the
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overseas offering and listing shall be determined as an indirect overseas offering and listing by
a domestic company: (i) any of the total assets, net assets, revenues or profits of the domestic
operating entities of the issuer in the most recent accounting year accounts for more than 50%
of the corresponding figure in the issuer’s audited consolidated financial statements for the
same period; and (ii) its major operational activities are carried out in China or its main places
of business are located in China, or the senior managers in charge of operation and
management of the issuer are mostly Chinese citizens or are domiciled in China. Where a
domestic company seeks to indirectly offer and list securities in an overseas market, the issuer
shall designate a major domestic operating entity responsible for all filing procedures with the
CSRC, and where an issuer makes an application for offering and listing in an overseas market,
the issuer shall submit filings with the CSRC within three business days after such application
is submitted. Failure to complete the filing under the Trial Administrative Measures may
subject a PRC domestic company to rectification ordered by the CSRC, a warning and a fine
of RMB1 million to RMB10 million.
Besides, PRC domestic companies seeking to overseas offering and listing shall strictly
comply with the laws, administrative regulations and relevant provisions of the PRC
government on foreign investment, state-owned assets, industry regulation, overseas
investment, etc., shall not disrupt domestic market order, and shall not harm national interests,
public interest and the legitimate rights and interests of domestic investors. PRC domestic
companies that conducts overseas offering and listing shall (i) formulate their articles of
association, improve their internal control system and standardize their corporate governance,
financial affairs and accounting activities in accordance with the PRC Company Law, the PRC
Accounting Law and other PRC laws, administrative regulations and applicable provisions; (ii)
abide by the legal system of the PRC on confidentiality and take necessary measures to
implement the confidentiality responsibility, not divulge any state secret or the work secrets of
state authorities, and also comply with laws, administrative regulations and the relevant
provisions of the PRC where involved in the overseas provision of personal information and
important data. In addition, the Trial Administrative Measures also provide the circumstances
where the overseas offering and listing is explicitly prohibited, including: (i) such securities
offering and listing are explicitly prohibited by specific PRC laws and regulations; (ii) such
securities offering and listing constitute a threat to or endanger national security; (iii) the PRC
domestic company, or its controlling shareholder(s) and the actual controller, has committed
relevant crimes such as corruption, bribery, embezzlement, misappropriation of property or
undermining the order of the socialist market economy during the latest three years; (iv) the
PRC domestic company is currently under investigations for suspicion of criminal offenses or
major violations of laws and regulations, and no conclusion has yet been made thereof; or (v)
there are material ownership disputes over equity held by the controlling shareholder(s) or by
other shareholder(s) that are controlled by the controlling shareholder(s) and/or the actual
controller.
On February 24, 2023, the CSRC and other three relevant government authorities jointly
promulgated the Provisions on Strengthening the Confidentiality and Archives Administration
of Overseas Securities Issuance and Listing by Domestic Enterprises (̋੶ྤʫΆุྤ
), where a domestic enterprise provides
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or publicly discloses any document or material that involving state secrets and working secrets
of state agencies to the relevant securities companies, securities service institutions, overseas
regulatory authorities and other entities and individuals, it shall report to the competent
department with the examination and approval authority for approval in accordance with the
law, and submit to the secrecy administration department of the same level for filing. The
working papers formed within the territory of the PRC by the securities companies and
securities service agencies that provide corresponding services for the overseas issuance and
listing of domestic enterprises shall be kept within the territory of the PRC, and cross-border
transfer shall go through the examination and approval formalities in accordance with the
relevant provisions of the State.
REGULATIONS ON FOREIGN EXCHANGE
The principal regulations governing foreign currency exchange in China are the Foreign
Exchange Administration Regulations of the PRC ( ʕശɛ͏΍ձ਷̮ි၍ଣૢԷ), which
was promulgated by the State Council on January 29, 1996 and was most recently amended on
August 5, 2008. Pursuant to these regulations and other PRC rules and regulations on currency
conversion, Renminbi is freely convertible for payments of current account items, such as
trade-and service-related foreign exchange transactions and dividend payments, but not freely
convertible for capital account items, such as direct investment, loan or investment in securities
outside China unless prior approval of the State Administration of Foreign Exchange, or the
SAFE, or its local counterpart is obtained.
On February 13, 2015, SAFE promulgated the Notice on Further Simplifying and
Improving the Direct Investment-related Foreign Exchange Administration Policies (ආ
), according to which, entities and individuals
may apply for such foreign exchange registrations from qualified banks. The qualified banks,
under the supervision of SAFE, may directly review the applications and conduct the
registration. On March 30, 2015, SAFE promulgated the Circular on Reforming the
Management Approach regarding the Settlement of Foreign Capital of Foreign-invested
Enterprise (), or the SAFE
Circular 19, which was last amended on March 23, 2023. According to the SAFE Circular 19,
the foreign exchange capital of foreign-invested enterprises shall be subject to the
Discretionary Foreign Exchange Settlement, which means that the foreign exchange capital in
the capital account of a foreign-invested enterprise for which the rights and interests of
monetary contribution have been confirmed by the local foreign exchange bureau (or the
book-entry registration of monetary contribution by the banks) can be settled at the banks
based on the actual operational needs of the foreign-invested enterprise, and if a foreign-
invested enterprise needs to make further payment from such account, it still needs to provide
supporting documents and proceed with the review process with the banks. Furthermore, the
SAFE Circular 19 stipulates that the use of capital by foreign-invested enterprises shall follow
the principles of authenticity and self-use within the business scope of enterprises. The capital
of a foreign-invested enterprise and capital in Renminbi obtained by the foreign-invested
enterprise from foreign exchange settlement shall not be used for the following purposes: (i)
directly or indirectly used for payments beyond the business scope of the enterprises or
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payments as prohibited by relevant laws and regulations; (ii) directly or indirectly used for
investment in securities unless otherwise provided by the relevant laws and regulations; (iii)
directly or indirectly used for granting entrust loans in Renminbi (unless permitted by the scope
of business), repaying inter-enterprise borrowings (including advances by the third-party) or
repaying the bank loans in Renminbi that have been sub-lent to third parties; or (iv) directly
or indirectly used for expenses related to the purchase of real estate that is not for self-use
(except for the foreign-invested real estate enterprises).
The Circular of Further Simplifying and Improving Foreign Exchange Administration
Policies on Foreign Direct Investment (ஷ
), or the SAFE Circular 13, which became effective on June 1, 2015 and was amended on
December 30, 2019, cancels the administrative approvals of foreign exchange registration of
direct domestic investment and direct overseas investment and simplifies the procedure of
foreign exchange-related registration. Pursuant to SAFE Circular 13, investors should register
with banks for direct domestic investment and direct overseas investment.
The Circular on Reforming and Standardizing the Foreign Exchange Settlement
Management Policy of Capital Account (),
or the SAFE Circular 16 was promulgated by SAFE on June 9, 2016 and amended on December
4, 2023. Pursuant to the SAFE Circular 16, enterprises registered in the PRC may also convert
their foreign debts from foreign currency to Renminbi on a self-discretionary basis. The SAFE
Circular 16 reiterates the principle that Renminbi converted from foreign currency-
denominated capital of a company may not be directly or indirectly used for purposes beyond
its business scope or prohibited by PRC Laws, while such converted Renminbi shall not be
provided as loans to its non-affiliated entities.
On January 26, 2017, SAFE promulgated the Circular on Further Improving Reform of
Foreign Exchange Administration and Optimizing Genuineness and Compliance V erification
(), which stipulates several
capital control measures with respect to the outbound remittance of profit from domestic
entities to offshore entities, including: (i) banks should check board resolutions regarding
profit distribution, the original version of tax filing records, and audited financial statements
pursuant to the principle of genuine transactions; and (ii) domestic entities should hold income
to account for previous years’ losses before remitting the profits. Moreover, pursuant to this
circular, domestic entities should make detailed explanations of the sources of capital and
utilization arrangements, and provide board resolutions, contracts, and other proof when
completing the registration procedures in connection with an outbound investment.
On October 23, 2019, the SAFE promulgated the Notice for Further Advancing the
Facilitation of Cross-border Trade and Investment (ٙ
), amended on December 4, 2023, which, among other things, allows all foreign invested
enterprises, or FIEs, to use Renminbi converted from foreign currency denominated capital for
equity investments in China, as long as the equity investment is genuine, does not violate
applicable laws, and complies with the negative list on foreign investment. According to the
Circular of the State Administration for Foreign Exchange on Optimizing Foreign Exchange
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Administration to Support the Development of Foreign-related Business (̮ි၍ଣ҅ᗫ
), promulgated by the SAFE and effective on April
10, 2020, the reform of facilitating the payments of incomes under the capital accounts shall
be promoted nationwide. Under the prerequisite of ensuring true and compliant use of funds
and compliance with the prevailing administrative provisions on use of income from capital
projects, enterprises which satisfy the criteria are allowed to use income under the capital
account, such as capital funds, foreign debt and overseas listing, for domestic payment, without
the need to provide proof materials for veracity to the bank beforehand for each transaction.
REGULATIONS ON FOREIGN EXCHANGE REGISTRATION OF OVERSEAS
INVESTMENT BY PRC RESIDENTS
On July 4, 2014, SAFE promulgated the Notice on Relevant Issues Relating to Domestic
Residents’ Investment and Financing and Round-Trip Investment through Special Purpose
V ehicles (ஷ
), or the Circular 37, to simplify the approval process, and for the promotion of the
cross-border investment. Circular 37 supersedes the Notice on Relevant Issues on the Foreign
Exchange Administration of Raising Funds through Overseas Special Purpose V ehicle and
Investing Back in China by Domestic Residents (ʮ̡ፄ༟
) and revises and regulates the relevant matters
involving foreign exchange registration for round-trip investment. Under Circular 37, (i) a
resident in mainland China must register with the local SAFE branch before he or she
contributes assets or equity interests in an overseas special purpose vehicle, or an Overseas
SPV , that is directly established or indirectly controlled by the PRC resident to conduct
investment or financing; and (ii) following the initial registration, PRC resident must update
his or her SAFE registration when the offshore special purpose vehicle undergoes material
events relating to any change of basic information (including change of such PRC citizens or
residents, name and operation term, increases or decreases in investment amount, transfers or
exchanges of shares, or mergers or divisions).
Under the SAFE Circular 13, the aforementioned registration shall be directly reviewed
and handled by qualified banks, and SAFE and its branches shall perform indirect regulation
over the foreign exchange registration via qualified banks.
Failure to comply with the registration procedures outlined in Circular 37 may result in
restrictions being imposed on the foreign exchange activities of the relevant onshore company,
including the payment of dividends and other distributions to its offshore parent or affiliate,
and may also subject relevant PRC residents to penalties under PRC foreign exchange
administration regulations. PRC residents who control the company from time to time are
required to register with the SAFE in connection with their investments in the company.
Moreover, failure to comply with the various SAFE registration requirements described above
could result in liability under applicable laws for evasion of foreign exchange controls.
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REGULATIONS ON STOCK INCENTIVE PLANS
On February 15, 2012, SAFE promulgated the Notice on Foreign Exchange
Administration of PRC Residents Participating in Share Incentive Plans of Offshore Listed
Companies (ྌ̮ි၍ଣϞᗫਪ
), or the Stock Option Rules. According to the Stock Option Rules, individuals
participating in any stock incentive plan of any overseas publicly listed company who are
Chinese citizens or foreign citizens who reside in mainland China for a continuous period of
not less than one year, subject to a few exceptions, are required to register with SAFE or its
local branches and complete certain other procedures through a domestic qualified agent,
which could be a Chinese subsidiary of such overseas listed company, and complete certain
other procedures. The participants must also retain an overseas entrusted institution to handle
matters in connection with their exercise of stock options, the purchase, and sale of
corresponding stocks or interests, and fund transfers. In addition, the agent in mainland China
is required to further amend the SAFE registration concerning the stock incentive plan if there
is any material change to the stock incentive plan, the mainland Chinese agent or the overseas
entrusted institution, or other material changes. The mainland Chinese agents must, on behalf
of the mainland Chinese residents who have the right to exercise the employee share options,
apply to SAFE or its local branches for an annual quota for the payment of foreign currencies
in connection with the mainland Chinese residents’ exercise of the employee share options. The
foreign exchange proceeds received by the mainland Chinese residents from the sale of shares
under the stock incentive plans granted and dividends distributed by the overseas-listed
companies must be remitted into the bank accounts in mainland China opened by the mainland
Chinese agents before distribution to such mainland Chinese residents. Under the Circular of
the State Administration of Taxation on Issues Concerning Individual Income Tax concerning
Equity Incentives () promulgated
by the SA T and effective on August 24, 2009, listed companies and their domestic
organizations shall, according to the individual income tax calculation methods for “wage and
salary income” and stock option income, lawfully withhold and pay individual income tax on
such income.
REGULATIONS ON DIVIDEND DISTRIBUTION
The principal regulations governing the distribution of dividends of foreign-invested
enterprises include the PRC Company Law, the Foreign Investment Law and the
Implementation Rules of the Foreign Investment Law. Under these laws and regulations,
foreign-invested enterprises in China may pay dividends only out of their accumulated after-tax
profits, if any, determined following PRC accounting standards and regulations. In addition,
foreign-invested enterprises in China are required to allocate at least 10% of their respective
accumulated profits each year, if any, to fund certain reserve funds until these reserves have
reached 50% of the registered capital of the enterprises. A PRC company shall not distribute
any profits until any losses from prior fiscal years have been offset. Profits retained from prior
fiscal years may be distributed together with distributable profits from the current fiscal year.
Wholly foreign-owned companies may, at their discretion, allocate a portion of their after-tax
profits based on PRC accounting standards to staff welfare and bonus funds. These reserves are
not distributable as cash dividends.
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CONTROLLING SHAREHOLDERS
Pursuant to the Acting-in-Concert Arrangement, Mr. Wang, Mr. Qi, Mr. Ruan, Ms. Pan
and their intermediate holding companies acknowledge and confirm that, at any meeting of our
Group where each of them and/or the directors appointed by them is entitled to vote on
corporate matters as shareholders or directors, each of them shall discuss and reach consensus
on such corporate matters and act in concert, provided that, if no consensus can be reached
after full discussions, they will act according to the decision of Mr. Wang. For details, see the
section headed “History, Reorganization and Corporate Structure — Acting-in-Concert
Arrangement” of this prospectus.
Immediately after the completion of the Global Offering and assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised
(i) Mr. Wang, through Modern Leaves Limited which is owned by (i) Nascent Leaves
Limited, which is in turn wholly-owned by a trust established by Mr. Wang as the
settlor with his family members being the beneficiaries, as to 99.0%; and
(ii) Ancient Leaves Limited, which is wholly owned by Mr. Wang, as to 1.0%, will
be interested in and control 939,441,461 Shares;
(ii) Mr. Qi, through Chivalrous Lancers Limited which is owned by (i) Chivalrous
Knights Limited, which is in turn wholly-owned by a trust established by Mr. Qi as
the settlor with his family members being the beneficiaries, as to 99.0%; and
(ii) Chivalrous Cavalry Limited, which is wholly owned by Mr. Qi, as to 1.0%, will
be interested in and control 429,999,961 Shares;
(iii) Mr. Ruan, through Cousin Tea Limited which is owned by (i) Nephew Tea Limited,
which is in turn wholly-owned by a trust established by Mr. Ruan as the settlor with
his family members being the beneficiaries, as to 99.0%; and (ii) Uncle Tea Limited,
which is wholly owned by Mr. Ruan, as to 1.0%, will be interested in and control
298,782,650 Shares;
(iv) Ms. Pan, through Spring Equinox Drinks Limited which is owned by (i) Summer
Solstice Drinks Limited, which is in turn wholly-owned by a trust established by Ms.
Pan as the settlor with her family members being the beneficiaries, as to 99.0%; and
(ii) Winter Solstice Drinks Limited, which is wholly owned by Ms. Pan, as to 1.0%,
will be interested in and control 60,036,800 Shares; and
by virtue of the Acting-in-Concert Arrangement, Mr. Wang, Mr. Qi, Mr. Ruan, Ms. Pan,
Modern Leaves Limited, Ancient Leaves Limited, Nascent Leaves Limited, Chivalrous Lancers
Limited, Chivalrous Cavalry Limited, Chivalrous Knights Limited, Cousin Tea Limited, Uncle
Tea Limited, Nephew Tea Limited, Spring Equinox Drinks Limited, Winter Solstice Drinks
Limited and Summer Solstice Drinks Limited will together be interested in and control
1,728,260,872 Shares, representing approximately 74.09% of our issued Shares.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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Therefore, Mr. Wang, Mr. Qi, Mr. Ruan, Ms. Pan, Modern Leaves Limited, Ancient
Leaves Limited, Nascent Leaves Limited, Chivalrous Lancers Limited, Chivalrous Cavalry
Limited, Chivalrous Knights Limited, Cousin Tea Limited, Uncle Tea Limited, Nephew Tea
Limited, Spring Equinox Drinks Limited, Winter Solstice Drinks Limited and Summer Solstice
Drinks Limited will constitute a group of Controlling Shareholders upon the Listing.
INDEPENDENCE FROM CONTROLLING SHAREHOLDERS
Having considered the following factors, our Directors are satisfied that we are capable
of carrying on our business independently from our Controlling Shareholders and its close
associates after the Listing.
Management Independence
Our business is managed by our Board and senior management. Upon Listing, our Board
will consist of nine Directors comprising five executive Directors, one non-executive Director
and three independent non-executive Directors. Mr. Wang, Mr. Ruan and Mr. Qi, each an
executive Director, are also our Controlling Shareholders. For more information, please see the
section headed “Directors and Senior Management.”
Our Directors consider that our Board and senior management are capable of operating
our business and managing all actual or potential conflicts of interest independently of our
Controlling Shareholders and their close associates after Listing because:
(a) each Director is aware of his fiduciary duties as a Director which require, among
other things, that he acts for the benefit and in the interest of our Company and does
not allow any conflict between his duties as a Director and his personal interests;
(b) our daily management and operations are carried out by our executive Directors and
the members of our senior management team, all of whom have substantial
experience in the industry in which our Company is engaged, and will therefore be
able to make business decisions that are in the best interests of our Group. Further,
a majority of our senior management team are independent of our Controlling
Shareholders;
(c) we have three independent non-executive Directors, representing one-third of the
Board. The independent non-executive Directors will represent an element of
independence at the board level, and certain matters of our Company must always
be referred to the independent non-executive Directors for review, to protect the
interests of our Company and the Shareholders as a whole;
(d) in the event that there is a material conflict of interest arising out of any transaction
to be entered into between our Group and a Director or his or her respective
associates, the interested Director shall abstain from voting and shall not be counted
in the quorum in respect of such transactions; and
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(e) we have adopted a series of corporate governance measures to manage conflicts of
interest, if any, between our Group and our Controlling Shareholders which would
support our independent management. Please see “— Corporate Governance
Measures” in this section for further information.
Based on the above, our Directors believe that our Board as a whole and together with our
senior management team are able to perform the managerial role our Group independently.
Operational Independence
Our Directors believe that our Group is operationally independent from the Controlling
Shareholders and their close associates. Our Company (through our subsidiaries) holds all
relevant licenses. We own or are legally licensed to use all relevant intellectual properties and
own facilities necessary to carry on our business. We have sufficient capital, facilities,
equipment and employees to operate our business independently from our Controlling
Shareholders. We also have independent access to our customers and independent departments,
each with specific areas of responsibilities. We have adopted a set of internal control
procedures to maintain effective and independent operation of our business.
In addition, we have established our internal organizational and management structure
which includes shareholders’ meetings, our Board and other committees, and formulated the
terms of reference of these bodies in accordance with the requirements of the applicable laws
and regulations, the Listing Rules and the Articles of Association, so as to establish a regulated
and effective corporate governance structure.
We entered into continuing connected transaction with certain associates of our
Controlling Shareholders. The transactions include procurement of packaging materials and
raw materials. See section headed “Connected Transactions” for more details on such
continuing connected transactions. Considering that the amounts of the relevant transactions
during the Track Record Period are not significant to our Group, our Directors believe that such
transactions will not have any impact on the operational independence of our Group.
Financial Independence
Our financial system and financial operations are independent from our Controlling
Shareholders and their close associates. Our Group makes financial decisions according to our
own business needs and our Group’s financial operations are handled by our finance team,
without sharing any financial management functions or resources with our Controlling
Shareholders or their close associates.
There was no outstanding loans or guarantees or other financial assistance provided by,
or granted to, our Controlling Shareholders or their associates as of the Latest Practicable Date.
Based on the above, our Directors believe that our business is financially independent of
our Controlling Shareholders and their close associates.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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Competition
Our Controlling Shareholders confirm that as of the Latest Practicable Date, they did not
have any interest in a business, apart from the business of our Group, which competes or is
likely to compete, directly or indirectly, with our business, and requires disclosure under Rule
8.10 of the Listing Rules.
CORPORATE GOVERNANCE MEASURES
Our Directors recognize the importance of good corporate governance in protecting our
Shareholders’ interests. We have adopted the following measures to ensure good corporate
governance standards and to avoid potential conflicts of interest between our Group and our
Controlling Shareholders:
(a) where a Shareholders’ meeting is held to consider proposed transactions in which
our Controlling Shareholders or any of their associates is, under the Listing Rules,
required to abstain, our Controlling Shareholder(s) shall abstain from voting and
their votes shall not be counted in respect of such transactions;
(b) our Company has established internal control mechanisms to identify connected
transactions. Upon the Listing, if our Company enters into connected transactions
with our Controlling Shareholders or any of their associates, our Company will
comply with the applicable Listing Rules;
(c) the independent non-executive Directors will review, on an annual basis, whether
there are any conflicts of interests between our Group and our Controlling
Shareholders and provide impartial and professional advice to protect the interests
of our minority Shareholders;
(d) our Controlling Shareholders will undertake to provide all information necessary,
including all relevant financial, operational and market information and any other
necessary information as required by the independent non-executive Directors for
the purpose of their annual review;
(e) our Company will disclose decisions on matters reviewed by the independent
non-executive Directors either in its interim and annual reports or by way of
announcements as required by the Listing Rules;
(f) where our Directors reasonably request the advice of independent professionals,
such as financial advisors, the appointment of such independent professionals will
be made at our Company’s expense;
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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(g) we have appointed Altus Capital Limited as our compliance advisor to provide
advice and guidance to us in respect of compliance with the applicable laws and
regulations, as well as the Listing Rules, including various requirements relating to
corporate governance; and
(h) we have established our audit committee, remuneration committee and nominating
committee with written terms of reference in compliance with the Listing Rules and
the Code of Corporate Governance and Corporate Governance Report in Appendix
C1 to the Listing Rules.
Based on the above, our Directors are satisfied that sufficient corporate governance
measures have been put in place to manage conflicts of interest that may arise between our
Group and our Controlling Shareholders, and to protect our minority Shareholders’ interests
after the Listing.
RELATIONSHIP WITH OUR CONTROLLING SHAREHOLDERS
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Pursuant to Chapter 14A of the Listing Rules, the following transactions that we enter into
with our connected persons will constitute connected transactions upon the Listing.
OUR CONNECTED PERSONS
We have entered into certain transactions in the ordinary course of our business with the
following connected persons, which will constitute continuing connected transactions
following the Listing :
Name Connected relationship
Zhejiang Mingxing Packaging Co., Ltd.
(ʮ̡)( “ Zhejiang
Mingxing Packaging ”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Zhejiang Mingxing Packaging is wholly-
owned by Mr. Zhao Jianhua, the uncle of
Mr. Wang. Accordingly, Zhejiang
Mingxing Packaging is deemed a
connected person of our Company under
the Listing Rules.
Zhejiang Y unqi Investment Co., Ltd. ( एϪ
ʮ̡)(“Zhejiang Yunqi ”)
and its subsidiaries /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Zhejiang Y unqi is owned by Mr. Wang,
Mr. Qi, Mr. Ruan and Ms. Pan as to
44.8%, 29.0%, 23.2% and 3.0%,
respectively. Accordingly, Zhejiang Y unqi
is an associate of Mr. Wang, Mr. Qi and
Mr. Ruan and constitutes a connected
person of our Company under the Listing
Rules.
SUMMARY OF OUR CONTINUING CONNECTED TRANSACTIONS
We have entered into the following transactions that will constitute continuing connected
transactions under Rule 14A.31 of the Listing Rules upon Listing:
Proposed annual cap for the year
ending December 31,
Transaction
Applicable
Listing Rule Waiver sought 2025 2026 2027
(RMB million)
Non-exempt continuing connected transaction
1. Procurement of packaging
materials by our Group
from Zhejiang Mingxing
Packaging
Rule 14A.35
Rule 14A.36
Rule 14A.105
Announcement,
independent
shareholders’
approval,
circular
316.20 392.09 491.68
CONNECTED TRANSACTIONS
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Proposed annual cap for the year
ending December 31,
Transaction
Applicable
Listing Rule Waiver sought 2025 2026 2027
(RMB million)
Partially-exempt continuing connected transaction
2. Procurement of raw materials
by our Group from
Zhejiang Y unqi
Rule 14A.35
Rule 14A.76(2)
Rule 14A.105
Announcement 32.92 43.54 54.60
NON-EXEMPT CONTINUING CONNECTED TRANSACTIONS
Procurement of packaging materials
On January 24, 2025, our Company (for itself and on behalf of other members of our
Group) entered into a framework agreement (the “ Packaging Material Procurement
Agreement ”) with Zhejiang Mingxing Packaging, pursuant to which we agreed to purchase
packaging materials, including but not limited to insulated bags, plastic cups, paper cups and
cup lids, from Zhejiang Mingxing Packaging after Listing.
The initial term of the Packaging Material Procurement Agreement will commence on the
Listing Date and end on December 31, 2027 (both days inclusive). Separate underlying
agreements will be entered into which will set out the precise scope of procurements, purchase
price calculation, method of payment and other details of the procurement arrangement in the
manner provided in the Packaging Material Procurement Agreement.
Reasons for the transaction
Zhejiang Mingxing Packaging has been a reliable supplier of packaging materials for our
Group. Through the business cooperation, Zhejiang Mingxing Packaging has acquired a
comprehensive understanding of our need for packaging materials and has been continuously
providing packaging materials with high quality and tailored for our need. The Directors
consider that entering into the Packaging Material Procurement Agreement with Zhejiang
Mingxing Packaging will enable us to secure a stable supply of high-quality packaging
materials at reasonable prices.
Pricing policy
The purchase price of the packaging materials as contemplated under the Packaging
Material Procurement Agreement shall be determined on an arm’s length basis with reference
to a variety of factors, including but not limited to the types, quality, specifications, quantities
and manufacturing costs of packaging materials to be purchased and the prevailing market
price of the relevant packaging materials that can be procured from independent third parties
CONNECTED TRANSACTIONS
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by the Group. Our Group would obtain at least three other quotations from independent third
party suppliers for similar packaging materials on a regular basis to determine if the prices and
terms offered by Zhejiang Mingxing Packaging are fair and reasonable and comparable to those
offered by independent third parties.
The Directors consider that the transactions under the Packaging Material Procurement
Agreement will be conducted on normal commercial terms or better and in the interests of our
Company and its Shareholders as a whole.
Historical amounts, annual caps and basis of annual caps
Back in 2019, the Group commenced procurement of packaging materials from Anhui
Taili Packaging Co., Ltd. (ʮ̡)( “ Anhui Taili Packaging ”). Anhui Taili
Packaging is a company established in the PRC in 2018 which was principally engaged in the
production of packaging materials at the relevant time and was then controlled by Mr. Zhao
Jianhua until it was sold to independent third parties in March 2023. Since May 2023, the
Group commenced the procurement of packaging materials from Zhejiang Mingxing
Packaging, which is a company established in the PRC in 2020 which is principally engaged
in the production of packaging materials. In June 2023, as one of our five largest suppliers
during the year ended December 31, 2022 experienced significant disruption in its production,
our procurement of packaging materials from this supplier has significantly decreased since
then, and, from June 2023, we significantly increased our procurement of packaging materials
from Zhejiang Mingxing Packaging, which has been providing packaging material with high
quality and tailored for our need to us at competitive prices. In addition to Anhui Taili
Packaging and Zhejiang Mingxing Packaging, the Group also procured packaging materials
from other suppliers during the Track Record Period.
For the years ended December 31, 2021 and 2022, the aggregate procurement amounts of
packaging materials from Anhui Taili Packaging amounted to approximately RMB63.7 million
and RMB44.0 million, respectively. For the year ended December 31, 2023, the aggregate
procurement amounts of packaging materials from Anhui Taili Packaging and Zhejiang
Mingxing Packaging amounted to approximately RMB161.6 million (such figure took into
account the aggregate procurement amounts of packaging materials from Anhui Taili
Packaging from January to March 2023 only, prior to it being sold to independent third parties).
The increase in procurement amounts during the year ended December 31, 2023 as compared
with that during each of the year ended December 31, 2021 and 2022 was primarily due to the
above-mentioned reason where one of our five largest suppliers during the year ended
December 31, 2022 experienced significant disruption in its production in June 2023 and we
significantly increased our procurement of packaging materials from Zhejiang Mingxing
Packaging since June 2023. In particular, the aggregate procurement amounts of packaging
materials from Zhejiang Mingxing Packaging for the seven months from June to December
2023 amounted to approximately RMB154.9 million. For the nine months ended September 30,
2024, the aggregate procurement amounts of packaging materials from Zhejiang Mingxing
Packaging amounted to approximately RMB193.9 million.
CONNECTED TRANSACTIONS
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For the years ending December 31, 2025, 2026 and 2027, the relevant annual caps for the
procurement of packaging materials are expected to be RMB316.20 million, RMB392.09
million and RMB491.68 million, respectively.
The annual caps were determined taking into account the following key factors:
(a) the aforesaid historical transaction amounts during the Track Record Period in
relation to the procurement of packaging materials from Zhejiang Mingxing
Packaging, in particular the aggregate procurement amounts of packaging materials
from Zhejiang Mingxing Packaging for the nine months from January to September
2024 of approximately RMB193.9 million (representing an annualised aggregate
procurement amount of approximately RMB258.5 million);
(b) the expected increase in our demand for packaging materials due to the potential
growth of our sales volume as our total number of cups sold for the nine months
ended September 30, 2024 has reached 989.5 million, representing a 16.7%
year-over-year growth and we expect to continue to increase our store density in
existing markets and expand our store network to new markets in China;
(c) the expected increase in the types and specifications of packaging materials from
Zhejiang Mingxing Packaging taking into account its high quality and the supply of
packaging materials tailored for our need at competitive prices;
(d) the expected increase in the proportion of our Group’s overall procurement of
packaging materials from Zhejiang Mingxing Packaging taking into account its high
quality and the supply of packaging materials tailored for our need at competitive
prices; and
(e) the expected prices of packaging materials and the potential fluctuation in the prices.
Listing Rules implications
Since the highest of the applicable percentage ratios calculated under Chapter 14A of the
Listing Rules will be 5% or more, the procurement of packaging materials as contemplated
under the Packaging Material Procurement Agreement will constitute continuing connected
transactions of our Company subject to the annual reporting requirement under Rules 14A.49
and 14A.71 of the Listing Rules, the announcement requirement under Rule 14A.35 of the
Listing Rules and the independent Shareholders’ approval requirement under Rule 14A.36 of
the Listing Rules.
CONNECTED TRANSACTIONS
– 283 –


--- page 294 ---
PARTIALLY-EXEMPT CONTINUING CONNECTED TRANSACTIONS
Procurement of raw materials
On January 24, 2025, our Company (for itself and on behalf of other members of our
Group) entered into a framework agreement (the “ Raw Materials Procurement Agreement ”)
with Zhejiang Y unqi, pursuant to which we will procure raw materials such as Taiwan citrus
lemons from the subsidiaries of Zhejiang Y unqi, including Y unnan Houan Agricultural
Development Co., Ltd. (ʮ̡) and Y unnan Qining Agricultural
Development Co., Ltd. (ʮ̡), after Listing.
The initial term of the Raw Materials Procurement Agreement will commence on the
Listing Date and end on December 31, 2027 (both days inclusive). Separate underlying
agreements will be entered into which will set out the precise scope of procurements, purchase
price calculation, method of payment and other details of the procurement arrangement in the
manner provided in the Raw Materials Procurement Agreement.
Reasons for the transaction
The subsidiaries of Zhejiang Y unqi primarily engage in the business of supplying Taiwan
citrus lemons. They have been a stable and reliable supplier of raw materials such as Taiwan
citrus lemons for our Group since 2020. The stable business cooperation with the subsidiaries
of Zhejiang Y unqi provides us with access to fresh and high-quality raw materials at reasonable
prices.
Pricing policy
The purchase price of the raw materials as contemplated under the Raw Materials
Procurement Agreement shall be determined on an arm’s length basis with reference to a
variety of factors, including but not limited to the types, quality, quantities of raw materials to
be purchased and the prevailing market prices of the relevant raw materials that can be
procured from independent third parties by the Group. Our Group would obtain at least three
other quotations from independent third-party suppliers for similar raw materials on a regular
basis to determine if the prices and terms offered by the subsidiaries of Zhejiang Y unqi are fair
and reasonable and comparable to those offered by independent third parties.
The Directors consider that the transactions under the Raw Materials Procurement
Agreement will be conducted on normal commercial terms or better and in the interests of our
Company and its Shareholders as a whole.
Historical amounts, annual caps and basis of annual caps
The Group procured raw materials such as Taiwan citrus lemons from the subsidiaries of
Zhejiang Y unqi and other suppliers during the Track Record Period. For the years ended
December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024, the
CONNECTED TRANSACTIONS
– 284 –


--- page 295 ---
aggregate procurement amounts of raw materials from the subsidiaries of Zhejiang Y unqi
amounted to approximately RMB5.0 million, RMB18.1 million, RMB14.8 million and
RMB11.4 million, respectively. The increase in procurement amounts of raw materials from the
subsidiaries of Zhejiang Y unqi from the year ended December 31, 2021 to the year ended
December 31, 2022 was primarily driven by the increase in sales of our relevant products
during the same period. The slight decrease in procurement amount from the subsidiaries of
Zhejiang Y unqi during the year ended December 31, 2023 was attributable to certain adverse
weather condition affecting the planting bases operated by one of the subsidiaries of Zhejiang
Y unqi, leading to a decrease in the quantity of raw materials supplied, which caused the
Company to procure the relevant raw materials from other suppliers during such period.
For the years ending December 31, 2025, 2026 and 2027, the relevant annual caps for the
procurement of raw materials are expected to be RMB32.92 million, RMB43.54 million and
RMB54.60 million, respectively.
The annual caps were determined taking into account the following key factors:
(a) the aforesaid historical transaction amounts during the Track Record Period in
relation to the procurement of raw materials from the subsidiaries of Zhejiang
Y unqi, in particular the aggregate procurement from Zhejiang Y unqi of
approximately RMB18.1 million during the year ended December 31, 2022;
(b) the historical aggregate procurement during the year ended December 31, 2023 was
impacted by certain one-off event, namely the adverse weather condition which
affected the planting bases operated by one of the subsidiaries of Zhejiang Y unqi,
leading to a decrease in the quantity of raw materials supplied during the same year
as explained above;
(c) the expected considerable amount of aggregate procurement from the subsidiaries of
Zhejiang Y unqi for the year ended December 31, 2024 based on our aggregate
procurement of approximately RMB11.4 million for the nine months ended
September 30, 2024, as our overall procurement amounts of Taiwan citrus lemons
usually increase significantly in the second half of a year due to the large-scale
maturation of Taiwan citrus lemons starting from autumn for each year, leading to
a substantial increase of the aggregate procurement amounts of Taiwan citrus lemons
from the subsidiaries of Zhejiang Y unqi in winter;
(d) the expected increase in sales of our relevant products due to its popularity, as our
sales of Taiwan citrus lemons and products to the franchisees increased
approximately 44% for the nine months ended September 30, 2024 as compared with
the same period last year;
CONNECTED TRANSACTIONS
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--- page 296 ---
(e) the expected continuous increase in the overall procurement of raw materials of our
Group due to potential growth of our sales volume as we expect to continue to
increase our store density in existing markets and expand our store network to new
markets in China;
(f) the expected increase in the proportion of our Group’s overall procurement of raw
materials from the subsidiaries of Zhejiang Y unqi taking into account its high
quality and the supply of raw materials which were suitable for our need at
competitive prices;
(g) the expected prices of raw materials and the potential fluctuation in the prices; and
(h) taking into account and on the basis of all the aforesaid factors, it is estimated that
the aggregate procurement from the subsidiaries of Zhejiang Y unqi on an annual
basis will increase significantly for the three years ending December 31, 2027 with
a year-on-year increase of approximately 32% and 25%, for each of the years ending
December 31, 2026 and 2027, respectively.
Listing Rules implications
Since the highest of the applicable percentage ratios calculated under Chapter 14A of the
Listing Rules will be 0.1% or more but less than 5%, pursuant to Rule 14A.76(2) of the Listing
Rules, the procurement of raw materials as contemplated under the Raw Materials Procurement
Agreement will be exempt from the circular (including the opinion and recommendation from
an independent financial advisor) and the independent shareholders’ approval requirements,
but are subject to the announcement requirements under Rule 14A.35 of the Listing Rules and
the annual reporting requirements under Rules 14A.49, 14A.71 and 14A.72 of the Listing
Rules.
INTERNAL CONTROL PROCEDURES ADOPTED BY THE COMPANY IN RESPECT
OF THE IMPLEMENTATION OF CONTINUING CONNECTED TRANSACTION
FRAMEWORK AGREEMENTS
In order to ensure the terms under relevant framework agreements for the continuing
connected transactions are fair and reasonable and are carried out on normal commercial terms
or better, the Company has adopted the following internal control procedures:
 The Company has adopted and implemented a comprehensive management system
on connected transactions for supervision, management and approval of the
Company’s connected transactions in accordance with relevant requirement of the
Listing Rules;
 The independent non-executive Directors will review the non-fully exempt
connected transactions annually to ensure that the agreements have been entered into
on normal commercial terms or better, on terms that are fair and reasonable and
CONNECTED TRANSACTIONS
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--- page 297 ---
carried out in accordance with the terms of the framework agreements set out above.
The auditor of the Company will also review annually the pricing policies and
annual caps of such agreements; and
 The pricing of the connected transactions should be no less favorable to us compared
with the prices provided by independent third parties. For prices of similar products
and raw materials provided by independent third parties, we will conduct price
enquiries and comparison on the market to ensure that pricings of relevant connected
transactions are no less favorable than prices provided by independent third parties.
W AIVERS
In respect of the transactions as contemplated under the Packaging Material Procurement
Agreement as described above, we have applied for, and the Stock Exchange has granted us,
a waiver from strict compliance with the announcement, circular and independent
Shareholders’ approval requirements under the Listing Rules pursuant to Rule 14A.105 of the
Listing Rules.
In respect of the transactions as contemplated under the Raw Materials Procurement
Agreement as described above, we have applied for, and the Stock Exchange has granted us,
a waiver from strict compliance with the announcement requirements under the Listing Rules
pursuant to Rule 14A.105 of the Listing Rules.
DIRECTORS’ CONFIRMATION
Our Directors (including independent non-executive Directors) are of the view that: (i)
the continuing connected transactions set out above have been and will be entered into in our
ordinary and usual course of business on normal commercial terms or better, on terms that are
fair and reasonable, and in the interests of our Company and our Shareholders as a whole; and
(ii) the proposed annual caps of the continuing connected transactions are fair and reasonable
and in the interests of our Company and our Shareholders as a whole.
JOINT SPONSORS’ CONFIRMATION
Based on the documentation, information and data (including historical transaction
amounts) provided by the Company and participation in the due diligence and discussion with
the Company, the Joint Sponsors are of the view that: (i) the aforesaid continuing connected
transactions for which a waiver has been sought have been and will be entered into in the
Company’s ordinary and usual course of business on normal commercial terms or better, that
are fair and reasonable, and are in the interests of the Company and its Shareholders as a whole;
and (ii) the proposed annual caps of the continuing connected transactions are fair and
reasonable and in the interests of the Company and the Shareholders as a whole.
CONNECTED TRANSACTIONS
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DIRECTORS
Our Board consists of nine Directors, including five executive Directors, one
non-executive Director, and three independent non-executive Directors. The following table
sets forth certain information about the Directors.
Name Age Position
Date of Joining
our Group
Date of
Appointment as
a Director Major Responsibilities
Mr. Y un’an Wang
(ˮථτ΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
38 Founder, Chairman of the
Board, Executive
Director and Chief
Executive Officer
June 12, 2018 August 31, 2021 Overseeing strategic and
business direction and
overall management of our
Group
Mr. Xia Qi
(΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
38 Executive Director and
President
June 12, 2018 May 18, 2022 Overseeing business
development and franchisee
management
Mr. Xiudi Ruan
(΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
38 Executive Director June 12, 2018 December 28,
2023
Product research and
development
Ms. Y ayu Jin
(ඩ͗ɾɻ) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
35 Executive Director June 12, 2018 December 28,
2023
Corporate culture development
Mr. Y unjiang Cai
(ᇹථϪ΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
40 Executive Director June 12, 2018 December 28,
2023
Business development and
franchisee management
Mr. Y aoxin Huang
(ර᪙㒥΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
37 Non-executive Director June 29, 2020 May 18, 2022 Providing advice and making
recommendations to the
Board
Mr. Y ue Zhuo ( ՙ൳΋͛) /H1118/H111837 Independent
Non-executive
Director
Listing Date Listing Date Providing independent opinion
and judgment to the Board
Ms. Xiaodong Zheng
(ቍወ̆ɾɻ) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
68 Independent
Non-executive
Director
Listing Date Listing Date Providing independent opinion
and judgment to the Board
Mr. Jianbo Li
(΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
54 Independent
Non-executive
Director
Listing Date Listing Date Providing independent opinion
and judgment to the Board
Save as disclosed below, (i) none of our Directors had held any directorships in listed
companies during the three years immediately prior to the Latest Practicable Date; (ii) none of
our Directors and members of senior management are related to other Directors or members of
senior management; and (iii) to the best knowledge, information and belief of our Company
having made all reasonable enquiries, there is no other information relating to our Directors
that is required to be disclosed pursuant to Rule 13.51(2) of the Listing Rules or other material
matter with respect to the appointment of our Directors that needs to be brought to the attention
of our Shareholders.
DIRECTORS AND SENIOR MANAGEMENT
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Executive Directors
Mr. Yun’an Wang ( ˮථτ΋͛), aged 38, is the founder, chairman of the Board,
executive Director and chief executive officer of our Company.
Mr. Wang opened the first “ Good me ” store in 2010. Since then, he has been responsible
for setting the strategies, directions and goals of the “ Good me ” brand for over a decade. Mr.
Wang has acutely observed the changes and opportunities in the freshly-made beverage
industry, and led us to maintain our industry-leading position as the industry continuously
evolves. He has been serving as the chief executive officer of Guming Technology since its
establishment in 2018. Mr. Wang received a bachelor’s degree in material science and
engineering from Keyi College of Zhejiang Sci-Tech University (Ҧၾᖵஔኪ
৫) in June 2010.
Mr. Xia Qi (΋͛), aged 38, is an executive Director and the president of our
Company, and oversees business development and franchisee management of our Group. Mr.
Qi has worked with Mr. Wang since the early days of the “ Good me ” brand and was
instrumental to its growth. Mr. Qi has made significant contributions to the initial
establishment and ongoing operation of our franchisee committee, franchise training system,
and various franchisee management measures of our Group. Mr. Qi was one of the initial
shareholders of Guming Technology when it was established and has worked with Guming
Technology since its establishment in June 2018. Prior to that, Mr. Qi worked at the Office of
Safety Inspection of Fuhai township, Cixi city (הfrom November 2011 to
December 2013. Mr. Qi received a bachelor’s degree in electronics information science and
technology from Keyi College of Zhejiang Sci-Tech University (Ҧၾᖵஔኪ
৫) in June 2010.
Mr. Xiudi Ruan (΋͛), aged 38, is an executive Director of our Company, and
focuses on our Group’s product research and development. Mr. Ruan has extensive experience
and deep understanding of tea related research and procurement. Previously, Mr. Ruan was
responsible for our Group’s store management, procurement and logistics. Mr. Ruan
co-founded the “ Good me ” brand, and was instrumental to its growth. Mr. Ruan was one of the
initial shareholders of Guming Technology when it was established and has been serving as a
supervisor of Guming Technology since May 2020. Prior to that, Mr. Ruan worked as a sales
agent of Taizhou Baoli Economics and Trade Co., Ltd. (ʮ̡) from
September 2009 to February 2010. Mr. Ruan graduated from Hangzhou V ocational and
Technical College (ψᔖุҦஔኪ৫) with a major in mold design and manufacturing in June
2009.
Ms. Y ayu Jin (ඩ͗ɾɻ), aged 35, is an executive Director of our Company, and
focuses on our Group’s corporate culture development. Ms. Jin has worked with Mr. Wang in
the early days of the “ Good me ” brand since 2016. She has served in multiple departments
within our Group, mainly responsible for our Group’s overall administrative management,
procurement of packaging materials, and enforcement of our Group’s anti-bribery policies, and
was instrumental to the formation of our corporate culture. Prior to that, Ms. Jin worked at the
DIRECTORS AND SENIOR MANAGEMENT
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Hangzhou office of Zhejiang Xixi Glass Co., Ltd. (ψ፬ԫஈ)a sa
human resources specialist from June 2013 to July 2016. From March 2012 to May 2013, she
worked for Hangzhou Xingdong Chenggong Enterprise Management Co., Ltd. (ψБਗϓ̌
ʮ̡) as a teaching assistant of EMBA programs. Ms. Jin graduated from
Zhejiang Changzheng V ocational and Technical College (ᔖุҦஔኪ৫) with a major
in office administration in June 2011.
Mr. Yunjiang Cai ( ᇹථϪ΋͛) (with former name as Y unjiang Cai (۴aged 40,
is an executive Director of our Company, and focuses on our Group’s business development
and franchisee management, including franchisee development, store inspection and
operational support. Mr. Cai has over a decade of experience in business development, has
worked with Mr. Wang as early as in 2015 for the “ Good me ” brand, and was instrumental to
its growth. Prior to that, Mr. Cai worked as a vice general manager of Xishuangbanna Jianfeng
Media Co., Ltd. (ʮ̡) from October 2013 to January 2015. Mr. Cai has
been serving as the head of business development of Guming Technology since June 2018. Mr.
Cai graduated from Huainan Normal University (ᇍኪ৫) with a major in digital
commerce in July 2009.
Non-Executive Director
Mr. Y aoxin Huang ( ර᪙㒥΋͛), aged 37, is a non-executive Director of our Company.
Mr. Huang was appointed as our Director on May 18, 2022. Mr. Huang joined Ningbo Meishan
Bonded Port Area Meixing Private Fund Management Co. Ltd. (ጳӷ෍ਿ
ʮ̡) in May 2018 and currently serves as a managing director. From July 2012 to
May 2018, Mr. Huang worked at China International Capital Corporation (HKEX: 3908;
SSE: 601995), with his last position as an executive director. Mr. Huang received a master’s
degree in finance from Renmin University of China in June 2012 and a bachelor’s degree in
financial engineering from Xiamen University in July 2009.
Independent Non-executive Directors
Mr. Yue Zhuo ( ՙ൳΋͛), aged 37, was appointed as an independent non-executive
Director of our Company taking effect on the Listing Date. Mr. Zhuo has served as the director
of DiDi Global Inc., or DiDi, since May 2024, and the chief financial officer of DiDi since
April 2021. Mr. Zhuo joined DiDi in February 2017 as the deputy general manager of the ride
hailing department and served as the vice president of finance and operation management of
DiDi from December 2018 to April 2021. Prior to joining DiDi, Mr. Zhuo worked at Sculptor
Capital Management Hong Kong Limited (formerly known as Och-Ziff Capital Management
Hong Kong Limited) in Hong Kong from September 2014 to February 2017. Prior to that, Mr.
Zhuo worked at Goldman Sachs (Asia) L.L.C. from February 2011 to August 2014 and Morgan
Stanley Asia Limited from July 2009 to January 2011. While working in asset management
firm and investment banks, Mr. Zhuo has gained the accounting and financial management
expertise through (i) reviewing and analyzing financial statements, business plans and financial
projections of potential investee companies to determine their investment merits and identify
any financial issues; and (ii) overseeing and evaluating the financial performance of portfolio
companies. Mr. Zhuo received a bachelor’s degree in finance from Peking University in July
2009.
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Ms. Xiaodong Zheng ( ቍወ̆ɾɻ), aged 68, was appointed as an independent
non-executive Director of our Company taking effect on the Listing Date. Ms. Zheng was
appointed as the head of the Food Biological Science and Technology Research Center at
Zhejiang University (הin January 2013. Prior to that, Ms.
Zheng was appointed as the head of the Institute of Food Science at Zhejiang University ( ए
הin April 2006.
Ms. Zheng became a Qiushi Distinguished Professor (त໌઺બ) of Zhejiang
University in January 2011 and a professor of Zhejiang University in December 2000. Ms.
Zheng became a Doctoral supervisor at Zhejiang University in January 2002, a recipient of
special grants by the State Council of the PRC (൨) in March 2011, and was
recognized as an expert on the Agricultural Product Quality and Safety Expert Committee of
the Agriculture Department of the PRC (ଡ଼) in August 2011. Ms.
Zheng received a master’s degree in agronomy from Zhejiang Agricultural University ( एϪ༵
ุɽኪ) in July 1996 and a bachelor’s degree in biology from Harbin Normal University (۞
ᇍɽኪ) in February 1982.
Mr. Jianbo Li (΋͛), aged 54, was appointed as an independent non-executive
Director of our Company taking effect on the Listing Date. From July 2022 to May 2024,
Mr. Li served as a non-executive director of Plus Group Holdings Inc. (HKEX: 2486). Mr. Li
has also been serving as the chief executive officer of Y onghui Fresh Food Development Co.,
Ltd. (ʮ̡) since February 2020. Prior to that, in November 2016, Mr. Li
founded Guangzhou Y oorstore Technology Co., Ltd. (ʮ̡) where he
served as its director until January 2020. From March 2011 to April 2016, Mr. Li served as an
executive vice president and subsequently the president of Y onghui Superstores Co., Ltd. ( ͑
ʮ̡) (SSE: 601933). From April 1999 to January 2011, he served as a director
and partner at IBM (China) Co., Limited Guangzhou Branch ( ਷ყਠุዚኜ(ʕ਷)ʮ̡ᄿ
ψʱʮ̡). From July 1995 to March 1999, he worked at the product supply department of
Procter & Gamble (Guangzhou) Ltd. (ʮ̡).
Mr. Li received a master’s degree in management science from University of Science and
Technology of China (ኪҦஔɽኪ) in June 1995 and a bachelor’s degree in management
science from the same university in July 1993.
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SENIOR MANAGEMENT
The following table provides information about members of the senior management of our
Company:
Name Age Position
Date of Joining
the Group
Date of
Appointment as
Senior
Management Major Responsibilities
Mr. Y un’an Wang
(ˮථτ΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
38 Founder, Chairman of the
Board, Executive
Director and Chief
Executive Officer
June 12, 2018 June 12, 2018 Overseeing strategic and
business direction and
overall management of our
Group
Mr. Xia Qi (΋͛) /H1118/H1118/H1118/H111838 Executive Director and
President
June 12, 2018 December 28,
2023
Overseeing business
development and franchisee
management of our Group
Mr. Jifeng Li
(ҽᘱቜ΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
46 Chief Operating Officer August 29, 2020 August 29, 2020 Overseeing business operations
of our Group
Mr. Hailing Meng
(ऎ௒΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118
41 Chief Financial Officer June 17, 2020 June 17, 2020 Overseeing capital operations
and finance of our Group
Mr. Y u Qiang
(੶ρ΋͛) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
43 Chief Technology Officer May 20, 2023 May 20, 2023 Overseeing technologies of our
Group
Mr. Yun’an Wang ( ˮථτ΋͛), aged 38, is the founder, chairman of the Board,
executive Director and chief executive officer of our Company. For further details, please see
the paragraphs headed “— Directors — Executive Directors” in this section.
Mr. Xia Qi (΋͛), aged 38, is an executive Director and the president of our
Company. For further details, please see the paragraphs headed “— Directors — Executive
Directors” in this section.
Mr. Jifeng Li ( ҽᘱቜ΋͛), aged 46, is the chief operating officer of our Company.
Mr. Li has been serving as our chief operating officer since March 2022 and served as our chief
technology officer from August 2020 to March 2022. Prior to joining our Group, Mr. Li served
as the chief technology officer of Lvyue Group (ණྠ) from January to August 2020 and
the vice president of products at Blibee Trading Co., Ltd. (ʮ̡) from April
2017 to January 2020. Prior to that, Mr. Li worked at Beijing Qunar Software Technology Co.,
Ltd. (ʮ̡), a subsidiary of Qunar Cayman Islands Limited, most
recently as the chief executive officer of the hospitalities business unit from March 2012 to
April 2017. Mr. Li received a master’s degree in computer software and theories from the
Institute of Computing Technology at the Chinese Academy of Sciences (ၑҦஔ
הin August 2003, and both a bachelor’s degree in computer science and a bachelor of
art degree in Chinese language and literature from Tsinghua University in July 2000.
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Mr. Hailing Meng (ऎ௒΋͛), aged 41, is the chief financial officer of our Company.
Prior to joining our Group in June 2020, Mr. Meng was the head of research at Zebra Global
Capital between June 2016 and June 2020. Prior to joining Zebra Global Capital, Mr. Meng
covered China’s internet stocks as an equity research analyst for investment banks. He was an
executive director at Goldman Sachs (Asia) L.L.C. from July 2015 to June 2016, a vice
president at Morgan Stanley Asia Limited from June 2014 to July 2015, and a senior associate
at Macquarie Capital Securities Limited from July 2012 to June 2014. Prior to that, Mr. Meng
worked for iQiyi Inc. (NASDAQ: IQ) as a manager of strategic cooperation and investor
relations from August 2011 to July 2012. Mr. Meng started his career as a consultant with
Deloitte’s Enterprise Risk Services (ERS) department in Hong Kong in September 2007. He
received a master’s degree in electrical and electronic engineering from the Hong Kong
University of Science and Technology (HKUST) in November 2007 and a bachelor’s degree in
information engineering from Southeast University (ɽኪ) in June 2005.
Mr. Meng became a certified public accountant of the Chinese Institute of Certified
Public Accountants (CICPA) in March 2015 and a chartered financial analyst (CFA)
charterholder in May 2013. Mr. Meng also completed the CPA Qualification Programme of the
Hong Kong Institute of Certified Public Accountants (HKICPA) and passed the professional
examination for membership admission under the Professional Accountants Ordinance of Hong
Kong in September 2009. He earned the highest score in the Asia geographical region on the
June 2009 CISA (Certified Information Systems Auditor) examination by the Information
Systems Audit and Control Association (ISACA).
Mr. Yu Qiang ( ੶ρ΋͛), aged 43, is the chief technology officer of our Company. Prior
to joining our Group in May 2023, Mr. Qiang served as the vice general manager of Lepu
Medical Technology (SZSE: 300003; SIX: LEPU) from December 2020 to May 2023. Prior to
that, Mr. Qiang served as the chief technology officer of Luckin Coffee (Beijing) Co., Ltd. ( ๿
դਥ(̏ԯ)ʮ̡), first joining the company in October 2017. Prior to that, Mr. Qiang
worked for over a decade at China Auto Renting Inc. (ʮ̡), most
recently as its chief technology officer. Mr. Qiang received a bachelor’s degree in applied
chemistry from Beijing University of Technology ( ̏ԯʈุɽኪ) in July 2003.
JOINT COMPANY SECRETARIES
Mr. Saibin Wang ( ˮᒄⅳ΋͛), aged 33, is one of our joint company secretaries. Mr.
Wang has been serving as a senior finance manager of our Company since May 2022. Prior to
joining us, Mr. Wang served as a finance BP (business partner) of Hangzhou Kuaidi
Technology Co., Ltd. (ʮ̡) from July 2021 to May 2022, a finance manager
of Hangzhou Duiba Internet Technology Co., Ltd. (ʮ̡) from April
2018 to July 2021 and a joint company secretary of its parent company, Duiba Group Ltd.
(HKEX: 1753), from August 2018 to June 2021. Prior to that, Mr. Wang was a senior auditor
of Ernst & Y oung from October 2014 to April 2018. Mr. Wang became a certified public
accountant of the Chinese Institute of Certified Public Accountants (CICPA) in January 2021.
Mr. Wang received a bachelor’s degree in accounting from Zhejiang University of Finance and
Economics ( एϪৌ຾ɽኪ) in June 2014.
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Ms. Ying Man Sham ( Ҋᅂ˖ɾɻ), is one of our joint company secretaries. Ms. Sham
is a manager of the Company Secretarial Services Division of Tricor Services Limited, a global
professional services provider specializing in integrated business, corporate and investor
services. She has over 25 years of experience in the corporate secretarial field. Ms. Sham
currently holds company secretary/joint company secretary positions in other companies listed
on the Stock Exchange, including Hilong Holding Limited (HKEX: 1623), Honma Golf
Limited (HKEX: 6858), WuXi Biologics (Cayman) Inc. (HKEX: 2269) and BrainAurora
Medical Technology Limited (HKEX: 6681). Ms. Sham obtained a bachelor degree in business
administration from Lingnan College (now known as Lingnan University). She is a Chartered
Secretary, a Chartered Governance Professional and an associate of both The Hong Kong
Chartered Governance Institute and The Chartered Governance Institute in the United
Kingdom, respectively.
LEGAL PROCEEDINGS INVOLVING ONE OF OUR DIRECTORS
Mr. Y ue Zhuo, in his capacity as the chief financial officer of Didi, has been named as one
of the defendants in (i) an ongoing securities class action lawsuit against Didi in the United
States District Court for Southern District of New Y ork (the “ Federal Court ”), captioned In
re Didi Global Inc. Securities Litigation , No. 1:21-cv-05807-LAK (the “ Federal Action ”); and
(ii) an ongoing securities class action lawsuit against Didi in the state court in New Y ork (the
“State Court Action ”, together with the Federal Action, the “ Class Actions ”). The plaintiffs
in the Class Actions brought similar allegations that the registration statement and prospectus
prepared for Didi’s initial public offering (“ IPO”) on June 30, 2021 contained material
misstatements and omissions. In the Class Actions, plaintiffs seek monetary damages for
alleged losses suffered as a result of these alleged misrepresentations or omissions.
By way of background for the Federal Action, starting in July 2021, Didi and certain of
its officers and directors were named as defendants in several putative securities class actions
filed in federal court in New Y ork and California. These actions alleged, in sum and substance,
that the registration statement and prospectus prepared for Didi’s IPO on June 30, 2021
contained material misstatements and omissions in violation of the Securities Act of 1933, the
Securities Exchange Act of 1934 and Rule 10b-5 promulgated thereunder. In September 2021,
plaintiffs voluntarily dismissed all actions filed in federal court in California. On October 12,
2021, the Federal Court appointed lead plaintiffs and lead counsel and consolidated the
remaining federal actions under the caption In re Didi Global Inc. Securities Litigation ,
No. 1:21-cv-05807-LAK. Lead plaintiffs in the consolidated action filed a consolidated
amended complaint on January 7, 2022. Didi moved to dismiss the consolidated amended
complaint on March 8, 2022. In response, lead plaintiffs further amended their complaint,
filing a second amended complaint on May 5, 2022. On June 3, 2022, Didi moved to dismiss
the second amended complaint. On March 14, 2024, the Federal Court denied Didi and other
defendants’ motion to dismiss plaintiffs’ second amended complaint in the Federal Action.
Discovery in the Federal Action is currently ongoing. Separately, for the State Court Action,
in December 2021, Didi and certain of its officers and directors were named as defendants in
a putative securities class action filed in state court in New Y ork, which similarly alleges that
the registration statement and prospectus prepared for the IPO contained material
misstatements and omissions in violation of the Securities Act of 1933. As the Class Actions
remain in process, we cannot predict the timing, outcome or consequences of the Class Actions.
DIRECTORS AND SENIOR MANAGEMENT
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Mr. Zhuo confirmed that he has consistently acted in good faith when discharging his
duties and responsibilities as the chief financial officer of Didi. To his knowledge and at all
times, he did not commit or omit to do any act that would constitute misconduct in management
under applicable securities laws, acts or regulations that would impugn his integrity, character
or competence as an independent non-executive Director of the Company. Mr. Zhuo believes
that the allegations against him in the Class Actions are without merit and intends to defend
such allegations against him vigorously.
Based on currently available public information and taking into account that (i) the Class
Actions are still pending as of the Latest Practicable Date and the courts have not ruled on the
merits of the plaintiffs’ claims; (ii) the Class Actions were brought by private plaintiffs and
private law firms, not by any public regulatory or enforcement authority; (iii) such kind of class
action is not uncommon among companies listed in the United States and being named as a
defendant in the capacity of an officer in a class action is not a judgment on that defendant’s
integrity or suitability, including, as applicable here, the defendant’s character or his ability to
discharge his duties as a director of a listed company in Hong Kong; (iv) as of the Latest
Practicable Date, there has been no dispositive court ruling on any of plaintiffs’ factual
allegations in the complaint, Mr. Zhuo’s alleged liability arising therefrom, or Mr. Zhuo’s
character, experience, integrity and ability to discharge his duties as a director, including
fiduciary duties and duties to exercise skill, care and diligence pursuant to standards
commensurate with those required of a director of a listed company in Hong Kong; and (v)
based on the background check and litigation searches conducted by independent third parties,
the Company is not aware of any other disputes, litigations or regulatory disciplinary actions
or investigations against Mr. Zhuo which may impugn his integrity, character or competence
as an independent non-executive Director of the Company, the Directors are of the view that
the Class Actions would not affect the suitability of Mr. Zhuo as a Director of the Company
under Rules 3.08 and 3.09 of the Listing Rules.
Given that (i) none of the Class Actions involve any companies within the Group; and (ii)
Mr. Zhuo, as an independent non-executive Director, has not participated and will not
participate in the day-to-day management of the Company, the Directors are of the view that
the Class Actions would not have any material adverse impact on the business and/or
operations of the Group despite the uncertainty of their outcomes.
Based on currently available public information and the independent due diligence
conducted by the Joint Sponsors, the Joint Sponsors concur with the Directors’ view on the
suitability of Mr. Zhuo as a Director of the Company under Rules 3.08 and 3.09 of the Listing
Rules as stated above.
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MANAGEMENT AND CORPORATE GOVERNANCE
Board Committees
Audit committee
We have established an audit committee with written terms of reference in compliance
with Rule 3.21 of the Listing Rules and the Corporate Governance Code set out in Appendix
C1 to the Listing Rules. The primary duties of the audit committee are to review and supervise
the financial reporting process and internal controls system of our Group and provide advice
and recommendations to the Board. The audit committee comprises three members, namely,
Mr. Y ue Zhuo, Mr. Jianbo Li and Mr. Y aoxin Huang, with Mr. Y ue Zhuo as the chairperson of
the audit committee. Mr. Y ue Zhuo has appropriate related financial management expertise as
required under Rules 3.10(2) and 3.21 of the Listing Rules.
Remuneration committee
We have established a remuneration committee with written terms of reference in
compliance with Rule 3.25 of the Listing Rules and the Corporate Governance Code set out in
Appendix C1 to the Listing Rules. The primary duties of the remuneration committee are to
review and make recommendations to the Board on the terms of remuneration packages,
bonuses and other compensation payable to our Directors and other senior management. The
remuneration committee comprises three members, namely Mr. Jianbo Li, Mr. Y un’an Wang
and Mr. Y ue Zhuo, with Mr. Jianbo Li as the chairperson of the remuneration committee.
Nomination committee
We have established a nomination committee with written terms of reference in
compliance with Rule 3.27A and the Corporate Governance Code set out in Appendix C1 to the
Listing Rules. The primary duties of the nomination committee are to make recommendations
to our Board on the appointment of Directors and management of Board succession. The
nomination committee comprises three members, namely Mr. Y un’an Wang, Ms. Xiaodong
Zheng and Mr. Jianbo Li, with Mr. Y un’an Wang as the chairperson of the nomination
committee.
Corporate Governance Code
We aim to achieve high standards of corporate governance which are crucial to our
development and safeguard the interests of our Shareholders. In order to accomplish this, we
expect to comply with the Corporate Governance Code set out in Appendix C1 to the Listing
Rules save for the below.
Pursuant to code provision C.2.1 of the Corporate Governance Code, companies listed on
the Stock Exchange are expected to comply with, but may choose to deviate from the
requirement that the responsibilities between the chairman of the Board and the chief executive
officer should be segregated and should not be performed by the same individual. We do not
have a separate chairman of the Board and chief executive officer and Mr. Wang currently
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performs these two roles. The Board believes that vesting the roles of both chairman of the
Board and chief executive officer in the same person has the benefit of ensuring consistent
leadership within the Group and enables more effective and efficient overall strategic planning
for the Group. The Board considers that the balance of power and authority for the present
arrangement will not be impaired and this structure will enable our Company to make and
implement decisions promptly and effectively. The Board will continue to review and consider
splitting the roles of chairman of the Board and the chief executive officer of our Company if
and when it is appropriate taking into account the circumstances of the Group as a whole. For
further information relating to our Company’s corporate governance measures, please see the
section headed “Relationship with our Controlling Shareholders — Corporate Governance
Measures.”
Board Diversity
Our Company has adopted a board diversity policy which sets out the approach to achieve
diversity of the Board. Our Company recognizes and embraces the benefits of having a diverse
Board and sees increasing diversity at the Board level, including gender diversity, as an
essential element in maintaining our Company’s competitive advantage and enhancing its
ability to attract, retain, and motivate employees from the widest possible pool of available
talent. We target to have at least one female Director in the Board in the future. Pursuant to the
board diversity policy, in reviewing and assessing suitable candidates to serve as a Director of
our Company, the nomination committee will consider a number of factors, including but not
limited to gender, age, cultural and educational background, professional qualifications, skills,
knowledge, and industry and regional experience. Pursuant to the board diversity policy, the
nomination committee will discuss periodically and when necessary, agree on the measurable
objectives for achieving diversity, including gender diversity, on the Board and recommend
them to the Board for formal adoption.
We recognize the particular importance of gender diversity. Our Board currently
comprises nine Directors, including two female Directors. We have taken and will continue to
take steps to promote and enhance gender diversity at all levels of our Company, including but
without limitation at our Board and senior management levels. Our board diversity policy
provides that our Board shall take opportunities when selecting and making recommendations
on suitable candidates for Board appointments with the aim to maintain the proportion of
female members after Listing. We will also ensure that there is gender diversity when
recruiting staff at mid to senior level, as well as engage more resources in training more female
staff with the aim of providing a pipeline of female senior management and potential
successors to our Board going forward. It is our objective to maintain an appropriate balance
of gender diversity with reference to the stakeholders’ expectation and international and local
recommended best practices.
Management Presence
Pursuant to Rule 8.12 of the Listing Rules, an issuer must have a sufficient management
presence in Hong Kong. This will normally mean that at least two of its executive directors
must be ordinarily resident in Hong Kong. We do not have sufficient management presence in
Hong Kong for the purposes of Rule 8.12 of the Listing Rules.
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Our Group’s management headquarters, senior management, business operations and
assets are primarily based outside Hong Kong, in mainland China. The Directors consider that
the appointment of executive Directors who will be ordinarily resident in Hong Kong would
not be beneficial to, or appropriate for, our Group and therefore would not be in the best
interests of our Company or the Shareholders as a whole. Accordingly, we have applied for and
the Stock Exchange has granted, a waiver from compliance with Rule 8.12 of the Listing Rules.
For further details, see “Waivers and Exemptions — Management presence in Hong Kong.”
Confirmation from our Directors
Each of our Directors confirms that he or she (i) has obtained the legal advice referred
to under Rule 3.09D of the Listing Rules in December 2023 or December 2024, as the case may
be, and (ii) understands his or her obligations as a director of a listed issuer under the Listing
Rules.
Each of our independent non-executive Directors has confirmed (i) his or her
independence as regards each of the factors referred to in Rules 3.13(1) to (8) of the Listing
Rules, (ii) that he or she has no past or present financial or other interest in the business of the
Company or its subsidiaries or any connection with any core connected person of the Company
under the Listing Rules as at the Latest Practicable Date, and (iii) that there are no other factors
that may affect his or her independence at the time of his or her appointment.
REMUNERATION
Our Directors receive remuneration, including salaries and allowance, performance-
related bonuses, pension scheme contributions and social welfare, equity-settled share-based
payments, and other benefits in kind.
The aggregate amount of remuneration for our Directors in 2021, 2022 and 2023 was
approximately RMB6.1 million, RMB7.3 million and RMB10.4 million, respectively. The
aggregate amount of remuneration for our Directors in the nine months ended September 30,
2023 and 2024 was approximately RMB6.8 million and RMB3.9 million, respectively. None of
our Directors waived any remuneration during the aforesaid periods.
The five highest paid individuals of our Group in 2021, 2022 and 2023 included one, one
and one Director, respectively. The aggregate amount of remuneration for the five highest paid
individuals, excluding the one Director, in 2021, 2022 and 2023 were approximately RMB8.8
million, RMB9.9 million and RMB31.0 million, respectively. The five highest paid individuals
of our Group in the nine months ended September 30, 2023 and 2024 included one and one
Director, respectively. The aggregate amount of remuneration for the five highest paid
individuals, excluding the one Director, in the nine months ended September 30, 2023 and 2024
were approximately RMB10.1 million and RMB7.9 million, respectively.
Save as disclosed above, no other payments have been paid or are payable, in respect of
2021, 2022, 2023 and the nine months ended September 30, 2024 by our Company to our
Directors.
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No remuneration was paid to our Directors or the five highest paid individuals as an
inducement to join, or upon joining, our Group. No compensation was paid to, or receivable
by, our Directors or past directors or the five highest paid individuals for the Track Record
Period for the loss of office as director of any member of our Group or of any other office in
connection with the management of the affairs of any member of our Group. None of our
Directors waived any emoluments during the same period.
COMPLIANCE ADVISOR
We have appointed Altus Capital Limited as our Compliance Adviser pursuant to Rule
3A.19 of the Listing Rules. The Compliance Adviser will provide us with guidance and advice
as to compliance with the requirements under the Listing Rules and applicable Hong Kong
laws. Pursuant to Rule 3A.23 of the Listing Rules, the Compliance Adviser will advise our
Company, among others, in the following circumstances:
(a) before the publication of any regulatory announcement, circular, or financial report;
(b) where a transaction, which might be a notifiable or connected transaction, is
contemplated, including share issues, sales or transfers of treasury shares and share
repurchases;
(c) where we propose to use the proceeds of the Global Offering in a manner different
from that detailed in this document or where our business activities, developments
or results deviate from any forecast, estimate or other information in this document;
and
(d) where the Stock Exchange makes an inquiry to our Company regarding unusual
movements in the price or trading volume of its listed securities or any other matters
in accordance with Rule 13.10 of the Listing Rules.
The term of appointment of the Compliance Adviser shall commence on the Listing Date
and is expected to end on the date on which we comply with Rule 13.46 of the Listing Rules
in respect of our financial results for the first full financial year commencing after the Listing
Date.
COMPETITION
Each of the Directors confirms that as of the Latest Practicable Date, he or she did not
have any interest in a business which materially competes or is likely to compete, directly or
indirectly, with our business, and requires disclosure under Rule 8.10 of the Listing Rules.
DIRECTORS’ AND SENIOR MANAGEMENT’S INTERESTS
As of the Latest Practicable Date, none of our Directors or members of our senior
management are related to other Directors or members of our senior management of our
Company.
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So far as our Directors are aware, immediately following the completion of the Global
Offering and assuming the Offer Size Adjustment Option and the Over-allotment Option are
not exercised, the following persons will have interests and/or short positions (as applicable)
in the Shares or underlying Shares which would fall to be disclosed to the Company and the
Stock Exchange pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or, will
be, directly or indirectly, interested in 10% or more of the issued voting rights of our Company:
Substantial shareholders of our Company
Name of substantial
shareholders
Capacity/Nature of
Interest
Number of
Shares (1)
Approximate
percentage of
shareholding in
our Company as
at the Latest
Practicable Date
Approximate
percentage of
shareholding in
our Company
after the Global
Offering (1)
Mr. Wang (2 and 3) /H1118/H1118/H1118Beneficiary of a
trust; Founder of
a trust; interest
held jointly with
another person
1,728,260,872 79.50% 74.09%
Mr. Qi
(2 and 4) /H1118/H1118/H1118/H1118/H1118/H1118Beneficiary of a
trust; Founder of
a trust; interest
held jointly with
another person
1,728,260,872 79.50% 74.09%
Mr. Ruan
(2 and 5) /H1118/H1118/H1118/H1118Beneficiary of a
trust; Founder of
a trust; interest
held jointly with
another person
1,728,260,872 79.50% 74.09%
Ms. Pan
(2 and 6) /H1118/H1118/H1118/H1118Beneficiary of a
trust; Founder of
a trust; interest
held jointly with
another person
1,728,260,872 79.50% 74.09%
Mr. Y onghua Zhu
(7) /H1118Interest in
controlled
corporations
173,913,040 8.00% 7.46%
Notes:
(1) The table assumes (i) the Global Offering becomes unconditional and the Offer Shares are issued pursuant to
the Global Offering, and (ii) the Offer Size Adjustment Option and the Over-allotment Option are not
exercised.
SUBSTANTIAL SHAREHOLDERS
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(2) Mr. Wang, Mr. Qi, Mr. Ruan and Ms. Pan and their respective intermediate holding companies entered into the
Acting-in-Concert Arrangement, details of which are set out in the section headed “History, Reorganization
and Corporate Structure — Acting-in-Concert Arrangement” of this prospectus.
(3) Shares in which Mr. Wang is interested consist of (i) 939,441,461 Shares held by Modern Leaves Limited, in
which Mr. Wang is deemed to be interested under the SFO; and (ii) an aggregate of 788,819,411 Shares in
which Mr. Wang is deemed to be interested as a result of being a party acting in concert pursuant to the
Acting-in-Concert Arrangement.
Modern Leaves Limited is owned by (i) Nascent Leaves Limited, which is in turn wholly-owned by a trust
established by Mr. Wang as the settlor with his family members being the beneficiaries, as to 99.0%; and
(ii) Ancient Leaves Limited, which is wholly owned by Mr. Wang, as to 1.0%. Under the SFO, each of Mr.
Wang, Modern Leaves Limited, Nascent Leaves Limited and Ancient Leaves Limited is deemed to be
interested in the aggregate of 1,728,260,872 Shares held by the parties to the Acting-in-Concert Arrangement.
(4) Shares in which Mr. Qi is interested consist of (i) 429,999,961 Shares held by Chivalrous Lancers Limited, in
which Mr. Qi is deemed to be interested under the SFO; and (ii) an aggregate of 1,298,260,911 Shares in which
Mr. Qi is deemed to be interested as a result of being a party acting in concert pursuant to the
Acting-in-Concert Arrangement.
Chivalrous Lancers Limited is owned by (i) Chivalrous Knights Limited, which is in turn wholly-owned by a
trust established by Mr. Qi as the settlor with his family members being the beneficiaries, as to 99.0%; and
(ii) Chivalrous Cavalry Limited, which is wholly owned by Mr. Qi, as to 1.0%. Under the SFO, each of Mr.
Qi, Chivalrous Lancers Limited, Chivalrous Knights Limited and Chivalrous Cavalry Limited is deemed to be
interested in the aggregate of 1,728,260,872 Shares held by the parties to the Acting-in-Concert Arrangement.
(5) Shares in which Mr. Ruan is interested consist of (i) 298,782,650 Shares held by Cousin Tea Limited, in which
Mr. Ruan is deemed to be interested under the SFO; and (ii) an aggregate of 1,429,478,222 Shares in which
Mr. Ruan is deemed to be interested as a result of being a party acting in concert pursuant to the
Acting-in-Concert Arrangement.
Cousin Tea Limited is owned by (i) Nephew Tea Limited, which is in turn wholly-owned by a trust established
by Mr. Ruan as the settlor with his family members being the beneficiaries, as to 99.0%; and (ii) Uncle Tea
Limited, which is wholly owned by Mr. Ruan, as to 1.0%. Under the SFO, each of Mr. Ruan, Cousin Tea
Limited, Nephew Tea Limited and Uncle Tea Limited is deemed to be interested in the aggregate of
1,728,260,872 Shares held by the parties to the Acting-in-Concert Arrangement.
(6) Shares in which Ms. Pan is interested consist of (i) 60,036,800 Shares held by Spring Equinox Drinks Limited,
in which Ms. Pan is deemed to be interested under the SFO; and (ii) an aggregate of 1,668,224,072 Shares in
which Ms. Pan is deemed to be interested as a result of being a party acting in concert pursuant to the
Acting-in-Concert Arrangement.
Spring Equinox Drinks Limited is owned by (i) Summer Solstice Drinks Limited, which is in turn
wholly-owned by a trust established by Ms. Pan as the settlor with her family members being the beneficiaries,
as to 99.0%; and (ii) Winter Solstice Drinks Limited, which is wholly owned by Ms. Pan, as to 1.0%. Under
the SFO, each of Ms. Pan, Spring Equinox Drinks Limited, Summer Solstice Drinks Limited and Winter
Solstice Drinks Limited is deemed to be interested in the aggregate of 1,728,260,872 Shares held by the parties
to the Acting-in-Concert Arrangement.
(7) Each of Beijing Meiming Enterprise Management Consulting Partnership (Limited Partnership) (পΆ
ุ၍ଣፔ༔ΥྫΆุ(Υྫ)) (“ Meiming ”), which directly holds 94,493,060 Shares, and Beijing Meiyan
Enterprise Management Consulting Partnership (Limited Partnership) (Άุ၍ଣፔ༔ΥྫΆุ(ࠢ
Υྫ)) (“ Meiyan ”), which directly holds 79,419,980 Shares, is a Pre-IPO Investor. Ningbo Meishan Bonded
Port Area Meixing Private Fund Management Co., Ltd. (ʮ̡)
(“Ningbo Meixing ”) is the general partner of Meiming, and Shenzhen Meizhu Enterprise Management Co.,
Ltd. (ப΂ʮ̡)( “ Shenzhen Meizhu ”) is the general partner of Meiyan. Shenzhen
Meizhu is wholly-owned by Ningbo Meixing, which is in turn controlled by Mr. Y onghua Zhu ( ϡኹശ). Under
the SFO, each of Ningbo Meixing and Mr. Y onghua Zhu is deemed to be interested in the aggregate of
173,913,040 Shares held by Meiming and Meiyan.
This interest excludes any Offer Shares that may be subscribed by Long-Z Fund I, L.P ., a controlled
corporation of Mr. Y onghua Zhu, under the Global Offering pursuant to the exercise of an anti-dilution right
granted to Meiming and Meiyan (or their affiliates) on December 26, 2023. For more information on this
subscription, see the section headed “Cornerstone Investors”.
SUBSTANTIAL SHAREHOLDERS
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For the persons who will be, directly or indirectly, interested in 10% of more of the issued
voting shares of the other members of our Group immediately following the completion of the
Global Offering, see the section headed “Appendix IV — Statutory and General Information”
of this document.
Save as disclosed above, our Directors are not aware of any other person who will,
immediately following the completion of the Global Offering (assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised), have any interest and/or
short positions in our Shares or underlying Shares which would fall to be disclosed to us
pursuant to the provisions of Divisions 2 and 3 of Part XV of the SFO, or, will be, directly or
indirectly, interested in 10% or more of the issued voting shares of our Company or any other
member of our Group.
SUBSTANTIAL SHAREHOLDERS
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AUTHORIZED AND ISSUED SHARE CAPITAL
The following is a description of our authorized share capital and the amount in issue and
to be issued as fully paid or credited as fully paid immediately prior to and following
completion of the Global Offering, assuming the Offer Size Adjustment Option and the
Over-allotment Option are not exercised:
Share capital as at the date of this document
Authorized share capital
Number Description of share
Aggregate nominal
value
4,713,043,460 Ordinary Share with a par value of US$0.00001 US$47,130.43
286,956,540 Preferred Share with a par value of US$0.00001 US$2,869.57
5,000,000,000 Shares in total US$50,000.00
Issued share capital
Number Description of share
Aggregate nominal
value
1,886,956,520 Ordinary Share with a par value of US$0.00001 US$18,869.57
286,956,540 Preferred Share with a par value of US$0.00001 US$2,869.57
2,173,913,060 Shares in total US$21,739.13
Share capital immediately following the completion of the Global Offering
Authorized share capital
Number Description of share
Aggregate nominal
value
5,000,000,000 Ordinary Share with a par value of US$0.00001 US$50,000.00
5,000,000,000 Shares in total US$50,000.00
SHARE CAPITAL
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--- page 314 ---
Issued share capital
Number Description of share
Aggregate nominal
value
2,173,913,060 Shares in issue US$21,739.13
158,612,000 Shares to be issued pursuant to the Global Offering
(assuming the Offer Size Adjustment Option and
the Over-allotment Option are not exercised)
US$1,586.12
2,332,525,060 Shares in total US$23,325.25
Ranking
The Offer Shares rank equally with all Shares currently in issue or to be issued as
mentioned in this document and, in particular, will rank pari passu for all dividends or other
distributions declared, made or paid on the Shares in respect of a record date which falls after
the date of this document.
POTENTIAL CHANGES TO SHARE CAPITAL AFTER LISTING
Circumstances under which general meeting and class meeting are required
Our Company may by ordinary resolution (i) increase its share capital by the creation of
new shares; (ii) consolidate and divide all or any of its share capital into shares of a larger than
its existing shares; (iii) divide its shares into several classes; (iv) sub-divide its shares or any
of them into shares of smaller amount; (v) cancel any shares, which at the date of the passing
of the resolution, have not been taken or agreed to be taken by any person; (vi) make provision
for the issue and allotment of shares which do not carry any voting rights; (vii) change the
currency of denomination of its share capital; and (viii) reduce its share premium account. In
addition, our Company may by special resolution reduce its share capital or any capital
redemption reserve subject to any conditions prescribed by law.
See “Summary of the Constitution of Our Company and Company Law of the Cayman
Islands — 2. Articles of Association — (a) Shares — (iii) Alteration of capital” in Appendix
III for further details.
Subject to the Cayman Companies Act, all or any of the special rights attached to the
shares or any class of shares (unless otherwise provided for by the terms of issue of the shares
of that class) may be varied, modified or abrogated either with (in addition to a special
resolution to amend the Memorandum or the Articles) the consent in writing of the holders of
not less than three-fourths of the voting rights of the issued shares of that class or with the
sanction of a special resolution passed at a separate general meeting of the holders of the shares
of that class.
SHARE CAPITAL
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--- page 315 ---
See “Summary of the Constitution of Our Company and Company Law of the Cayman
Islands — 2. Articles of Association — (a) Shares — (ii) V ariation of rights of existing shares
or classes of shares” in Appendix III for further details.
General mandate to issue Shares
Subject to the Global Offering becoming unconditional, our Directors were granted a
general mandate to allot, issue and deal with any Shares or securities convertible into Shares
(including any sale or transfer of treasury shares by our Company) of not more than the sum
of:
 20% of the total number of Shares in issue (excluding treasury shares of our
Company) immediately following completion of the Global Offering (excluding any
Shares which may be issued pursuant to the exercise of the Over-allotment Option
and the Shares that may be issued pursuant to the exercise of options that may be
granted under the Post-IPO Share Scheme); and
 the total number of Shares to be repurchased by our Company pursuant to the
authority referred to in “— Potential Changes to Share Capital after Listing —
General mandate to repurchase Shares” below.
This general mandate to issue Shares will remain in effect until the earliest of:
 the conclusion of the next annual general meeting of our Company unless, by
ordinary resolution passed at that meeting, the authority is renewed, either
unconditionally or subject to condition;
 the expiration of the period within which the next annual general meeting of our
Company is required to be held under any applicable laws of the Cayman Islands or
the memorandum and the articles of association of our Company; and
 the passing of an ordinary resolution by our Shareholders in a general meeting
revoking or varying the authority.
General mandate to repurchase Shares
Subject to the Global Offering becoming unconditional, our Directors were granted a
general mandate to repurchase our own Shares up to 10% of the total number of Shares in issue
(excluding treasury shares of our Company) immediately following completion of the Global
Offering (excluding any Shares which may be issued pursuant to the exercise of the
Over-allotment Option and the Shares that may be issued pursuant to the exercise of options
under the Post-IPO Share Scheme).
This mandate only relates to repurchases on the Stock Exchange or on any other stock
exchange on which the securities of our Company may be listed and which is recognized by
the SFC and the Stock Exchange for this purpose, and in accordance with all applicable laws
and the requirements under the Listing Rules as amended from time to time.
SHARE CAPITAL
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This general mandate to repurchase Shares will remain in effect until the earliest of:
 the conclusion of the next annual general meeting of our Company unless, by
ordinary resolution passed at that meeting, the authority is renewed, either
unconditionally or subject to condition;
 the expiration of the period within which the next annual general meeting of our
Company is required to be held under any applicable laws of the Cayman Islands or
the memorandum and the articles of association of our Company; and
 the passing of an ordinary resolution by our Shareholders in a general meeting
revoking or varying the authority.
See “Statutory and General Information — Further Information About Our Group — 5.
Explanatory Statement on Repurchase of Our Own Securities” in Appendix IV for further
details of this general mandate to repurchase Shares.
SHARE INCENTIVE PLAN
We have adopted the Post-IPO Share Scheme. See “Statutory and General Information —
Post-IPO Share Scheme” in Appendix IV for further details.
SHARE CAPITAL
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Y ou should read the following discussion and analysis in conjunction with our
consolidated financial information and the related notes thereto included in the
Accountants’ Report in Appendix I to this document. Our consolidated financial
information has been prepared in accordance with IFRSs.
The following discussion and analysis contain forward-looking statements that
involve risks and uncertainties. These statements are based on our assumptions and
analysis in light of our experience and perception of historical trends, current conditions,
and expected future developments, as well as other factors that we believe are appropriate
under the circumstances. However, our actual results could differ materially from those
anticipated in these forward-looking statements due to various factors, including those set
forth under “Risk Factors” and elsewhere in this document. For further details, see
“Forward-Looking Statements.”
For the purposes of this section, unless the context otherwise requires, references to
2021, 2022 and 2023 refer to our financial years ended December 31 of such years.
OVERVIEW
We are a leading and fast-growing freshly-made beverage company in China, dedicated
to serving fresh, tasty and value-for-money beverages of consistently high quality. Our brand,
“Good me (̚প),” is China’s largest mid-priced freshly-made tea store brand and the second
largest freshly-made tea store brand across all price ranges, in terms of both GMV in 2023 and
store count as of December 31, 2023. In the nine months ended September 30, 2024, we
generated a GMV of RMB16.6 billion, representing an increase of 20.4% from the same period
in 2023. In 2023, we generated a GMV of RMB19.2 billion, representing an increase of 37.2%
from 2022. Our store network encompassed 9,001 stores as of December 31, 2023, representing
an increase of 35.0% from December 31, 2022, and expanded to 9,778 stores as of
September 30, 2024.
We generate revenue mainly from the sales of goods and equipment and the provision of
services to our franchisees. We have experienced substantial growth during the Track Record
Period. Our revenue increased by 26.8% from RMB4,383.9 million in 2021 to RMB5,559.2
million in 2022, and further increased by 38.1% to RMB7,675.7 million in 2023. Our revenue
increased by 15.6% from RMB5,570.9 million in the nine months ended September 30, 2023
to RMB6,441.3 million in the same period in 2024. Our profit for the year was RMB24.0
million, RMB372.0 million and RMB1,096.4 million in 2021, 2022 and 2023, respectively. Our
profit for the period was RMB1,002.0 million and RMB1,119.8 million in the nine months
ended September 30, 2023 and 2024, respectively. Our adjusted profit (non-IFRS measure) was
RMB769.6 million, RMB788.1 million and RMB1,459.0 million in 2021, 2022 and 2023,
respectively, and was RMB1,044.5 million and RMB1,148.7 million in the nine months ended
September 30, 2023 and 2024, respectively. For more details, se e “ — Description of Major
Components of Our Results of Operations — Non-IFRS Measures.”
FINANCIAL INFORMATION
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BASIS OF PREPARATION AND PRESENTATION
Pursuant to the Reorganization, our Company became the holding company of the
companies that now comprise our Group in May 2022. See the section headed “History,
Reorganization and Corporate Structure” in this document for more details. As the
Reorganization only involved the addition of new holding companies above the existing group
without changing the economic substance, our historical financial information during the Track
Record Period is presented as a continuation of the existing group as if the Reorganization had
been completed at the beginning of the Track Record Period.
The historical financial information of our Group has been prepared in accordance with
International Financial Reporting Standards (“ IFRSs ”) issued by International Accounting
Standards Board. All IFRSs effective for the accounting period commencing from January 1,
2024, together with the relevant transitional provisions, were early adopted by our Group in the
preparation of the historical financial information throughout the Track Record Period. The
historical financial information has been prepared under the historical cost convention, except
for equity investments designated at fair value through other comprehensive income, financial
assets at fair value through profit or loss, and financial liabilities at fair value through profit
or loss, which were measured at fair value.
The preparation of the historical financial information in conformity with IFRSs requires
the use of certain critical accounting estimates. It also requires management to make
judgements, estimates and assumptions when applying our Group’s accounting policies.
Management’s judgements made in the application of IFRSs, which have had a significant
effect on the historical financial information and major sources of estimation uncertainty, are
discussed in note 3 to the Accountants’ Report in Appendix I to this document.
MAJOR FACTORS AFFECTING OUR RESULTS OF OPERATIONS
Our business and results of operations are influenced by various general factors that affect
the overall consumption and market for freshly-made beverages. These factors include, among
others, overall economic and industry trends, their impact on consumer behavior, per capita
disposable income, changes in consumers’ taste, food safety and health awareness,
procurement costs, and the competitive landscape. Unfavorable changes in these general
conditions could materially and adversely affect our results of operations.
While our business is influenced by these general factors, we believe that the following
specific factors have a more direct impact on our results of operations:
Ability to Maintain and Increase the Appeal of Our Product Offerings
Our results of operations have been, and will continue to be, influenced by consumer
tastes and demands for freshly-made beverages. Maintaining consistently high quality in our
freshly-made beverages is pivotal for consumer trust and loyalty, which, in turn, leads to
increasing purchases and drives up sales.
FINANCIAL INFORMATION
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Furthermore, our ability to introduce and enhance product offerings can also impact our
sales and brand reputation. We work diligently to uphold and boost the attractiveness of our
product offerings in response to consumers’ evolving preferences, which has led to a growing
consumer base and increased repurchases, as well as higher GMV in our stores. Our abilities
to quickly act on consumer feedback, identify and respond to market trends, and develop and
launch new products consistently that appeal to consumers are critical to our continuous
success.
Freshly-made beverages have found their way into the daily routines of Chinese
consumers. The mid-priced tea store market stands as the largest and fastest-growing segment
within China’s freshly-made tea store market in 2022. By serving fresh, tasty, and value-for-
money beverages of consistently high quality that cater to diverse consumer needs, we have
established ourselves as the largest mid-priced freshly-made tea store brand and the second
largest freshly-made tea store brand across all price ranges in China, in terms of both GMV in
2023 and store count as of December 31, 2023. We believe that our proactive approach to
product development and the ability to quickly adapt to changes in consumer tastes and
demands will solidify our position in China’s rapidly expanding freshly-made tea store market.
Ability to Expand Our Store Network
We mainly operate our nationwide store network through our franchise model. Our
franchised stores contributed to approximately 99.9% of our respective GMV for the years
ended December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024.
We derived our revenue from (i) sales of goods and equipment primarily to our franchised
stores, (ii) franchise management services, which include initial franchise fees, continuing
support services fees, and fees for provision of training and other services, and (iii) sales from
company-operated stores. The scale of our store network plays a significant role in our revenue
growth and results of operation. As of December 31, 2021, 2022 and 2023 and September 30,
2024, our store network consisted of 5,694, 6,669, 9,001 and 9,778 stores, respectively.
We have adopted a unique regional densification strategy for our store expansion, under
which we strategically select target provinces for expansion and prioritize resources to focus
on building store networks with high geographical density with coverage across all city tiers
in such provinces. We have been continually increasing store density and solidifying our supply
chain infrastructure in the provinces where we have established presence. A dense store
network also enables centralized franchisee management and significantly enhances our
warehousing and logistics efficiency. By capitalizing on our accumulated operational
experience and the natural spread of our brand reputation among consumers and franchisees,
we have consistently replicated our regional densification strategy to neighboring provinces.
We intend to continue to expand our geographic coverage and grow our nationwide store
network to establish a stronger presence in the market.
FINANCIAL INFORMATION
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Ability to Enhance Performance of Our Franchised Stores
Our results of operations have been, and will continue to be, influenced by the
performance of our stores. In particular, our per-store GMV increased during the Track Record
Period. We believe our franchise model drives quality growth and our franchisees’ success is
crucial to our results of operations. To facilitate shared success with our franchisees, we
empower our franchisees to promote franchisee profitability and foster close and enduring
franchisee relationships. In achieving this goal, we extend comprehensive support to them
across various aspects of their business operations. With our store management software, we
are able to streamline the operations of our franchisees, thereby improving both our and their
operating efficiency, which further leads to enhanced store performance and a track record of
franchisee profitability. For example, we offer various technological modules to efficiently
process transactions, digitalize orders, track sales and manage inventory in real-time. Our
proven franchisee management capabilities are also broadly recognized by our franchisees and
lay a solid basis for their continuous compliance with our standards to deliver high-quality
products and services. As a result, we are able to achieve a consistent operational standard
across our store network. This approach hence ensures consistently high-quality products and
services, subsequently enhancing our brand recognition and encouraging consumer
repurchases. The enhanced consumer satisfaction, in turn, leads to industry-leading repurchase
rate and increased store performance, which further drives the growth of our revenue.
Ability to Efficiently Manage Our Costs
Our ability in efficiently procuring and delivering supplies to our stores significantly
impacts the results of our operations. Our gross profit margin was 30.0%, 28.1% and 31.3% in
2021, 2022 and 2023, respectively, and was 31.0% and 30.5% in the nine months ended
September 30, 2023 and 2024, respectively. In particular, our gross profit margin for sales of
goods and equipment was 16.8%, 15.5% and 18.7% in 2021, 2022 and 2023, respectively, and
was 18.8% and 18.0% in the nine months ended September 30, 2023 and 2024, respectively.
For certain fresh fruits such as lemons and mangoes, tea leaves, and other key ingredients
for our beverages, we directly purchase from their producers rather than purchasing through
intermediary distributors so that we have more control over their availability, quality and price.
Our direct contact with producers also enables us to influence, to some extent, how producers
cultivate their products, and implement adjustments that better address our needs based on our
recipes. Additionally, this direct relationship, along with the bulk supplies we procure that help
increase our negotiating power, enables us to secure more favorable terms with our suppliers.
We operate freight vehicles to make deliveries from our warehouses to our stores.
Leveraging the economies of scale under our regional densification strategy, we are able to
deliver fresh and quality ingredients to our stores at competitive costs. During the Track
Record Period, the logistics cost for delivery from our warehouses to stores was less than 1%
of our total GMV on average. By harnessing our supply chain management expertise, we
streamline our supply and distribution chain to achieve sustained benefits in procurement cost
and efficiency.
FINANCIAL INFORMATION
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Ability to Control Our Operating Expenses
Our ability to manage and control our operating expenses is critical to the success of our
business. Our marketing strategy centers on building a brand image associated with fresh, tasty
and value-for-money beverages of consistently high quality. By implementing our regional
densification strategy, we have built a dense store network, which helps accumulate strong
brand recognition and constantly attract new consumers through word-of-mouth referrals. At
the same time, our dense store network, along with our supply chain infrastructure, can also
effectively help optimize our warehousing expenses and facilitate centralized franchisee
management, which, in turn, enables us to enhance our operating efficiency.
Our selling and distribution expenses amounted to RMB186.2 million, RMB268.1 million
and RMB336.6 million in 2021, 2022 and 2023, respectively, and amounted to RMB239.3
million and RMB357.2 million in the nine months ended September 30, 2023 and 2024,
respectively. Our administrative expenses amounted to RMB123.7 million, RMB187.6 million
and RMB282.8 million in 2021, 2022 and 2023, respectively, and amounted to RMB180.7
million and RMB225.2 million in the nine months ended September 30, 2023 and 2024,
respectively. As we continue to expand our store network, we expect our operating expenses
to increase in absolute amounts. Meanwhile, we aim to leverage the benefits of the economies
of scale under our regional densification strategy to continually optimize our operating
expenses.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
Some of our accounting policies require us to apply estimates and assumptions as well as
complex judgments relating to accounting items. The estimates and assumptions we use and the
judgments we make in applying our accounting policies have a significant impact on our
financial position and results of operations. Our management continually evaluates such
estimates, assumptions and judgments based on past experience and other factors, including
expectation of future events that are believed to be reasonable under the circumstances. There
has not been any material deviation between our management’s estimates or assumptions and
actual results, and we have not made any material changes to these estimates or assumptions
during the Track Record Period. We do not expect any material changes in these estimates and
assumptions in the foreseeable future.
Set forth below are discussions of the accounting policies that we believe are of critical
importance to us or involve the most significant estimates, assumptions and judgments used in
the preparation of our financial statements. Other material accounting policies, estimates,
assumptions and judgments, which are important for understanding our financial condition and
results of operations, are set forth in detail in notes 2 and 3 of the Accountants’ Report in
Appendix I to this document.
FINANCIAL INFORMATION
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Material Accounting Policy Information
Revenue Recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognized when control of goods or services
is transferred to the customers at an amount that reflects the consideration to which we expect
to be entitled in exchange for those goods or services.
When the consideration in a contract includes a variable amount, the amount of
consideration is estimated to which we will be entitled in exchange for transferring the goods
or services to the customer. The variable consideration is estimated at contract inception and
constrained until it is highly probable that a significant revenue reversal in the amount of
cumulative revenue recognized will not occur when the associated uncertainty with the variable
consideration is subsequently resolved.
When the contract contains a financing component which provides the customer with a
significant benefit of financing the transfer of goods or services to the customer for more than
one year, revenue is measured at the present value of the amount receivable, discounted using
the discount rate that would be reflected in a separate financing transaction between us and the
customer at contract inception. When the contract contains a financing component which
provides us with a significant financial benefit for more than one year, revenue recognized
under the contract includes the interest expense accreted on the contract liability under the
effective interest method. For a contract where the period between the payment by the customer
and the transfer of the promised goods or services is one year or less, the transaction price is
not adjusted for the effects of a significant financing component, using the practical expedient
in IFRS 15.
Sales of goods and equipment
We generate revenue from the sales of goods, including ingredients and other related
products of freshly-made beverages, and equipment, which is recognized at the point in time
when control of the asset is transferred to the customer, generally on delivery of the goods and
equipment.
Provision of franchise management services
We enter into franchise agreements with all franchisees. As the franchisor, we provide
franchise management services under our franchise agreements with franchisees. Franchise is
a right to sell products in a particular area using our brand name and trademarks.
Our franchise management services revenue mainly includes income from initial
franchise fees, income from continuing support services fees and income from the provision of
training and other services.
FINANCIAL INFORMATION
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For income from initial franchise fees, the franchisee pays a fixed upfront fee and revenue
is recognized over the franchise period. Initial franchise fees are generally charged for
pre-opening support services provided to the franchisees, including location analysis, certain
advisory services like license application, marketing advisory services, and operational
support. As those services are highly interrelated with the franchise right, they are not
individually distinct from the ongoing licensing arrangement provided to the franchisees.
For income from continuing support services fees, the franchisee receives ongoing
operational support services, which are highly interrelated with the franchise right, from us
during the whole franchise period, and pays continuing support services fees, which is
determined based on a pre-determined fixed amount per month multiplying the number of the
applicable franchisee’s stores and a pre-determined rate range as a percentage of the applicable
franchisee’s stores procurement amounts, and we recognize revenue when the franchisee’s
subsequent usage occurs.
For income from the provision of training and other services, including pre-opening
training services and other training services, and store supervisory and maintenance services,
revenue is recognized when the related services are rendered as the customer simultaneously
receive and consume the benefits provided by us. The pre-opening training services provided
to the franchisees are considered to be distinct as the training contents are largely unrelated to
our brand name and trademarks.
Sales from company-operated stores
We generate revenue from stores directly operated by us, and revenue is recognized when
the control of the products has transferred to the end customer.
Contract Assets
If we perform by transferring goods or services to a franchisee before being
unconditionally entitled to the consideration under the contract terms, a contract asset is
recognized for the earned consideration that is conditional. Contract assets are subject to
impairment assessment, details of which are included in the accounting policies for impairment
of financial assets in note 2.4 of the Accountants’ Report in Appendix I to this document. They
are reclassified to trade receivables when the right to the consideration becomes unconditional.
Contract Liabilities
A contract liability is recognized when a payment is received or a payment is due
(whichever is earlier) from a franchisee or corporate customer before we transfer the related
goods or services. Contract liabilities are recognized as revenue when we transfer control of
the related goods or services to the franchisee or corporate customer.
FINANCIAL INFORMATION
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Financial Liabilities at Fair V alue through Profit or Loss
Financial liabilities at fair value through profit or loss include financial liabilities held for
trading and financial liabilities designated upon initial recognition as at fair value through
profit or loss. The redeemable ordinary shares, the warrants and the convertible redeemable
preferred shares issued by us were designated upon initial recognition at fair value through
profit or loss. They are initially recognized at fair value. Any directly attributable transaction
costs are recognized as finance costs in profit or loss. The net fair value changes relating to
market risk are recognized in profit or loss which do not include any interest charged on these
financial liabilities.
Financial investments
Wealth management products are classified as financial assets at fair value through profit
or loss (“ FVTPL Assets ”). FVTPL Assets are measured and recorded at fair value with net
changes in fair value recognized in profit or loss.
Upon initial recognition, we elected to classify irrevocably an equity investment
designated at fair value through other comprehensive income (“ OCI”) when they meet the
definition of equity under IAS 32 Financial Instruments: Presentation and is not held for
trading. The classification is determined on an instrument-by-instrument basis. Gains and
losses on these financial assets is never recycled to profit or loss. Dividends are recognized as
other income in profit or loss when the right of payment has been established, it is probable
that the economic benefits associated with the dividend will flow to us and the amount of the
dividend can be measured reliably, except when we benefit from such proceeds as a recovery
of part of the cost of the financial asset, in which case, such gains are recorded in OCI. Equity
investment designated at fair value through OCI is not subject to impairment assessment.
Purchases and sales of financial assets that require delivery of assets within the period
generally established by regulation or convention in the marketplace are recognized on the
trade date, that is, the date that we commit to purchase or sell the asset.
Fair value measurement
We measure certain of our financial assets, equity investment and financial liabilities at
fair value at the end of each of the reporting periods. Fair value is the price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date. The fair value measurement is based on the presumption
that the transaction to sell the asset or transfer the liability takes place either in the principal
market for the asset or liability, or in the absence of a principal market, in the most
advantageous market for the asset or liability. The principal or the most advantageous market
must be accessible by us. The fair value of an asset or a liability is measured using the
assumptions that market participants would use when pricing the asset or liability, assuming
FINANCIAL INFORMATION
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that market participants act in their economic best interest. We use valuation techniques that
are appropriate in the circumstances and for which sufficient data are available to measure fair
value, maximizing the use of relevant observable inputs and minimizing the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Historical
Financial Information are categorized within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the fair value measurement as a whole:
 Leve l 1 – based on quoted prices (unadjusted) in active markets for identical assets
or liabilities
 Leve l 2 – based on valuation techniques for which the lowest level input that is
significant to the measurement is observable, either directly or indirectly
 Leve l 3 – based on valuation techniques for which the lowest level input that is
significant to the fair value measurement is unobservable
For assets and liabilities that are recognized in the Historical Financial Information on a
recurring basis, we determine whether transfers have occurred between levels in the hierarchy
by re-assessing categorization (based on the lowest level input that is significant to the fair
value measurement as a whole) at the end of each of the reporting periods.
In respect of the valuation of level 3 fair value measurement financial assets and
liabilities, with reference to the guidance under the “Guidance Note on Director’s Duties in the
Context of V aluations in Corporate Transactions” issued by the SFC in May 2017 applicable
to directors of companies listed on the Stock Exchange, our Directors adopted the following
procedures: (i) selected qualified persons with adequate knowledge and conducted valuation on
the financial assets and liabilities without readily determinable fair value; (ii) carefully
considered available information in assessing the financial data and assumptions including but
not limited to risk free interest rate, expected volatility and political, economic and industry
conditions; (iii) engaged an independent valuer to appraise the fair value of certain financial
assets and liabilities that are significant, provided necessary financial information to the valuer
to assess our performed valuation procedures and discussed with the valuer on relevant
assumptions; and (iv) reviewed the valuation reports prepared by the valuer. Based on the
above procedures, our Directors are of the view that the valuation analysis is fair and
reasonable and our consolidated financial statements are properly prepared.
Details of the fair valuation measurement of the financial assets and liabilities,
particularly the fair value hierarchy, valuation techniques and key inputs, including significant
unobservable inputs and the relationship of unobservable inputs to valuation, are disclosed in
note 41 of Appendix I to this document. The Reporting Accountants have conducted their work
in accordance with Hong Kong Standard on Investment Circular Reporting Engagements 200
Accountants’ Reports on Historical Financial Information in Investment Circulars issued by
the Hong Kong Institute of Certified Public Accountants to express an opinion on Historical
FINANCIAL INFORMATION
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Financial Information. This standard requires that the Reporting Accountants plan and perform
their work to obtain reasonable assurance about whether the Historical Financial Information
as a whole is free from any material misstatement. The Reporting Accountants’ opinion on the
Historical Financial Information for the Track Record Period as a whole is set out on pages I-1
to I-3 of Appendix I to this document.
Share-based payments
We operate share option schemes for the purpose of providing incentives and rewards to
eligible participants who contribute to the success of our operations. Our employees (including
directors) receive remuneration in the form of share-based payments, whereby rendering
services in exchange for equity instruments (“ equity-settled transactions ”).
The cost of equity-settled transactions with employees is measured by reference to the
fair value at the dates at which they are granted. The fair values of equity instrument granted
are determined by an external valuer using a binomial model, further details of which are given
in note 34 to the Accountants’ Report in Appendix I to this document.
Property, Plant and Equipment and Depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less
accumulated depreciation and any impairment losses. The cost of an item of property, plant and
equipment comprises its purchase price and any directly attributable costs of bringing the asset
to its working condition and location for its intended use.
Expenditure incurred after items of property, plant and equipment have been put into
operation, such as repairs and maintenance, is normally charged to profit or loss in the period
in which it is incurred. In situations where the recognition criteria are satisfied, the expenditure
for a major inspection is capitalized in the carrying amount of the asset as a replacement.
Where significant parts of property, plant and equipment are required to be replaced at
intervals, we recognize such parts as individual assets with specific useful lives and depreciates
them accordingly.
Depreciation is calculated on the straight-line basis to write off the cost of each item of
property, plant and equipment to its residual value over its estimated useful life. The principal
annual rates used for this purpose are as follows:
Category Principal annual rates
Machinery /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11189.5%-31.7%
Office equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111819.0%-47.5%
Motor vehicles /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823.8%-47.5%
Leasehold improvements /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Over the shorter of the
lease terms and 33.3%
FINANCIAL INFORMATION
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Where parts of an item of property, plant and equipment have different useful lives, the
cost of that item is allocated on a reasonable basis among the parts and each part is depreciated
separately. Residual values, useful lives and the depreciation method are reviewed, and
adjusted if appropriate, at least at each financial year end.
An item of property, plant and equipment including any significant part initially
recognized is derecognized upon disposal or when no future economic benefits are expected
from its use or disposal. Any gain or loss on disposal or retirement recognized in profit or loss
in the reporting period the asset is derecognized is the difference between the net sales
proceeds and the carrying amount of the relevant asset.
Construction in progress is stated at cost less any impairment losses, and is not
depreciated. It is reclassified to the appropriate category of property, plant and equipment when
completed and ready for use.
Leases
We assess at contract inception whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of an identified asset for
a period of time in exchange for consideration.
Group as a lessee
We apply a single recognition and measurement approach for all leases, except for
short-term leases and leases of low-value assets. We recognize lease liabilities to make lease
payments and right-of-use assets representing the right to use the underlying assets.
Right-of-use assets
Right-of-use assets are recognized at the commencement date of the lease (that is the date
the underlying asset is available for use). Right-of-use assets are measured at cost, less
accumulated depreciation and any impairment losses, and adjusted for any remeasurement of
lease liabilities. The cost of right-of-use assets includes the amount of lease liabilities
recognized, initial direct costs incurred, and lease payments made at or before the
commencement date less any lease incentives received. Right-of-use assets are depreciated on
a straight-line basis over the shorter of the lease terms and the estimated useful lives of the
assets as follows:
Office premises, company-operated stores and plant /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182-10 years
Leasehold land /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111850 years
If ownership of the leased asset transfers to us by the end of the lease term or the cost
reflects the exercise of a purchase option, depreciation is calculated using the estimated useful
life of the asset.
FINANCIAL INFORMATION
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Lease liabilities
Lease liabilities are recognized at the commencement date of the lease at the present value
of lease payments to be made over the lease term. The lease payments include fixed payments
(including in-substance fixed payments) less any lease incentives receivable, variable lease
payments that depend on an index or a rate, and amounts expected to be paid under residual
value guarantees. The lease payments also include the exercise price of a purchase option
reasonably certain to be exercised by us and payments of penalties for termination of a lease,
if the lease term reflects we exercising the option to terminate the lease. The variable lease
payments that do not depend on an index or a rate are recognized as an expense in the period
in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, we use our incremental borrowing rate
at the lease commencement date because the interest rate implicit in the lease is not readily
determinable. After the commencement date, the amount of lease liabilities is increased to
reflect the accretion of interest and reduced for the lease payments made. In addition, the
carrying amount of lease liabilities is remeasured if there is a modification, a change in the
lease term, a change in lease payments (e.g., a change to future lease payments resulting from
a change in an index or rate) or a change in assessment of an option to purchase the underlying
asset.
Short-term leases
We apply the short-term lease recognition exemption to its short-term leases of office
premises (that is those leases that have a lease term of 12 months or less from the
commencement date and do not contain a purchase option).
Lease payments on short-term leases are recognized as an expense on a straight-line basis
over the lease term.
Significant Accounting Judgements and Estimates
The preparation of our historical financial information requires management to make
judgements, estimates and assumptions that affect the reported amounts of revenues, expenses,
assets and liabilities, and their accompanying disclosures, and the disclosure of contingent
liabilities. Uncertainty about these assumptions and estimates could result in outcomes that
could require a material adjustment to the carrying amounts of the assets or liabilities affected
in the future.
FINANCIAL INFORMATION
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The key assumptions concerning the future and other key sources of estimation
uncertainty during the Track Record Period, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year, are
described below.
Revenue recognition from the provision of franchise management services over time
Franchise rights, which represent primarily the right to access our brand name and
trademarks, are granted to franchisees upon upfront initial payments for the first year and are
renewable annually by the franchisees at no cost, the control of services is transferred over
time. Based on the historical franchise information of the franchised shops, we determined that
license fees from the franchise business are recognized as contract liabilities upon receipt of
the upfront initial payments and are released to profit or loss as revenue over the estimated
franchise period of three years for each reporting period.
Actual franchise periods may differ from the estimated franchise periods. We would
periodically review the estimated franchise periods of the franchisees and consider if any
adjustment to the current estimation is needed.
Fair values of redeemable ordinary shares, warrants and convertible redeemable preferred
shares
The fair values of the redeemable ordinary shares, warrants and convertible redeemable
preferred shares measured at fair value through profit or loss are determined using the
valuation techniques, including the discounted cash flow method and the option-pricing
method. Such valuation is based on key parameters about risk-free rate, discounts for lack of
marketability (“ DLOM ”) and volatility, which are subject to uncertainty and might materially
differ from the actual results. Further details are included in note 30 of the Accountants’ Report
in Appendix I to this document.
Fair value of an unlisted equity investment
The unlisted equity investment has been valued based on a market-based valuation
technique. The valuation requires the Group to determine the price-to-sales ratio (“P/S”) for
similar instruments, adjusted by discount for lack of marketability. We classify the fair value
of the unlisted equity investment as Level 3. Further details are included in notes 16 and 41
of the Accountants’ Report in Appendix I to this document.
Fair value measurement of share-based payments
We set up share incentive plans in 2019 and 2022, respectively, and granted options to our
directors and our employees. The fair values of the options are determined by the binomial
option-pricing model at the date of grant to employees. Significant estimates on assumptions,
including the underlying equity value, risk-free rate, expected volatility, and dividend yield,
are made by our board of directors. Further details are included in note 34 to the Accountants’
Report in Appendix I to this document.
FINANCIAL INFORMATION
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IMPACT OF COVID-19
The outbreak of COVID-19 and its resurgence in 2022 severely impacted China and the
rest of the world. In an effort to contain the spread of COVID-19, China implemented
precautionary measures that reduced economic activities, including temporary closure of
workplaces and commercial centers and the imposition of travel and mobility restrictions. As
a result, our store operations and financial condition were negatively affected during the Track
Record Period. The supply of our goods and equipment was also adversely affected due to the
associated disruptions in the upstream supply chain and logistics services. We reduced the
prices of certain goods supplied to our franchisees to support their operations during
COVID-19. This adjustment resulted in a slight dip in our overall gross profit margin from
30.0% in 2021 to 28.1% in 2022. We also slowed down our store expansion efforts in 2022.
We opened 1,317 new stores in 2022, as compared to 1,808 new stores in 2021.
Nevertheless, our continuous efforts to improve our results of operation enabled us to
achieve growth in 2022, and our revenue increased from RMB4,383.9 million in 2021 to
RMB5,559.2 million in 2022. This growth can be attributed to the growth of our per-store
GMV and our ongoing efforts to expand our store network. Our per-store GMV increased by
3.4% from RMB2.2 million in 2021 to RMB2.3 million in 2022, and we recorded same-store
GMV growth of 2.8% from 2021 to 2022.
DESCRIPTION OF MAJOR COMPONENTS OF OUR RESULTS OF OPERATIONS
The following table sets forth a summary of our consolidated statements of profit or loss
and comprehensive income in absolute amount and as a percentage of our revenue for the
periods indicated. This information should be read together with our consolidated financial
statements. The results of operations in any period are not necessarily indicative of our future
trends.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Revenue /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,383,901 100.0 5,559,222 100.0 7,675,665 100.0 5,570,882 100.0 6,441,288 100.0
Cost of sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(3,070,196) (70.0) (3,996,290) (71.9) (5,272,334) (68.7) (3,844,469) (69.0) (4,476,906) (69.5)
Gross profit /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,313,705 30.0 1,562,932 28.1 2,403,331 31.3 1,726,413 31.0 1,964,382 30.5
Other income and gains /H1118/H1118/H1118/H111847,598 1.0 57,477 1.1 168,828 2.2 125,879 2.2 144,067 2.1
Selling and distribution
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(186,193) (4.2) (268,143) (4.8) (336,584) (4.4) (239,291) (4.3) (357,172) (5.5)
Administrative expenses /H1118/H1118/H1118/H1118(123,745) (2.8) (187,605) (3.4) (282,848) (3.7) (180,689) (3.2) (225,206) (3.3)
FINANCIAL INFORMATION
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For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Research and development
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(65,030) (1.5) (118,288) (2.1) (198,736) (2.6) (129,055) (2.3) (165,826) (2.6)
Other expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5,775) (0.1) (1,069) (0.1) (9,456) (0.1) (9,434) (0.2) (16,711) (0.3)
Operating profit /H1118/H1118/H1118/H1118/H1118/H1118/H1118980,560 22.4 1,045,304 18.8 1,744,535 22.7 1,293,823 23.2 1,343,534 20.9
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5,079) (0.1) (5,424) (0.1) (5,233) (0.1) (4,299) (0.1) (2,216) (0.0)
Fair value changes of financial
liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118(728,388) (16.7) (389,523) (7.0) (294,215) (3.8) (21,669) (0.3) (10,556) (0.2)
Profit before tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118247,093 5.6 650,357 11.7 1,445,087 18.8 1,267,855 22.8 1,330,762 20.7
Income tax expense /H1118/H1118/H1118/H1118/H1118/H1118(223,101) (5.1) (278,332) (5.0) (348,733) (4.5) (265,818) (4.8) (210,994) (3.3)
Profit for the year/period /H1118/H1118/H1118 23,992 0.5 372,025 6.7 1,096,354 14.3 1,002,037 18.0 1,119,768 17.4
Total comprehensive income
for the year/period /H1118/H1118/H1118/H1118/H111823,992 0.5 392,307 7.1 1,076,563 14.0 1,002,229 18.0 1,112,134 17.3
Total comprehensive income
for the year/period
attributable to:
Owners of the parent /H1118/H1118/H1118/H1118/H111820,139 0.4 386,901 7.0 1,059,837 13.8 990,225 17.8 1,098,857 17.1
Non-controlling interests /H1118/H1118/H1118/H11183,853 0.1 5,406 0.1 16,726 0.2 12,004 0.2 13,277 0.2
Non-IFRS Measures
To supplement our consolidated financial statements, which are presented in accordance
with IFRSs, we also use adjusted profit (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) as additional financial measures, which are not required by, or presented in
accordance with, IFRSs.
FINANCIAL INFORMATION
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The following table reconciles our adjusted profit (non-IFRS measure) for the periods
presented in accordance with IFRSs, which is profit for the year/period.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
(Unaudited)
(RMB in thousands)
Reconciliation of profit
for the year/period to
adjusted profit
(non-IFRS measure):
Profit for the
year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,992 372,025 1,096,354 1,002,037 1,119,768
Add:
Fair value changes of
financial liabilities at
fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118728,388 389,523 294,215 21,669 10,556
Share-based payment
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111817,226 24,476 55,537 18,981 –
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118– 2,080 12,884 1,815 18,393
Adjusted profit
(non-IFRS measure) /H1118/H1118/H1118769,606 788,104 1,458,990 1,044,502 1,148,717
We define adjusted profit (non-IFRS measure) as profit for the year/period, excluding fair
value changes of financial liabilities at fair value through profit or loss, share-based payment
expenses and listing expenses. We have made the following adjustments consistently during the
Track Record Period:
 Fair value changes of financial liabilities at fair value through profit or loss mainly
represent changes in the fair value of the redeemable ordinary shares, warrants and
the convertible redeemable preferred shares issued by us and relate to changes in our
valuation. We do not expect to record any further fair value changes of financial
liabilities at fair value through profit or loss after Listing as preferred shares
liabilities will be re-designated and reclassified from liabilities to equity as a result
of the automatic conversion into ordinary shares upon the Listing.
 Share-based payment expenses represent the non-cash employee benefit expenses
incurred in connection with our award to key employees. Such expenses in any
specific period are not expected to result in future cash payments.
 Listing expenses relate to this Global Offering of the Company.
FINANCIAL INFORMATION
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The following table reconciles our adjusted EBITDA (non-IFRS measure) for the periods
presented in accordance with IFRSs, which is profit for the year/period.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
(Unaudited)
(RMB in thousands)
Reconciliation of profit
for the year/period to
adjusted EBITDA
(non-IFRS measure):
Profit for the
year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,992 372,025 1,096,354 1,002,037 1,119,768
Add:
Income tax expense /H1118/H1118/H1118/H1118223,101 278,332 348,733 265,818 210,994
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,079 5,424 5,233 4,299 2,216
Depreciation and
amortization /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111869,870 118,947 135,137 101,943 102,681
Less: Interest income /H1118/H1118/H1118/H1118/H1118(2,181) (5,375) (53,735) (35,583) (47,550)
EBITDA /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118319,861 769,353 1,531,722 1,338,514 1,388,109
Add:
Fair value changes of
financial liabilities at
fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118728,388 389,523 294,215 21,669 10,556
Share-based payment
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111817,226 24,476 55,537 18,981 –
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118– 2,080 12,884 1,815 18,393
Adjusted EBITDA
(non-IFRS measure) /H1118/H1118/H11181,065,475 1,185,432 1,894,358 1,380,979 1,417,058
We define adjusted EBITDA (non-IFRS measure) as profit for the year/period, excluding
income tax expense, finance costs, interest income, depreciation and amortization, fair value
changes of financial liabilities at fair value through profit or loss, share-based payment
expenses and listing expenses. For the same reasons stated above, we have made the
adjustments of fair value changes of financial liabilities at fair value through profit or loss,
share-based payment expenses and listing expenses.
FINANCIAL INFORMATION
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We believe that adjusted profit (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) provide useful information to investors and others in understanding and evaluating
our consolidated results of operations in the same manner as they help our management.
However, our presentation of adjusted profit (non-IFRS measure) and adjusted EBITDA
(non-IFRS measure) may not be comparable to similarly titled measures presented by other
companies. The use of adjusted profit (non-IFRS measure) and adjusted EBITDA (non-IFRS
measure) has limitations as an analytical tool, and you should not consider them in isolation
from, or as a substitute for an analysis of, our results of operations or financial condition as
reported under IFRSs.
Revenue
During the Track Record Period, we derived our revenue from (i) sales of goods and
equipment, (ii) franchise management services, which consist of initial franchise fees,
continuing support services fees, and income from provision of training and other services, and
(iii) sales from company-operated stores. Revenue from sales of goods and equipment
accounted for 80.9%, 81.0% and 80.1% of our revenue in 2021, 2022 and 2023, respectively,
and accounted for 80.4% and 80.0% of our revenue in the nine months ended September 30,
2023 and 2024, respectively.
During the Track Record Period, the vast majority of our revenue was contributed by our
franchised stores. In 2021, 2022 and 2023, revenue from franchised stores accounted for
97.9%, 97.9% and 97.1% of our total revenue, respectively. In the nine months ended
September 30, 2023 and 2024, revenue from franchised stores accounted for 97.4% and 97.2%
of our total revenue, respectively.
The following table sets forth a breakdown of our revenue by nature of products/services,
in absolute amounts and as a percentage of our total revenue, for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Revenue:
Sales of goods and
equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,546,918 80.9 4,505,145 81.0 6,144,711 80.1 4,477,504 80.4 5,153,346 80.0
– Sales of goods /H1118/H1118/H1118/H1118/H1118/H11183,348,943 76.4 4,282,733 77.0 5,778,264 75.3 4,175,719 75.0 4,872,023 75.6
– Sales of equipment /H1118/H1118/H1118/H1118197,975 4.5 222,412 4.0 366,447 4.8 301,785 5.4 281,323 4.4
Franchise management
services /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118831,645 19.0 1,044,290 18.8 1,518,646 19.8 1,083,910 19.5 1,277,085 19.8
– Initial franchise fees /H1118/H1118/H1118/H111873,414 1.7 87,911 1.6 109,509 1.4 80,794 1.5 87,421 1.4
FINANCIAL INFORMATION
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For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
– Continuing support
services fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118699,488 16.0 898,883 16.2 1,311,905 17.1 929,906 16.7 1,141,904 17.7
– Provision of training and
other services /H1118/H1118/H1118/H1118/H1118/H1118/H111858,743 1.3 57,496 1.0 97,232 1.3 73,210 1.3 47,760 0.7
Sales from company-
operated stores /H1118/H1118/H1118/H1118/H1118/H11185,338 0.1 9,787 0.2 12,308 0.1 9,468 0.1 10,857 0.2
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,383,901 100.0 5,559,222 100.0 7,675,665 100.0 5,570,882 100.0 6,441,288 100.0
Sales of Goods and Equipment . We generate revenue from sales of goods and equipment
primarily to our franchisees. Our revenue from sales of goods is primarily generated from our
sales of ingredients for our beverages such as fresh fruits, fresh juices, tea leaves, dairy
products and packaging materials, among others.
Our revenue from sales of equipment primarily includes the sales of tea brewers, ice
machines, freezers, refrigerators and other electronic equipment to our franchised stores. We
primarily (i) sell the store equipment to newly opened stores, and (ii) replace or upgrade store
equipment for existing stores. We recognize revenue from sales of goods and equipment at the
point in time when control of the asset is transferred to the franchisees, generally upon the
delivery of the goods and equipment.
Our revenue from sales of goods and equipment grew from RMB3,546.9 million in 2021
to RMB4,505.1 million in 2022, and to RMB6,144.7 million in 2023, as (i) the number of our
franchised stores increased from 5,689 as of December 31, 2021 to 6,664 as of December 31,
2022, and further to 8,995 as of December 31, 2023, and (ii) our total GMV increased from
RMB10.6 billion in 2021 to RMB14.0 billion in 2022, and increased to RMB19.2 billion in
2023. Our revenue from sales of goods and equipment grew from RMB4,477.5 million in the
nine months ended September 30, 2023 to RMB5,153.3 million in the same period in 2024 as
(i) the number of our franchised stores increased from 8,572 as of September 30, 2023 to 9,771
as of September 30, 2024, and (ii) our total GMV increased from RMB13.8 billion in the nine
months ended September 30, 2023 to RMB16.6 billion in the same period in 2024.
Franchise Management Services. Our revenue generated from franchise management
services to our franchisees mainly includes initial franchise fees, continuing support services
fees and income from the provision of training and other services.
FINANCIAL INFORMATION
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For initial franchise fees, each franchisee pays a fixed upfront fee after it enters into a
franchise agreement with us, and revenue is recognized over the franchise period, which is
typically three years. Initial franchise fees are generally charged for pre-opening support
services provided to the franchisees, including (i) location analysis and certain advisory
services such as license application, (ii) marketing advisory services, and (iii) operational
support.
For income from continuing support services fees, our franchisees receive our ongoing
operational support services from us with respect to supply chain, store operation, technology
support, and marketing and promotion, during the whole franchise period, which are highly
interrelated with the franchise right. Our franchisees pay us continuing support services fees,
which is determined based on (i) a pre-determined fixed amount per month multiplying the
number of the applicable franchised stores, and (ii) a pre-determined rate range as a percentage
of the applicable franchised stores’ procurement amounts. We recognize revenue when the
franchisee’s subsequent usage occurs.
Our franchise management services revenue is also generated from the provision of
training and other services, including pre-opening training services and other training services,
and store supervisory and maintenance services, and revenue is recognized when the related
services are rendered as our franchisees simultaneously receive and consume the benefits
provided by us.
Our revenue generated from franchise management services increased from RMB831.6
million in 2021 to RMB1,044.3 million in 2022, and to RMB1,518.6 million in 2023, as a result
of an increase in the number of our franchised stores from 5,689 as of December 31, 2021 to
6,664 as of December 31, 2022, and further to 8,995 as of December 31, 2023, as well as the
increased average procurement amounts of our franchised stores. Our revenue generated from
franchise management services increased from RMB1,083.9 million in the nine months ended
September 30, 2023 to RMB1,277.1 million in the same period in 2024, as a result of an
increase in the number of our franchised stores from 8,572 as of September 30, 2023 to 9,771
as of September 30, 2024.
Sales from Company-operated Stores. We also generate a small portion of our revenue
from company-operated stores and revenue is recognized when the control of the products has
been transferred to the consumers. As of December 31, 2021, 2022 and 2023 and September
30, 2024, our store network included five, five, six and seven company-operated stores,
respectively.
FINANCIAL INFORMATION
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Cost of Sales
Our cost of sales primarily consists of (i) cost of sales of goods and equipment, (ii) cost
of providing franchise management services, and (iii) cost of sales from our company-operated
stores. In particular, cost of sales of goods and equipment mainly includes cost of inventories
sold, cost of wages and salaries and the logistics cost for delivery from our warehouses to our
stores. Cost of providing franchise management services, consisting of cost of initial franchise
fees, cost of continuing support services fees and cost of provision of training and other
services, mainly includes labor costs, travel expenses and training costs. For logistics costs that
are related to the promise to transfer control of the good and incurred to fulfill a revenue
obligation, they are recorded in cost of sales.
The following table sets forth a breakdown of our cost of sales by nature of
products/services, in absolute amounts and as a percentage of our total revenue, for the periods
indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Cost of sales:
Cost of sales of goods and
equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,952,080 67.3 3,806,506 68.4 4,992,861 65.0 3,636,260 65.3 4,228,262 65.6
– Cost of goods /H1118/H1118/H1118/H1118/H1118/H1118/H11182,770,371 63.2 3,605,030 64.8 4,661,048 60.7 3,363,123 60.4 3,974,599 61.7
– Cost of equipment /H1118/H1118/H1118/H1118/H1118181,709 4.1 201,476 3.6 331,813 4.3 273,137 4.9 253,663 3.9
Cost of providing franchise
management services /H1118/H1118/H1118114,640 2.6 181,818 3.4 269,468 3.6 200,618 3.6 239,338 3.8
– Cost of initial
franchise fees /H1118/H1118/H1118/H1118/H1118/H1118/H111830,527 0.7 38,603 0.7 56,639 0.8 43,129 0.8 39,835 0.6
– Cost of continuing support
services fees /H1118/H1118/H1118/H1118/H1118/H1118/H111855,339 1.2 106,031 2.0 163,473 2.1 119,644 2.1 174,862 2.8
– Cost of provision of
training and other services /H1118 28,774 0.7 37,184 0.7 49,356 0.7 37,845 0.7 24,641 0.4
Cost of sales from
company-operated stores /H1118 3,476 0.1 7,966 0.1 10,005 0.1 7,591 0.1 9,306 0.1
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,070,196 70.0 3,996,290 71.9 5,272,334 68.7 3,844,469 69.0 4,476,906 69.5
Our cost of sales increased from RMB3,070.2 million in 2021 to RMB3,996.3 million in
2022, and to RMB5,272.3 million in 2023, and increased from RMB3,844.5 million in the nine
months ended September 30, 2023 to RMB4,476.9 million in the same period in 2024, which
is generally in line with our revenue growth in these periods.
FINANCIAL INFORMATION
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Gross Profit and Gross Profit Margin
We recorded gross profit of RMB1,313.7 million, RMB1,562.9 million and RMB2,403.3
million in 2021, 2022 and 2023, respectively, representing gross profit margin of 30.0%, 28.1%
and 31.3% in these years, respectively. We recorded gross profit of RMB1,726.4 million and
RMB1,964.4 million in the nine months ended September 30, 2023 and 2024, respectively,
representing gross profit margin of 31.0% and 30.5% in these periods, respectively.
The following table breaks down our gross profit and gross profit margin by nature of
products/services for the periods indicated.
For the Y ear Ended December 31, For the Nine Months Ended September 30,
2021 2022 2023 2023 2024
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
Gross
Profit
Gross
Profit
Margin
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Sales of goods and
equipment /H1118/H1118/H1118/H1118/H1118/H1118594,838 16.8 698,639 15.5 1,151,850 18.7 841,244 18.8 925,084 18.0
– Sales of goods /H1118/H1118/H1118/H1118578,572 17.3 677,703 15.8 1,117,216 19.3 812,596 19.5 897,424 18.4
– Sales of equipment /H1118/H1118 16,266 8.2 20,936 9.4 34,634 9.5 28,648 9.5 27,660 9.8
Franchise management
services /H1118/H1118/H1118/H1118/H1118/H1118/H1118717,005 86.2 862,472 82.6 1,249,178 82.3 883,292 81.5 1,037,747 81.3
– Initial
franchise fees /H1118/H1118/H1118/H111842,887 58.4 49,308 56.1 52,870 48.3 37,665 46.6 47,586 54.4
– Continuing support
services fees /H1118/H1118/H1118/H1118/H1118644,149 92.1 792,852 88.2 1,148,432 87.5 810,262 87.1 967,042 84.7
– Provision of training
and other services /H1118/H1118 29,969 51.0 20,312 35.3 47,876 49.2 35,365 48.3 23,119 48.4
Sales from company-
operated stores /H1118/H1118/H1118 1,862 34.9 1,821 18.6 2,303 18.7 1,877 19.8 1,551 14.3
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,313,705 30.0 1,562,932 28.1 2,403,331 31.3 1,726,413 31.0 1,964,382 30.5
Other Income and Gains
Our other income primarily consists of (i) government grants, which represent incentives
received from the local governments as their support to the growth of local enterprises, and
(ii) bank interest income.
FINANCIAL INFORMATION
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--- page 339 ---
Our net other gains primarily consist of (i) foreign exchange gains, (ii) fair value changes
of financial assets at fair value through profit or loss, and (iii) gains on disposal of items of
property, plant and equipment.
The following table breaks down our other income and gains by absolute amounts and as
a percentage of our total revenue for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Other income:
– Government grants (1) /H1118/H1118/H1118/H111823,475 0.5 18,576 0.4 90,009 1.2 77,506 1.4 72,900 1.1
– Bank interest income (2) /H1118/H1118/H1118 2,181 0.0 5,375 0.1 53,735 0.7 35,583 0.6 47,550 0.7
– Imputed interest income for
long-term trade receivables
and non-current portion of
contract assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118–– –– –– –– 9 2 8 0 . 0
– Additional tax deduction
(3) /H1118/H1118 1,131 0.0 3,959 0.1 3,908 0.0 3,203 0.1 4,623 0.1
– Sale of scraps /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118448 0.0 1,398 0.0 1,100 0.0 772 0.0 1,417 0.0
– Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,074 0.1 9,115 0.2 13,852 0.2 7,094 0.1 8,915 0.1
Total other income /H1118/H1118/H1118/H1118/H1118/H111831,309 0.6 38,423 0.8 162,604 2.1 124,158 2.2 136,333 2.0
Gains:
– Foreign exchange
differences, net (4) /H1118/H1118/H1118/H1118/H1118/H1118– – 7,935 0.1 4,315 0.1 – – – –
– Fair value changes of
financial assets at fair value
through profit or loss /H1118/H1118/H1118/H111816,289 0.4 10,933 0.2 1,909 0.0 1,721 0.0 7,734 0.1
– Gains on disposal of items of
property, plant and
equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–– 1 8 6 0 . 0 –– –– ––
Total gains /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111816,289 0.4 19,054 0.3 6,224 0.1 1,721 0.0 7,734 0.1
Total other income and gains /H1118 47,598 1.0 57,477 1.1 168,828 2.2 125,879 2.2 144,067 2.1
Notes:
(1) The government grants related to income mainly represent incentives received from the local government in
connection with certain financial support to local business enterprises for the purpose of encouraging business
development. These grants are recognized in profit or loss upon receipt of these grants. There are no unfulfilled
conditions or contingencies relating to these grants.
The significant increase in government grants in 2023 was primarily attributable to our revenue growth and
contribution to the local economy.
(2) The significant increase in bank interest income in 2023 was primarily attributable to our increased cash and
bank balances.
FINANCIAL INFORMATION
– 329 –


--- page 340 ---
(3) The amounts represent the additional input value added tax deduction, pursuant to the announcement of the
State Administration of Taxation, which became effective from April 1, 2019 onwards.
(4) The amounts represent the exchange differences arising on translation of monetary items denominated in
foreign currencies at the reporting dates.
Selling and Distribution Expenses
Our selling and distribution expenses consist of (i) employee costs for our sales and
distribution staff, (ii) advertising and promoting fees, (iii) warehousing and transportation
expenses, which mainly represent expenses for warehousing and transportation among our
warehouses, (iv) depreciation and amortization expenses allocated to our assets for selling and
distribution purposes, which are mainly related to the warehouses, and (v) other expenses,
mainly including outsourced labor costs and training fees. In 2021, 2022 and 2023, our selling
and distribution expenses accounted for 4.2%, 4.8% and 4.4% of our total revenue in these
periods, respectively. In the nine months ended September 30, 2023 and 2024, our selling and
distribution expenses accounted for 4.3% and 5.5% of our total revenue in these periods,
respectively.
The following table breaks down our selling and distribution expenses by absolute
amounts and as a percentage of our total revenue for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Selling and distribution
expenses:
Employee costs /H1118/H1118/H1118/H1118/H1118/H1118/H111870,712 1.6 91,112 1.6 94,479 1.2 62,162 1.1 68,727 1.1
Advertising and
promoting fees (1) /H1118/H1118/H1118/H1118/H111840,907 0.9 36,622 0.7 62,522 0.8 42,715 0.8 115,932 1.8
Warehousing and
transportation expenses /H1118/H1118 40,930 0.9 70,098 1.3 78,191 1.0 56,178 1.0 83,789 1.3
Depreciation and
amortization expenses /H1118/H1118/H1118 27,372 0.6 48,592 0.9 53,174 0.7 39,906 0.7 44,422 0.7
Other expenses /H1118/H1118/H1118/H1118/H1118/H1118/H11186,272 0.2 21,719 0.3 48,218 0.7 38,330 0.7 44,302 0.6
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118186,193 4.2 268,143 4.8 336,584 4.4 239,291 4.3 357,172 5.5
Note:
(1) The significant increase in advertising and promoting fees in the nine months ended September 30, 2024 was
primarily attributable to our increased efforts to increase our brand awareness, with the fees in the nine months
ended September 30, 2024 primarily consisting of fees relating to IP collaborations where we pay owners of
popular IPs for collaboration events, such as our collaboration event with “ Love and Deepspace (٤”,)
and new product launches.
FINANCIAL INFORMATION
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Administrative Expenses
Our administrative expenses consist of (i) employee costs for our administrative staff, (ii)
depreciation and amortization expenses allocated to our assets for administrative purposes, (iii)
office and travel expenses, (iv) service fees paid to independent third-party services providers,
and (v) other expenses, primarily including rental expenses, sample usage expenses and listing
expenses. In particular, during the Track Record Period, the services fees under administrative
expenses were primarily paid for services mainly covering (i) consultancy services on finance,
marketing and business development; (ii) meeting services, mainly for the organization of
franchisee meeting to strengthen the communication with franchisees; (iii) information
technology system services, mainly for system upgrades and daily operation technology
support; and (iv) mould design services for the design of new cup mould. In 2021, 2022 and
2023, our administrative expenses accounted for 2.8%, 3.4% and 3.7% of our total revenue in
these periods, respectively. In the nine months ended September 30, 2023 and 2024, our
administrative expenses accounted for 3.2% and 3.3% of our total revenue in these periods,
respectively.
The following table breaks down our administrative expenses by absolute amounts and as
a percentage of our total revenue for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months Ended
September 30,
2021 2022 2023 2023 2024
R M B%R M B%R M B%R M B%R M B%
(Unaudited)
(RMB in thousands, except percentages)
Administrative Expenses:
Employee costs /H1118/H1118/H1118/H1118/H1118/H1118/H111865,118 1.5 97,320 1.8 141,844 1.8 89,566 1.6 89,416 1.4
Depreciation and
amortization expenses /H1118/H1118/H1118 18,158 0.4 29,937 0.5 35,335 0.5 25,985 0.5 28,428 0.4
Office and travel expenses /H1118/H1118 20,790 0.5 28,401 0.5 35,436 0.5 24,551 0.4 29,285 0.5
Services fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111813,029 0.3 11,462 0.2 33,710 0.4 19,278 0.3 28,618 0.4
Other expenses (1) /H1118/H1118/H1118/H1118/H1118/H11186,650 0.1 20,485 0.4 36,523 0.5 21,309 0.4 49,459 0.6
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118123,745 2.8 187,605 3.4 282,848 3.7 180,689 3.2 225,206 3.3
Note:
(1) Primarily include rental expenses, sample usage expenses, and listing expenses. In particular, the listing
expenses amounted to nil, RMB2.1 million and RMB12.9 million in 2021, 2022 and 2023, respectively, and
amounted to RMB1.8 million and RMB18.4 million in the nine months ended September 30, 2023 and 2024,
respectively.
FINANCIAL INFORMATION
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Research and Development Expenses
Our research and development expenses primarily consist of (i) employee costs for our
product research and development and information technology staff, (ii) information
technology fees, mainly related to our servers, (iii) depreciation and amortization expenses
allocated to our assets for research and development purposes, and (iv) other expenses, mainly
including property management fees and training fees, office and relevant expenses. In 2021,
2022 and 2023, our research and development expenses accounted for 1.5%, 2.1% and 2.6%
of our total revenue in these periods, respectively. In the nine months ended September 30,
2023 and 2024, our research and development expenses accounted for 2.3% and 2.6% of our
total revenue in these periods, respectively.
Other Expenses
Our other expenses mainly consist of donations, foreign exchange losses, and late
payment fees in relation to our historical tax non-compliance. Our other expenses amounted to
RMB5.8 million, RMB1.1 million and RMB9.5 million for the years ended December 31,
2021, 2022 and 2023, respectively, and amounted to RMB9.4 million and RMB16.7 million in
the nine months ended September 30, 2023 and 2024, respectively.
Finance Costs
Our finance costs primarily represent interest on lease liabilities and interest on other
borrowings. Our finance costs amounted to RMB5.1 million, RMB5.4 million and RMB5.2
million for the years ended December 31, 2021, 2022 and 2023, respectively, and amounted to
RMB4.3 million and RMB2.2 million in the nine months ended September 30, 2023 and 2024,
respectively.
Fair Value Changes of Financial Liabilities at Fair Value through Profit or Loss
In 2020, we issued redeemable ordinary shares to certain investors, who have the right to
mandate us to repurchase their equity interests at the price agreed under certain circumstances.
In 2022, we replaced the redeemable ordinary shares with warrants and convertible redeemable
Series A preferred shares, which will be converted to ordinary shares upon the Listing. The
investments from these investors were classified as financial liabilities and designated at fair
value through profit or loss. See note 30 to the Accountants’ Report in Appendix I to this
document for details.
We recorded losses from fair value changes of financial liabilities through profit or loss
of RMB728.4 million, RMB389.5 million and RMB294.2 million in 2021, 2022 and 2023,
respectively, and of RMB21.7 million and RMB10.6 million in the nine months ended
September 30, 2023 and 2024, respectively, primarily attributable to changes in the valuation
of our Company.
FINANCIAL INFORMATION
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Taxation
Cayman Islands
The Cayman Islands currently levy no taxes on individuals or corporations based upon
profits, income, gains, or appreciation, and there is no taxation in the nature of inheritance tax
or estate duty. There are no other taxes likely to be material to us levied by the government of
the Cayman Islands except for certain stamp duties, which may be applicable, from time to
time, on certain instruments executed in or brought within the jurisdiction of the Cayman
Islands. In addition, the Cayman Islands does not impose withholding tax on dividend
payments.
Hong Kong
The Company’s subsidiaries domiciled in Hong Kong are subject to a two-tiered income
tax rate for taxable income earned in Hong Kong, effective since April 1, 2018. The first two
million Hong Kong dollars of profits earned by these subsidiaries are to be taxed at an income
tax rate of 8.25%, while the remaining profits will continue to be taxed at the existing tax rate,
16.5%. To avoid abuse of the two-tiered tax regime, each group of connected entities can
nominate only one entity to benefit from the two-tiered tax rate. Additionally, payments of
dividends by the subsidiaries incorporated in Hong Kong to the Company are not subject to any
Hong Kong withholding tax.
Mainland China
Generally, our subsidiaries in China are subject to enterprise income tax on their taxable
income in China at a rate of 25%, except where a special preferential rate applies. The
enterprise income tax is calculated based on the entity’s global income as determined under
PRC tax laws and accounting standards.
Certain of our subsidiaries that are registered in Jingning She Autonomous County,
Zhejiang, are entitled to a preferential income tax policy for an exemption of the local portion
of income tax for 10 years since the date of their registration. Certain of our subsidiaries in
China were accredited as “High and New Technology Enterprises” and therefore entitled to a
preferential income tax rate of 15% for the years ended December 31, 2022 and 2023 and the
nine months ended September 30, 2024. In addition, one of our subsidiaries in China was
qualified as a “Double Soft Enterprise” (“ DSE”) under the PRC Enterprise Income Tax Law
during the years ended December 31, 2021, 2022 and 2023 and the nine months ended
September 30, 2024, which entitled it to an income tax exemption for two years commencing
from its first profitable year, and a 50% reduction in the applicable tax rates for the subsequent
three years if it meets the criteria of DSE each year.
If our holding company in the Cayman Islands or any of our subsidiaries outside of China
were deemed to be a “resident enterprise” under the PRC Enterprise Income Tax Law, it would
be subject to enterprise income tax on its worldwide income at a rate of 25%. See “Risk Factors
— Risks Relating to Doing Business in the Country Where We Operate — If we are classified
as a PRC resident enterprise for PRC income tax purposes, such classification could result in
unfavorable tax consequences to us and our non-PRC shareholders.”
FINANCIAL INFORMATION
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PERIOD-TO-PERIOD COMPARISON OF RESULTS OF OPERATIONS
Nine Months Ended September 30, 2024 Compared to Nine Months Ended September 30,
2023
Revenue
Our revenue increased by 15.6% from RMB5,570.9 million in the nine months ended
September 30, 2023 to RMB6,441.3 million in the same period in 2024, primarily attributable
to the growth in sales of goods and equipment mainly as a result of the expansion of our store
network and growing GMV . The number of stores in our store network increased by 14.0%
from 8,578 stores as of September 30, 2023 to 9,778 stores as of September 30, 2024. The total
GMV increased by 20.4% from RMB13.8 billion in the nine months ended September 30, 2023
to RMB16.6 billion in the same period in 2024.
Sales of goods and equipment . Our revenue from sales of goods and equipment increased
by 15.1% from RMB4,477.5 million in the nine months ended September 30, 2023 to
RMB5,153.3 million in the same period in 2024. In particular, our revenue from sales of goods
increased by 16.7% from RMB4,175.7 million in the nine months ended September 30, 2023
to RMB4,872.0 million in the same period in 2024 as our store network expanded and the total
GMV increased, which leads to higher demands of goods from us. Our revenue from sales of
equipment decreased by 6.8% from RMB301.8 million in the nine months ended September 30,
2023 to RMB281.3 million in the same period in 2024, primarily due to fewer newly opened
stores in the nine months ended September 30, 2024.
Franchise management service . Our franchise management services revenue increased by
17.8% from RMB1,083.9 million in the nine months ended September 30, 2023 to RMB
1,277.1 million in the same period in 2024. Our revenue from initial franchise fees increased
by 8.2% from RMB80.8 million in the nine months ended September 30, 2023 to RMB87.4
million in the same period in 2024, as the number of our newly opened stores increased in 2023
and we recognized the initial franchise fees from these stores as revenue in 2024. Our revenue
from continuing support services fees increased by 22.8% from RMB929.9 million in the nine
months ended September 30, 2023 to RMB1,141.9 million in the same period in 2024, which
is in line with our increased total GMV . Our revenue from provision of training and other
services decreased by 34.7% from RMB73.2 million in the nine months ended September 30,
2023 to RMB47.8 million in the same period in 2024 primarily due to fewer newly opened
stores in the nine months ended September 30, 2024.
Sales from company-operated stores . Our revenue from sales from company-operated
stores increased by 14.7% from RMB9.5 million in the nine months ended September 30, 2023
to RMB10.9 million in the same period in 2024, primarily because we opened one more
company-operated store.
FINANCIAL INFORMATION
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Cost of sales
Our cost of sales increased by 16.4% from RMB3,844.5 million in the nine months ended
September 30, 2023 to RMB4,476.9 million in the same period in 2024, primarily due to (i) an
increase of RMB592.0 million in cost of sales of goods and equipment, and (ii) an increase of
RMB38.7 million in cost of providing franchise management services. The increase in our cost
of sales is generally in line with our business expansion and revenue growth.
Gross profit and gross profit margin
As a result of the foregoing, our gross profit increased by 13.8% from RMB1,726.4
million in the nine months ended September 30, 2023 to RMB1,964.4 million in the same
period in 2024, and our gross profit margin was 31.0% and 30.5% in the nine months ended
September 30, 2023 and 2024, respectively.
Our gross profit for sales of goods and equipment increased by 10.0% from RMB841.2
million in the nine months ended September 30, 2023 to RMB925.1 million in the same period
in 2024. The gross profit margin for sales of goods and equipment decreased from 18.8% in
the nine months ended September 30, 2023 to 18.0% for the same period in 2024, primarily
because we maintained stable raw materials supplies, despite upstream price fluctuations in
2024. Our gross profit for franchise management services increased by 17.5% from RMB883.3
million in the nine months ended September 30, 2023 to RMB1,037.7 million in the same
period in 2024. Our gross profit margin for franchise management services remained relatively
stable at 81.3% in the nine months ended September 30, 2024, as compared to 81.5% for the
same period in 2023.
Other income and gains
Our other income and gains increased by 14.5% from RMB125.9 million in the nine
months ended September 30, 2023 to RMB144.1 million in the same period in 2024, primarily
due to an increase of RMB12.0 million in bank interest income and an increase of RMB6.0
million in fair value changes of financial assets at fair value through profit or loss.
Selling and distribution expenses
Our selling and distribution expenses increased by 49.3% from RMB239.3 million in the
nine months ended September 30, 2023 to RMB357.2 million in the same period in 2024,
primarily due to an increase of RMB73.2 million in advertising and promoting fees, mainly as
a result of our increasing marketing and promotional efforts, and an increase of RMB27.6
million in warehousing and transportation expenses, primarily attributable to our expanding
warehouse network.
FINANCIAL INFORMATION
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Administrative expenses
Our administrative expenses increased by 24.6% from RMB180.7 million in the nine
months ended September 30, 2023 to RMB225.2 million in the same period in 2024, primarily
due to increased services fees relating to the franchisee conference and listing expenses.
Research and development expenses
Our research and development expenses increased by 28.4% from RMB129.1 million in
the nine months ended September 30, 2023 to RMB165.8 million in the same period in 2024,
primarily due to increased employee costs for our research and development staff.
Fair value changes of financial liabilities at fair value through profit or loss
We recorded fair value loss of financial liabilities at fair value through profit or loss of
RMB21.7 million and RMB10.6 million in the nine months ended September 30, 2023 and
2024, respectively, primarily due to the increase in the fair value of our convertible redeemable
preferred shares as a result of changes in the valuation of our Company. See note 30 to the
Accountants’ Report in Appendix I to this document for details.
Income tax expense
We recorded income tax expense of RMB265.8 million and RMB211.0 million in the nine
months ended September 30, 2023 and 2024, respectively. The decrease in our income tax
expense was primarily due to more of our entities enjoying preferential income tax policies.
Profit for the period
As a result of the foregoing, our profit for the period increased by 11.8% from
RMB1,002.0 million in the nine months ended September 30, 2023 to RMB1,119.8 million in
the same period in 2024.
Y ear Ended December 31, 2023 Compared to Y ear Ended December 31, 2022
Revenue
Our revenue increased by 38.1% from RMB5,559.2 million in 2022 to RMB7,675.7
million in 2023, primarily attributable to the growth in sales of goods and equipment mainly
as a result of the expansion of our store network and growing GMV . The number of stores in
our store network increased by 35.0% from 6,669 stores as of December 31, 2022 to 9,001
stores as of December 31, 2023. The total GMV increased by 37.2% from RMB14.0 billion in
2022 to RMB19.2 billion in 2023.
FINANCIAL INFORMATION
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Sales of goods and equipment . Our revenue from sales of goods and equipment increased
by 36.4% from RMB4,505.1 million in 2022 to RMB6,144.7 million in 2023. In particular, our
revenue from sales of goods increased by 34.9% from RMB4,282.7 million in 2022 to
RMB5,778.3 million in 2023 as our store network expanded and the total GMV increased,
which leads to higher demands of goods from us. Our revenue from sales of equipment
increased by 64.7% from RMB222.4 million in 2022 to RMB366.4 million in 2023, primarily
due to the increased number of our newly opened stores and the equipment upgrade in our
existing stores.
Franchise management service . Our franchise management services revenue increased by
45.4% from RMB1,044.3 million in 2022 to RMB1,518.6 million in 2023. Our revenue from
initial franchise fees increased by 24.6% from RMB87.9 million in 2022 to RMB109.5 million
in 2023 as the number of our newly opened stores increased. Our revenue from continuing
support services fees increased by 45.9% from RMB898.9 million in 2022 to RMB1,311.9
million in 2023, which is in line with our increased total GMV . Our revenue from provision of
training and other services increased by 69.0% from RMB57.5 million in 2022 to RMB97.2
million in 2023 as we opened more stores in 2023 as compared to 2022.
Sales from company-operated stores . Our revenue from sales from company-operated
stores increased by 25.5% from RMB9.8 million in 2022 to RMB12.3 million in 2023,
primarily because we had six company-operated stores as of December 31, 2023, as compared
to five company-operated stores as of December 31, 2022.
Cost of sales
Our cost of sales increased by 31.9% from RMB3,996.3 million in 2022 to RMB5,272.3
million in 2023, primarily due to (i) an increase of RMB1,186.4 million in cost of sales of
goods and equipment, and (ii) an increase of RMB87.7 million in cost of providing franchise
management services. The increase in our cost of sales is generally in line with our business
expansion and revenue growth.
Gross profit and gross profit margin
As a result of the foregoing, our gross profit increased by 53.8% from RMB1,562.9
million in 2022 to RMB2,403.3 million in 2023, and our gross profit margin was 28.1% and
31.3% in 2022 and 2023, respectively.
Our gross profit for sales of goods and equipment increased by 64.9% from RMB698.6
million in 2022 to RMB1,151.9 million in 2023. Our gross profit margin for sales of goods and
equipment was 15.5% and 18.7% in 2022 and 2023, respectively, primarily as a result of the
economies of scale and the ease of COVID-19. Our gross profit for franchise management
services increased by 44.8% from RMB862.5 million in 2022 to RMB1,249.2 million in 2023.
Our gross profit margin for franchise management services slightly decreased from 82.6% in
2022 to 82.3% in 2023, as we allocated resources to expand our store network in new regions
at an accelerating pace.
FINANCIAL INFORMATION
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Other income and gains
Our other income and gains increased by 193.6% from RMB57.5 million in 2022 to
RMB168.8 million in 2023, primarily due to (i) an increase of RMB71.4 million in government
grants because we received more government grants in 2023, and (ii) an increase of RMB48.4
million in bank interest income, partially offset by a decrease of RMB9.0 million in fair value
changes of financial assets at fair value through profit or loss.
Selling and distribution expenses
Our selling and distribution expenses increased by 25.6% from RMB268.1 million in
2022 to RMB336.6 million in 2023, primarily due to (i) an increase of RMB26.5 million in
other expenses, mainly as a result of our increased outsourced labor costs, and (ii) an increase
of RMB25.9 million in advertising and promoting fees, mainly as a result of our increasing
marketing and promotional efforts.
Administrative expenses
Our administrative expenses increased by 50.7% from RMB187.6 million in 2022 to
RMB282.8 million in 2023, primarily due to increased employee costs for our administrative
staff.
Research and development expenses
Our research and development expenses increased by 68.0% from RMB118.3 million in
2022 to RMB198.7 million in 2023, primarily due to increased employee costs for our research
and development staff.
Fair value changes of financial liabilities at fair value through profit or loss
We recorded fair value loss of financial liabilities at fair value through profit or loss of
RMB389.5 million and RMB294.2 million in 2022 and 2023, respectively, primarily due to the
increase in the fair value of our convertible redeemable preferred shares as a result of changes
in the valuation of our Company. See note 30 to the Accountants’ Report in Appendix I to this
document for details.
Income tax expense
We recorded income tax expense of RMB278.3 million in 2022 and RMB348.7 million
in 2023. The increase in our income tax expense was primarily due to an increase in our profit
before tax, partially offset by the preferential income tax policies we enjoyed.
FINANCIAL INFORMATION
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Profit for the year
As a result of the foregoing, our profit for the year increased by 194.7% from RMB372.0
million in 2022 to RMB1,096.4 million in 2023.
Y ear Ended December 31, 2022 Compared to Y ear Ended December 31, 2021
Revenue
Our revenue increased by 26.8% from RMB4,383.9 million in 2021 to RMB5,559.2
million in 2022, primarily attributable to the growth in sales of goods and equipment mainly
as a result of our growing store network and the increasing GMV . The number of stores in our
store network increased by 17.1% from 5,694 stores as of December 31, 2021 to 6,669 stores
as of December 31, 2022. The total GMV increased from RMB10.6 billion in 2021 to RMB14.0
billion in 2022.
Sales of goods and equipment . Our revenue from sales of goods and equipment increased
by 27.0% from RMB3,546.9 million in 2021 to RMB4,505.1 million in 2022. In particular, our
revenue from sales of goods increased by 27.9% from RMB3,348.9 million in 2021 to
RMB4,282.7 million in 2022 primarily due to our growing store network and our increased
total GMV , which leads to higher demands of goods and equipment from us. Our revenue from
sales of equipment increased by 12.3% from RMB198.0 million in 2021 to RMB222.4 million
in 2022, primarily because we expanded our store network.
Franchise management service . Our franchise management services revenue increased by
25.6% from RMB831.6 million in 2021 to RMB1,044.3 million in 2022. Our revenue from
initial franchise fees, which is recognized over the franchise period, increased by 19.7% from
RMB73.4 million in 2021 to RMB87.9 million in 2022 as the total number of our franchised
stores that are in the franchise period increased. Our revenue from continuing support services
fees increased by 28.5% from RMB699.5 million in 2021 to RMB898.9 million in 2022, which
is in line with the growth of our store network and increased total GMV . Our revenue from
provision of training and other services slightly decreased by 2.1% from RMB58.7 million in
2021 to RMB57.5 million in 2022, mainly attributable to the lower number of new store
openings in 2022 as compared to that in 2021 due to the impact of COVID-19.
Sales from company-operated stores . Our revenue from sales from company-operated
stores was RMB5.3 million and RMB9.8 million in 2021 and 2022, respectively.
Cost of sales
Our cost of sales increased by 30.2% from RMB3,070.2 million in 2021 to RMB3,996.3
million in 2022, primarily due to (i) an increase of RMB854.4 million in cost of sales of goods
and equipment, and (ii) an increase of RMB67.2 million in cost of providing franchise
management services. The increase in our cost of sales is generally in line with our business
expansion and revenue growth.
FINANCIAL INFORMATION
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Gross profit and gross profit margin
As a result of the foregoing, our gross profit increased by 19.0% from RMB1,313.7
million in 2021 to RMB1,562.9 million in 2022. Our gross profit margin slightly decreased
from 30.0% in 2021 to 28.1% in 2022, primarily because we reduced the prices of certain goods
supplied to our franchisees to support their operations during COVID-19.
Our gross profit for sales of goods and equipment increased by 17.5% from RMB594.8
million in 2021 to RMB698.6 million in 2022. Our gross profit margin for sales of goods and
equipment was 16.8% and 15.5% in 2021 and 2022, respectively. Our gross profit for franchise
management services increased by 20.3% from RMB717.0 million in 2021 to RMB862.5
million in 2022. Our gross profit margin for franchise management services was 86.2% and
82.6% in 2021 and 2022, respectively, as we invested more resources into franchisee
development and store management.
Other income and gains
Our other income and gains increased by 20.8% from RMB47.6 million in 2021 to
RMB57.5 million in 2022, primarily due to an increase of RMB7.9 million in foreign exchange
gains, and an increase of RMB3.2 million in interest income due to increased cash and bank
balances.
Selling and distribution expenses
Our selling and distribution expenses increased by 44.0% from RMB186.2 million in
2021 to RMB268.1 million in 2022, primarily due to (i) an increase of RMB21.2 million in
depreciation and amortization expenses primarily related to the leased warehouses, (ii) an
increase of RMB20.4 million in employee costs for our selling and distribution staff, and (iii)
an increase of RMB29.2 million in warehousing and transportation expenses.
Administrative expenses
Our administrative expenses increased by 51.6% from RMB123.7 million in 2021 to
RMB187.6 million in 2022, primarily due to increased employee costs for our administrative
staff and increased depreciation and amortization expenses of our assets for administrative
purposes.
Research and development expenses
Our research and development expenses increased by 81.9% from RMB65.0 million in
2021 to RMB118.3 million in 2022, primarily due to increased employee costs for our research
and development staff and increased information technology fees as we procured more servers
to enhance our technological capabilities.
FINANCIAL INFORMATION
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Fair value changes of financial liabilities at fair value through profit or loss
We recorded fair value loss of financial liabilities at fair value through profit or loss of
RMB728.4 million and RMB389.5 million in 2021 and 2022, respectively, primarily due to the
increase in the fair value of our convertible redeemable preferred shares as a result of changes
in the valuation of our Company. See note 30 to the Accountants’ Report in Appendix I to this
document for details.
Income tax expense
We recorded income tax expense of RMB223.1 million in 2021 and RMB278.3 million
in 2022. The increase in our income tax expense was primarily due to an increase in our profit
before tax.
Profit for the year
As a result of the foregoing, our profit for the year increased significantly from RMB24.0
million in 2021 to RMB372.0 million in 2022.
DISCUSSION OF CERTAIN KEY ITEMS OF CONSOLIDATED STATEMENTS OF
FINANCIAL POSITION
The following table sets forth selected information from our consolidated statements of
financial position as of the dates indicated, which have been extracted from the Accountants’
Report in Appendix I to this document:
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Total non-current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118675,961 867,109 1,144,257 1,688,935
Total current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,367,539 2,164,567 4,008,672 4,661,814
Total assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,043,500 3,031,676 5,152,929 6,350,749
Total non-current liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118169,091 182,628 175,220 297,335
Total current liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,080,220 3,665,642 4,362,203 4,325,774
Total liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,249,311 3,848,270 4,537,423 4,623,109
Net (liabilities)/assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,205,811) (816,594) 615,506 1,727,640
Share capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 112 127 127
Reserves /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,216,305) (832,494) 582,865 1,681,722
Equity attributable to owners of
the parent /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,216,193) (832,382) 582,992 1,681,849
Non-controlling interests /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111810,382 15,788 32,514 45,791
(Deficiency in assets)/Total equity /H1118/H1118/H1118(1,205,811) (816,594) 615,506 1,727,640
FINANCIAL INFORMATION
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We recorded net liabilities of RMB1,205.8 million and RMB816.6 million as of
December 31, 2021 and 2022, respectively, and recorded net assets of RMB615.5 million and
RMB1,727.6 million as of December 31, 2023 and September 30, 2024, respectively. We
recorded net liabilities of RMB1,247.0 million as of December 31, 2020, mainly from
accumulated fair value losses of redeemable ordinary shares of RMB1,322.1 million, the
deferred recognition of income from initial franchise fees of RMB109.1 million, and the
financial impact of RMB37.7 million from the historical tax non-compliance. Our net liabilities
decreased from RMB1,205.8 million as of December 31, 2021 to RMB816.6 million as of
December 31, 2022, primarily attributable to our profit for the year of RMB372.0 million in
2022. As of December 31, 2023, we returned to a net assets position, primarily attributable to
our profit for the year of RMB1,096.4 million in 2023. As of September 30, 2024, our net assets
further increased primarily attributable to our profit for the period of RMB1,119.8 million in
the nine months ended September 30, 2024.
The following table sets forth our current assets and current liabilities as of the dates
indicated.
As of December 31,
As of
September 30,
As of
January 15,
2021 2022 2023 2024 2025
(Unaudited)
(RMB in thousands)
Current assets:
Inventories /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118706,789 705,560 881,141 818,455 1,018,469
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H111834,401 37,511 70,416 151,207 309,069
Contract assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 9,042 19,676 36,639
Prepayments, other
receivables and other
assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118232,862 236,945 298,809 327,401 363,495
Financial assets at fair
value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118241,679 37,346 197,285 1,606,210 1,035,254
Restricted cash /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 124,000 29,030 41,510
Cash and bank balances /H1118/H1118151,808 1,147,205 2,427,979 1,709,835 1,943,118
Total current assets /H1118/H1118/H1118/H11181,367,539 2,164,567 4,008,672 4,661,814 4,747,554
FINANCIAL INFORMATION
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As of December 31,
As of
September 30,
As of
January 15,
2021 2022 2023 2024 2025
(Unaudited)
(RMB in thousands)
Current liabilities:
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118149,591 389,543 601,272 612,127 584,865
Other payables and
accruals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118181,546 251,213 322,219 352,222 2,099,823
Tax payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118166,809 53,372 38,813 65,597 72,538
Contract liabilities /H1118/H1118/H1118/H1118/H1118/H111865,335 57,520 76,212 89,356 78,440
Interest-bearing other
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 124,000 – –
Financial liabilities at fair
value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,472,275 2,861,798 3,156,013 3,166,569 3,045,487
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111844,664 52,196 43,674 39,903 36,048
Total current liabilities /H1118/H11183,080,220 3,665,642 4,362,203 4,325,774 5,917,201
Net current
assets/(liabilities) /H1118/H1118/H1118/H1118/H1118(1,712,681) (1,501,075) (353,531) 336,040 (1,169,647)
We recorded net current liabilities of RMB1,712.7 million, RMB1,501.1 million and
RMB353.5 million as of December 31, 2021, 2022 and 2023, respectively, primarily due to the
presentation of convertible redeemable preferred shares as current liabilities. Our convertible
redeemable preferred shares will be reclassified from liabilities to equity as a result of the
automatic conversion into ordinary shares upon the Listing, after which we do not expect to
recognize any further loss or gain on changes in fair value of convertible redeemable preferred
shares. We recorded net current assets of RMB336.0 million as of September 30, 2024,
primarily due to our more sufficient cash and bank balances and financial assets at fair value
through profit or loss, while fair value of financial liabilities remained stable for the nine
months ended September 30, 2024. The increase in the total amounts of our cash and bank
balances and financial assets at fair value through profit or loss is further attributable to the fact
that we generated net cash flow from operating activities of RMB1,128.5 million in the nine
months ended September 30, 2024.
Our net current liabilities decreased from RMB1,712.7 million as of December 31, 2021
to RMB1,501.1 million as of December 31, 2022. The decrease was mainly due to an increase
in cash and bank balances of RMB995.4 million, primarily due to the expansion of our
business, partially offset by (i) an increase in financial liabilities at fair value through profit
or loss of RMB389.5 million, primarily due to the increase in the fair value of our convertible
redeemable preferred shares as a result of changes in the valuation of our Company, and (ii)
an increase in trade payables of RMB240.0 million, attributable to the expansion of our
business and increased bargaining power to our suppliers.
FINANCIAL INFORMATION
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--- page 354 ---
Our net current liabilities decreased from RMB1,501.1 million as of December 31, 2022
to RMB353.5 million as of December 31, 2023. The decrease was mainly due to an increase
in cash and bank balances of RMB1,280.8 million, primarily due to the growth of our business,
partially offset by (i) an increase in financial liabilities at fair value through profit or loss of
RMB294.2 million, primarily due to the increase in the fair value of our convertible
redeemable preferred shares as a result of changes in the valuation of our Company, and (ii)
an increase in trade payables of RMB211.7 million, attributable to the expansion of our
business and increased bargaining power to our suppliers.
We recorded net current liabilities of RMB353.5 million as of December 31, 2023, as
compared to net current assets of RMB336.0 million as of September 30, 2024. The change was
mainly due to (i) an increase in financial assets at fair value through profit or loss of
RMB1,408.9 million, primarily due to the expansion of our business and the increase in our
investment amounts in wealth management products, and (ii) an increase in trade receivables
of RMB80.8 million, mainly attributable to our business expansion and the longer credit period
that we provide to our franchisees for their purchases of equipment from us.
We recorded net current assets of RMB336.0 million as of September 30, 2024, as
compared to net current liabilities of RMB1,169.6 million as of January 15, 2025. The change
was primarily due to (i) an increase in other payables and accruals of RMB1,747.6 million,
primarily as a result of the dividend payable of RMB1,740.0 million, and (ii) a decrease in
financial assets at fair value through profit of loss of RMB571.0 million due to a decrease in
our wealth management products, partially offset by an increase in cash and bank balances of
RMB233.3 million from our business operations.
We seek to improve our net current asset position by improving our operating cash flow
through our expanding store network. During the Track Record Period, our net cash generated
from operating activities continued to grow from RMB267.5 million in 2021 to RMB1,011.2
million in 2022, and further to RMB1,573.3 million in 2023, which was primarily attributable
to a growing number of stores within our network. We continued to generate cash flows from
our business operations in the nine months ended September 30, 2024, recording RMB1,128.5
million of net cash generated from operating activities. We expect our operating cash flow to
improve as a result of (i) the rapid growth of business scale, and (ii) our continuous efforts to
improve and maintain the sales and profitability of our stores, which we believe would help
improve our net current liabilities position. We expect to further improve our net current asset
position upon Listing due to the reclassification of financial liabilities at fair value through
profit or loss from liabilities to equity as a result of the automatic conversion of convertible
redeemable preferred shares into ordinary shares upon Listing.
FINANCIAL INFORMATION
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--- page 355 ---
Inventories
Our inventories primarily consist of (i) ingredients such as fresh fruits, fruit juices, tea
leaves, and dairy products, and (ii) packaging materials.
The following table sets forth our inventories as of the dates indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Inventories:
Raw materials /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118151,281 86,465 106,792 108,146
Work in progress /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818,768 24,635 37,187 127,284
Finished goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118536,740 594,460 737,162 583,025
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118706,789 705,560 881,141 818,455
Our inventories remained stable at RMB706.8 million and RMB705.6 million as of
December 31, 2021 and 2022, respectively, and increased to RMB881.1 million as of
December 31, 2023, which is consistent with the expansion of our business. Our inventories
decreased to RMB818.5 million as of September 30, 2024, primarily because we made more
procurement in December 2023 for the upcoming holidays. We assess our inventory level and
turnover rates on a monthly basis in order to respond to potential inventory risks in a timely
manner. Leveraging our extensive warehousing and logistics capabilities, we are able to
manage our inventory efficiently and ensure consistent quality of our products.
The following table sets forth the aging analysis of our inventories as of the dates
indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Inventories
Within 90 days /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118628,236 628,776 792,338 753,176
91 to 365 days /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111878,553 76,784 88,803 65,279
706,789 705,560 881,141 818,455
FINANCIAL INFORMATION
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--- page 356 ---
All of our inventories aged within one year throughout the Track Record Period. The
following table sets forth our inventory turnover days for the periods indicated.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Inventory turnover days (1) /H1118/H1118/H1118/H1118/H111855 64 55 52
Note:
(1) Inventory turnover days are based on the average balance of inventories divided by cost of sales for the
relevant period and multiplied by the number of days in the relevant period. Average balance is calculated as
the average of the beginning balance and ending balance of a given period. The number of days for the years
ended December 31 is 365 days, and the number of days for the nine months ended September 30 is 274 days.
Our inventory turnover days increased from 55 days in 2021 to 64 days in 2022, and
decreased to 55 days in 2023. Our inventory turnover days increased due to the impact of
COVID-19 in 2022 and decreased due to the ease of COVID-19 that brought more stable
logistics. Our inventory turnover days further decreased to 52 days in the nine months ended
September 30, 2024.
As of January 15, 2025, RMB599.2 million, or 73.2%, of our inventories as of September
30, 2024 had been sold or utilized.
Trade Receivables
Our trade receivables primarily refer to outstanding amounts due from franchisees and
corporate customers for their purchase of goods and equipment from us. For franchisees,
payment for the goods and equipment is generally paid in advance by franchisees or paid
before delivery of next supply order under the franchise agreements. Supply orders from
franchisees are delivered every two days in general and we will not deliver supplies to
franchisees that have not made payment in full for any prior supply order. For corporate
customers, credit terms are granted pursuant to their individually-negotiated agreements with
us. Therefore, the credit period we grant to our customers generally ranges from two days to
one month. For corporate customers which have longstanding relationships with us and are
believed to have low credit risks, we may extend their credit period, occasionally to up to three
months.
Our trade receivables increased from RMB34.4 million as of December 31, 2021 to
RMB37.5 million as of December 31, 2022, and further increased to RMB70.4 million as of
December 31, 2023. The increases were mainly due to (i) increased sales of goods to our
corporate customers as we typically grant a relatively longer credit period to our corporate
customers than our franchisees, and (ii) increased sales of goods and provision of franchise
management services as the number of our franchised stores grew. Our trade receivables
FINANCIAL INFORMATION
– 346 –


--- page 357 ---
increased from RMB70.4 million as of December 31, 2023 to RMB151.2 million as of
September 30, 2024, mainly due to our increased sales of coffee machines to franchisees which
have long credit periods. In the nine months ended September 30, 2024, we offered our coffee
machines to more franchisees in order to help them diversify their product offerings and
increase sales. Since each coffee machine is relatively expensive, we offered payment by
installments and relatively long credit periods to alleviate the financial pressure on franchisees.
Franchisees can elect to purchase coffee machines on a voluntary basis. We expect to continue
offering flexible payment terms for coffee machines in the foreseable future.
The following table sets forth the aging analysis of our trade receivables as of the dates
indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Trade receivables:
Within 1 month /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111829,928 31,951 46,664 98,215
1 to 3 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,090 3,734 16,870 35,551
3 to 6 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,784 977 4,479 7,937
6 months to 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118599 849 2,403 9,504
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,401 37,511 70,416 151,207
The following table sets forth our trade receivable turnover days for the periods indicated.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Trade receivable turnover
days (1) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182.5 2.4 2.6 4.7
Note:
(1) Trade receivable turnover days are based on the average balance of trade receivables divided by total revenue
for the relevant period and multiplied by the number of days in the relevant period. Average balance is
calculated as the average of the beginning balance and ending balance of a given period. The number of days
for the years ended December 31 is 365 days, and the number of days for the nine months ended September
30 is 274 days.
Our trade receivable turnover days remained stable at 2.5 days, 2.4 days and 2.6 days in
2021, 2022 and 2023, respectively. Our trade receivable turnover days increased to 4.7 days in
the nine months ended September 30, 2024, mainly due to the longer credit period that we
provide to our franchisees for their purchases of equipment from us.
FINANCIAL INFORMATION
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--- page 358 ---
As of January 15, 2025, approximately RMB139.9 million, or 92.5%, of our trade
receivables as of September 30, 2024 had been settled.
Contract Assets
The balance of our contract assets was RMB9.0 million and RMB24.2 million as of
December 31, 2023 and September 30, 2024, respectively, which represent unbilled trade
receivables that will be re-classified as trade receivables once billed. The increase in our
contract assets was primarily because we offered franchisees newly-enrolled after March 2024
to pay their initial franchisee fees in three installments over a period of 24 months.
As of January 15, 2025, approximately RMB0.3 million, or 1.2%, of our contract assets
as of September 30, 2024 had been re-classified to trade receivables upon billing.
Prepayments, Other Receivables and Other Assets
Our prepayments, other receivables and other assets primarily consist of (i) prepayments
to suppliers, (ii) prepaid expenses, mainly representing advertising and promoting fees prepaid
to online platforms, (iii) deposits, which are related to our leased properties, (iv) value-added
tax recoverable, which is in line with our purchase amounts, and (v) others, which are mainly
advances or disbursement to our employees for operational purpose, including petty cash
advances for business travel and other small operational activities.
The following table sets forth our prepayments, other receivables and other assets as of
the dates indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Prepayments, other receivables
and other assets:
Prepayments to suppliers /H1118/H1118/H1118/H1118/H1118166,441 141,120 148,339 138,400
Prepaid expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,940 19,975 29,080 53,104
Deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111816,791 18,698 18,875 22,989
V alue-added tax recoverable /H1118/H1118/H111823,221 45,064 88,337 84,779
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,469 12,088 14,178 28,129
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118232,862 236,945 298,809 327,401
Our prepayments, other receivables and other assets remained stable at RMB232.9
million and RMB236.9 million as of December 31, 2021 and 2022, respectively.
FINANCIAL INFORMATION
– 348 –


--- page 359 ---
Our prepayments, other receivables and other assets increased from RMB236.9 million as
of December 31, 2022 to RMB298.8 million as of December 31, 2023. The increase was mainly
due to an increase in value-added tax recoverable of RMB43.3 million, primarily due to an
increase in our purchase amounts.
Our prepayments, other receivables and other assets increased from RMB298.8 million as
of December 31, 2023 to RMB327.4 million as of September 30, 2024, mainly due to an
increase in prepaid expenses of RMB24.0 million, primarily as a result of the increased
advertising and travelling expenses.
As of January 15, 2025, approximately RMB209.8 million, or 64.1%, of our prepayments,
other receivables and other assets as of September 30, 2024 had been settled.
Financial Assets at Fair Value through Profit or Loss
Our financial assets at fair value through profit or loss represent wealth management
products, which we purchased, issued by banks in mainland China with a maturity period
within one year. Our financial assets at fair value through profit or loss decreased from
RMB241.7 million as of December 31, 2021 to RMB37.3 million as of December 31, 2022, and
increased to RMB197.3 million as of December 31, 2023. Our financial assets at fair value
through profit or loss then increased significantly to RMB1,606.2 million as of September 30,
2024. The changes in our financial assets at fair value through profit or loss were primarily
because we adjusted our investment amounts in wealth management products due to changes
in the interest rates of bank deposits and investment return rates of wealth management
products.
During the Track Record Period, our wealth management products primarily include
wealth management products with maturity period within one year that we purchased from
various national and rural commercial banks in China without guaranteed returns. The risk
exposure from our wealth management products is primarily that neither the principal nor the
returns are protected or guaranteed by the relevant issuers. As of December 31, 2021, 2022 and
2023 and September 30, 2024, the majority of the wealth products we purchased are due on
demand. During the Track Record Period, the wealth management products we purchased did
not have material decline in market value.
To monitor and control the investment risks associated with our wealth management
product portfolio, we have adopted a comprehensive set of internal procedures to manage our
investment in wealth management products. With the authorization of the Board, our
management is responsible for carrying out the investment plans with respect to wealth
management products in accordance with our cash management policies and internal approval
process. Supervised by Mr. Hailing Meng, the chief financial officer of the Group who has been
supervising our investment activities and was highly involved in our historical investments, our
finance department proposes, analyses and evaluates potential investment in wealth
management products based on recommendations of our relationship and account managers at
banks in China. Prior to making any material investments in wealth management products or
FINANCIAL INFORMATION
– 349 –


--- page 360 ---
modifying our existing investment portfolio, the proposal shall be approved by Mr. Meng and
his designated senior member of our management. In assessing the wealth management
products, we apply a number of standards, including (i) investment in high risk products are
prohibited; (ii) the primary objectives of investment activities focus on minimizing the
financial risks by reasonably and conservatively matching the maturities of the portfolio to
anticipated operating cash needs, while generating desirable investment returns for the benefits
of our Shareholders; (iii) the proposed investment must not interfere with our business
operations or capital expenditures; and (iv) the wealth management products should be issued
by a reputable bank. We primarily invest in wealth management products issued by national
and rural commercial banks in China with low risks and a short-to mid-term of no more than
one year. We make investment decisions related to wealth management products on a
case-by-case basis after thoroughly considering a number of factors, including but not limited
to macro-economic environment, general market conditions, risk control and credit of issuing
banks, the need for risk diversification of our investment portfolio, our own working capital
conditions, and the expected profit or potential loss of the investment. Since the wealth
management products that we purchased during the Track Record Period did not have any
material decline in market value, we have not adopted a specific cumulative investment loss
threshold that mandates reporting to the Board. Nonetheless, Mr. Hailing Meng, our chief
financial officer who supervises our investment activities, frequently discusses our investment
matters with members of the Board and senior management of the Company. Additionally, our
Board adopted a variety of procedures in relation to the valuation of our financial assets. For
details of those procedures, see “— Critical Accounting Policies and Estimates — Material
Accounting Policy Information — Fair V alue Measurement.” Going forward, we intend to
invest in wealth management products with low/medium risks or low risks on a case-by-case
basis if such products are in our Group’s interest upon thorough evaluations and analyses. Mr.
Meng has nearly 15 years of experience in finance. For other relevant qualifications and
experience of our chief financial officer, see “Directors and Senior Management.” In addition,
we have a professional and efficient financial management team. The team members have
professional certifications, such as CPA and CFA, as well as financial and cash management
capabilities with prior working experience in the big four international accounting firms. They
also have experiences in the identification, calculation, reduction of risk exposure, and
evaluation of the effectiveness of risk management, to ensure stable returns on investments in
wealth management products.
After Listing, our investments in wealth management products will be subject to
compliance with Chapter 14 of the Listing Rules.
Cash and Bank Balances
Our cash and bank balances primarily consist of (i) cash on hand and cash at bank, and
(ii) short-term bank deposits. We had cash and bank balances of RMB151.8 million,
RMB1,147.2 million, RMB2,428.0 million and RMB1,709.8 million as of December 31, 2021,
2022 and 2023 and September 30, 2024, respectively. See “— Liquidity and Capital Resources
— Cash Flow Analysis.”
FINANCIAL INFORMATION
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--- page 361 ---
Property, Plant and Equipment
Our property, plant and equipment primarily consists of (i) machinery, mainly
representing cold storage in our warehouses, and equipment and machines at our processing
facilities, (ii) office equipment, (iii) motor vehicles, which are mainly for delivery of goods,
(iv) leasehold improvements, and (v) construction in progress, which includes our office
building, warehouse and processing facility.
The following table sets forth our property, plant and equipment as of the dates indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Property, plant and equipment:
Machinery /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111853,056 97,574 98,724 167,470
Office equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814,796 22,157 20,914 25,134
Motor vehicles /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111852,227 50,181 46,550 47,045
Leasehold improvements /H1118/H1118/H1118/H1118/H1118/H1118/H111817,814 47,511 27,443 20,165
Construction in progress /H1118/H1118/H1118/H1118/H1118/H1118/H111854,569 16,391 396,427 629,715
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118192,462 233,814 590,058 889,529
The carrying amount of our property, plant and equipment increased from RMB192.5
million as of December 31, 2021 to RMB233.8 million as of December 31, 2022, primarily
attributable to our business growth and the increased investment in warehouses and logistics
infrastructure driven by the expansion of our nationwide store network. In particular, the
carrying amount of our machinery increased from RMB53.1 million as of December 31, 2021
to RMB97.6 million as of December 31, 2022, which is mainly related to the upgrades of
equipment at our processing facilities. The carrying amount of our office equipment increased
from RMB14.8 million as of December 31, 2021 to RMB22.2 million as of December 31, 2022,
primarily from the purchase of office computers, furniture and other supporting facilities due
to the increase in the number of our employees. The carrying amount of our motor vehicles
slightly decreased from RMB52.2 million as of December 31, 2021 to RMB50.2 million as of
December 31, 2022, as a result of the depreciation of our motor vehicles. The carrying amount
of our leasehold improvements increased from RMB17.8 million as of December 31, 2021 to
RMB47.5 million as of December 31, 2022, mainly related to the increased fit-out costs for the
new offices. The carrying amount of our construction in progress decreased from RMB54.6
million as of December 31, 2021 to RMB16.4 million as of December 31, 2022, as the fit-out
new offices were reclassified in leasehold improvements when we started to put the new offices
into operation in 2022.
FINANCIAL INFORMATION
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--- page 362 ---
The carrying amount of our property, plant and equipment further increased from
RMB233.8 million as of December 31, 2022 to RMB590.1 million as of December 31, 2023,
primarily attributable to our business growth and the expansion of our nationwide store
network, warehouses and logistics infrastructure. In particular, the carrying amount of our
construction in progress increased from RMB16.4 million as of December 31, 2022 to
RMB396.4 million as of December 31, 2023, primarily due to the construction of our new
office building and a warehouse in Taizhou, Zhejiang, and our processing facility in Zhuji,
Zhejiang. The carrying amount of our machinery slightly increased from RMB97.6 million as
of December 31, 2022 to RMB98.7 million as of December 31, 2023, as a combined effect of
the construction and operation of our processing facilities and the depreciation of our
machinery. The carrying amount of our motor vehicles decreased from RMB50.2 million as of
December 31, 2022 to RMB46.6 million as of December 31, 2023, as a combined effect of the
depreciation of our motor vehicles and our purchases of more motor vehicles for transportation.
The carrying amount of our leasehold improvements decreased from RMB47.5 million as of
December 31, 2022 to RMB27.4 million as of December 31, 2023, primarily because the fit-out
costs for the new offices were amortized over this year. The carrying amount of our office
equipment decreased from RMB22.2 million as of December 31, 2022 to RMB20.9 million as
of December 31, 2023, mainly as a result of the depreciation of our office equipment.
The carrying amount of our property, plant and equipment further increased from
RMB590.1 million as of December 31, 2023 to RMB889.5 million as of September 30, 2024,
primarily attributable to our business growth and the expansion of our nationwide store
network, warehouses and logistics infrastructure. In particular, the carrying amount of our
construction in progress increased from RMB396.4 million as of December 31, 2023 to
RMB629.7 million as of September 30, 2024, primarily due to the construction of our new
office building and a warehouse in Taizhou, Zhejiang, and our processing facility in Zhuji,
Zhejiang. The carrying amount of our machinery slightly increased from RMB98.7 million as
of December 31, 2023 to RMB167.5 million as of September 30, 2024, as a combined effect
of the construction and operation of our processing facilities and the depreciation of our
machinery. The carrying amount of our motor vehicles increased slightly from RMB46.6
million as of December 31, 2023 to RMB47.0 million as of September 30, 2024, primarily due
to a combined effect of new purchases and depreciation of our motor vehicles. The carrying
amount of our leasehold improvements decreased from RMB27.4 million as of December 31,
2023 to RMB20.2 million as of September 30, 2024, primarily because of the depreciation of
our leasehold improvements. The carrying amount of our office equipment increased from
RMB20.9 million as of December 31, 2023 to RMB25.1 million as of September 30, 2024,
mainly as a result of the combined effect of new purchases and depreciation of our office
equipment.
FINANCIAL INFORMATION
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--- page 363 ---
Right-of-Use Assets
Our right-of-use assets primarily consist of (i) office premises, company-operated stores
and processing facility, and (ii) leasehold land. The carrying amount of our right-of-use assets
increased from RMB126.6 million as of December 31, 2021 to RMB215.8 million as of
December 31, 2022, primarily due to our newly procured leasehold land. The carrying amount
of our right-of-use assets decreased to RMB178.4 million as of December 31, 2023 and
RMB169.3 million as of September 30, 2024, mainly as a result of the depreciation of our
right-of-use assets.
Equity Investment Designated at Fair Value through Other Comprehensive Income
The equity investment designated at fair value through other comprehensive income
represent our investment in the equity interests of Adopt A Cow Holding Group Co., Ltd.
(“Adopt A Cow ”), which also supplies us with milk and dairy products during our procurement
process. Adopt A Cow is a company established in Hangzhou in 2016 and mainly develops,
produces, and sells dairy products including fresh milk, yogurt, milk powder, cheese, among
others. Our procurement amounts from Adopt A Cow were RMB3.9 million, RMB18.4 million,
RMB39.2 million and RMB45.3 million for the years ended December 31, 2021, 2022 and
2023 and the nine months ended September 30, 2024, respectively. Our procurement amount
from Adopt A Cow steadily increased during the Track Record Period as our business grew in
scale and our need for dairy products increased, particularly due to the popularity of our light
milk tea series. To the best of our knowledge, our equity interest in Adopt A Cow is
approximately 2.5% in terms of percentage of its total share capital and the extent of control
which we are entitled to exercise since December 2021. See note 16 to the Accountants’ Report
in Appendix I to this document for details.
We recorded equity investment designated at fair value through other comprehensive
income of RMB247.5 million, RMB277.1 million, RMB257.1 million and RMB248.1 million
as of December 31, 2021, 2022 and 2023 and September 30, 2024, respectively. These changes
were primarily due to fair value changes of the equity interests of the invested company.
Long-term Trade Receivables
Our long-term trade receivables arise from sales of coffee machines to some franchisees
by instalments. According to the payment terms in the sales contracts of coffee machines with
these franchisees, instalment repayments are allowed and part of the sales consideration will
be collected after one year. The above settlement arrangements contain financing components
which provide our franchisees with financial benefits for more than one year and our Group
transferred substantially all the risks and rewards incidental to ownership of the underlying
coffee machines to these franchisees on the commencement date. Accordingly, the
arrangements are finance lease arrangements under IFRS 16. The present value of the
instalment payments which are due for more than a year are included in our long-term trade
receivables as the finance lease receivables.
FINANCIAL INFORMATION
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--- page 364 ---
Trade Payables
Our trade payables primarily include outstanding amounts due to our suppliers for our
purchases. Our trade payables increased from RMB149.6 million as of December 31, 2021 to
RMB389.5 million as of December 31, 2022, and further increased to RMB601.3 million as of
December 31, 2023. The increase was mainly due to an increase in our purchase amounts and
extended settlement cycles as a result of our increased bargaining power with suppliers. Our
trade payables remained relatively stable at RMB612.1 million as of September 30, 2024, as
compared to RMB601.3 million as of December 31, 2023.
The following table sets forth the aging analysis of our trade payables as of the dates
indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Trade payables:
Within 3 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118148,733 387,123 594,838 604,702
3 to 6 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118102 2,236 4,088 2,733
6 months to 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118632 44 2,346 4,692
Over 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118124 140 – –
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118149,591 389,543 601,272 612,127
The following table sets forth our trade payable turnover days for the periods indicated.
For the Y ear Ended December 31,
For the Nine
Months Ended
September 30,
2021 2022 2023 2024
Trade payable turnover days (1)/H1118/H1118/H1118 21 25 34 37
Note:
(1) Trade payable turnover days for a period equals average balance of trade payables divided by cost of sales for
the relevant period and multiplied by the number of days in the relevant period. Average balance is calculated
as the average of the beginning balance and ending balance of a given period. The number of days for the years
ended December 31 is 365 days, and the number of days for the nine months ended September 30 is 274 days.
Our trade payable turnover days increased from 21 days in 2021 to 25 days in 2022 and
further increased to 34 days in 2023. The increases were primarily attributable to better
settlement terms with our suppliers. Our trade payable turnover days increased slightly to 37
days in the nine months ended September 30, 2024.
FINANCIAL INFORMATION
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--- page 365 ---
As of January 15, 2025, approximately RMB602.8 million, or 98.5%, of our trade
payables as of September 30, 2024 had been settled.
Other Payables and Accruals
Our other payables and accruals primarily consist of (i) payroll and welfare payable, (ii)
tax payable other than corporate income tax, mainly representing value-added tax payable, (iii)
deposits received, which are mainly from franchisees, (iv) other payables for property, plant
and equipment, (v) accrued expenses, which are mainly related to delivery fees and marketing
fees, (vi) payables to related parties arising from the Reorganization, representing payables of
capital reduction mainly relating to the arrangement of the Reorganization, and (vii) other
payables, representing our miscellaneous payables.
The following table sets forth our other payables and accruals as of the dates indicated.
As of December 31,
As of
September 30,
2021 2022 2023 2024
(RMB in thousands)
Other payables and accruals:
Payroll and welfare payable /H1118/H1118/H111861,773 75,705 114,409 98,001
Tax payable other than
corporate income tax /H1118/H1118/H1118/H1118/H1118/H111849,164 14,465 15,051 17,837
Deposits received /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,445 24,195 36,482 46,319
Other payables for property,
plant and equipment /H1118/H1118/H1118/H1118/H1118/H1118/H111812,730 11,173 87,068 118,082
Accrued expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111832,741 27,806 59,337 69,586
Due to related parties arising
from the Reorganization /H1118/H1118/H1118/H1118 – 94,348 – –
Other payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,693 3,521 9,872 2,397
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118181,546 251,213 322,219 352,222
Our other payables and accruals increased from RMB181.5 million as of December 31,
2021 to RMB251.2 million as of December 31, 2022. The increase was mainly due to (i) an
increase in payables to related parties arising from the Reorganization of RMB94.3 million,
and (ii) an increase in payroll and welfare payable of RMB13.9 million, primarily attributable
to an increase in the number of our employees.
Our other payables and accruals increased from RMB251.2 million as of December 31,
2022 to RMB322.2 million as of December 31, 2023. The increase was mainly due to (i) an
increase of RMB75.9 million in other payables for property, plant and equipment, primarily
related to the construction of our processing facility, and (ii) an increase of RMB38.7 million
FINANCIAL INFORMATION
– 355 –


--- page 366 ---
in payroll and welfare payable, primarily attributable to an increase in the number of our
employees and our accrued year-end bonus, partially offset by a decrease in payables to related
parties arising from the Reorganization of RMB94.3 million.
Our other payables and accruals increased from RMB322.2 million as of December 31,
2023 to RMB352.2 million as of September 30, 2024. The increase was mainly due to an
increase of RMB31.0 million in other payables for property, plant and equipment, primarily
related to the construction of our processing facility.
As of January 15, 2025, approximately RMB206.1 million, or 58.5%, of our other
payables and accruals as of September 30, 2024 had been settled.
Tax Payables
Our tax payables decreased from RMB166.8 million as of December 31, 2021 to
RMB53.4 million as of December 31, 2022, as some of our tax payments were settled in 2022.
Our tax payables further decreased to RMB38.8 million as of December 31, 2023, primarily
attributable to the preferential income tax policies we enjoyed. Our tax payables increased to
RMB65.6 million as of September 30, 2024, primarily attributable to increased profit before
tax.
Contract Liabilities
Our contract liabilities mainly arise from the advance payments received from our
franchisees for services yet to be provided. Our contract liabilities, including current and
non-current portion, slightly decreased from RMB128.6 million as of December 31, 2021 to
RMB117.3 million as of December 31, 2022, and further decreased to RMB102.7 million as of
December 31, 2023, primarily as a result of less advance payments made by our franchisees at
the end of respective periods. Our contract liabilities, including current and non-current
portion, slightly increased to RMB123.2 million as of September 30, 2024, primarily due to
more advance payments made by our franchisees at the end of the nine months ended
September 30, 2024.
As of January 15, 2025, approximately RMB88.5 million, or 71.9%, of our contract
liabilities as of September 30, 2024 had been subsequently recognized as revenue.
Lease Liabilities
As of December 31, 2021, 2022 and 2023 and September 30, 2024, our lease liabilities,
including current and non-current portion, amounted to RMB127.5 million, RMB106.3 million,
RMB70.2 million and RMB60.9 million, respectively. The decrease was due to an increase in
our lease payments.
FINANCIAL INFORMATION
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--- page 367 ---
Financial Liabilities at Fair Value through Profit or Loss
In 2020, we issued redeemable ordinary shares to certain investors and further replaced
the redeemable ordinary shares with warrants and convertible redeemable Series A preferred
shares in 2022, which will be converted to ordinary shares upon the Listing. The investments
from these investors were classified as financial liabilities and designated at fair value through
profit or loss. See note 30 to the Accountants’ Report in Appendix I to this document for
details.
Our financial liabilities at fair value through profit or loss increased from RMB2,472.3
million as of December 31, 2021 to RMB2,861.8 million as of December 31, 2022 and further
increased to RMB3,156.0 million as of December 31, 2023 and RMB3,166.6 million as of
September 30, 2024. The increases were primarily due to the increase in the fair value of our
convertible redeemable preferred shares as a result of changes in the valuation of our Company.
LIQUIDITY AND CAPITAL RESOURCES
During the Track Record Period and up to the Latest Practicable Date, we funded our cash
requirements principally from cash flows from operating activities and capital
contribution from shareholders. We had cash and cash equivalents of RMB151.8 million,
RMB1,114.5 million, RMB2,358.0 million and RMB1,677.9 million as of December 31, 2021,
2022 and 2023 and September 30, 2024, respectively. Our cash and cash equivalents include
cash on hand and cash at banks. After the Global Offering, we intend to finance our future
capital requirements through cash generated from our operating activities, the net proceeds
from the Global Offering, and other future equity or debt financings. We currently do not
anticipate any changes to the availability of financing to fund our operations in the near future.
Cash Flow Analysis
The following table sets forth our cash flows for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
(Unaudited)
(RMB in thousands)
Net cash flows from
operating activities /H1118/H1118/H1118/H1118/H1118267,470 1,011,162 1,573,306 1,206,286 1,128,514
Net cash flows used in
investing activities /H1118/H1118/H1118/H1118/H1118(237,595) (57,341) (470,954) (318,607) (1,844,425)
Net cash flows (used in)/
from financing
activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(42,860) 5,315 139,958 (145,507) 44,176
FINANCIAL INFORMATION
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--- page 368 ---
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
(Unaudited)
(RMB in thousands)
Net (decrease)/increase in
cash and cash
equivalents /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(12,985) 959,136 1,242,310 742,172 (671,735)
Effect of foreign exchange
rate changes, net /H1118/H1118/H1118/H1118/H1118/H1118(1,325) 3,524 1,183 564 (8,358)
Cash and cash equivalents
at the beginning of the
year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118166,118 151,808 1,114,468 1,114,468 2,357,961
Cash and cash
equivalents at end of
the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118151,808 1,114,468 2,357,961 1,857,204 1,677,868
Net cash flows from operating activities
In the nine months ended September 30, 2024, net cash flows from operating activities
were RMB1,128.5 million, primarily consisting of our profit before tax of RMB1,330.8
million, adjusted for certain non-cash and non-operating items, and income tax paid of
RMB179.3 million. Adjustments for certain non-cash and non-operating items primarily
include (i) depreciation of property, plant and equipment of RMB58.3 million, and (ii)
depreciation of right-of-use assets of RMB44.1 million. The amount was further adjusted by
changes in working capital, which primarily result from an increase in trade receivables of
RMB80.8 million and an increase in contract assets of RMB14.9 million.
In 2023, net cash flows from operating activities were RMB1,573.3 million, primarily
consisting of our profit before tax of RMB1,445.1 million, adjusted for certain non-cash and
non-operating items, and income tax paid of RMB310.2 million. Adjustments for certain
non-cash and non-operating items primarily include (i) fair value changes of financial
liabilities at fair value through profit or loss of RMB294.2 million, (ii) depreciation of
property, plant and equipment of RMB73.1 million, and (iii) depreciation of right-of-use assets
of RMB61.7 million. The amount was further adjusted by changes in working capital, which
primarily result from an increase in trade payables of RMB211.7 million, partially offset by an
increase in inventories of RMB175.6 million and an increase in trade receivables of RMB32.9
million.
FINANCIAL INFORMATION
– 358 –


--- page 369 ---
In 2022, net cash flows from operating activities were RMB1,011.2 million, primarily
consisting of our profit before tax of RMB650.4 million, adjusted for certain non-cash and
non-operating items, and income tax paid of RMB354.7 million. Adjustments for certain
non-cash and non-operating items primarily include (i) fair value changes of financial
liabilities at fair value through profit or loss of RMB389.5 million, (ii) depreciation of
property, plant and equipment of RMB62.6 million, and (iii) depreciation of right-of-use assets
of RMB54.7 million. The amount was further adjusted by changes in working capital, which
primarily result from an increase in trade payables of RMB240.0 million, partially offset by a
decrease in other payables and accruals of RMB23.1 million.
In 2021, net cash flows from operating activities were RMB267.5 million, primarily
consisting of our profit before tax of RMB247.1 million, adjusted for certain non-cash and
non-operating items, and income tax paid of RMB159.6 million. Adjustments for such
non-cash and non-operating items primarily include (i) fair value changes of financial
liabilities at fair value through profit or loss of RMB728.4 million, (ii) depreciation of
right-of-use assets of RMB40.5 million, and (iii) depreciation of property, plant and equipment
of RMB27.3 million. The amount was further adjusted by changes in working capital, which
primarily result from (i) an increase in contract liabilities of RMB14.4 million, and (ii) an
increase in other payables and accruals of RMB24.8 million, partially offset by (i) an increase
in inventories of RMB488.1 million, (ii) an increase in prepayments, other receivables and
other assets of RMB104.8 million, and (iii) a decrease in trade payables of RMB60.7 million.
Net cash flows used in investing activities
In the nine months ended September 30, 2024, net cash flows used in investing activities
were RMB1,844.4 million, primarily attributable to (i) purchases of items of property, plant
and equipment of RMB332.6 million, (ii) purchase of financial assets at fair value through
profit or loss of RMB4,139.2 million, and (iii) purchase of bank deposits with original maturity
of more than three months when acquired of RMB290.8 million, partially offset by (i) proceeds
from the disposal of financial assets at fair value through profit or loss of RMB2,738.0 million,
(ii) proceeds from bank deposits with original maturity of more than three months when
acquired of RMB100.0 million, and (iii) interest received of RMB45.0 million.
In 2023, net cash flows used in investing activities were RMB471.0 million, primarily
attributable to (i) purchase of financial assets at fair value through profit or loss of RMB745.0
million, and (ii) purchases of items of property, plant and equipment of RMB398.8 million,
partially offset by (i) proceeds from the disposal of financial assets at fair value through profit
or loss of RMB587.0 million, and (ii) interest received of RMB52.3 million.
FINANCIAL INFORMATION
– 359 –


--- page 370 ---
In 2022, net cash flows used in investing activities were RMB57.3 million, primarily
attributable to (i) purchase of financial assets at fair value through profit or loss
of RMB2,258.2 million, (ii) prepayment for the right-of-use of parcels of leasehold land of
RMB108.9 million, and (iii) purchases of items of property, plant and equipment of RMB90.1
million, partially offset by (i) proceeds from disposal of financial assets at fair value through
profit or loss of RMB2,473.4 million, and (ii) proceeds from disposal of items of property,
plant, and equipment of RMB5.7 million.
In 2021, net cash flows used in investing activities were RMB237.6 million, primarily
attributable to (i) purchase of financial assets at fair value through profit or loss of
RMB5,369.4 million, (ii) purchase of equity investment designated at fair value through other
comprehensive income of RMB247.5 million, and (iii) purchases of items of property, plant
and equipment of RMB163.5 million, partially offset by proceeds from disposal of financial
assets at fair value through profit or loss of RMB5,581.9 million.
Net cash flows (used in)/from financing activities
In the nine months ended September 30, 2024, net cash flows generated from financing
activities were RMB44.2 million, primarily attributable to decrease in restricted cash of
RMB95.0 million, partially offset by principal portion of lease payments of RMB44.3 million.
In 2023, net cash flows generated from financing activities were RMB140.0 million,
primarily attributable to (i) proceeds from exercise of share options of RMB300.0 million, and
(ii) proceeds from interest-bearing other borrowings of RMB171.0 million, partially offset by
(i) increase in restricted cash of RMB124.0 million, (ii) payment of capital reduction arising
from the Reorganization of RMB94.3 million, (iii) principal portion of lease payments of
RMB60.5 million and (iv) repayment of interest-bearing other borrowings of RMB47.0
million.
In 2022, net cash flows generated from financing activities were RMB5.3 million,
primarily attributable to (i) proceeds from issuance of warrants and convertible redeemable
preferred shares as a part of the Reorganization of RMB649.0 million, and (ii) capital
contribution from the then shareholders of a subsidiary of RMB66.8 million, partially offset by
(i) repayment of redeemable capital contribution arising from the Reorganization of RMB649.0
million, and (ii) principal portion of lease payments of RMB56.0 million.
In 2021, net cash flows used in financing activities were RMB42.9 million, attributable
to (i) principal portion of lease payments of RMB37.8 million, and (ii) interest portion of lease
payments of RMB5.1 million.
FINANCIAL INFORMATION
– 360 –


--- page 371 ---
INDEBTEDNESS
The following table sets forth the breakdown of our indebtedness as of the dates
indicated.
As of December 31,
As of
September 30,
As of
January 15,
2021 2022 2023 2024 2025
(Unaudited)
(RMB in thousands)
Current
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111844,664 52,196 43,674 39,903 36,048
Interest-bearing other
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 124,000 – –
Financial liabilities at fair
value through profit or
loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,472,275 2,861,798 3,156,013 3,166,569 3,045,487
Subtotal /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,516,939 2,913,994 3,323,687 3,206,472 3,081,535
Non-current
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111882,866 54,144 26,516 20,996 16,107
Interest-bearing bank
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 121,204 163,394
Subtotal /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111882,886 54,144 26,516 142,200 179,501
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,599,805 2,968,138 3,350,203 3,348,672 3,261,036
Lease Liabilities
As of December 31, 2021, 2022 and 2023 and September 30, 2024, our lease liabilities,
including current and non-current portion, amounted to RMB127.5 million, RMB106.3 million,
RMB70.2 million and RMB60.9 million, respectively. For further information regarding our
lease liabilities, see note 14 to the Accountants’ Report in Appendix I to this document.
Interest-bearing Bank and Other Borrowings
As of December 31, 2021, 2022 and 2023 and September 30, 2024, our interest-bearing
other borrowings, which are discount notes issued by the Industrial and Commercial Bank of
China, amounted to nil, nil, RMB124.0 million and nil, respectively. Restricted cashes are
pledged to secure the borrowings. To the best of our knowledge, the lender does not have other
past or present relationships with us or our substantial shareholders, directors or senior
management, or any of their respective associates. As advised by our PRC Legal Advisor, these
borrowings fully complied with all applicable laws and regulations in the PRC.
FINANCIAL INFORMATION
– 361 –


--- page 372 ---
As of December 31, 2021, 2022 and 2023 and September 30, 2024, our interest-bearing
bank borrowings amounted to nil, nil, nil and RMB121.2 million, respectively. As of
September 30, 2024, our bank facilities amounted to RMB736.4 million, of which RMB128.0
million had been utilized with an effective interest rate of 3.01% per annum. All of these bank
facilities are guaranteed by our subsidiaries and secured by the construction in progress with
net carrying amounts of approximately RMB45.7 million, the leasehold land with net carrying
amounts of approximately RMB49.7 million and restricted cash with amounts of approximately
RMB20.0 million held by our subsidiaries. For further information regarding our interest-
bearing bank and other borrowings, see notes 29 and 37 to the Accountants’ Report in Appendix
I to this document.
Financial Liabilities at Fair Value through Profit or Loss
As of December 31, 2021, 2022 and 2023 and September 30, 2024, our financial
liabilities at fair value through profit or loss amounted to RMB2,472.3 million, RMB2,861.8
million, RMB3,156.0 million and RMB3,166.6 million, respectively. For further information
regarding our financial liabilities at fair value through profit or loss, see note 30 to the
Accountants’ Report in Appendix I to this document.
Contingent Liabilities or Guarantees
During the Track Record Period and up to the Latest Practicable Date, we did not have
any material contingent liabilities or guarantees.
No Other Outstanding Indebtedness
Except as disclosed above, as of January 15, 2025, being the latest practicable date for
determining our indebtedness, we did not have any outstanding mortgages, charges,
debentures, other issued debt capital, bank overdrafts, borrowings, liabilities under acceptance
or other similar indebtedness, hire purchase commitments, guarantees or other material
contingent liabilities.
As of January 15, 2025, we had RMB806.6 million unutilized banking facilities. For the
maturity analysis of our financial liabilities, please refer to note 42(c) to the Accountants’
Report in Appendix I to this document.
Our Directors confirm that there has not been any material change in our indebtedness
since January 15, 2025 up to the date of this Prospectus. Our Directors also confirm that as of
the Latest Practicable Date, there was no material covenant on any of our outstanding debt and
there was no breach of any covenant during the Track Record Period and up to the Latest
Practicable Date. Our Directors also confirm that we did not experience any difficulty in
obtaining bank loans and other borrowings, default in payment of bank loans and other
borrowings or breach of covenants during the Track Record Period and up to the Latest
Practicable Date.
FINANCIAL INFORMATION
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CAPITAL EXPENDITURES
Our capital expenditures are primarily incurred for purchases of property, plant and
equipment, purchases of other intangible assets, and purchases of right-of-use assets. Our
capital expenditures were RMB164.6 million, RMB199.1 million and RMB398.8 million in
2021, 2022 and 2023, respectively, and were RMB257.9 million and RMB333.7 million in the
nine months ended September 30, 2023 and 2024, respectively.
We have constructed a processing facility in Zhuji, Zhejiang. For the years ended
December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024, we
incurred capital expenditures related to the construction of the processing facility of nil,
RMB54.0 million, RMB190.4 million and RMB196.9 million, respectively.
We have also constructed a warehouse and are constructing an office building in Taizhou,
Zhejiang. For the years ended December 31, 2021, 2022 and 2023 and the nine months ended
September 30, 2024, we incurred capital expenditures related to the warehouse’s construction
of nil, RMB45.9 million, RMB96.5 million and RMB71.3 million, respectively. For the years
ended December 31, 2021, 2022 and 2023 and the nine months ended September 30, 2024, we
incurred capital expenditures related to the office building’s construction of nil, RMB25.1
million, RMB73.1 million and RMB51.0 million, respectively.
We intend to fund our future capital expenditures with our existing cash balance, cash
generated primarily from operating activities. See the section headed “Future Plans and Use of
Proceeds” for more details. We may reallocate the fund to be utilized on capital expenditures
and long-term investments based on our ongoing business needs.
CONTRACTUAL OBLIGATIONS
Capital Commitments
Our capital commitments during the Track Record Period were related to the capital
expenditures of property, plant and equipment contracted for but not provided in the historical
financial information. Our capital commitments increased from RMB11.9 million as of
December 31, 2021 to RMB266.0 million as of December 31, 2022, then decreased to
RMB183.1 million as of December 31, 2023 and RMB25.1 million as of September 30, 2024,
as a result of the ongoing construction and completion of our warehouses, processing facilities
and office building to support our business expansion.
FINANCIAL INFORMATION
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KEY FINANCIAL RATIOS
The following table sets forth certain of our key financial ratios for the periods indicated.
For the Y ear Ended December 31,
For the Nine Months
Ended September 30,
2021 2022 2023 2023 2024
(Unaudited)
Adjusted profit margin
(non-IFRS measure) (1) /H1118/H1118 17.6% 14.2% 19.0% 18.7% 17.8%
Adjusted EBITDA margin
(non-IFRS measure) (2) /H1118/H1118 24.3% 21.3% 24.7% 24.8% 22.0%
Notes:
(1) Adjusted profit margin (non-IFRS measure) represents adjusted profit (non-IFRS measure) as a percentage of
the revenue for such year/period.
(2) Adjusted EBITDA margin (non-IFRS measure) represents adjusted EBITDA (non-IFRS measure) as a
percentage of the revenue for such year/period.
Our adjusted profit margin (non-IRFS measure) and adjusted EBITDA margin (non-IFRS
measure) decreased in the nine months ended September 30, 2024 as compared to the same
period in 2023, primarily because (i) our gross profit margin for sales of goods and equipment
decreased as we maintained stable raw material supplies despite upstream price fluctuations in
2024; (ii) we incurred higher advertising and promoting fees in the nine months ended
September 30, 2024; and (iii) we increased our employee headcount from 2,373 as of
September 30, 2023 to 2,720 as of September 30, 2024.
OFF-BALANCE SHEET COMMITMENTS AND ARRANGEMENTS
We have not entered into any financial guarantees or other commitments to guarantee the
payment obligations of any third parties. We have not entered into any derivative contracts that
are indexed to our shares and classified as Shareholder’s equity or that are not reflected in our
consolidated financial statements. Furthermore, we do not have any retained or contingent
interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or
market risk support to such entity. We do not have any variable interest in any unconsolidated
entity that provides financing, liquidity, market risk or credit support to us or engages in
leasing, hedging or product development services with us.
FINANCIAL INFORMATION
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RELATED PARTY TRANSACTIONS
We enter into transactions with our related parties from time to time. For more details
about our related party transactions, see note 39 to the Accountants’ Report in Appendix I to
this document.
Our Directors are of the view that our transactions with related parties during the Track
Record Period were conducted on an arm’s length basis and with normal commercial terms
between the relevant parties. Our Directors are also of the view that our related party
transactions during the Track Record Period would not distort our results of operations or make
our historical results not reflective of our future performance.
FINANCIAL RISK DISCLOSURE
We are exposed to a variety of financial risks, including market risks (such as foreign
currency risk), credit risk and liquidity risk. Our overall risk management program focuses on
the unpredictability of financial markets and seeks to minimize potential adverse effects on our
financial performance. Our Board reviewed and agreed the following risk management
policies. See note 42 to the Accountants’ Report in Appendix I to this document for a detailed
description of our financial risk management.
Foreign Currency Risk
Foreign currency risk arises from recognized assets and liabilities denominated in a
currency other than the functional currency of our entities. We operate mainly in the PRC with
most of the transactions settled in Renminbi. We seek to limit our exposure to foreign currency
risk by minimizing our net foreign currency position. We consider that our business is not
exposed to any significant foreign exchange risk as there are no significant financial assets or
liabilities of ours are denominated in the currencies other than the respective functional
currencies of our entities, so that we do not hedge against any fluctuation in foreign currency.
Credit Risk
Credit risk mainly arises from cash and bank balances, trade receivables, long-term trade
receivables, contract assets and financial assets included in prepayments, other receivables and
other assets. The carrying amount of these financial assets represents our maximum exposure
to credit risk in relation to the corresponding class of financial assets. See note 42(b) to the
Accountants’ Report in Appendix I to this document for further information relating to our
credit risk.
Our cash and bank balances were deposited with high-credit-quality financial institutions
without significant credit risk. There has been no recent history of default in relation to these
financial institutions. The expected credit loss is not material.
FINANCIAL INFORMATION
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We maintain strict control over our outstanding trade receivables, long-term trade
receivables, and contract assets and has a credit control department to minimize credit risk. We
have policies in place to ensure that credit terms are made only to counterparties with an
appropriate credit history and perform ongoing credit evaluations of our counterparties. We
assess the credit quality of our counterparties by taking into account various factors including
their financial position, past operational and financial performance and forward-looking
factors. We also have other monitoring procedures to ensure that follow-up action is taken to
recover overdue trade receivables, long-term trade receivables, and contract assets. In addition,
we review regularly the recoverable amount of trade receivables, long-term trade receivables,
and contract assets to ensure that adequate impairment losses are made. As of December 31,
2021, 2022 and 2023 and September 30, 2024, the expected credit loss rate for trade
receivables, long-term trade receivables, and contract assets was assessed to be minimal.
We make periodic collective assessments for financial assets included in prepayments,
other receivables and other assets, as well as individual assessment on the recoverability of
other receivables based on historical settlement records and past experience. We also
continuously monitor their credit risk. There has been no recent history of default in relation
to such financial assets. The expected loss allowance was assessed to be minimal.
For the analysis of the credit quality and the maximum exposure to credit risk based on
our credit policy, see note 42(b) to the Accountants’ Report in Appendix I to this document.
Liquidity Risk
We monitor and maintain a level of cash and bank balances deemed adequate by our
management to finance the operations and mitigate the effects of fluctuations of cash flows.
For the analysis of our financial liabilities into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date, see note 42(c) to
the Accountants’ Report in Appendix I to this document.
DIVIDENDS
In January 2025, the Company passed a Board resolution and Shareholders resolution,
declaring a dividend of RMB1.74 billion based on the Company’s share premium and retained
profits from our subsidiaries as of September 30, 2024 to our existing Shareholders whose
names appeared in the register of members of the Company on December 31, 2024 (the
“Dividend ”). As of September 30, 2024, the total amount of our cash and bank balances and
financial assets at fair value through profit or loss was RMB3.3 billion. We will not apply any
proceeds from the Listing for settlement of the Dividend. RMB0.4 billion of the Dividend has
been paid in January 2025. We will settle the remaining RMB1.34 billion of the Dividend by
March 2026 with the funds received from the dividend declared by our subsidiaries and/or
other financial resources. We shall disclose details of the payment of the Dividend in the annual
reports after the Listing.
FINANCIAL INFORMATION
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The Company intends to declare and distribute by December 2025 a special dividend (the
“Special Dividend ”) in an amount of no less than RMB2 billion to our Shareholders (including
our new Shareholders after the Listing) based on our Company’s retained profits from our
subsidiaries as of December 31, 2024 and share premium included in capital reserve, upon
Special Dividend declaration. The Company will make announcements in due course after the
Listing in respect of the declaration and payment of the foregoing Special Dividend. The
Controlling Shareholders have undertaken to vote in favor of the Shareholders’ resolution for
the declaration and payment of such Special Dividend.
Save as disclosed above, we intend to adopt, before the Listing, a general dividend policy
of declaring and distributing dividends on an annual basis in an amount which is no less than
50% of our net profit generated in any fiscal year after the Listing after deducting any
significant capital expenditures or as otherwise authorized by the Board. For the avoidance of
doubt, the foregoing general dividend policy only applies to net profit generated in any fiscal
year after the Listing, i.e. for the year ending 31 December 2025 onwards. Other than the
foregoing Dividend declared in January 2025 and the Special Dividend, no further dividend
will be declared in 2025 in respect of our Company’s retained profits from the Company and/or
our subsidiaries as of December 31, 2024 or under the general dividend policy. Therefore, the
payment of the Dividend and the Special Dividend will not have any impact on the general
dividend policy. The decision on whether to declare dividends and the exact amount of any
such distributions in any year will be based upon our operations and earnings, cash flow,
financial condition, general business conditions and strategies, capital requirements, future
business prospects, statutory and contractual restrictions applying to the payment of dividends
and other factors that the Board may consider relevant, and subject to adjustment and
determination by the Board and compliance with the requirements under applicable laws and
regulations. As advised by our legal advisor on Cayman Islands law, Ogier, under the laws of
the Cayman Islands, dividends may be declared and paid out of our profits or share premium
account, provided that immediately following the date on which the distribution or dividend is
proposed to be paid, our Company shall be able to pay its debts as they fall due in the ordinary
course of business.
We are a holding company incorporated under the laws of the Cayman Islands. As a result,
the payment and amount of any future dividends will also depend on the availability of
dividends received from our subsidiaries. PRC laws require that dividends shall be paid only
out of the accumulated after-tax profits, if any, determined following PRC accounting
standards and regulations. In addition, enterprises in China are required to allocate at least 10%
of their respective after-tax profits each year, if any, to fund certain reserve funds until these
reserves have reached 50% of the registered capital of the enterprises. Dividend distribution to
our shareholders is recognized in a period in which the dividends are approved by our
Shareholders or Directors, where appropriate.
FINANCIAL INFORMATION
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WORKING CAPITAL SUFFICIENCY
Taking into account the financial resources available to us, including our cash and cash
equivalents on hand and the estimated net proceeds from the Global Offering, our Directors are
of the view that we have sufficient working capital to meet our present needs and for the next
twelve months from the date of this document. On the basis of the independent due diligence
undertaken, the Joint Sponsors concur with the aforementioned views of our Directors. Our
Directors confirm that we had no material defaults on trade and non-trade payables and
borrowings, nor did we breach any covenants during the Track Record Period and up to the date
of this document.
DISTRIBUTABLE RESERVES
As of September 30, 2024, the Company did not have distributable reserves available for
distribution to its shareholders.
LISTING EXPENSE
Based on the mid-point Offer Price of HK$9.31, the total estimated listing expenses in
relation to the Global Offering is approximately RMB111.2 million, or approximately 8.2% of
the gross proceeds, assuming the Offer Size Adjustment Option and the Over-allotment Option
are not exercised. We estimate that the listing expenses will consist of approximately RMB67.0
million in underwriting fees and RMB44.2 million in non-underwriting fees. During the Track
Record Period, the listing expenses charged to consolidated statement of profit or loss and
comprehensive income were RMB33.4 million. We estimate that we will incur listing expenses
of RMB77.8 million, of which RMB24.2 million will be charged to our consolidated statement
of profit or loss and comprehensive income. The balance of approximately RMB53.6 million,
which mainly includes underwriting commission, is expected to be accounted for as a
deduction from equity upon the completion of the Global Offering.
UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible assets
of our Group prepared in accordance with Rule 4.29 of the Listing Rules is set out below to
illustrate the effect of the Global Offering on the consolidated net tangible assets of our Group
attributable to the owners of our Company as of September 30, 2024 as if the Global Offering
had taken place on that date.
FINANCIAL INFORMATION
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This unaudited pro forma statement of adjusted consolidated net tangible assets has been
prepared for illustrative purposes only and because of its hypothetical nature, it may not give
a true picture of the consolidated net tangible assets of our Group attributable to the owners
of our Company as of September 30, 2024 or at any future dates following the Global Offering.
Consolidated net
tangible assets of
our Group
attributable to
owners of our
Company as of
September 30,
2024
Estimated net
proceeds from
the Global
Offering
Estimated impact
to the consolidated
net tangible assets
of our Group
attributable to
owners of our
Company upon
conversion of
convertible
redeemable
preferred shares
Unaudited pro
forma adjusted
consolidated net
tangible assets of
our Group
attributable to
owners of our
Company as of
September 30,
2024
Unaudited pro forma
adjusted consolidated net
tangible assets of our Group
attributable to owners of
our Company per share as
of September 30, 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
(Note 1) (Note 2) (Note 3) (Note 4) (Note 5)
Based on an
Offer Price
of HK$8.68
per Share /H1118/H1118/H11181,680,943 1,193,112 3,166,569 6,040,624 2.59 2.81
Based on an
Offer Price
of HK$9.94
per Share /H1118/H1118/H11181,680,943 1,369,690 3,166,569 6,217,202 2.67 2.90
Notes:
(1) The consolidated net tangible assets of our Group attributable to owners of our Company as of September 30,
2024 is based on consolidated net assets of our Group attributable to owners of our Company as of September
30, 2024 of approximately RMB1,681,849,000, after netting off other intangible assets of our Group as at
September 30, 2024 of approximately RMB906,000 as shown in the Accountants’ Report set out in Appendix
I to this document.
(2) The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$8.68 and
HK$9.94 per Share, being the low and high end of the indicative Offer Price range, respectively, after
deduction of underwriting fees and other listing related expenses payable by our Company (excluding listing
expenses which have been recognized in profit or loss during the Track Record Period) and do not take into
account any share which may be sold and offered upon exercise of the Offer Size Adjustment Option and the
Over-allotment Option.
(3) Upon the Listing and the completion of the Global Offering, all the preferred shares will be automatically
converted into ordinary shares of our Company. The convertible redeemable preferred shares will then be
transferred from liabilities to equity. Accordingly, for the purpose of the unaudited pro forma statement of
adjusted consolidated net tangible assets, had the conversion of preferred shares into ordinary shares of our
Company been completed as of September 30, 2024, the unaudited pro forma adjusted consolidated net
tangible assets of our Group attributable to owners of our Company will be increased by RMB3,166,569,000,
being the carrying amounts of the preferred shares as of September 30, 2024.
(4) The unaudited pro forma adjusted consolidated net tangible assets of our Group attributable to owners of our
Company per Share is arrived at after adjustments referred to notes 2 and 3 above and on the basis that
2,332,525,060 shares are in issue, assuming that the conversion of preferred shares into ordinary shares of our
Company, the issuance of shares under equity-settled share-based payment plan and the Global Offering had
been completed on September 30, 2024, without taking into account of any shares which may be allotted and
issued upon the exercise of the Offer Size Adjustment Option and the Over-allotment Option.
FINANCIAL INFORMATION
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(5) For the purpose of this unaudited pro forma statement of adjusted consolidated net tangible assets, the balances
stated in Renminbi are converted into Hong Kong dollars at an exchange rate of HK$1 to RMB0.9204. No
representation is made that the Hong Kong dollar amounts have been, could have been or may be converted
to Renminbi, or vice versa, at that rate or any other rates or at all.
(6) No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of our
Group to reflect any trading results or other transactions for our Group entered into subsequent to
September 30, 2024.
(7) The unaudited pro forma adjusted consolidated net tangible assets of our Group attributable to owners of our
Company as shown in Appendix II to this document have not been adjusted to illustrate the effect of the
following:
In January 2025, our Company declared a dividend of RMB1.74 billion to the existing shareholders prior to
the Listing based on our Company’s share premium and retained profits from our subsidiaries as of September
30, 2024. Had the payment of the declared dividend been made on September 30, 2024, the unaudited pro
forma adjusted consolidated net tangible assets of our Group would decrease from RMB6,040,624,000 to
RMB4,300,624,000 based on Offer Price of HK$8.68 per Share, or from RMB6,217,202,000 to
RMB4,477,202,000 based on Offer Price of HK$9.94 per Share. Had the Global Offering and the dividend
declaration been taken into account, the unaudited pro forma adjusted consolidated net tangible assets of our
Group attributable to owners of our Company as at September 30, 2024 per Share would be RMB1.84
(equivalent to HK$2.00) based on an Offer Price of HK$8.68 per Share and RMB1.92 (equivalent to HK$2.09)
based on an Offer Price of HK$9.94 per Share, respectively, on the basis that a total of 2,332,525,060 shares
were in issue assuming that the Global Offering had been completed on September 30, 2024. These amounts
are converted from Renminbi to Hong Kong dollars or Hong Kong dollars to Renminbi at an exchange rate
of HK$1 to RMB0.9204. No representation is made that Renminbi/Hong Kong dollars amount have been,
could have been or may be converted to Hong Kong dollars/Renminbi at that rate or at all. After the Listing,
our Company intends to declare and distribute a special dividend in an amount of no less than RMB2 billion
to our shareholders, which has not been taken into account in the calculation of the unaudited pro forma
adjusted consolidated net tangible assets of our Group attributable to owners of our Company as of September
30, 2024.
PROFIT ESTIMATE FOR THE YEAR ENDED DECEMBER 31, 2024
On the basis set out in Appendix IIA to this prospectus, and in the absence of unforeseen
circumstances, we estimate that our unaudited consolidated profit attributable to owners of our
Company for the year ended December 31, 2024 is as follows:
Estimated consolidated profit attributable
to owners of our Company /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Not less than RMB1.4 billion
NO MATERIAL ADVERSE CHANGE
Our Directors have confirmed that, up to the date of this document, there has been no
material adverse change in our financial or trading position or prospects since September 30,
2024, being the end date of our latest audited consolidated financial statements, and there has
been no event since September 30, 2024 that would materially affect the information shown in
the Accountants’ Report set out in Appendix I to this document.
DISCLOSURE UNDER RULES 13.13 TO 13.19 OF THE LISTING RULES
Our Directors confirm that, as of the Latest Practicable Date, there was no circumstance
that would give rise to a disclosure requirement under Rules 13.13 to 13.19 of the Listing
Rules.
FINANCIAL INFORMATION
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OVERVIEW
We have entered into cornerstone investment agreements (the “ Cornerstone Investment
Agreement(s) ”) with the cornerstone investors set out below (“ Cornerstone Investor(s) ”),
pursuant to which the Cornerstone Investors have agreed to, subject to certain conditions,
subscribe, or cause their designated entities to subscribe, for such number of Offer Shares
(rounded down to the nearest whole board lot of 400 Shares) that may be purchased at the Offer
Price of an aggregate amount of up to approximately US$71.0 million (or approximately
HK$553.1 million, based on the exchange rate set out in the section headed “Information about
this document and the Global Offering — Exchange Rate Conversion”) and exclusive of
brokerage, the SFC transaction levy, the AFRC transaction levy and the Stock Exchange
trading fee (each a “ Cornerstone Investment ” and collectively, the “ Cornerstone Placing ”).
We believe that the Cornerstone Placing demonstrates our Cornerstone Investors’
confidence in our Company and its business prospect, and that the Cornerstone Placing will
help to raise the profile of our Company. Our Company became acquainted with each of the
Cornerstone Investors in its ordinary course of business through the Group’s business network
or through introduction by our Company’s business partners/the Overall Coordinators in the
Global Offering.
The Cornerstone Placing will form part of the International Offering, and save as
otherwise consented to by the Stock Exchange in accordance with Chapter 4.15 of the Guide
for New Listing Applicants, the Cornerstone Investors and their respective close associates will
not acquire any Offer Shares under the Global Offering (other than pursuant to the Cornerstone
Investment Agreements). The Offer Shares to be acquired by the Cornerstone Investors will
rank pari passu in all respects with the fully paid Shares in issue following the Global Offering
of the Company and will be counted towards the public float of our Company under Rule 8.08
of the Listing Rules.
Other than a guaranteed allocation of the relevant Offer Shares at the final Offer Price,
the Cornerstone Investors do not have any preferential rights under each of their Cornerstone
Investment Agreements, as compared with other public Shareholders. There are no side
arrangements or agreements between our Company and the Cornerstone Investors or any
benefit, direct or indirect, conferred on the Cornerstone Investors by virtue of or in relation to
the Cornerstone Placing, other than a guaranteed allocation of the relevant Offer Shares at the
final Offer Price, following the principles as set out in Chapter 4.15 of the Guide for New
Listing Applicants.
As confirmed by each of the Cornerstone Investors, their subscription under the
Cornerstone Placing would be financed by their own internal financial resources and they have
sufficient funds to settle the respective investment under the Cornerstone Placing. Each of the
Cornerstone Investors has confirmed that all necessary approvals have been obtained with
respect to the Cornerstone Placing and that no specific approval from any stock exchange (if
relevant) is required for the relevant Cornerstone Placing.
CORNERSTONE INVESTORS
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The Cornerstone Investors have agreed to fully pay for the relevant Offer Shares that they
have subscribed before dealings in the Company’s Shares commence on the Stock Exchange.
There will be no delayed delivery of the Offer Shares and no deferred settlement of payment
of the investment amounts for each Cornerstone Investor under the Cornerstone Investment
Agreements.
The Offer Shares to be subscribed by the Cornerstone Investors will not be affected by
reallocation of the Offer Shares between the International Offering and the Hong Kong Public
Offering pursuant to Practice Note 18 of the Listing Rules. Details of the actual number of
Offer Shares to be allocated to the Cornerstone Investors will be disclosed in the allotment
results announcement to be issued by us on or around Tuesday, February 11, 2025.
CORNERSTONE INVESTORS
Based on the information provided by the Cornerstone Investors in connection with the
Cornerstone Placing, our Cornerstone Investors are as follows:
1. Huang River Investment Limited
Huang River Investment Limited is wholly owned by Tencent Holdings Limited
(“Tencent ”), a company listed on the Stock Exchange of Hong Kong (stock code: 00700 (HKD
Counter) and 80700 (RMB Counter)). Tencent is principally engaged in the provision of
communication, social, digital content, games, marketing, fintech and business services in the
PRC.
2. GM Charm Yield (BVI) Limited
GM Charm Yield (BVI) Limited is a company incorporated in the British Virgin Islands,
which is wholly owned by Genesis Capital III LP , whose general partner is Genesis Capital III
Ltd. Genesis Capital III Ltd is wholly-owned by Y uan Capital III Ltd, which is wholly-owned
by Mr. Zhijian Peng. The ultimate beneficial owner of Genesis Capital III LP holding 30% or
more of its interest is a global institutional investor and not an individual shareholder. Other
than the aforesaid limited partner holding 30% or more of its interest, no other limited partners
holds more than 30% of the partnership interest of Genesis Capital III LP .
3. LVC
LVC is a private equity firm that mainly focuses on the following segments: consumer
(media, entertainment and education), healthcare and advanced manufacturing. LVC is
ultimately controlled by Lijun Lin and has investments in, without limitation, NetEase Cloud
Music Inc. (SEHK: 9899), Bilibili Inc. (SEHK: 9626; Nasdaq: BILI), and Pop Mart
International Group Limited (SEHK: 9992). LVC will subscribe for the Offer Shares through
Golden V alley Global Limited and Golden V alley V alue Select Master Fund, each an
investment vehicle of LVC. Golden V alley Global Limited is a business company established
by LVC in 2016 and none of the remaining shareholders of Golden V alley Global Limited holds
30% or more of the equity interest therein. Golden V alley V alue Select Master Fund is a mutual
fund established by LVC in 2022.
CORNERSTONE INVESTORS
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4. Long-Z Fund I, LP
Long-Z Fund I, LP , a limited partnership incorporated in the Cayman Islands, is an
investment fund that mainly focuses on investing in growth-stage companies in the consumer
and technology industries in the PRC, Hong Kong, Macau, Taiwan and companies with
significant ties to these jurisdictions. Long-Z GP I Limited is the general partner of Long-Z
Fund I, LP , which is ultimately controlled by Mr. Y onghua Zhu.
5. Duckling Fund, L.P.
Duckling Fund, L.P ., an exempted limited partnership registered under the laws of
Cayman Islands, whose general partner is Grandiflora Hook GP Limited and ultimately
controlled by Mr. Eric Li. The only limited partner of Duckling Fund, L.P . is Lionet Fund, L.P .,
which is a fund focusing on logistics, healthcare, telecommunication, media, technology and
consumer industries investment. The general partner of Lionet Fund, L.P . is Grandiflora Hook
GP Limited. Lionet Fund, L.P . has more than 15 limited partners, none of which holds more
than 30% of the interest in Lionet Fund, L.P .
Long-Z Fund I, LP is a close associate of Beijing Meiming Enterprise Management
Consulting Partnership (Limited Partnership) and Beijing Meiyan Enterprise Management
Consulting Partnership (Limited Partnership) (together, “ Long-Z Shareholders ”), two existing
Shareholders that collectively hold approximately 8.00% and 7.46% of our total issued Shares
as at the Latest Practicable Date and immediately following the Global Offering (assuming the
Offer Size Adjustment Option and the Over-allotment Option are not exercised), respectively
(excluding any Shares that may be subscribed by Long-Z Fund I, LP under the Global
Offering). Long-Z Fund I, LP and the Long-Z Shareholders are ultimately controlled by Mr.
Y onghua Zhu.
Pursuant to an anti-dilution right granted by our Company to the Pre-IPO Shareholders
under the shareholders agreement of our Company on December 26, 2023, the Long-Z
Shareholders or their affiliates (which includes Long-Z Fund I, LP) may subscribe for Offer
Shares under the Global Offering at the Offer Price up to the pro-rata ratio, being the ratio of
(i) the aggregate number of ordinary shares held by the Long-Z Shareholders to (ii) the total
number of ordinary shares then outstanding immediately prior to the closing of the Global
Offering, each calculated on an as-converted and fully-diluted basis (“ Long-Z Anti-dilution
Option ”). For more information, see the section headed “History, Reorganization and
Corporate Structure — Pre-IPO Investments — Special Rights of the Pre-IPO Investors”.
Long-Z Fund I, LP intends to subscribe for Offer Shares at the Offer Price pursuant to the
Long-Z Anti-dilution Option (“ Long-Z Anti-dilution Exercise ”)
We have applied for, and the Stock Exchange has granted, a waiver from strict compliance
with the requirements under Rule 10.04 of, and consent under Paragraph 5(2) of Appendix F1
to, the Listing Rules in relation to the Long-Z Anti-dilution Exercise. Please refer to the section
headed “Waivers and Exemptions — Cornerstone Subscription by a Close Associate of an
Existing Shareholder” for further details.
CORNERSTONE INVESTORS
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Upon Listing, none of the Cornerstone Investors or their close associates will, by virtue
of their cornerstone investments, have any Board representation in our Company; and none of
the Cornerstone Investors and their close associates will hold 10% or more of the total issued
Shares.
Other than as disclosed above with respect to Long-Z Fund I, LP , to the best knowledge
of our Company, each of the Cornerstone Investors is: (i) an Independent Third Party and not
a connected person of the Company; (ii) independent of other Cornerstone Investors; (iii) not
accustomed to take instructions from us, our Directors, chief executive, Controlling
Shareholders, substantial shareholders, existing Shareholders or any of our subsidiaries or their
respective close associates in relation to the acquisition, disposal, voting or other disposition
of the Shares; and (iv) not financed by us, our Directors, chief executive, Controlling
Shareholders, substantial shareholders, existing Shareholders or any of our subsidiaries or their
respective close associates.
CORNERSTONE PLACING
Based on the Offer Price of HK$8.68 per Offer Share, being the low-end of the indicative
Offer Price range, the total number of Offer Shares to be subscribed for by the Cornerstone
Investors would be 63,722,000, representing approximately 40.17% of the Offer Shares
pursuant to the Global Offering and approximately 2.73% of our total issued share capital
immediately upon completion of the Global Offering (assuming the Offer Size Adjustment
Option and the Over-allotment Option are not exercised).
The table sets out the details of the Cornerstone Placing, based on a final Offer Price of
HK$8.68 per Share (being the low-end of the indicative Offer Price range) and assuming the
Offer Size Adjustment Option is not exercised:
Cornerstone Investor
Subscription
amount
Number of
Offer Shares
to be
acquired (1)
Assuming the
Over-Allotment Option is
not exercised
Assuming the
Over-Allotment Option is
fully exercised
(US$ in
millions)
%o ft h e
Offer Shares
%o ft h e
issued share
capital (2)
%o ft h e
Offer Shares
%o ft h e
issued share
capital (2)
Huang River
Investment Limited /H1118 25.0 22,437,200 14.15% 0.96% 12.30% 0.95%
GM Charm Yield
(BVI) Limited /H1118/H1118/H1118/H1118 15.0 13,462,400 8.49% 0.58% 7.38% 0.57%
LVC /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815.0 13,462,400 8.49% 0.58% 7.38% 0.57%
– Golden V alley Global
Limited /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187.5 6,731,200 4.24% 0.29% 3.69% 0.29%
– Golden V alley V alue
Select Master Fund /H1118 7.5 6,731,200 4.24% 0.29% 3.69% 0.29%
Long-Z Fund I, LP /H1118/H1118 8.0 7,180,000 4.53% 0.31% 3.94% 0.30%
Duckling Fund, L.P. /H1118/H1118 8.0 7,180,000 4.53% 0.31% 3.94% 0.30%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111871.0 63,722,000 40.17% 2.73% 34.93% 2.70%
CORNERSTONE INVESTORS
– 374 –


--- page 385 ---
Based on the Offer Price of HK$9.31 per Offer Share, being the mid-point of the
indicative Offer Price range, the total number of Offer Shares to be subscribed for by the
Cornerstone Investors would be 59,409,200, representing approximately 37.46% of the Offer
Shares pursuant to the Global Offering and approximately 2.55% of our total issued share
capital immediately upon completion of the Global Offering (assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised).
The table sets out the details of the Cornerstone Placing, based on a final Offer Price of
HK$9.31 per Share (being the mid-point of the indicative Offer Price range) and assuming the
Offer Size Adjustment Option is not exercised:
Cornerstone Investor
Subscription
amount
Number of
Offer Shares
to be
acquired (1)
Assuming the
Over-Allotment Option is
not exercised
Assuming the
Over-Allotment Option is
fully exercised
(US$ in
millions)
%o ft h e
Offer Shares
%o ft h e
issued share
capital (2)
%o ft h e
Offer Shares
%o ft h e
issued share
capital (2)
Huang River
Investment Limited /H1118 25.0 20,918,800 13.19% 0.90% 11.47% 0.89%
GM Charm Yield
(BVI) Limited /H1118/H1118/H1118/H1118 15.0 12,551,200 7.91% 0.54% 6.88% 0.53%
LVC /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815.0 12,551,200 7.91% 0.54% 6.88% 0.53%
– Golden V alley Global
Limited /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187.5 6,275,600 3.96% 0.27% 3.44% 0.27%
– Golden V alley V alue
Select Master Fund /H1118 7.5 6,275,600 3.96% 0.27% 3.44% 0.27%
Long-Z Fund I, LP /H1118/H1118 8.0 6,694,000 4.22% 0.29% 3.67% 0.28%
Duckling Fund, L.P. /H1118/H1118 8.0 6,694,000 4.22% 0.29% 3.67% 0.28%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111871.0 59,409,200 37.46% 2.55% 32.57% 2.52%
Based on the Offer Price of HK$9.94 per Offer Share, being the high-end of the indicative
Offer Price range, the total number of Offer Shares to be subscribed for by the Cornerstone
Investors would be 55,643,200, representing approximately 35.08% of the Offer Shares
pursuant to the Global Offering and approximately 2.39% of our total issued share capital
immediately upon completion of the Global Offering (assuming the Offer Size Adjustment
Option and the Over-allotment Option are not exercised).
CORNERSTONE INVESTORS
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The table sets out the details of the Cornerstone Placing, based on a final Offer Price of
HK$9.94 per Share (being the high-end of the indicative Offer Price range) and assuming the
Offer Size Adjustment Option is not exercised:
Cornerstone Investor
Subscription
amount
Number of
Offer Shares
to be
acquired (1)
Assuming the
Over-Allotment Option is
not exercised
Assuming the
Over-Allotment Option is
fully exercised
(US$ in
millions)
%o ft h e
Offer Shares
%o ft h e
issued share
capital (2)
%o ft h e
Offer Shares
%o ft h e
issued share
capital (2)
Huang River
Investment Limited /H1118 25.0 19,593,200 12.35% 0.84% 10.74% 0.83%
GM Charm Yield
(BVI) Limited /H1118/H1118/H1118/H1118 15.0 11,755,600 7.41% 0.50% 6.44% 0.50%
LVC /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815.0 11,755,200 7.41% 0.50% 6.44% 0.50%
– Golden V alley Global
Limited /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187.5 5,877,600 3.71% 0.25% 3.22% 0.25%
– Golden V alley V alue
Select Master Fund /H1118 7.5 5,877,600 3.71% 0.25% 3.22% 0.25%
Long-Z Fund I, LP /H1118/H1118 8.0 6,269,600 3.95% 0.27% 3.44% 0.27%
Duckling Fund, L.P. /H1118/H1118 8.0 6,269,600 3.95% 0.27% 3.44% 0.27%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111871.0 55,643,200 35.08% 2.39% 30.51% 2.36%
Notes:
(1) Subject to rounding down to the nearest whole board lot of 400 Offer Shares. Calculated based on the exchange
rate set out in the section headed “Information about this document and the Global Offering — Exchange Rate
Conversion”.
(2) Immediately upon completion of the Global Offering.
(3) Percentages in the above tables are approximations and subject to rounding.
CLOSING CONDITIONS
The obligation of the Cornerstone Investors to subscribe for the Offer Shares under their
Cornerstone Investment Agreements is subject to, among other things, the following closing
conditions:
(a) the Underwriting Agreements for the Hong Kong Public Offering and the
International Offering being entered into and having become effective and
unconditional (in accordance with their respective original terms or as subsequently
waived or varied by agreement of the parties thereto) by no later than the time and
date as specified in the Underwriting Agreements, and neither of the aforesaid
Underwriting Agreements having been terminated;
CORNERSTONE INVESTORS
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--- page 387 ---
(b) the Offer Price having been agreed according to Underwriting Agreements and Price
Determination Agreement among the parties thereto in connection with the Global
Offering;
(c) the Listing Committee of the Stock Exchange having granted the approval for the
listing of, and permission to deal in, the Shares (including the Shares to be
subscribed for by the Cornerstone Investors in the International Offering as well as
other applicable waivers and approvals) and such approval, permission or waiver
having not been revoked prior to the commencement of dealings in the Shares on the
Stock Exchange;
(d) no laws shall have been enacted or promulgated by any applicable governmental
authority which prohibits the consummation of the transactions contemplated in the
Global Offering or in the respective Cornerstone Investment Agreement and there
shall be no orders or injunctions from a court of competent jurisdiction in effect
precluding or prohibiting consummation of such transactions; and
(e) the respective representations, acknowledgements, warranties, undertakings and
confirmations of the Cornerstone Investor under their Cornerstone Investment
Agreement are (as of the date of the Cornerstone Investment Agreement) and will be
(as of the Listing Date) accurate, true and complete in all respects and not
misleading or deceptive and that there is no material breach of the Cornerstone
Investment Agreement on the part of the relevant Cornerstone Investor.
RESTRICTIONS ON THE CORNERSTONE INVESTORS
Each Cornerstone Investor has agreed that it will not, whether directly or indirectly, at any
time during the period of six months from the Listing Date (the “ Lock-up Period ”), dispose
of, in any way, any of the Offer Shares or any interest in any company or entity holding such
Offer Shares that it has purchased pursuant to the Cornerstone Investment Agreement, save for
certain limited circumstances, such as transfers to any of its wholly-owned subsidiaries who
will be bound by the same obligations of such Cornerstone Investor, including the Lock-up
Period restriction.
CORNERSTONE INVESTORS
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FUTURE PLANS
For a detailed description of our future plans, see “Business — Our Growth Strategies.”
USE OF PROCEEDS
We estimate that we will receive net proceeds from the Global Offering of approximately
HK$1,356 million based on an Offer Price of HK$9.31 per Offer Share (being the mid-point
of the indicative Offer Price range) and assuming no exercise of the Offer Size Adjustment
Option and the Over-allotment Option, or HK$1,813 million if the Offer Size Adjustment
Option and the Over-allotment Option were exercised in full, after deducting underwriting fees
and commissions and other estimated offering expenses paid and payable by us in relation to
the Global Offering.
In the past few years, China’s freshly-made beverage sector has experienced rapid
growth, a trend projected to persist. According to the CIC Report, the GMV of China’s
freshly-made beverage market increased from RMB187.8 billion in 2018 to RMB517.5 billion
in 2023, representing a CAGR of 22.5%. The market GMV is expected to reach RMB1,163.4
billion in 2028, with an anticipated CAGR of 16.7% from 2024 to 2028. The market for
freshly-made beverages in China is burgeoning, exhibiting ample room for growth when
compared to more mature markets. In light of this significant market opportunity, we believe
our business model and competitive strengths make us well-positioned to capitalize on the
fast-growing freshly-made beverage market in China, with our established brand awareness
contributing to drive long-term growth. We had a market share of 4.8% in China’s freshly-made
beverage store market in terms of GMV in 2023. We will strive to maintain or increase our
market share in the future, as we continually and steadily expand our store network. In
addition, we operate in the mid-priced freshly-made tea stores segment and focus on
second-tier and below cities, which are expected to be the fastest-growing markets in the
industry. We expect to grasp the growth opportunity. As of September 30, 2024, we had
presence in 17 provinces in China where we will continue to increase our store density, which,
along with another 17 provinces where we had yet to have presence, provide us with ample
room for growth. In particular, in 2023, the provinces in mainland China where we had not
established a critical mass collectively accounted for 48% of the overall freshly-made tea store
market. We will both deepen our penetration in the existing provinces and expand our presence
to other provinces in China as well as other countries in the future. In line with our strategies,
we plan to use the net proceeds from the Global Offering for the purposes and in the amounts
set forth below:
 approximately 25% of the net proceeds, or approximately HK$339 million, will
be used to strengthen our information technology team and continue to
digitalize our business management and store operations. For more details, see
“Business — Our Growth Strategies — Enhance Our Technologies to Improve
Operating Efficiency.” In particular,
/H11568approximately 15% of the net proceeds, or approximately HK$203 million,
will be used to recruit additional talents with expertise in information
technology, including software engineers, data engineers, website and mini
program developers, among others, to strengthen various aspects of our
FUTURE PLANS AND USE OF PROCEEDS
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--- page 389 ---
information technology system and support the continual improvement of our
store management software. We expect to develop proprietary softwares to
substitute certain third-party softwares that we currently use, such as those
related to financial recording, and tailor our softwares for our unique business
needs. As our business grows in scale and diversifies in offering (e.g. increases
our offering of coffee beverages), we may encounter issues that require more
sophisticated software and expect to hire additional talents to identify these
issues and upgrade our systems. Specifically, in the next four years, we expect
to recruit approximately 248 additional technology specialists responsible for
developing, testing and administering our various information technology
systems and applications, approximately 84 additional IT talents dedicated to
the research, development and maintenance of our store systems, and
approximately 68 additional software development and data engineers. We
expect to hire people with bachelor’s or more advanced degrees in relevant
field such as computer science and automation, and relevant work experiences
for at least five years;
The following table sets forth details of the timeframe for recruiting additional
IT talents in the next four years and the number of staff to be recruited for each
role, which are subject to changes based on our actual needs and market
conditions at the relevant time.
For the year ended December 31,
2025 2026 2027 2028 Total
Role Number of staff to be recruited
Technology specialists
responsible for
developing, testing and
administering our
various IT systems and
applications /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111862 62 62 62 248
IT talents dedicated to the
research, development
and maintenance of our
store system /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111821 21 21 21 84
Software development
and data engineers /H1118/H1118/H1118/H111817 17 17 17 68
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118100 100 100 100 400
FUTURE PLANS AND USE OF PROCEEDS
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/H11568approximately 5% of the net proceeds, or approximately HK$68 million, will
be used to strengthen our technologies related to business management and
intelligent decision-making. Through purchasing technology infrastructure
services, such as cloud services, and investing in our own research and
development, we will enhance our technologies to continue to digitalize and
automate our business management system, enabling more efficient
coordination within our internal teams and between us and our franchisees or
other business partners. For example, we plan to maintain and upgrade our
cloud server facilities, accounting management software, expense control
system and other third-party software systems. In addition, we will continue to
maintain and strengthen our business intelligence tools to further optimize our
operations; and
/H11568approximately 5% of the net proceeds, or approximately HK$68 million, will
be used to upgrade our store systems which integrate software and connected
appliances and further automate our store operations. We plan to invest in
upgrading our various connected appliances, including defrosting machine, tea
brewers, juice dispensers and other electronic appliances. We will also
continue to improve the software modules we provide to our stores, including
order processing module and ingredient expiration management module,
among others, to improve store operation efficiency. At the same time, we will
enhance the IoT capabilities of our store systems to improve the
communication efficiency between our franchised stores and us. We will also
continue to optimize our stores’ services, for example, by improving our mini
programs to achieve easier order placement.
 approximately 25% of the net proceeds, or approximately HK$339 million, will
be used to enhance our supply chain capabilities and improve our supply chain
management efficiency. For more details, see “Business — Our Growth
Strategies — Enhance Our Supply Chain Capabilities.” In particular,
/H11568approximately 15% of the net proceeds, or approximately HK$203 million,
will be used to invest in warehouses and processing facilities. To support our
store network expansion and ensure that we provide consistent, fresh and
high-quality ingredients to our stores, we expect to extend our warehousing
infrastructure by operating new warehouses, with cold storage capabilities, in
provinces where we plan to have dense store networks in the next three to five
years. Specifically, in the next four years, we plan to build approximately 27
new warehouses and purchase related warehousing facilities. We intend to
invest in both our existing and new processing facilities. We recently
completed the construction of a new processing facility in Zhuji, Zhejiang
although certain fees are not yet fully settled. We will also upgrade and expand
our existing facilities, including investing in their ripening and cold pressing
FUTURE PLANS AND USE OF PROCEEDS
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--- page 391 ---
equipment, among others. We also intend to invest in intelligent equipment and
software for our warehouses, which will support automatic storage, packaging,
inventory management and information tracking, to enhance our warehouse
operating efficiency.
The following table sets forth details of the timeframe for our expected
expansion of warehouses and processing facilities, and investments by the net
proceeds in the next four years, which are subject to changes based on our
actual needs and market conditions at the relevant time.
For the year ended December 31,
Total
Approximate
percentage
of net
proceeds2025 2026 2027 2028
Number of new warehouses to
be constructed /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183789 2 7
Related facilities and equipment to be
constructed/purchased
Cold storage facilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183789 2 7
Warehouse racking systems /H1118/H1118/H1118/H1118/H1118/H1118/H11183789 2 7
Forklifts and lift trucks /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815 35 40 45 135
Trays /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118570 1,330 1,520 1,710 5,130
Total investment in warehouses by the
net proceeds (HK$ in millions) /H1118/H1118/H1118 15 35 40 45 136 10%
Construction of new processing facility
in Zhuji, Zhejiang (HK$ in millions) /H1118 2 4––– 2 4
Ongoing upgrade and expansion
of existing facilities (HK$ in
millions) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184444 1 6
Total investment in processing
facilities by the net proceeds (HK$
in millions) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182 8444 4 1 3 %
Total investment in automatic
warehouse management by the net
proceeds (HK$ in millions) /H1118/H1118/H1118/H1118/H1118/H11187777 2 7 2 %
Total investment by the net proceeds
(HK$ in millions) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111850 46 51 56 203 15%
FUTURE PLANS AND USE OF PROCEEDS
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/H11568approximately 5% of the net proceeds, or approximately HK$68 million, will
be used to invest in our freight vehicles and vehicle management systems. In
connection with the expanding warehousing infrastructure, we expect to
strengthen our logistics infrastructure by increasing and upgrading our freight
vehicles. In the next four years, we expect to purchase approximately 405
additional freight vehicles (approximately 15 additional vehicles per new
warehouse). We also intend to strengthen our proprietary transportation
management module which uses advanced algorithms to optimize delivery
routes, thereby reducing our logistics cost and improving our logistics
efficiency; and
The following table sets forth details of the timeframe for purchasing
additional freight vehicles in the next four years and the number and types of
freight vehicles to be procured, which are subject to changes based on our
actual needs and market conditions at the relevant time.
For the year ended December 31,
2025 2026 2027 2028 Total
Types of freight
vehicles /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Number of additional freight vehicles to be procured
Large-sized freight
vehicles /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111892 12 42 78 1
Small-to-medium-sized
freight vehicles /H1118/H1118/H1118/H1118/H1118/H111836 84 96 108 324
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111845 105 120 135 405
/H11568approximately 5% of the net proceeds, or approximately HK$68 million, will
be used to recruit additional employees to manage or operate the expanded
warehousing and logistics infrastructure, which will further strengthen our
supply chain capabilities. Specifically, in the next four years, we expect to
recruit approximately 216 additional warehouse management personnel
(approximately 8 additional personnel per new warehouse) and approximately
324 logistics personnel (approximately 12 additional personnel per new
warehouse). We expect to hire people with bachelor’s or more advanced
degrees in relevant fields such as logistics and supply chain management, and
relevant work experiences in logistics and the management of warehouses with
cold-chain storage capabilities.
FUTURE PLANS AND USE OF PROCEEDS
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 approximately 20% of the net proceeds, or approximately HK$271 million, will
be used to strengthen our branding and consumer engagement efforts and
implement diversified approaches to build our brand image and increase
consumer awareness. For more details, see “Business — Our Growth Strategies
— Strengthen Our Branding and Consumer Engagement Efforts.” In
particular,
/H11568approximately 6% of the net proceeds, or approximately HK$81 million, will
be used to build and upgrade our brand image. For example, we plan to upgrade
the interior design of our stores. We will also hold various online and offline
branding and promotional activities to increase our brand awareness and
recognition;
/H11568approximately 6% of the net proceeds, or approximately HK$81 million, will
be used to launch diverse marketing campaigns. For example, we will leverage
online marketing methods such as developing creative online promotional
content and collaborating with key opinion leaders. We will use diverse online
social media and content platforms to further enhance consumer interaction;
/H11568approximately 3% of the net proceeds, or approximately HK$41 million, will
be used to launch new collaborations with other brands. In the future, we will
continue to actively pursue crossover collaborations with other well-known
brands and partners to further boost our brand awareness and expand our
customer base;
/H11568approximately 5% of the net proceeds, or approximately HK$68 million, will
be invested in our membership program. In the next four years, we plan to
recruit approximately 96 additional employees for brand promotion and
approximately 144 additional employees for marketing activities and media
operations, who will be dedicated to consumer engagement to help foster our
members’ community in order to expand our membership base and facilitate
the acquisition and retention of members. We expect to hire people with
bachelor’s or more advanced degrees and relevant work experiences such as
branding and marketing. We also expect to offer more interactive member
activities and adopt more tailored consumer engagement strategies in order to
improve consumer experience and encourage repurchases.
FUTURE PLANS AND USE OF PROCEEDS
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 approximately 10% of the net proceeds, or approximately HK$136 million, will
be used to recruit additional employees for franchisee management as we
continue to execute our regional densification strategy, strengthen our support
for franchisees and further foster a close franchisee community. For more
details, see “Business — Our Growth Strategies — Expand Our Store Network
and Solidify Our Position in the Industry.” In particular,
/H11568approximately 8% of the net proceeds, or approximately HK$108 million, will
be used to recruit additional employees for franchisee management as we
expand our store network under the regional densification strategy, and work
with an increasing number of franchisees. Specifically, in the next four years,
we expect to recruit approximately 323 additional employees to engage in store
inspection and operational support, approximately 107 additional employees to
engage in franchisee trainings, and approximately 68 additional employees to
engage in franchisee selection and store location selection. We expect to hire
people with bachelor’s or more advanced degrees and relevant work
experiences in the management of franchisees. We intend to strengthen our
support for franchisees across all stages of their business endeavor, from the
early steps such as site selection to the day-to-day management of well-
established stores. We will also enhance our store inspection capabilities to
maintain comprehensive store supervisions as our store network expands; and
The following table sets forth details of the timeframe for recruiting additional
employees responsible for franchisee management in the next four years and
the number of employees to be recruited for each role, which are subject to
changes based on our actual needs and market conditions at the relevant time.
For the year ended December 31,
2025 2026 2027 2028 Total
Role Number of staff to be recruited
Store inspection and
operational support /H1118/H1118/H1118 39 84 95 105 323
Franchisee trainings /H1118/H1118/H1118/H111813 28 31 35 107
Franchisee selection and
store location selection /H1118 81 82 02 26 8
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111860 130 146 162 498
FUTURE PLANS AND USE OF PROCEEDS
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--- page 395 ---
/H11568approximately 2% of the net proceeds, or approximately HK$27 million,
will be used to further strengthen our relationship with franchisees and
foster a close franchisee community. We will continue to invest in and
host franchisee events, such as annual nationwide franchisee meetings, to
solidify our relationship with franchisees and attract new franchisees. We
will also improve communications with our franchisees and regularly
collect their feedbacks through various online and offline channels.
 approximately 10% of the net proceeds, or approximately HK$136 million, will
be used to recruit experts in product development and enhance our product
development capabilities. For more details, see “Business — Our Growth
Strategies — Continue to Invest in Product Research and Development to
Refine and Expand Our Product Offerings.” In particular,
/H11568approximately 5% of the net proceeds, or approximately HK$68 million, will
be used to recruit additional talents including experts in food science and
engineering, food processing and safety, food biology, among others, to join
our product research and development team. Specifically, in the next four
years, we expect to recruit approximately 80 additional employees
(approximately 20 additional employees per year) to engage in consumer
research and product development, and 80 additional employees
(approximately 20 additional employees per year) to engage in research on
food sciences. We expect to hire people with bachelor’s or more advanced
degrees and relevant work experiences for consumer research and product
development, and hire people with master’s or more advanced degrees in
relevant fields for research on food sciences;
/H11568Approximately 1% of the net proceeds, or approximately HK$14 million, will
be used to invest in further collaborations with universities and research
institutions, including Zhejiang University and Jiangnan University, to enhance
our research capabilities. Our research will mainly focus on further refining the
flavors of our existing products, launching innovative beverages that cater to
evolving consumer preferences and improving our stores’ processing
techniques; and
/H11568approximately 4% of the net proceeds, or approximately HK$54 million, will
be used to invest in equipment used in product development. We expect to
purchase advanced equipment to support our research on ingredients and
beverages. We plan to provide our product research and development team with
a microbial testing laboratory and an atmospheric pressure laboratory, among
others, to facilitate the research and development of connected appliances for
our stores, thereby providing consistent and high-quality beverages to our
consumers.
 approximately 10% of the net proceeds, or approximately HK$136 million, is
expected to be used for working capital and other general corporate purposes.
FUTURE PLANS AND USE OF PROCEEDS
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We intend to use the net proceeds from the Global Offering according to the timeframe
as set out below, which is subject to changes based on our actual needs and market conditions
at the relevant time.
Purpose
For the
period from
January 1,
2025 to
December 31,
2025
For the
period from
January 1,
2026 to
December 31,
2026
For the
period from
January 1,
2027 to
December 31,
2027
For the
period from
January 1,
2028 to
December 31,
2028 Total
Approximate
percentage of
net proceeds
(HK$ in millions, except for percentages)
(i) To strengthen our information
technology team and continue
to digitalize our business
management and store
operations /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111854 75 95 115 339 25%
(ii) To enhance our supply chain
capabilities and improve our
supply chain management
efficiency /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111861 75 92 110 339 25%
(iii) To strengthen our branding and
consumer engagement efforts
and implement diversified
approaches to build our brand
image and increase consumer
awareness /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111862 66 70 74 271 20%
(iv) To recruit additional employees
for franchisee management as
we continue to execute our
regional densification strategy,
strengthen our support for
franchisees and further foster a
close franchisee community. /H1118/H1118 13 26 40 57 136 10%
(v) To recruit experts in product
development and enhance our
product development
capabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824 31 37 44 136 10%
(vi) For working capital and other
general corporate purposes /H1118/H1118/H1118 34 34 34 34 136 10%
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118248 306 368 434 1,356 100%
In the event that the Offer Price is fixed at the high or low end of the indicative Offer
Price range and assuming no exercise of the Offer Size Adjustment Option and the
Over-allotment Option, the net proceeds of the Global Offering will increase or decrease by
approximately HK$96 million. If we make an upward or downward offer price adjustment to
set the final Offer Price to be above or below the mid-point of the Offer Price range, we will
increase or decrease the allocation of the net proceeds to the above purposes on a pro rata basis.
FUTURE PLANS AND USE OF PROCEEDS
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--- page 397 ---
The additional net proceeds that we would receive if the Offer Size Adjustment Option
and the Over-allotment Option were exercised in full would be (i) HK$488 million (assuming
an Offer Price of HK$9.94 per Offer Share, being the Maximum Offer Price), (ii) HK$457
million (assuming an Offer Price of HK$9.31 per Offer Share, being the mid-point of the Offer
Price range) and (iii) HK$426 million (assuming an Offer Price of HK$8.68 per Offer Share,
being the Minimum Offer Price).
To the extent that the net proceeds from the Global Offering (including the net proceeds
from the exercise of the Offer Size Adjustment Option and the Over-allotment Option) are
either more or less than expected, we may adjust our allocation of the net proceeds for the
above purposes on a pro rata basis and we may also use cash on hand to fulfill our expansion
plan.
To the extent that the net proceeds of the Global Offering are not immediately required
for the above purposes, we will only deposit such funds into short-term interest-bearing
accounts at licensed commercial banks and/or other authorized financial institutions (as
defined under the SFO and/or applicable laws and regulations in relevant jurisdictions).
FUTURE PLANS AND USE OF PROCEEDS
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--- page 398 ---
HONG KONG UNDERWRITERS
Goldman Sachs (Asia) L.L.C.
UBS AG Hong Kong Branch
China International Capital Corporation Hong Kong Securities Limited
The Hongkong and Shanghai Banking Corporation Limited
ABCI Securities Company Limited
BOCI Asia Limited
CMB International Capital Limited
Futu Securities International (Hong Kong) Limited
UNDERWRITING
This prospectus is published solely in connection with the Hong Kong Public Offering.
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters on a
conditional basis. The International Offering is expected to be fully underwritten by the
International Underwriters. If, for any reason, the Offer Price is not agreed between the Overall
Coordinators (for themselves and on behalf of the Underwriters) and the Company, the Global
Offering will not proceed and will lapse.
The Global Offering comprises the Hong Kong Public Offering of initially 15,861,200
Hong Kong Offer Shares and the International Offering of initially 142,750,800 International
Offer Shares, subject, in each case, to reallocation on the basis as described in the section
headed “Structure of the Global Offering” in this prospectus, as well as to the Offer Size
Adjustment Option and the Over-allotment Option in the case of the International Offering.
UNDERWRITING ARRANGEMENTS AND EXPENSES
Hong Kong Public Offering
Hong Kong Underwriting Agreement
The Hong Kong Underwriting Agreement was entered into on February 3, 2025. Pursuant
to the Hong Kong Underwriting Agreement, the Company is offering the Hong Kong Offer
Shares for subscription on the terms and conditions set out in this prospectus and the Hong
Kong Underwriting Agreement at the Offer Price.
Subject to (a) the Listing Committee granting approval for the listing of, and permission
to deal in, the Shares in issue and to be issued pursuant to the Global Offering (including any
additional Shares that may be issued pursuant to the exercise of the Offer Size Adjustment
Option and the Over-allotment Option) on the Main Board of the Stock Exchange and such
approval not having been withdrawn and (b) certain other conditions set out in the Hong Kong
Underwriting Agreement, the Hong Kong Underwriters have agreed severally but not jointly to
procure subscribers for, or themselves to subscribe for, their respective applicable proportions
of the Hong Kong Offer Shares being offered which are not taken up under the Hong Kong
Public Offering on the terms and conditions set out in this prospectus and the Hong Kong
Underwriting Agreement.
UNDERWRITING
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--- page 399 ---
The Hong Kong Underwriting Agreement is conditional on, among other things, the
International Underwriting Agreement having been executed and becoming unconditional and
not having been terminated in accordance with its terms.
Grounds for Termination
The Joint Sponsors and the Overall Coordinators (for themselves and on behalf of the
Hong Kong Underwriters) shall be entitled, in their sole and absolute discretion, by giving
notice to the Company and the Warranting Shareholders to terminate the Hong Kong
Underwriting Agreement with immediate effect if prior to 8:00 a.m. on the Listing Date:
(a) there develops, occurs, exists or come into force:
(i) any event, or series of events, in the nature of force majeure (including,
without limitation, any acts of government, declaration of a national, regional
or international emergency or war, calamity, crisis, epidemic, pandemic,
outbreaks, adverse mutation or aggravation of diseases (including, without
limitation, COVID-19, Severe Acute Respiratory Syndrome (SARS), swine or
avian flu, H5N1, H1N1, H7N9, Ebola virus, Middle East respiratory syndrome
and such related/mutated forms), comprehensive sanctions, strikes, labour
disputes, lock-outs, fire, explosion, flooding, earthquake, tsunami, volcanic
eruption, riots, rebellion, civil commotion, public disorder, acts of war,
outbreak or escalation of hostilities (whether or not war is declared), acts of
God or acts of terrorism (whether or not responsibility has been claimed), in
or affecting the Cayman Islands, BVI, Hong Kong, the PRC, the United States,
the United Kingdom, or the European Union (or any member thereof), or any
other jurisdiction relevant to the Group (each a “ Relevant Jurisdiction ” and
collectively, the “ Relevant Jurisdictions ”); or
(ii) any change or development involving a prospective change, or any event or
circumstances or series of events likely to result in any change or development
involving a prospective change, in any local, national, regional or international
financial, economic, political, military, industrial, legal, fiscal, regulatory,
currency, credit or market matters or conditions, equity securities or exchange
control or any monetary or trading settlement system or other financial markets
(including, without limitation, conditions in the stock and bond markets,
money and foreign exchange markets, the interbank markets and credit
markets), in or affecting any of the Relevant Jurisdictions; or
(iii) any moratorium, suspension or restriction (including, without limitation, any
imposition of or requirement for any minimum or maximum price limit or price
range) in or on trading in securities generally on the Stock Exchange, the New
Y ork Stock Exchange, the NASDAQ Stock Market, the London Stock
Exchange, the Shanghai Stock Exchange or the Shenzhen Stock Exchange; or
UNDERWRITING
– 389 –


--- page 400 ---
(iv) any general moratorium on commercial banking activities in Hong Kong
(imposed by the Financial Secretary or the Hong Kong Monetary Authority or
other authority), New Y ork (imposed at the U.S. Federal or New Y ork State
level or by any other authority), London, the PRC, the European Union (or any
member thereof) or any of the other Relevant Jurisdictions (declared by the
relevant authorities) or any disruption in commercial banking or foreign
exchange trading or securities settlement or clearance services, procedures or
matters in or affecting any of the Relevant Jurisdictions; or
(v) any new law or regulation or any change or development involving a
prospective change in existing laws or regulations or any change or
development involving a prospective change in the interpretation or
application thereof by any authority in or affecting any of the Relevant
Jurisdictions; or
(vi) the imposition of economic sanctions, or the withdrawal of trading privileges,
in whatever form, directly or indirectly, by, or for, any of the Relevant
Jurisdictions relevant to the business operations of the Group; or
(vii) any change or development involving a prospective change or amendment in
or affecting taxation or foreign exchange control, currency exchange rates or
foreign investment regulations (including, without limitation, a devaluation of
the United States dollar, the Hong Kong dollar or RMB against any foreign
currencies, a change in the system under which the value of the Hong Kong
dollar is linked to that of the United States dollar or RMB is linked to any
foreign currency or currencies), or the implementation of any exchange
control, in any of the Relevant Jurisdictions or affecting an investment in the
Offer Shares; or
(viii) other than with the prior written consent of the Joint Sponsors and the Overall
Coordinators (for themselves and on behalf of the Hong Kong Underwriters),
the issue or requirement to issue by the Company of a supplement or
amendment to this prospectus, the preliminary offering circular, the offering
circular or other documents in connection with the offer and sale of the Offer
Shares pursuant to the Companies (Winding Up and Miscellaneous Provisions)
Ordinance or the Listing Rules or the Trial Administrative Measures of
Overseas Securities Offering and Listing by Domestic Companies and
supporting guidelines issued by the CSRC and the Provisions on Strengthening
Confidentiality and Archives Administration of Overseas Securities Offering
and Listing by Domestic Companies (collectively, the “ CSRC Rules ”) or upon
any requirement or request of the Stock Exchange, the SFC and/or the CSRC;
or
UNDERWRITING
– 390 –


--- page 401 ---
(ix) any order or petition for the winding up or liquidation of any member of the
Group or any composition or arrangement made by any member of the Group
with its creditors or a scheme of arrangement entered into by any member of
the Group or any resolution for the winding-up of any member of the Group or
the appointment of a provisional liquidator, receiver or manager over all or part
of the assets or undertaking of any member of the Group or anything analogous
thereto occurring in respect of any member of the Group; or
(x) any litigation, dispute, legal action or claim or regulatory or administrative
investigation or action being instigated or announced against any member of
the Group or any Director; or
(xi) any contravention by any member of the Group or any Director of any
applicable Laws, the Listing Rules or the CSRC Rules; or
(xii) any Director or member of senior management of the Company is vacating his
or her office; or
(xiii) any executive Director or member of senior management of the Company is
being found guilty of an indictable offence or is prohibited by operation of Law
or otherwise disqualified from taking part in the management or taking
directorship of a company, or there is the commencement by any governmental,
political or regulatory body or stock exchange of any formal investigation or
other action against any Director or member of senior management of the
Company in his or her capacity as such or any member of the Group or an
announcement by any governmental, political or regulatory body or stock
exchange that it intends to commence any such investigation or take any such
action; or
(xiv) any non-compliance of this prospectus (or any other documents used in
connection with the contemplated subscription and sale of the Offer Shares),
the filings to the CSRC or any aspect of the Global Offering with the Listing
Rules, the CSRC Rules or any other applicable Laws; or,
(xv) any change or announced prospective change or development, or a
materialization of, any of the risks set out in the section headed “Risk Factors”
in this prospectus;
which, individually or in the aggregate, in the sole opinion of the Joint Sponsors and
the Overall Coordinators (for themselves and on behalf of the Hong Kong
Underwriters):
(1) has or will have or may have a material adverse effect on the assets, liabilities,
business, general affairs, management, prospects, shareholders’ equity, profits,
losses, earnings, results of operations, performance, position or condition,
financial or otherwise, of the Group taken as a whole; or
UNDERWRITING
– 391 –


--- page 402 ---
(2) has or will have or may have a material adverse effect on the success of the
Global Offering or the level of applications for or the distribution of the Offer
Shares under the Hong Kong Public Offering or the level of interest under the
International Offering; or
(3) makes or will make or is likely to make it inadvisable, inexpedient,
impracticable or incapable for the Hong Kong Public Offering and/or the
International Offering to proceed or to market the Global Offering or the
delivery or distribution of the Offer Shares on the terms and in the manner
contemplated by the Offering Related Documents (as defined below); or
(4) has or will have or may have the effect of making any material part of the Hong
Kong Underwriting Agreement (including underwriting) incapable of
performance in accordance with its terms or preventing the processing of
applications and/or payments pursuant to the Global Offering or pursuant to
the underwriting thereof; or
(b) there has come to the notice of the Joint Sponsors and the Overall Coordinators (for
themselves and on behalf of the Hong Kong Underwriters) that:
(i) any statement contained in this prospectus, the formal notice of the Company,
the filings to the CSRC and/or any notices, announcements, advertisements,
communications or other documents (including any announcement, circular,
document or other communication pursuant to the Hong Kong Underwriting
Agreement) issued or used by or on behalf of the Company in connection with
the Hong Kong Public Offering, including any supplement or amendment
thereto (the “ Offering Related Documents ”) was, when it was issued, or has
become, untrue, incorrect, inaccurate, incomplete in any material respects or
misleading or deceptive, or that any estimate, forecast, expression of opinion,
intention or expectation contained in any of such documents is not fair and
honest and based on reasonable grounds or reasonable assumptions; or
(ii) any matter has arisen or has been discovered which would, had it arisen or been
discovered immediately before the date of this prospectus, constitute a material
omission from, or misstatement in, any of the Offering Related Documents; or
(iii) there is a breach of, or any event or circumstance rendering untrue, incorrect,
incomplete or misleading in any respect any of the warranties given by the
Company or the Warranting Shareholders in the Hong Kong Underwriting
Agreement or the International Underwriting Agreement, as applicable; or
(iv) there is a material breach of any of the obligations imposed upon the Company
or the Warranting Shareholders under the Hong Kong Underwriting Agreement
or the International Underwriting Agreement, as applicable; or
UNDERWRITING
– 392 –


--- page 403 ---
(v) there is an event, act or omission which gives or is likely to give rise to any
liability of the Company or the Warranting Shareholders pursuant to the
indemnities given by any of them under the Hong Kong Underwriting
Agreement or the International Underwriting Agreement, as applicable; or
(vi) there is any Material Adverse Change (as defined in the Hong Kong
Underwriting Agreement); or
(vii) the approval of the Listing Committee of the listing of, and permission to deal
in, the Shares in issue and to be issued pursuant to the Global Offering
(including pursuant to any exercise of the Offer Size Adjustment Option and
the Over-allotment Option) is refused or not granted, other than subject to
customary conditions, on or before the date of the Listing, or if granted, the
approval is subsequently withdrawn, cancelled, qualified (other than by
customary conditions), revoked or withheld; or
(viii) any person (other than any of the Joint Sponsors and the Overall Coordinators)
whose consent is required for the issue of this prospectus and/or the filings to
the CSRC has withdrawn its consent to the issue of this prospectus or the
filings to the CSRC with the inclusion of its reports, letters and/or opinions (as
the case may be) and references to its name included in the form and context
in which it respectively appears; or
(ix) the Company withdraws the Offering Related Documents, the filings to the
CSRC or the Global Offering;
(x) there is a prohibition on the Company for whatever reason from offering,
allotting, issuing or selling any of the Offer Shares pursuant to the terms of the
Global Offering; or
(xi) a material portion of the orders placed or confirmed in the bookbuilding
process, including the investment commitments by any cornerstone investors
after signing of agreements, have been withdrawn, terminated or cancelled, or
rejected or prohibited by the Stock Exchange, the SFC or any other authority,
which in the sole and absolute opinion of the Joint Sponsors and the Overall
Coordinators (for themselves and on behalf of the Hong Kong Underwriters)
has a material adverse effect on the success of the Global Offering.
UNDERWRITING
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--- page 404 ---
Indemnity
The Company has agreed to indemnify each of the Joint Sponsors, the Overall
Coordinators, the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers,
the Hong Kong Underwriters and the Capital Market Intermediaries for certain losses which
they may suffer or incur, including losses arising from their performance of their obligations
under the Hong Kong Underwriting Agreement and any breach of the Hong Kong Underwriting
Agreement by the Company and the Warranting Shareholders which are parties thereto.
LOCK-UP ARRANGEMENTS
(A) Undertakings by the Company to the Stock Exchange pursuant to the Listing Rules
Pursuant to Rule 10.08 of the Listing Rules, the Company has undertaken to the Stock
Exchange that no further Shares or securities convertible into equity securities of the Company
(whether or not of a class already listed) may be issued or sold or transferred out of treasury
by the Company or form the subject of any agreement to such an issue, or sale or transfer out
of treasury within six months from the Listing Date (whether or not such issue of Shares or
securities, or sale or transfer of treasury shares will be completed within six months from the
Listing Date), except (a) pursuant to the Global Offering (including any Shares which may be
issued pursuant to the exercise of the Offer Size Adjustment Option and the Over-allotment
Option), and (b) under any of the other circumstances provided under Rule 10.08 of the Listing
Rules.
(B) Undertakings by the Controlling Shareholders to the Stock Exchange pursuant to the
Listing Rules
Pursuant to Rule 10.07 of the Listing Rules, each of the Controlling Shareholders has
undertaken to the Stock Exchange and the Company that, except pursuant to the Global
Offering and Listing, it will not and will procure that the relevant registered holder(s) will not
without the prior written consent of the Stock Exchange or unless otherwise in compliance with
the applicable requirement of the Listing Rules:
(1) in the period commencing on the date by reference to which disclosure of its holding
of Shares is made in this prospectus and ending on the date which is six months from
the Listing Date (the “ Six-Month Period ”), dispose of, nor enter into any agreement
to dispose of or otherwise create any options, rights, interests or encumbrances in
respect of, any of the Shares in respect of which it is shown by this prospectus to
be the beneficial owner; or
UNDERWRITING
– 394 –


--- page 405 ---
(2) in the period of six months commencing from the expiry of the Six-Month Period,
dispose of, nor enter into any agreement to dispose of or otherwise create any
options, rights, interests or encumbrances in respect of, any such Shares referred to
in (1) above if, immediately following such disposal, or upon the exercise or
enforcement of such options, rights, interests or encumbrances, it would cease to be
a Controlling Shareholder of the Company.
Pursuant to Note 3 to Rule 10.07(2) of the Listing Rules, each of the Controlling
Shareholders has undertaken to the Stock Exchange and the Company that during the
Six-Month Period and six months following the Six-Month Period:
(1) if it pledges or charges any Shares beneficially owned by it in favor of an authorized
institution (as defined in the Banking Ordinance (Chapter 155 of the Laws of Hong
Kong)) pursuant to Note 2 to Rule 10.07(2) of the Listing Rules, it will immediately
inform the Company of such pledge or charge together with the number of Shares
so pledged or charged; and
(2) if it receives indications, either verbal or written, from the pledgee or chargee that
any of the pledged or charged Shares will be disposed of, it will immediately inform
the Company of such indications.
(C) Undertakings by the Company pursuant to the Hong Kong Underwriting Agreement
The Company hereby undertakes to each of the Joint Sponsors, the Overall Coordinators,
the Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong
Underwriters and the Capital Market Intermediaries that, except for (a) the issue, offer or sale
of the Offer Shares pursuant to the Global Offering (including pursuant to the Offer Size
Adjustment Option and the Over-allotment Option) and (b) the issue of Shares by the Company
pursuant to the Post-IPO Share Scheme, at any time after the date of the Hong Kong
Underwriting Agreement up to and including the date falling six months after the Listing Date
(the “ First Six-Month Period ”), it will not, without the prior written consent of the Joint
Sponsors and the Overall Coordinators (for themselves and on behalf of the Hong Kong
Underwriters) and unless in compliance with the requirements of the Listing Rules:
(1) allot, issue, sell, accept subscription for, offer to allot, issue or sell, contract or agree
to allot, issue or sell, grant or sell any option, warrant, contract or right to subscribe
for or purchase, grant or purchase any option, warrant, contract or right to allot,
issue or sell, or otherwise transfer or dispose of, or agree to transfer or dispose of
or, either directly or indirectly, conditionally or unconditionally, or repurchase any
legal or beneficial interest in any Shares or other securities of the Company or any
interest in any of the foregoing (including, but not limited to, any securities
convertible into or exchangeable or exercisable for or that represent the right to
receive, or any warrants or other rights to purchase, any Shares), or deposit any
Shares or other securities of the Company, as applicable, with a depositary in
connection with the issue of depositary receipts; or
UNDERWRITING
– 395 –


--- page 406 ---
(2) enter into any swap or other arrangement that transfers to another, in whole or in
part, any of the economic consequences of ownership (legal or beneficial) of any
Shares or other securities of the Company, as applicable, or any interest in any of
the foregoing (including without limitation, any securities convertible into or
exchangeable or exercisable for or that represent the right to receive, or any warrants
or other rights to purchase, any Shares); or
(3) enter into any transaction with the same economic effect as any transaction specified
in paragraphs (1) or (2) above; or
(4) offer or agree or contract to, or announce or publicly disclose any intention to, effect
any such transaction described in paragraphs (1), (2), or (3) above,
in each case, whether any of the transactions specified in paragraphs (1), (2), or (3) above is
to be settled by delivery of the Shares or other securities of the Company, in cash or otherwise
(whether or not the issue of such Shares or other securities of the Company will be completed
within the First Six-Month Period).
(D) Undertakings by the Warranting Shareholders pursuant to the Hong Kong
Underwriting Agreement
Each of the Warranting Shareholders shall procure that the Controlling Shareholders
agree and undertake to each of the Company, the Joint Sponsors, the Overall Coordinators, the
Joint Global Coordinators, the Joint Bookrunners, the Joint Lead Managers, the Hong Kong
Underwriters and the Capital Market Intermediaries that, without the prior written consent of
the Joint Sponsors and the Overall Coordinators (on behalf of the Hong Kong Underwriters)
and unless in compliance with the Listing Rules:
(1) except for any lending of Shares by Modern Leaves Limited pursuant to the Stock
Borrowing Agreement, it will not and will procure that the relevant registered
holders(s) will not, at any time during the First Six-Month Period:
(a) sell, offer to sell, contract or agree to sell, mortgage, charge, pledge,
hypothecate, lend, grant or sell any option, warrant, contract or right to
purchase, grant or purchase any option, warrant, contract or right to sell, or
otherwise transfer or dispose of or create an encumbrance over, or agree to
transfer or dispose of or create an encumbrance over, either directly or
indirectly, conditionally or unconditionally, any Shares or other securities of
the Company or any interest therein (including, but not limited to, any
securities convertible into or exchangeable or exercisable for or that represent
the right to receive, or any warrants or other rights to purchase, any Shares)
beneficially owned by him or it as of the Listing Date, or deposit any Shares
or other securities of the Company with a depositary in connection with the
issue of depositary receipts, or
UNDERWRITING
– 396 –


--- page 407 ---
(b) enter into any swap or other arrangement that transfers to another, in whole or
in part, any of the economic consequences of ownership of any Shares or other
securities of the Company or any interest therein (including, but not limited to,
any securities convertible into or exchangeable or exercisable for or that
represent the right to receive, or any warrants or other rights to purchase, any
Shares) beneficially owned by him or it as of the Listing Date, or
(c) enter into any transaction with the same economic effect as any transaction
specified in (a) or (b) above, or
(d) offer or agree or contract to, or announce or publicly discloses any intention to,
effect any transaction specified in (a), (b) or (c) above,
in each case, whether any of the transactions specified in (a), (b) or (c) above is to
be settled by delivery of the Shares or other securities of the Company or in cash or
otherwise and whether or not the issue of such Shares or other securities will be
completed within the First Six-Month Period, but except as permitted under Rule
10.07 of the Listing Rules;
(2) it will not, during the period of six months commencing on the date on which the
First Six-Month Period expires (the “ Second Six-Month Period ”), enter into any of
the transactions specified in (a), (b) or (c) above, or offer or agree or contract to, or
announce or publicly disclose any intention to, effect any such transaction if,
immediately following any such transaction, it will cease to be a “controlling
shareholder” (as the term is defined in the Listing Rules) of the Company; and
(3) until the expiry of the Second Six-Month Period, if it enters into any of the
transactions specified in (a), (b) or (c) above or offers or agrees or contracts to, or
announce or publicly disclose any intention to, effect any such transaction, it will
take all reasonable steps to ensure that it will not create a disorderly or false market
in the securities of the Company.
The lock-up arrangements concerning the Controlling Shareholders referred to above
shall not prevent any of the Controlling Shareholders from (a) using the Shares or other
securities of the Company (or any interest therein) beneficially owned by them respectively as
security (including a charge or a pledge) in favour of an authorized institution (as defined in
the Banking Ordinance (Chapter 155 of the Laws of Hong Kong)) for a bona fide commercial
loan; and (b) purchasing additional Shares or other securities of the Company or any interest
therein or dispose of Shares or other securities of the Company (or any interest therein) which
are purchased in the First Six-Month Period and the Second Six-Month Period, provided that
any such purchases do not contravene the lock-up arrangements referred to above or
compliance by the Company with the requirement of Rule 8.08 of the Listing Rules to maintain
an open market in the Shares and a sufficient public float in the Shares. The Company agrees
and undertakes to the Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators,
the Joint Bookrunners, the Joint Lead Managers, the Hong Kong Underwriters and the Capital
Market Intermediaries that, upon receiving information in writing from the Controlling
Shareholders on the matters referred to in (a), it shall, as soon as practicable, notify the Stock
Exchange and make an announcement in accordance with the Listing Rules.
UNDERWRITING
– 397 –


--- page 408 ---
(E) Undertakings by Certain Existing Shareholders pursuant to Lock-up Deeds
Each of the Pre-IPO Investors, Thriving Leafbuds Limited, Nascent Sprouts Limited and
Flourishing Leaves Limited has undertaken to each of the Company, the Joint Sponsors and the
Overall Coordinators (for themselves and on behalf of the Underwriters in connection with the
Global Offering) that it will not, and will procure that its respective affiliates will not, without
the prior written consent of the Company, the Joint Sponsors and the Overall Coordinators,
dispose of any Shares subscribed and/or acquired prior to the Global Offering and beneficially
owned by it as of the Listing Date (the “ Locked-up Securities ”) for a period of six months
from the Listing Date (the “ Lock-up Period ”), save for certain special circumstances.
For the purpose of the above undertaking, “dispose of” means:
(1) sell, offer to sell, contract or agree to sell, lend, grant or sell any option, warrant or
other right to purchase, grant or purchase any option, warrant, contract or right to
sell, or otherwise transfer or dispose of or create an encumbrance over, either
directly or indirectly, conditionally or unconditionally, any Locked-up Securities;
(2) enter into any swap or other arrangement that transfers to another person, in whole
or in part, any of the economic consequences of ownership of any Locked-up
Securities;
(3) enter into any transaction with the same economic effect as any transaction specified
in sub-paragraphs (1) or (2) above; or
(4) publicly disclose that it will or may enter into any transaction described in
sub-paragraphs (1), (2) or (3) above,
whether any such transaction described in sub-paragraphs (1), (2) or (3) above is to be settled
by delivery of such Shares or such other securities of the Company, in cash or otherwise
(whether or not the settlement or delivery of such Shares or such other securities of the
Company will be completed within the Lock-up Period).
JOINT SPONSORS’ AND HONG KONG UNDERWRITERS’ INTERESTS IN THE
COMPANY
Save as disclosed in this prospectus, and save for their respective obligations under the
Hong Kong Underwriting Agreement and, if applicable, the Stock Borrowing Agreement, as of
the Latest Practicable Date, none of the Joint Sponsors or the Hong Kong Underwriters was
interested, legally or beneficially, directly or indirectly, in any Shares or any securities of any
member of the Group or had any right or option (whether legally enforceable or not) to
subscribe for or purchase, or to nominate persons to subscribe for or purchase, any Shares or
any securities of any member of the Group. Further, see the section headed “Statutory and
General Information — Other Information — 3. Joint Sponsors” in Appendix IV to this
prospectus for the Joint Sponsors’ independence declaration pursuant to Rule 3A.07 of the
Listing Rules.
UNDERWRITING
– 398 –


--- page 409 ---
Following the completion of the Global Offering, the Hong Kong Underwriters and their
affiliated companies may hold a certain portion of the Shares as a result of fulfilling their
respective obligations under the Hong Kong Underwriting Agreement.
INTERNATIONAL OFFERING
International Underwriting Agreement
In connection with the International Offering, the Company and the Warranting
Shareholders expect to enter into the International Underwriting Agreement with, amongst
others, the International Underwriters on the Price Determination Date. Under the International
Underwriting Agreement and subject to the Offer Size Adjustment Option and the Over-
allotment Option, the International Underwriters would, subject to certain conditions set out
therein, agree severally but not jointly to procure purchasers for, or themselves to purchase,
their respective applicable proportions of the International Offer Shares initially being offered
pursuant to the International Offering. It is expected that the International Underwriting
Agreement may be terminated on similar grounds as the Hong Kong Underwriting Agreement.
Potential investors should note that in the event that the International Underwriting Agreement
is not entered into, the Global Offering will not proceed. See the section headed “Structure of
the Global Offering — The International Offering” in this prospectus.
Offer Size Adjustment Option
The Company is expected to grant to the Overall Coordinators the Offer Size Adjustment
Option, exercisable by the Overall Coordinators at their absolute discretion (for themselves and
on behalf of the International Underwriters) on or before the second business day prior to the
Listing Date and will lapse immediately thereafter, to require the Company to allot and issue
up to an aggregate of 23,791,600 additional Shares, representing approximately 15% of the
initial number of Offer Shares offered under the Global Offering, at the same price per Share
under the International Offering to cover any excess demand in the International Offering. The
Offer Size Adjustment Option provides flexibility for the Overall Coordinators to increase the
number of Offer Shares available for purchase under the International Offering to cover
additional market demand. See “Structure of the Global Offering — Offer Size Adjustment
Option” in this prospectus.
Over-allotment Option
The Company is expected to grant to the International Underwriters the Over-allotment
Option, exercisable by the Overall Coordinators (on behalf of the International Underwriters)
at any time from the Listing Date until 30 days after the last day for lodging applications under
the Hong Kong Public Offering, pursuant to which the Company may be required to issue up
to an aggregate of 27,360,400 additional Shares (representing approximately 15% of the Offer
Shares offered under the Global Offering assuming the Offer Size Adjustment Option is
exercised in full) or up to an aggregate of 23,791,600 additional Shares (representing
approximately 15% of the Offer Shares initially offered under the Global Offering assuming
the Offer Size Adjustment Option is not exercised), at the Offer Price, to cover over-allocations
in the International Offering, if any. See the section headed “Structure of the Global Offering
— Over-allotment Option” in this prospectus.
UNDERWRITING
– 399 –


--- page 410 ---
Commissions and Expenses
All Capital Market Intermediaries participating in the Global Offering will receive an
aggregate underwriting commission of 3.0% of the aggregate Offer Price payable in respect of
all of the Offer Shares (including any Offer Shares issued pursuant to the exercise of the Offer
Size Adjustment Option and the Over-allotment Option) (the “ Gross Proceeds ”) (the
“Underwriting Commission ”). In addition, the Company may, in its sole discretion, pay to all
Capital Market Intermediaries an incentive fee in an aggregate of up to 1.0% of the Gross
Proceeds (the “ Discretionary Fee ”). Assuming the Discretionary Fees are paid in full, the ratio
of the fixed amount of the Underwriting Commission payable to all Capital Market
Intermediaries (the “ Fixed Fees ”) and Discretionary Fees payable to all Capital Market
Intermediaries is approximately 58.75:41.25. For any unsubscribed Hong Kong Offer Shares
reallocated to the International Offering, we will pay the underwriting commission for such
Shares to the International Underwriters (but not the Hong Kong Underwriters).
The aggregate amount of sponsor fee payable by our Company to the Joint Sponsors is
US$700,000.
The aggregate underwriting commissions and fees together with the Stock Exchange
listing fees, the SFC transaction levy, the AFRC transaction levy and the Stock Exchange
trading fee, legal and other professional fees and printing and all other expenses relating to the
Global Offering are estimated to be approximately HK$121 million (assuming an Offer Price
of HK$9.31 per Offer Share (which is the mid-point of the Offer Price range), the full payment
of the Discretionary Fee and the Offer Size Adjustment Option and the Over-allotment Option
are not exercised) and will be paid by the Company.
ACTIVITIES BY SYNDICATE MEMBERS
The Underwriters of the Hong Kong Public Offering and the International Offering
(together, the “ Syndicate Members ”) and their affiliates may each individually undertake a
variety of activities (as further described below) which do not form part of the underwriting or
stabilizing process.
The Syndicate Members and their affiliates are diversified financial institutions with
relationships in countries around the world. These entities engage in a wide range of
commercial and investment banking, brokerage, funds management, trading, hedging,
investing and other activities for their own account and for the account of others. In the
ordinary course of their various business activities, the Syndicate Members and their respective
affiliates may purchase, sell or hold a broad array of investments and actively trade securities,
derivatives, loans, commodities, currencies, credit default swaps and other financial
instruments for their own account and for the accounts of their customers. Such investment and
trading activities may involve or relate to assets, securities and/or instruments of the Company
and/or persons and entities with relationships with the Company and may also include swaps
and other financial instruments entered into for hedging purposes in connection with the
Group’s loans and other debt.
UNDERWRITING
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--- page 411 ---
In relation to the Shares, the activities of the Syndicate Members and their affiliates could
include acting as agent for buyers and sellers of the Shares, entering into transactions with
those buyers and sellers in a principal capacity, including as a lender to initial purchasers of
the Shares (which financing may be secured by the Shares) in the Global Offering, proprietary
trading in the Shares, and entering into over the counter or listed derivative transactions or
listed or unlisted securities transactions (including issuing securities such as derivative
warrants listed on a stock exchange) which have as their underlying assets, assets including the
Shares. Such transactions may be carried out as bilateral agreements or trades with selected
counterparties. Those activities may require hedging activity by those entities involving,
directly or indirectly, the buying and selling of the Shares, which may have a negative impact
on the trading price of the Shares. All such activities could occur in Hong Kong and elsewhere
in the world and may result in the Syndicate Members and their affiliates holding long and/or
short positions in the Shares, in baskets of securities or indices including the Shares, in units
of funds that may purchase the Shares, or in derivatives related to any of the foregoing.
In relation to issues by Syndicate Members or their affiliates of any listed securities
having the Shares as their underlying securities, whether on the Stock Exchange or on any
other stock exchange, the rules of the stock exchange may require the issuer of those securities
(or one of its affiliates or agents) to act as a market maker or liquidity provider in the security,
and this will also result in hedging activity in the Shares in most cases.
All such activities may occur both during and after the end of the stabilizing period
described in the section headed “Structure of the Global Offering” in this prospectus. Such
activities may affect the market price or value of the Shares, the liquidity or trading volume
in the Shares and the volatility of the price of the Shares, and the extent to which this occurs
from day to day cannot be estimated.
It should be noted that when engaging in any of these activities, the Syndicate Members
will be subject to certain restrictions, including the following:
(a) the Syndicate Members (other than the Stabilizing Manager or any person acting for
it) must not, in connection with the distribution of the Offer Shares, effect any
transactions (including issuing or entering into any option or other derivative
transactions relating to the Offer Shares), whether in the open market or otherwise,
with a view to stabilizing or maintaining the market price of any of the Offer Shares
at levels other than those which might otherwise prevail in the open market; and
(b) the Syndicate Members must comply with all applicable laws and regulations,
including the market misconduct provisions of the SFO, including the provisions
prohibiting insider dealing, false trading, price rigging and stock market
manipulation.
Certain of the Syndicate Members or their respective affiliates have provided from time
to time, and expect to provide in the future, investment banking, lending and other services to
the Company and each of its affiliates for which such Syndicate Members or their respective
affiliates have received or will receive customary fees and commissions.
In addition, the Syndicate Members or their respective affiliates may provide financing to
investors to finance their subscriptions of Offer Shares in the Global Offering.
UNDERWRITING
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--- page 412 ---
THE GLOBAL OFFERING
The listing of the Shares on the Stock Exchange is sponsored by the Joint Sponsors. The
Joint Sponsors have made an application on behalf of the Company to the Listing Committee
of the Stock Exchange for the listing of, and permission to deal in, the Shares in issue and to
be issued as mentioned in this prospectus.
158,612,000 Offer Shares will initially be made available under the Global Offering
comprising:
(a) the Hong Kong Public Offering of initially 15,861,200 Shares (subject to
reallocation) in Hong Kong as described in the paragraph headed “— The Hong
Kong Public Offering” below; and
(b) the International Offering of initially 142,750,800 Shares (subject to reallocation,
the Offer Size Adjustment Option and the Over-allotment Option) (i) in the United
States solely to QIBs in reliance on Rule 144A or another exemption from, or in a
transaction not subject to, the registration requirements of the U.S. Securities Act
and (ii) outside the United States (including to professional and institutional
investors within Hong Kong) in offshore transactions in reliance on Regulation S, as
described in paragraph headed “— The International Offering” below.
Investors may either (i) apply for Hong Kong Offer Shares under the Hong Kong Public
Offering; or (ii) apply for or indicate an interest for International Offer Shares under the
International Offering, but may not do both.
The Offer Shares will represent approximately 6.8% of the total Shares in issue
immediately following the completion of the Global Offering, assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised. If the Over-allotment
Option is exercised in full, the Offer Shares (including Shares issued pursuant to the full
exercise of the Over-allotment Option) will represent approximately 7.7% of the total Shares
in issue (assuming the Offer Size Adjustment Option is not exercised at all) or approximately
8.8% of the total Shares in issue (assuming the Offer Size Adjustment Option is exercised in
full) immediately following the completion of the Global Offering.
References in this prospectus to applications, application monies or the procedure for
applications relate solely to the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
– 402 –


--- page 413 ---
THE HONG KONG PUBLIC OFFERING
Number of Offer Shares initially offered
The Company is initially offering 15,861,200 Shares for subscription by the public in
Hong Kong at the Offer Price, representing 10.0% of the total number of Offer Shares initially
available under the Global Offering. The number of Offer Shares initially offered under the
Hong Kong Public Offering, subject to any reallocation of Offer Shares between the
International Offering and the Hong Kong Public Offering, will represent approximately 0.7%
of the total Shares in issue immediately following the completion of the Global Offering
(assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised).
The Hong Kong Public Offering is open to members of the public in Hong Kong as well
as to institutional and professional investors. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate entities that regularly invest in shares and other
securities.
Completion of the Hong Kong Public Offering is subject to the conditions set out in the
paragraph headed “— Conditions of the Global Offering” below.
Allocation
Allocation of Offer Shares to investors under the Hong Kong Public Offering will be
based solely on the level of valid applications received under the Hong Kong Public Offering.
The basis of allocation may vary, depending on the number of Hong Kong Offer Shares validly
applied for by applicants. Such allocation could, where appropriate, consist of balloting, which
could mean that some applicants may receive a higher allocation than others who have applied
for the same number of Hong Kong Offer Shares, and those applicants who are not successful
in the ballot may not receive any Hong Kong Offer Shares.
For allocation purposes only, the total number of Hong Kong Offer Shares available under
the Hong Kong Public Offering (after taking into account any reallocation referred to below)
will be divided equally (to the nearest board lot and with any odd lots being allocated to Pool
A) into two pools: pool A and pool B. The Hong Kong Offer Shares in pool A will be allocated
on an equitable basis to applicants who have applied for Hong Kong Offer Shares with an
aggregate price of HK$5 million (excluding the brokerage, the SFC transaction levy, the AFRC
transaction levy and the Stock Exchange trading fee payable) or less. The Hong Kong Offer
Shares in pool B will be allocated on an equitable basis to applicants who have applied for
Hong Kong Offer Shares with an aggregate price of more than HK$5 million (excluding the
brokerage, the SFC transaction levy, the AFRC transaction levy and the Stock Exchange
trading fee payable) and up to the total value in pool B.
STRUCTURE OF THE GLOBAL OFFERING
– 403 –


--- page 414 ---
Investors should be aware that applications in pool A and applications in pool B may
receive different allocation ratios. If any Hong Kong Offer Shares in one (but not both) of the
pools are unsubscribed, such unsubscribed Hong Kong Offer Shares will be transferred to the
other pool to satisfy demand in that other pool and be allocated accordingly. For the purpose
of the immediately preceding paragraph only, the “price” for Hong Kong Offer Shares means
the price payable on application therefor (without regard to the Offer Price as finally
determined). Applicants can only receive an allocation of Hong Kong Offer Shares from either
pool A or pool B and not from both pools. Multiple or suspected multiple applications under
the Hong Kong Public Offering and any application for more than 7,930,400 Hong Kong Offer
Shares is liable to be rejected.
Reallocation
The allocation of the Offer Shares between the Hong Kong Public Offering and the
International Offering is subject to reallocation. Paragraph 4.2 of Practice Note 18 of the
Listing Rules requires a clawback mechanism to be put in place which would have the effect
of increasing the number of Offer Shares under the Hong Kong Public Offering to a certain
percentage of the total number of Offer Shares offered under the Global Offering if the
International Offer Shares are fully subscribed or oversubscribed and certain prescribed total
demand levels under the Hong Kong Public Offering are reached.
If the number of Offer Shares validly applied for under the Hong Kong Public Offering
represents (a) 15 times or more but less than 50 times, (b) 50 times or more but less than 100
times and (c) 100 times or more of the total number of Offer Shares initially available under
the Hong Kong Public Offering, then Offer Shares will be reallocated to the Hong Kong Public
Offering from the International Offering. As a result of such reallocation, the total number of
Offer Shares available under the Hong Kong Public Offering will be increased to 47,583,600
Offer Shares (in the case of (a)), 63,444,800 Offer Shares (in the case of (b)) and 79,306,000
Offer Shares (in the case of (c)), representing approximately 30%, approximately 40% and
approximately 50% of the total number of Offer Shares initially available under the Global
Offering, respectively (assuming the Offer Size Adjustment Option and the Over-allotment
Option are not exercised).
In each case, the additional Offer Shares reallocated to the Hong Kong Public Offering
will be allocated between pool A and pool B and the number of Offer Shares allocated to the
International Offering will be correspondingly reduced in such manner as the Overall
Coordinators deem appropriate.
In addition, the Overall Coordinators may allocate Offer Shares from the International
Offer Shares to the Hong Kong Public Offering to satisfy valid applications under the Hong
Kong Public Offering. In accordance with Chapter 4.14 of the Guide for New Listing
Applicants issued by the Stock Exchange, in the event that (i) the International Offer Shares
are undersubscribed and the Hong Kong Offer Shares are fully subscribed or oversubscribed
irrespective of the number of times; or (ii) the International Offer Shares are fully subscribed
or oversubscribed and the Hong Kong Offer Shares are fully subscribed or oversubscribed as
STRUCTURE OF THE GLOBAL OFFERING
– 404 –


--- page 415 ---
to less than 15 times of the number of Hong Kong Offer Shares initially available under the
Hong Kong Public Offering, the maximum total number of Offer Shares that may be allocated
to the Hong Kong Public Offering following such reallocation shall be not more than double
the initial allocation to the Hong Kong Public Offering (i.e. 31,722,400 Shares) and the final
Offer Price shall be fixed at the bottom end of the indicative price range (i.e. HK$8.68 per
Offer Share).
If the Hong Kong Public Offering is not fully subscribed, the Overall Coordinators may
reallocate all or any unsubscribed Hong Kong Offer Shares to the International Offering, in
such proportions as the Overall Coordinators deem appropriate.
Applications
Each applicant under the Hong Kong Public Offering will be required to give an
undertaking and confirmation in the application submitted by him that he and any person(s) for
whose benefit he is making the application has not applied for or taken up, or indicated an
interest for, and will not apply for or take up, or indicate an interest for, any International Offer
Shares under the International Offering. Such applicant’s application is liable to be rejected if
such undertaking and/or confirmation is/are breached and/or untrue (as the case may be) or if
he has been or will be placed or allocated International Offer Shares under the International
Offering.
Applicants under the Hong Kong Public Offering may be required to pay, on application
(subject to application channels), the maximum Offer Price of HK$9.94 per Offer Share in
addition to the brokerage, the SFC transaction levy, the AFRC transaction levy and the Stock
Exchange trading fee payable on each Offer Share, amounting to a total of HK$4,016.10 for
one board lot of 400 Shares. If the Offer Price, as finally determined in the manner described
in the paragraph headed “— Pricing and Allocation” below, is less than the maximum Offer
Price of HK$9.94 per Offer Share, appropriate refund payments (including the brokerage, the
SFC transaction levy, the AFRC transaction levy and the Stock Exchange trading fee
attributable to the surplus application monies) will be made to successful applicants, without
interest. Further details are set out in the section headed “How to Apply for Hong Kong Offer
Shares” in this prospectus.
STRUCTURE OF THE GLOBAL OFFERING
– 405 –


--- page 416 ---
THE INTERNATIONAL OFFERING
Number of Offer Shares initially offered
The International Offering will consist of an offering of initially 142,750,800 Shares,
representing 90.0% of the total number of Offer Shares initially available under the Global
Offering (subject to reallocation, the Offer Size Adjustment Option and the Over-allotment
Option). The number of Offer Shares initially offered under the International Offering, subject
to any reallocation of Offer Shares between the International Offering and the Hong Kong
Public Offering, will represent approximately 6.1% of the total Shares in issue immediately
following the completion of the Global Offering (assuming the Offer Size Adjustment Option
and the Over-allotment Option are not exercised).
Allocation
The International Offering will include selective marketing of Offer Shares to QIBs in the
United States as well as institutional and professional investors and other investors anticipated
to have a sizable demand for such Offer Shares in Hong Kong and other jurisdictions outside
the United States in reliance on Regulation S. Professional investors generally include brokers,
dealers, companies (including fund managers) whose ordinary business involves dealing in
shares and other securities and corporate entities that regularly invest in shares and other
securities. Allocation of Offer Shares pursuant to the International Offering will be effected in
accordance with the “book-building” process described in the paragraph headed “— Pricing
and Allocation” below and based on a number of factors, including the level and timing of
demand, the total size of the relevant investor’s invested assets or equity assets in the relevant
sector and whether or not it is expected that the relevant investor is likely to buy further Offer
Shares and/or hold or sell its Offer Shares after the Listing. Such allocation is intended to result
in a distribution of the Offer Shares on a basis which would lead to the establishment of a solid
professional and institutional shareholder base to the benefit of the Group and the Shareholders
as a whole.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may require
any investor who has been offered Offer Shares under the International Offering and who has
made an application under the Hong Kong Public Offering to provide sufficient information to
the Overall Coordinators so as to allow them to identify the relevant applications under the
Hong Kong Public Offering and to ensure that they are excluded from any allocation of Offer
Shares under the Hong Kong Public Offering.
Reallocation
The total number of Offer Shares to be issued pursuant to the International Offering may
change as a result of the clawback arrangement described in the paragraph headed “— The
Hong Kong Public Offering — Reallocation” above, the exercise of the Offer Size Adjustment
Option and the Over-allotment Option in whole or in part and/or any reallocation of
unsubscribed Offer Shares originally included in the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 417 ---
OFFER SIZE ADJUSTMENT OPTION
In order to provide flexibility for the Overall Coordinators to increase the number of
Offer Shares available for purchase under the International Offering to cover additional market
demand, the Company is expected to grant to the Overall Coordinators the Offer Size
Adjustment Option, exercisable by the Overall Coordinators at their absolute discretion (for
themselves and on behalf of the International Underwriters) on or before the second business
day prior to the Listing Date and will lapse immediately thereafter, to require the Company to
allot and issue up to an aggregate of 23,791,600 additional Shares, representing approximately
15% of the initial number of Offer Shares offered under the Global Offering, at the same price
per Share under the International Offering to cover any excess demand in the International
Offering. The dilution effect of the Offer Size Adjustment Option (assuming the Over-
allotment Option is not exercised) is set out below:
Number of Shares
issued under the Global
Offering before the
exercise of the Offer
Size Adjustment Option
(“Original Subscribers”)
Approximate percentage
of total issued share
capital held by the
Original Subscribers
before the exercise of
the Offer Size
Adjustment Option
Number of Shares
issued under the Global
Offering after the
exercise of the Offer
Size Adjustment Option
Approximate percentage
of total issued share
capital held by the
Original Subscribers
after the exercise of
the Offer Size
Adjustment Option
158,612,000 6.80% 182,403,600 6.73%
The Offer Size Adjustment Option will not be associated with any price stabilization
activities of the Shares in the secondary market after the listing of our Shares on the Stock
Exchange and will not be subject to the Securities and Futures (Price Stabilizing) Rules of the
SFO (Chapter 571W of the Laws of Hong Kong). The Offer Size Adjustment Option will be
in addition to the Over-allotment Option.
If the Offer Size Adjustment Option is exercised in full, the additional net proceeds
received from the placing of the additional Shares allotted and issued will be allocated in
accordance with the allocations as disclosed in the section headed “Future Plans and Use of
Proceeds” in this prospectus, on a pro rata basis.
The Company will disclose in the allotment results announcement whether and to what
extent the Offer Size Adjustment Option has been exercised, and will confirm in the
announcement that, where the Offer Size Adjustment Option had not been exercised by then,
the Offer Size Adjustment Option has lapsed and cannot be exercised on any future date.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 418 ---
OVER-ALLOTMENT OPTION
In connection with the Global Offering, the Company is expected to grant the
Over-allotment Option to the International Underwriters.
Pursuant to the Over-allotment Option, the International Underwriters will have the right,
exercisable by the Overall Coordinators (on behalf of the International Underwriters) at any
time from the Listing Date until 30 days after the last day for lodging applications under the
Hong Kong Public Offering, to require the Company to issue up to an aggregate of 27,360,400
additional Shares (representing approximately 15% of the Offer Shares offered under the
Global Offering assuming the Offer Size Adjustment Option is exercised in full) or up to an
aggregate of 23,791,600 additional Shares (representing approximately 15% of the Offer
Shares initially offered under the Global Offering assuming the Offer Size Adjustment Option
is not exercised), at the Offer Price under the International Offering to cover over-allocations
in the International Offering, if any.
If the Over-allotment Option is exercised in full, the additional Offer Shares to be issued
pursuant thereto will represent approximately 1.1% of the total Shares in issue immediately
following the completion of the Global Offering (assuming the Offer Size Adjustment Option
is exercised in full) or 1.0% of the total Shares in issue immediately following the completion
of the Global Offering (assuming the Offer Size Adjustment Option is not exercised). If the
Over-allotment Option is exercised, an announcement will be made.
STABILIZATION
Stabilization is a practice used by underwriters in some markets to facilitate the
distribution of securities. To stabilize, the underwriters may bid for, or purchase, the securities
in the secondary market during a specified period of time, to retard and, if possible, prevent
a decline in the initial public market price of the securities below the offer price. Such
transactions may be effected in all jurisdictions where it is permissible to do so, in each case
in compliance with all applicable laws and regulatory requirements, including those of Hong
Kong. In Hong Kong, the price at which stabilization is effected is not permitted to exceed the
offer price.
In connection with the Global Offering, the Stabilizing Manager (or any person acting for
it), on behalf of the Underwriters, may over-allocate or effect transactions with a view to
stabilizing or supporting the market price of the Shares at a level higher than that which might
otherwise prevail for a limited period after the Listing Date. However, there is no obligation
on the Stabilizing Manager (or any person acting for it) to conduct any such stabilizing action.
Such stabilizing action, if taken, (a) will be conducted at the absolute discretion of the
Stabilizing Manager (or any person acting for it) and in what the Stabilizing Manager
reasonably regards as the best interest of the Company, (b) may be discontinued at any time
and (c) is required to be brought to an end within 30 days after the last day for lodging
applications under the Hong Kong Public Offering.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 419 ---
Stabilization action permitted in Hong Kong pursuant to the Securities and Futures (Price
Stabilizing) Rules of the SFO includes (a) over-allocating for the purpose of preventing or
minimizing any reduction in the market price of the Shares, (b) selling or agreeing to sell the
Shares so as to establish a short position in them for the purpose of preventing or minimizing
any reduction in the market price of the Shares, (c) purchasing, or agreeing to purchase, the
Shares pursuant to the Over-allotment Option in order to close out any position established
under paragraphs (a) or (b) above, (d) purchasing, or agreeing to purchase, any of the Shares
for the sole purpose of preventing or minimizing any reduction in the market price of the
Shares, (e) selling or agreeing to sell any Shares in order to liquidate any position established
as a result of those purchases, and (f) offering or attempting to do anything as described in
paragraphs (b), (c), (d) or (e) above.
Specifically, prospective applicants for and investors in the Offer Shares should note that:
(a) as a result of effecting transactions to stabilize or maintain the market price of the
Shares, the Stabilizing Manager (or any person acting for it) may, in connection with
the stabilizing action, maintain a long position in the Shares;
(b) there is no certainty as to the extent to which and the time or period for which the
Stabilizing Manager (or any person acting for it) will maintain such a long position;
(c) liquidation of any such long position by the Stabilizing Manager (or any person
acting for it) and selling in the open market may have an adverse impact on the
market price of the Shares;
(d) no stabilizing action can be taken to support the price of the Shares for longer than
the stabilization period, which will begin on the Listing Date, and is expected to
expire on Sunday, March 9, 2025, being the 30th day after the last day for lodging
applications under the Hong Kong Public Offering. After this date, when no further
stabilizing action may be taken, demand for the Shares, and therefore the price of
the Shares, could fall;
(e) the price of the Shares cannot be assured to stay at or above the Offer Price by the
taking of any stabilizing action; and
(f) stabilizing bids or transactions effected in the course of the stabilizing action may
be made at any price at or below the Offer Price and can, therefore, be done at a
price below the price paid by applicants for, or investors in, the Offer Shares.
The Company will ensure or procure that an announcement in compliance with the
Securities and Futures (Price Stabilizing) Rules of the SFO will be made within seven days of
the expiration of the stabilization period.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 420 ---
Over-Allocation
Following any over-allocation of Shares in connection with the Global Offering, the
Stabilizing Manager (or any person acting for it) may cover such over-allocations by, among
other methods, exercising the Over-allotment Option in full or in part, by using Shares
purchased by the Stabilizing Manager (or any person acting for it) in the secondary market at
prices that do not exceed the Offer Price or through the Stock Borrowing Agreement as detailed
below or a combination of these means.
STOCK BORROWING AGREEMENT
In order to facilitate the settlement of over-allocations, if any, in connection with the
Global Offering, the Stabilizing Manager (or any person acting for it) may choose to borrow
up to an aggregate of 27,360,400 Shares (representing approximately 15% of the Offer Shares
offered under the Global Offering assuming the Offer Size Adjustment Option is exercised in
full) or up to an aggregate of 23,791,600 Shares (representing approximately 15% of the Offer
Shares initially offered under the Global Offering assuming the Offer Size Adjustment Option
is not exercised) from Modern Leaves Limited, pursuant to the stock borrowing agreement,
which is expected to be entered into between the Stabilizing Manager (or any person acting for
it) and Modern Leaves Limited on or about the Price Determination Date (the “ Stock
Borrowing Agreement ”).
If the Stock Borrowing Agreement with Modern Leaves Limited is entered into, the
borrowing of Shares will only be effected by the Stabilizing Manager (or any person acting for
it) for the settlement of over-allocations in the International Offering and such borrowing
arrangement is not subject to the restrictions of Rule 10.07(1)(a) of the Listing Rules, provided
that the requirements set out in Rule 10.07(3) of the Listing Rules, being that the Stock
Borrowing Agreement will be for the sole purpose of covering any short position prior to the
exercise of the Over-allotment Option in connection with the International Offering, are
complied with.
The same number of Shares so borrowed must be returned to Modern Leaves Limited or
its nominees, as the case may be, on or before the third business day following the earlier of
(a) the last day for exercising the Over-allotment Option and (b) the day on which the
Over-allotment Option is exercised in full.
The Shares borrowing arrangement described above will be effected in compliance with
all applicable laws, rules and regulatory requirements. No payment will be made to Modern
Leaves Limited by the Stabilizing Manager (or any person acting for it) in relation to such
Shares borrowing arrangement.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 421 ---
PRICING AND ALLOCATION
Pricing for the Offer Shares for the purpose of the various offerings under the Global
Offering will be fixed on the Price Determination Date, which is expected to be on or about
Monday, February 10, 2025 and, in any event, no later than 12:00 noon on Monday,
February 10, 2025, by agreement between the Overall Coordinators (for themselves and on
behalf of the Underwriters) and the Company, and the number of Offer Shares to be allocated
under the various offerings will be determined shortly thereafter.
The Offer Price will not be more than HK$9.94 per Offer Share and is expected to be not
less than HK$8.68 per Offer Share, unless otherwise announced, as further explained below.
Applicants under the Hong Kong Public Offering may be required to pay, on application
(subject to application channels), the maximum Offer Price of HK$9.94 per Offer Share plus
brokerage of 1.0%, SFC transaction levy of 0.0027%, AFRC transaction levy of 0.00015% and
Stock Exchange trading fee of 0.00565%, amounting to a total of HK$4,016.10 for one board
lot of 400 Shares.
Prospective investors should be aware that the Offer Price to be determined on the Price
Determination Date may be, but is not expected to be, lower than the lower end of the
price range stated in this prospectus.
The International Underwriters will be soliciting from prospective investors indications
of interest in acquiring Offer Shares in the International Offering. Prospective professional and
institutional investors will be required to specify the number of Offer Shares under the
International Offering they would be prepared to acquire either at different prices or at a
particular price. This process, known as “book-building,” is expected to continue up to, and to
cease on or about, the last day for lodging applications under the Hong Kong Public Offering.
The Overall Coordinators (for themselves and on behalf of the Underwriters) may, where
they deem appropriate, based on the level of interest expressed by prospective investors during
the book-building process in respect of the International Offering, and with the consent of the
Company, reduce the number of Offer Shares offered and/or the Offer Price range below that
stated in this prospectus at any time on or prior to the morning of the last day for lodging
applications under the Hong Kong Public Offering. In such a case, the Company will, as soon
as practicable following the decision to make such reduction, and in any event not later than
the morning of the last day for lodging applications under the Hong Kong Public Offering,
cause to be published on the websites of the Company and the Stock Exchange at
www.gumingnc.com and www.hkexnews.hk , respectively, an announcement to cancel the
Global Offering. The Company will then relaunch the offer at the revised number of Offer
Shares and/or the revised Offer Price with a supplemental or new prospectus as required under
Rule 11.13 of the Listing Rules, and complete the requisite settlement processes on the FINI
platform afresh. The Global Offering must first be canceled and subsequently relaunched on
the FINI platform pursuant to the supplemental or new prospectus. In the absence of any such
announcement or supplemental or new prospectus, the number of Offer Shares will not be
reduced and/or the Offer Price, if agreed upon between the Company and the Overall
Coordinators (for themselves and on behalf of the Underwriters), will under no circumstances
be set outside the Offer Price range stated in this Prospectus.
STRUCTURE OF THE GLOBAL OFFERING
–4 1 1–


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Before submitting applications for the Hong Kong Offer Shares, applicants should
therefore have regard to the possibility that any announcement of a reduction in the number of
Offer Shares and/or the Offer Price range may not be made until the last day for lodging
applications under the Hong Kong Public Offering.
The final Offer Price, the level of indications of interest in the International Offering, the
level of applications in the Hong Kong Public Offering, the basis of allocations of the Hong
Kong Offer Shares and the results of allocations in the Hong Kong Public Offering are
expected to be made available through a variety of channels in the manner described in the
section headed “How to Apply for Hong Kong Offer Shares — B. Publication of Results” in
this prospectus.
UNDERWRITING
The Hong Kong Public Offering is fully underwritten by the Hong Kong Underwriters
under the terms and conditions of the Hong Kong Underwriting Agreement and is subject to,
among other things, the Overall Coordinators (for themselves and on behalf of the
Underwriters) and the Company agreeing on the Offer Price.
The Company and the Warranting Shareholders expect to enter into the International
Underwriting Agreement relating to the International Offering on the Price Determination
Date.
These underwriting arrangements, including the Underwriting Agreements, are
summarized in the section headed “Underwriting” in this prospectus.
CONDITIONS OF THE GLOBAL OFFERING
Acceptance of all applications for Offer Shares will be conditional on:
(a) the Listing Committee granting approval for the listing of, and permission to deal in,
the Shares in issue and to be issued pursuant to the Global Offering on the Main
Board of the Stock Exchange and such approval not subsequently having been
withdrawn or revoked prior to the Listing Date;
(b) the Offer Price having been agreed between the Overall Coordinators (for
themselves on behalf of the Underwriters) and the Company;
(c) the execution and delivery of the International Underwriting Agreement on or about
the Price Determination Date; and
STRUCTURE OF THE GLOBAL OFFERING
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--- page 423 ---
(d) the obligations of the Hong Kong Underwriters under the Hong Kong Underwriting
Agreement and the obligations of the International Underwriters under the
International Underwriting Agreement becoming and remaining unconditional and
not having been terminated in accordance with the terms of the respective
agreements,
in each case on or before the dates and times specified in the respective Underwriting
Agreements (unless and to the extent such conditions are validly waived on or before such
dates and times) and, in any event, not later than the date which is 30 days after the date of
this prospectus.
If, for any reason, the Offer Price is not agreed between the Overall Coordinators (for
themselves and on behalf of the Underwriters) on or before 12:00 noon on Monday, February
10, 2025 the Global Offering will not proceed and will lapse.
The consummation of each of the Hong Kong Public Offering and the International
Offering is conditional upon, among other things, the other offering becoming unconditional
and not having been terminated in accordance with its terms.
If the above conditions are not fulfilled or waived prior to the dates and times specified,
the Global Offering will lapse and the Stock Exchange will be notified immediately. Notice of
the lapse of the Hong Kong Public Offering will be published by the Company on the websites
of the Company and the Stock Exchange at www.gumingnc.com and www.hkexnews.hk ,
respectively, on the next day following such lapse. In such a situation, all application monies
will be returned, without interest, on the terms set out in the section headed “How to Apply for
Hong Kong Offer Shares — D. Despatch/Collection of Share Certificates and Refund of
Application Monies” in this prospectus. In the meantime, all application monies will be held
in separate bank account(s) with the receiving bank or other bank(s) in Hong Kong licensed
under the Banking Ordinance (Chapter 155 of the Laws of Hong Kong).
Share certificates for the Offer Shares will only become valid at 8:00 a.m. Wednesday,
February 12, 2025, provided that the Global Offering has become unconditional in all respects
at or before that time.
DEALINGS IN THE SHARES
Assuming that the Hong Kong Public Offering becomes unconditional at or before 8:00
a.m. in Hong Kong on Wednesday, February 12, 2025, it is expected that dealings in the Shares
on the Stock Exchange will commence at 9:00 a.m. on Wednesday, February 12, 2025.
The Shares will be traded in board lots of 400 Shares each and the stock code of the
Shares will be 01364.
STRUCTURE OF THE GLOBAL OFFERING
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--- page 424 ---
IMPORTANT NOTICE TO INVESTORS
OF HONG KONG OFFER SHARES
FULLY ELECTRONIC APPLICATION PROCESS
We have adopted a fully electronic application process for the Hong Kong
Public Offering and below are the procedures for application.
This prospectus is available at the website of the Stock Exchange at
www.hkexnews.hk under the “HKEXnews > New Listings > New Listing
Information” section, and our website at www.gumingnc.com .
The contents of this prospectus are identical to the prospectus as registered with the
Registrar of Companies in Hong Kong pursuant to Section 342C of the Companies
(Winding Up and Miscellaneous Provisions) Ordinance.
A. APPLICATION FOR HONG KONG OFFER SHARES
1. Who Can Apply
Y ou can apply for Hong Kong Offer Shares if you or the person(s) for whose benefit you
are applying for:
 are 18 years of age or older;
 have a Hong Kong address (for the HK eIPO White Form service only) ;
 are outside the United States (within the meaning of Regulation S) or are a person
described in paragraph (h)(3) of Rule 902 of Regulation S; and
 are not a legal or natural person of the PRC (except qualified domestic institutional
investors).
Unless permitted by the Listing Rules or any relevant waivers that have been granted by
the Stock Exchange, you cannot apply for any Hong Kong Offer Shares if you or the person(s)
for whose benefit you are applying for:
 are an existing Shareholder of the Company and/or any of our subsidiaries; or
 are a director or chief executive of the Company and/or any of our subsidiaries;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 425 ---
 are a close associate of any of the above persons; or
 have been allocated or have applied for any International Offer Shares or otherwise
participate in the International Offering.
2. Application Channels
The Hong Kong Public Offering period will begin at 9:00 a.m. on Tuesday,
February 4, 2025 and end at 12:00 noon on Friday, February 7, 2025 (Hong Kong time).
To apply for Hong Kong Offer Shares, you may use one of the following application
channels:
Application
Channel Platform Target Investors Application Time
HK eIPO
White
Form
service /H1118/H1118/H1118
www.hkeipo.hk
Investors who would like
to receive a physical
Share certificate. Hong
Kong Offer Shares
successfully applied
for will be allotted and
issued in your own
name.
From 9:00 a.m. on
Tuesday, February 4,
2025 to 11:30 a.m. on
Friday, February 7,
2025, Hong Kong time.
The latest time for
completing full
payment of application
monies will be 12:00
noon on Friday,
February 7, 2025, Hong
Kong time.
HKSCC
EIPO
channel /H1118/H1118
Y our broker or custodian who is
a HKSCC Participant will
submit an EIPO application on
your behalf through HKSCC’s
FINI system in accordance
with your instruction
Investors who would not
like to receive a
physical Share
certificate. Hong Kong
Offer Shares
successfully applied
for will be allotted and
issued in the name of
HKSCC Nominees,
deposited directly into
CCASS and credited to
your designated
HKSCC Participant’s
stock account.
Contact your broker or
custodian for the
earliest and latest time
for giving such
instructions, as this may
vary by broker or
custodian.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 415 –


--- page 426 ---
The HK eIPO White Form service and the HKSCC EIPO channel are facilities subject
to capacity limitations and potential service interruptions and you are advised not to wait until
the last day of the application period to apply for Hong Kong Offer Shares.
For those applying through the HK eIPO White Form service, once you complete
payment in respect of any application instructions given by you or for your benefit through the
HK eIPO White Form service to make an application for Hong Kong Offer Shares, an actual
application shall be deemed to have been made. If you are a person for whose benefit the
electronic application instructions are given, you shall be deemed to have declared that only
one set of electronic application instructions has been given for your benefit. If you are an
agent for another person, you shall be deemed to have declared that you have only given one
set of electronic application instructions for the benefit of the person for whom you are an
agent and that you are duly authorized to give those instructions as an agent.
For the avoidance of doubt, giving an application instruction under the HK eIPO White
Form service more than once and obtaining different payment reference numbers without
effecting full payment in respect of a particular reference number will not constitute an actual
application.
If you apply through the HK eIPO White Form service, you are deemed to have
authorized the HK eIPO White Form Service Provider to apply on the terms and conditions
in this prospectus, as supplemented and amended by the terms and conditions of the HK eIPO
White Form service.
By instructing your broker or custodian to apply for the Hong Kong Offer Shares on
your behalf through the HKSCC EIPO channel, you (and, if you are joint applicants, each of
you jointly and severally) are deemed to have instructed and authorized HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant HKSCC Participants) to apply for Hong
Kong Offer Shares on your behalf and to do on your behalf all the things stated in this
prospectus and any supplement to it.
For those applying through the HKSCC EIPO channel, an actual application will be
deemed to have been made for any application instructions given by you or for your benefit to
HKSCC (in which case an application will be made by HKSCC Nominees on your behalf)
provided such application instruction has not been withdrawn or otherwise invalidated before
the closing time of the Hong Kong Public Offering.
HKSCC Nominees will only be acting as a nominee for you and neither HKSCC nor
HKSCC Nominees shall be liable to you or any other person in respect of any actions taken by
HKSCC or HKSCC Nominees on your behalf to apply for Hong Kong Offer Shares or for any
breach of the terms and conditions of this prospectus.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 416 –


--- page 427 ---
3. Information Required to Apply
Y ou must provide the following information with your application:
For Individual Applicants For Corporate Applicants
▪ Full name(s) (2) as shown on your
identity document
▪ Identity document’s issuing country or
jurisdiction
▪ Identity document type, with order of
priority:
i. HKID card; or
ii. National identification document;
or
iii. Passport; and
▪ Identity document number
▪ Full name(s)
(2) as shown on your
identity document
▪ Identity document’s issuing country or
jurisdiction
▪ Identity document type, with order of
priority:
i. LEI registration document; or
ii. Certificate of incorporation; or
iii. Business registration certificate; or
iv. Other equivalent document; and
▪ Identity document number
Notes:
(1) If you are applying through the HK eIPO White Form service, you are required to provide a valid e-mail
address, a contact telephone number and a Hong Kong address. Y ou are also required to declare that the
identity information provided by you follows the requirements as described in Note (2) below. In particular,
where you cannot provide a HKID number, you must confirm that you do not hold a HKID card. The number
of joint applicants may not exceed four. If you are a firm, the applicant must be in the individual members’
names.
(2) The applicant’s full name as shown on their identity document must be used. If an applicant’s identity
document contains both an English and Chinese name, both English and Chinese names must be used.
Otherwise, either English or Chinese names will be accepted. The order of priority of the applicant’s identity
document type must be strictly followed and where an individual applicant has a valid HKID card, the HKID
number must be used when making an application to subscribe for shares in a public offer. Similarly for
corporate applicants, a LEI number must be used if an entity has a LEI certificate.
(3) If the applicant is a trustee, the client identification data (“ CID”) of the trustee, as set out above, will be
required. If the applicant is an investment fund (i.e. a collective investment scheme, or CIS), the CID of the
asset management company or the individual fund, as appropriate, which has opened a trading account with
the broker will be required, as above.
(4) The maximum number of joint account holders on FINI is capped at 4 in accordance with market practice.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 428 ---
(5) If you are applying as a nominee, you must provide: (i) the full name (as shown on the identity document),
the identity document’s issuing country or jurisdiction, the identity document type; and (ii), the identity
document number, for each of the beneficial owners or, in the case(s) of joint beneficial owners, for each joint
beneficial owner. If you do not include this information, the application will be treated as being made for your
benefit.
(6) If you are applying as an unlisted company and (i) the principal business of that company is dealing in
securities; and (ii) you exercise statutory control over that company, then the application will be treated as
being for your benefit and you should provide the required information in your application as stated above.
“Unlisted company” means a company with no equity securities listed on the Stock Exchange or any other
stock exchange.
“Statutory control” means you:
 control the composition of the board of directors of the company;
 control more than half of the voting power of the company; or
 hold more than half of the issued share capital of the company (not counting any part of it which carries
no right to participate beyond a specified amount in a distribution of either profits or capital).
For those applying through the HKSCC EIPO channel, and making an application under
a power of attorney, we and the Overall Coordinators, as our agent, have discretion to consider
whether to accept it on any conditions we think fit, including evidence of the attorney’s
authority.
Failing to provide any required information may result in your application being rejected.
4. Permitted Number of Hong Kong Offer Shares for Application
Board lot size /H1118/H1118/H1118/H1118/H1118/H1118/H1118: 400 Hong Kong Offer Shares
Permitted number of
Hong Kong Offer
Shares for
application and
amount payable on
application/
successful
allotment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
: Hong Kong Offer Shares are available for application in
specified board lot sizes only. Please refer to the amount
payable associated with each specified board lot size in
the table below.
The maximum Offer Price is HK$9.94 per Share.
If you are applying through the HKSCC EIPO channel,
you are required to pre-fund your application based on
the amount specified by your broker or custodian ,a s
determined based on the applicable laws and regulations
in Hong Kong.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 418 –


--- page 429 ---
By instructing your broker or custodian to apply for the
Hong Kong Offer Shares on your behalf through the
HKSCC EIPO channel, you (and, if you are joint
applicants, each of you jointly and severally) are deemed
to have instructed and authorized HKSCC to cause
HKSCC Nominees (acting as nominee for the relevant
HKSCC Participants) to arrange payment of the final
Offer Price, brokerage, SFC transaction levy, the Stock
Exchange trading fee and the AFRC transaction levy by
debiting the relevant nominee bank account at the
designated bank for your broker or custodian.
If you are applying through the HK eIPO White Form
service, you may refer to the table below for the amount
payable for the number of Shares you have selected. Y ou
must pay the respective maximum amount payable on
application in full upon application for Hong Kong Offer
Shares.
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
No. of
Hong Kong
Offer Shares
applied for
Maximum
Amount
payable (2) on
application/
successful
allotment
HK$ HK$ HK$ HK$
400 4,016.10 8,000 80,321.96 70,000 702,817.14 900,000 9,036,220.41
800 8,032.19 10,000 100,402.45 80,000 803,219.59 1,000,000 10,040,244.90
1,200 12,048.29 12,000 120,482.94 90,000 903,622.03 2,000,000 20,080,489.80
1,600 16,064.39 14,000 140,563.43 100,000 1,004,024.49 3,000,000 30,120,734.70
2,000 20,080.49 16,000 160,643.92 200,000 2,008,048.98 4,000,000 40,160,979.60
2,400 24,096.59 18,000 180,724.41 300,000 3,012,073.46 5,000,000 50,201,224.50
2,800 28,112.68 20,000 200,804.90 400,000 4,016,097.95 6,000,000 60,241,469.40
3,200 32,128.79 30,000 301,207.35 500,000 5,020,122.46 7,000,000 70,281,714.30
3,600 36,144.88 40,000 401,609.80 600,000 6,024,146.95 7,930,400
(1) 79,623,158.15
4,000 40,160.98 50,000 502,012.25 700,000 7,028,171.44
6,000 60,241.47 60,000 602,414.69 800,000 8,032,195.92
Notes:
(1) Maximum number of Hong Kong Offer Shares you may apply for and this is approximately 50% of the Hong
Kong Offer Shares initially offered.
(2) The amount payable is inclusive of brokerage, SFC transaction levy, the Stock Exchange trading fee and AFRC
transaction levy. If your application is successful, brokerage will be paid to the Exchange Participants (as
defined in the Listing Rules) or to the HK eIPO White Form Service Provider (for applications made through
the application channel of the HK eIPO White Form Service Provider) while the SFC transaction levy, the
Stock Exchange trading fee and the AFRC transaction levy will be paid to the SFC, the Stock Exchange and
the AFRC, respectively.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 430 ---
5. Multiple Applications Prohibited
Y ou or your joint applicant(s) shall not make more than one application for your own
benefit, except where you are a nominee and provide the information of the underlying investor
in your application as required under the paragraph headed “— A. Application for Hong Kong
Offer Shares — 3. Information Required to Apply” in this section. If you are suspected of
submitting or cause to submit more than one application, all of your applications will be
rejected.
Multiple applications made either through (i) the HK eIPO White Form service, (ii)
HKSCC EIPO channel, or (iii) both channels concurrently are prohibited and will be rejected.
If you have made an application through the HK eIPO White Form service or HKSCC EIPO
channel, you or the person(s) for whose benefit you have made the application shall not apply
further for any Offer Shares in the Global Offering.
The Hong Kong Share Registrar would record all applications into its system and identify
suspected multiple applications with identical names and identification document numbers
according to the Best Practice Note on Treatment of Multiple/Suspected Multiple Applications
issued by the Federation of Share Registrars Limited.
Since applications are subject to personal information collection statements,
identification document numbers displayed are redacted.
6. Terms and Conditions of An Application
By applying for Hong Kong Offer Shares through the HK eIPO White Form service or
HKSCC EIPO channel, you (or as the case may be, HKSCC Nominees will do the following
things on your behalf):
(i) undertake to execute all relevant documents and instruct and authorise us and/or the
Overall Coordinators, as our agents, to execute any documents for you and to do on
your behalf all things necessary to register any Hong Kong Offer Shares allocated
to you in your name or in the name of HKSCC Nominees as required by the Articles
of Association, and (if you are applying through the HKSCC EIPO channel) to
deposit the allotted Hong Kong Offer Shares directly into CCASS for the credit of
your designated HKSCC Participant’s stock account on your behalf;
(ii) confirm that you have read and understand the terms and conditions and application
procedures set out in this prospectus and the designated website of the HK eIPO
White Form service (or as the case may be, the agreement you entered into with
your broker or custodian), and agree to be bound by them;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 431 ---
(iii) (if you are applying through the HKSCC EIPO channel) agree to the arrangements,
undertakings and warranties under the participant agreement between your broker or
custodian and HKSCC and observe the General Rules of HKSCC and the HKSCC
Operational Procedures for giving application instructions to apply for Hong Kong
Offer Shares;
(iv) confirm that you are aware of the restrictions on offers and sales of shares set out
in this prospectus and they do not apply to you, or the person(s) for whose benefit
you have made the application;
(v) confirm that you have read this prospectus and any supplement to it and have relied
only on the information and representations contained therein in making your
application (or as the case may be, causing your application to be made) and will not
rely on any other information or representations;
(vi) agree that the Relevant Persons
1, the Hong Kong Share Registrar and HKSCC will
not be liable for any information and representations not in this prospectus and any
supplement to it;
(vii) undertake and confirm that you or the person(s) for whose benefit you have made
the application have not applied for or taken up, or indicated an interest for, and will
not apply for or take up, or indicate an interest for, any International Offer Shares
nor participated in the International Offering;
(viii) agree to disclose the details of your application and your personal data and any other
personal data which may be required about you and the person(s) for whose benefit
you have made the application to us, the Relevant Persons, the Hong Kong Share
Registrar, the receiving bank, HKSCC, HKSCC Nominees, the Stock Exchange, the
SFC and any other statutory regulatory or governmental bodies or otherwise as
required by laws, rules or regulations, for the purposes under the paragraph headed
“— G. Personal Data — 3. Purposes and 4. Transfer of personal data” in this section;
(ix) agree (without prejudice to any other rights which you may have once your
application (or as the case may be, HKSCC Nominees’ application) has been
accepted) that you will not rescind it because of an innocent misrepresentation;
1 Relevant Persons would include the Joint Sponsors, the Overall Coordinators, the Joint Global Coordinators,
the Joint Bookrunners, the Joint Lead Managers, the Underwriters, the Capital Market Intermediaries, any of
their respective directors, officers, employees, partners, agents, advisers and any other parties involved in the
Global Offering.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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(x) agree that subject to Section 44A(6) of the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, any application made by you or HKSCC
Nominees on your behalf cannot be revoked once it is accepted, which will be
evidenced by the notification of the result of the ballot by the Hong Kong Share
Registrar by way of publication of the results at the time and in the manner as
specified in the paragraph headed “— B. Publication of Results” in this section;
(xi) confirm that you are aware of the situations specified in the paragraph headed “—
C. Circumstances In Which Y ou Will Not Be Allocated Hong Kong Offer Shares” in
this section;
(xii) agree that your application or HKSCC Nominees’ application, any acceptance of it
and the resulting contract will be governed by and construed in accordance with the
laws of Hong Kong;
(xiii) represent, warrant and undertake that (a) you understand that the Hong Kong Offer
Shares have not been and will not be registered under the U.S. Securities Act and (b)
you and any person for whose benefit you are applying for the Hong Kong Offer
Shares are outside the United States (within the meaning of Regulation S) or are a
person described in paragraph (h)(3) of Rule 902 of Regulation S;
(xiv) agree to comply with the Companies Ordinance, the Companies (Winding Up and
Miscellaneous Provisions) Ordinance, our Memorandum and Articles of
Association, the Cayman Companies Act and laws of any place outside Hong Kong
that apply to your application and that neither we nor the Relevant Persons will
breach any law inside and/or outside Hong Kong as a result of the acceptance of
your offer to purchase, or any action arising from your rights and obligations under
the terms and conditions contained in this prospectus;
(xv) confirm that (a) your application or HKSCC Nominees’ application on your behalf
is not financed directly or indirectly by the Company, any of the directors, chief
executives, substantial shareholder(s) or existing shareholder(s) of the Company or
any of its subsidiaries or any of their respective close associates; and (b) you are not
accustomed or will not be accustomed to taking instructions from the Company, any
of the directors, chief executives, substantial shareholder(s) or existing
shareholder(s) of the Company or any of its subsidiaries or any of their respective
close associates in relation to the acquisition, disposal, voting or other disposition
of the Shares registered in your name or otherwise held by you;
(xvi) warrant that the information you have provided is true and accurate;
(xvii) confirm that you understand that we and the Overall Coordinators will rely on your
declarations and representations in deciding whether or not to allocate any Hong
Kong Offer Shares to you and that you may be prosecuted for making a false
declaration;
HOW TO APPLY FOR HONG KONG OFFER SHARES
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(xviii) agree to accept Hong Kong Offer Shares applied for or any lesser number allocated
to you under the application;
(xix) authorize (a) us to place your name(s) or the name of HKSCC Nominees on our
register of members as the holder(s) of any Hong Kong Offer Shares allocated to you
and such other registers as required under our Memorandum and Articles of
Association; and (b) us and/or our agents to send any Share certificate(s) and/or any
e-Auto Refund payment instructions and/or any refund check(s) to you or the
first-named applicant for joint applications by ordinary post at your own risk to the
address stated on the application, unless you have fulfilled the criteria mentioned in
“— D. Despatch/Collection of Share Certificates and Refund of Application
Monies” below to collect the Share certificate(s) and/or refund check(s) in person;
(xx) declare and represent that this is the only application made and the only application
intended by you to be made to benefit you or the person for whose benefit you are
applying;
(xxi) (if the application is made for your own benefit) warrant that no other application
has been or will be made for your benefit by giving electronic application
instructions to HKSCC directly or indirectly or through the application channel of
the HK eIPO White Form Service Provider or by any one as your agent or by any
other person; and
(xxii) (if you are making the application as an agent for the benefit of another person)
warrant that (a) no other application has been or will be made by you as agent for
or for the benefit of that person or by that person or by any other person as agent
for that person by giving electronic application instructions to HKSCC and the HK
eIPO White Form Service Provider and (b) you have due authority to give
electronic application instructions on behalf of that other person as its agent.
For the avoidance of doubt, we and all other parties involved in the preparation of this
prospectus acknowledge that each applicant and HKSCC Participant who gives or causes to
give electronic application instructions is a person who may be entitled to compensation under
Section 40 of the Companies (Winding Up and Miscellaneous Provisions) Ordinance (as
applied by Section 342E of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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B. PUBLICATION OF RESULTS
Results of Allocation
Y ou can check whether you are successfully allocated any Hong Kong Offer Shares
through:
Platform Date/Time
Applying through HK eIPO White Form service or HKSCC EIPO channel:
Website /H1118/H1118From the “Allotment Results”
page at www.hkeipo.hk/IPOResult
(or www.tricor.com.hk/ipo/result )
with a “search by ID” function
The full list of (i) wholly or partially
successful applicants using the HK
eIPO White Form service and
HKSCC EIPO channel, and (ii) the
number of Hong Kong Offer Shares
conditionally allotted to them, among
other things, will be displayed at
www.hkeipo.hk/IPOResult or
www.tricor.com.hk/ipo/result .
24 hours, from 11:00 p.m. on
Tuesday, February 11, 2025
to 12:00 midnight Monday,
February 17, 2025 (Hong
Kong time).
The Stock Exchange’s website at
www.hkexnews.hk and our website
at www.gumingnc.com which will
provide links to the above mentioned
websites of the Hong Kong Share
Registrar.
No later than 11:00 p.m. on
Tuesday, February 11, 2025
(Hong Kong time).
Telephone /H1118+852 3691 8488 – the allocation results
telephone enquiry line provided by
the Hong Kong Share Registrar.
between 9:00 a.m. and 6:00
p.m., from Wednesday,
February 12, 2025 to
Monday, February 17, 2025
(Hong Kong time) on a
business day.
For those applying through HKSCC EIPO channel, you may also check with your
broker or custodian from 6:00 p.m. on Monday, February 10, 2025 (Hong Kong
time).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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HKSCC Participants can log into FINI and review the allotment result from 6:00 p.m. on
Monday, February 10, 2025 (Hong Kong time) on a 24-hour basis and should report any
discrepancies on allotments to HKSCC as soon as practicable.
Allocation Announcement
We expect to announce the results of the final Offer Price, the level of indications of
interest in the Global Offering, the level of applications in the Hong Kong Public Offering and
the basis of allocations of Hong Kong Offer Shares on the Stock Exchange’s website at
www.hkexnews.hk and our website at www.gumingnc.com by no later than 11:00 p.m. on
Tuesday, February 11, 2025 (Hong Kong time).
C. CIRCUMSTANCES IN WHICH YOU WILL NOT BE ALLOCATED HONG KONG
OFFER SHARES
Y ou should note the following situations in which Hong Kong Offer Shares will not be
allocated to you or the person(s) for whose benefit you are applying for:
1. If your application is revoked:
Y our application or the application made by HKSCC Nominees on your behalf may be
revoked pursuant to Section 44A(6) of the Companies (Winding Up and Miscellaneous
Provisions) Ordinance.
2. If we or our agents exercise our discretion to reject your application:
We, the Overall Coordinators, the Hong Kong Share Registrar and their respective agents
and nominees have full discretion to reject or accept any application, or to accept only part of
any application, without giving any reasons.
3. If the allocation of Hong Kong Offer Shares is void:
The allocation of Hong Kong Offer Shares will be void if the Stock Exchange does not
grant permission to list the Shares either:
 within three weeks from the closing date of the application lists; or
 within a longer period of up to six weeks if the Stock Exchange notifies us of that
longer period within three weeks of the closing date of the application lists.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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4. If:
 you make multiple applications or suspected multiple applications. Y ou may refer to
the paragraph headed “— A. Applications for Hong Kong Offer Shares — 5.
Multiple Applications Prohibited” in this section on what constitutes multiple
applications;
 your application instruction is incomplete;
 your payment (or confirmation of funds, as the case may be) is not made correctly;
 the Underwriting Agreements do not become unconditional or are terminated; or
 we or the Overall Coordinators believe that by accepting your application, it or we
would violate applicable securities or other laws, rules or regulations.
5. If there is money settlement failure for allotted Shares:
Based on the arrangements between HKSCC Participants and HKSCC, HKSCC
Participants will be required to hold sufficient application funds on deposit with their
designated bank before balloting. After balloting of the Hong Kong Offer Shares, the receiving
bank will collect the portion of these funds required to settle each HKSCC Participant’s actual
Hong Kong Offer Shares allotment from their designated bank.
There is a risk of money settlement failure. In the extreme event of money settlement
failure by a HKSCC Participant (or its designated bank), who is acting on your behalf in
settling payment for your allotted shares, HKSCC will contact the defaulting HKSCC
Participant and its designated bank to determine the cause of failure and request such
defaulting HKSCC Participant to rectify or procure to rectify the failure.
However, if it is determined that such settlement obligation cannot be met, the affected
Hong Kong Offer Shares will be reallocated to the Global Offering. Hong Kong Offer Shares
applied for by you through the broker or custodian may be affected to the extent of the
settlement failure. In the extreme case, you will not be allocated any Hong Kong Offer Shares
due to the money settlement failure by such HKSCC Participant. None of us, the Relevant
Persons, the Hong Kong Share Registrar and HKSCC is or will be liable if Hong Kong Offer
Shares are not allocated to you due to the money settlement failure.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 437 ---
D. DESPATCH/COLLECTION OF SHARE CERTIFICATES AND REFUND OF
APPLICATION MONIES
Y ou will receive one Share certificate for all Hong Kong Offer Shares allotted to you
under the Hong Kong Public Offering (except pursuant to applications made through the
HKSCC EIPO channel where the Share certificates will be deposited into CCASS as described
below).
No temporary document of title will be issued in respect of the Shares. No receipt will
be issued for sums paid on application.
Share certificates will only become valid at 8:00 a.m. on Wednesday, February 12, 2025
(Hong Kong time), provided that the Global Offering has become unconditional and the right
of termination described in the section headed “Underwriting” has not been exercised.
Investors who trade Shares prior to the receipt of Share certificates or the Share certificates
becoming valid do so entirely at their own risk.
The right is reserved to retain any Share certificate(s) and (if applicable) any surplus
application monies pending clearance of application monies.
The following sets out the relevant procedures and time:
HK eIPO White Form service HKSCC EIPO channel
Despatch/collection of Share certificate 2
For application of
1,000,000 Hong
Kong Offer Shares
or more /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Collection in person from the Hong Kong
Share Registrar, Tricor Investor Services
Limited, at 17/F, Far East Finance
Centre, 16 Harcourt Road, Hong Kong
Share certificate(s) will be issued in the
name of HKSCC Nominees, deposited
into CCASS and credited to your
designated HKSCC Participant’s stock
account
Time: from 9:00 a.m. to 1:00 p.m. on
Wednesday, February 12, 2025 (Hong
Kong time)
No action by you is required
2 Except in the event of a tropical cyclone warning signal number 8 or above, a black rainstorm warning and/or
an “extreme conditions” announcement issued after a super typhoon in force in Hong Kong in the morning on
Tuesday, February 11, 2025 rendering it impossible for the relevant Share certificates to be despatched to
HKSCC in a timely manner, the Company shall procure the Hong Kong Share Registrar to arrange for delivery
of the supporting documents and Share certificates in accordance with the contingency arrangements as agreed
between them. Y ou may refer to “– E. Bad Weather Arrangements” in this section.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 438 ---
HK eIPO White Form service HKSCC EIPO channel
If you are an individual, you must not
authorise any other person to collect for
you. If you are a corporate applicant,
your authorised representative must bear
a letter of authorization from your
corporation stamped with your
corporation’s chop
Both individuals and authorised
representatives must produce, at the
time of collection, evidence of identity
acceptable to the Hong Kong Share
Registrar
Note: If you do not collect your Share
certificate(s) personally within the time
above, it/they will be sent to the
address specified in your application
instructions by ordinary post at your
own risk
For application of less
than 1,000,000 Hong
Kong Offer Shares /H1118
Y our Share certificate(s) will be sent to the
address specified in your application
instructions by ordinary post at your
own risk
Date: Tuesday, February 11, 2025, or any
other date notified by us
Refund mechanism for surplus application monies paid by you
Date /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Wednesday, February 12, 2025 Subject to the arrangement between you
and your broker or custodian
Responsible party /H1118/H1118/H1118Hong Kong Share Registrar Y our broker or custodian
Application monies
paid through single
bank account /H1118/H1118/H1118/H1118
HK eIPO White Form e-Auto Refund
payment instructions to your designated
bank account
Y our broker or custodian will arrange
refund to your designated bank account
subject to the arrangement between you
and it
Application monies
paid through
multiple bank
accounts /H1118/H1118/H1118/H1118/H1118/H1118/H1118
Refund check(s) will be despatched to the
address as specified in your application
instructions by ordinary post at your
own risk
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 439 ---
E. BAD WEATHER ARRANGEMENTS
The Opening and Closing of the Application Lists
The application lists will not open or close on Friday, February 7, 2025 if, there is:
 a tropical cyclone warning signal number 8 or above;
 a black rainstorm warning; and/or
 Extreme Conditions
(collectively, “ Bad Weather Signals ”),
in force in Hong Kong at any time between 9:00 a.m. and 12:00 noon on Friday, February 7,
2025.
Instead they will open between 11:45 a.m. and 12:00 noon and/or close at 12:00 noon on
the next business day which does not have Bad Weather Signals in force at any time between
9:00 a.m. and 12:00 noon.
Prospective investors should be aware that a postponement of the opening/closing of the
application lists may result in a delay in the listing date. Should there be any changes to the
dates mentioned in the section headed “Expected Timetable” in this prospectus, an
announcement will be made and published on the Stock Exchange’s website at
www.hkexnews.hk and our website at www.gumingnc.com of the revised timetable.
If a Bad Weather Signal is hoisted on Tuesday, February 11, 2025, the Hong Kong Share
Registrar will make appropriate arrangements for the delivery of the Share certificates to the
CCASS depository’s service counter so that they would be available for trading on Wednesday,
February 12, 2025.
If a Bad Weather Signal is hoisted on Tuesday, February 11, 2025, for application of less
than 1,000,000 Hong Kong Offer Shares, the despatch of physical Share certificate(s) will be
made by ordinary post when the post office re-opens after the Bad Weather Signal is lowered
or cancelled (e.g. in the afternoon of Tuesday, February 11, 2025 or on Wednesday,
February 12, 2025).
If a Bad Weather Signal is hoisted on Wednesday, February 12, 2025, for application of
1,000,000 Hong Kong Offer Shares or more, physical Share certificate(s) will be available for
collection in person at the Hong Kong Share Registrar’s office after the Bad Weather Signal
is lowered or cancelled (e.g. in the afternoon of Wednesday, February 12, 2025 or on Thursday,
February 13, 2025).
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--- page 440 ---
Prospective investors should be aware that if they choose to receive physical Share
certificates issued in their own name, there may be a delay in receiving the Share
certificates.
F. ADMISSION OF THE SHARES INTO CCASS
If the Stock Exchange grants the listing of, and permission to deal in, the Shares on the
Stock Exchange and we comply with the stock admission requirements of HKSCC, the Shares
will be accepted as eligible securities by HKSCC for deposit, clearance and settlement in
CCASS with effect from the date of commencement of dealings in the Shares or any other date
HKSCC chooses. Settlement of transactions between Exchange Participants (as defined in the
Listing Rules) is required to take place in CCASS on the second settlement day after any
trading day.
All activities under CCASS are subject to the General Rules of HKSCC and HKSCC
Operational Procedures in effect from time to time.
All necessary arrangements have been made enabling the Shares to be admitted into
CCASS.
Y ou should seek the advice of your broker or other professional advisor for details of the
settlement arrangement as such arrangements may affect your rights and interests.
G. PERSONAL DATA
The following Personal Information Collection Statement applies to any personal data
collected and held by the Company, the Hong Kong Share Registrar, the receiving bank and the
Relevant Persons about you in the same way as it applies to personal data about applicants
other than HKSCC Nominees. This personal data may include client identifier(s) and your
identification information. By giving application instructions to HKSCC, you acknowledge
that you have read, understood and agree to all of the terms of the Personal Information
Collection Statement below.
1. Personal Information Collection Statement
This Personal Information Collection Statement informs the applicant for, and holder of,
Hong Kong Offer Shares, of the policies and practices of the Company and the Hong Kong
Share Registrar in relation to personal data and the Personal Data (Privacy) Ordinance (Chapter
486 of the Laws of Hong Kong).
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 441 ---
2. Reasons for the collection of your personal data
It is necessary for applicants and registered holders of Hong Kong Offer Shares to ensure
that personal data supplied to the Company or its agents and the Hong Kong Share Registrar
is accurate and up-to-date when applying for Hong Kong Offer Shares or transferring Hong
Kong Offer Shares into or out of their names or in procuring the services of the Hong Kong
Share Registrar.
Failure to supply the requested data or supplying inaccurate data may result in your
application for Hong Kong Offer Shares being rejected, or in the delay or the inability of the
Company or the Hong Kong Share Registrar to effect transfers or otherwise render their
services. It may also prevent or delay registration or transfers of Hong Kong Offer Shares
which you have successfully applied for and/or the despatch of Share certificate(s) to which
you are entitled.
It is important that applicants for and holders of Hong Kong Offer Shares inform the
Company and the Hong Kong Share Registrar immediately of any inaccuracies in the personal
data supplied.
3. Purposes
Y our personal data may be used, held, processed, and/or stored (by whatever means) for
the following purposes:
 processing your application and refund check and HK eIPO White Form e-Auto
Refund payment instruction(s), where applicable, verification of compliance with
the terms and application procedures set out in this prospectus and announcing
results of allocation of Hong Kong Offer Shares;
 compliance with applicable laws and regulations in Hong Kong and elsewhere;
 registering new issues or transfers into or out of the names of the holders of the
Shares including, where applicable, HKSCC Nominees;
 maintaining or updating the register of members of the Company;
 verifying identities of applicants for and holders of the Shares and identifying any
duplicate applications for the Shares;
 facilitating Hong Kong Offer Shares balloting;
 establishing benefit entitlements of holders of the Shares, such as dividends, rights
issues, bonus issues, etc.;
 distributing communications from the Company and its subsidiaries;
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 431 –


--- page 442 ---
 compiling statistical information and profiles of the holder of the Shares;
 disclosing relevant information to facilitate claims on entitlements; and
 any other incidental or associated purposes relating to the above and/or to enable the
Company and the Hong Kong Share Registrar to discharge their obligations to
applicants and holders of the Shares and/or regulators and/or any other purposes to
which applicants and holders of the Shares may from time to time agree.
4. Transfer of personal data
Personal data held by the Company and the Hong Kong Share Registrar relating to the
applicants for and holders of Hong Kong Offer Shares will be kept confidential but the
Company and the Hong Kong Share Registrar may, to the extent necessary for achieving any
of the above purposes, disclose, obtain or transfer (whether within or outside Hong Kong) the
personal data to, from or with any of the following:
 the Company’s appointed agents such as financial advisers, receiving bank and
overseas principal share registrar;
 HKSCC or HKSCC Nominees, who will use the personal data and may transfer the
personal data to the Hong Kong Share Registrar, in each case for the purposes of
providing its services or facilities or performing its functions in accordance with its
rules or procedures and operating FINI and CCASS (including where applicants for
the Hong Kong Offer Shares request a deposit into CCASS);
 any agents, contractors or third-party service providers who offer administrative,
telecommunications, computer, payment or other services to the Company or the
Hong Kong Share Registrar in connection with their respective business operation;
 the Stock Exchange, the SFC and any other statutory regulatory or governmental
bodies or otherwise as required by laws, rules or regulations, including for the
purpose of the Stock Exchange’s administration of the Listing Rules and the SFC’s
performance of its statutory functions; and
 any persons or institutions with which the holders of Hong Kong Offer Shares have
or propose to have dealings, such as their bankers, solicitors, accountants or brokers
etc.
HOW TO APPLY FOR HONG KONG OFFER SHARES
– 432 –


--- page 443 ---
5. Retention of personal data
The Company and the Hong Kong Share Registrar will keep the personal data of the
applicants and holders of Hong Kong Offer Shares for as long as necessary to fulfil the
purposes for which the personal data were collected. Personal data which is no longer required
will be destroyed or dealt with in accordance with the Personal Data (Privacy) Ordinance
(Chapter 486 of the Laws of Hong Kong).
6. Access to and correction of personal data
Applicants for and holders of Hong Kong Offer Shares have the right to ascertain whether
the Company or the Hong Kong Share Registrar hold their personal data, to obtain a copy of
that data, and to correct any data that is inaccurate. The Company and the Hong Kong Share
Registrar have the right to charge a reasonable fee for the processing of such requests. All
requests for access to data or correction of data should be addressed to the Company and the
Hong Kong Share Registrar, at their registered address disclosed in the section headed
“Corporate Information” in this prospectus or as notified from time to time, for the attention
of the company secretary, or the Hong Kong Share Registrar for the attention of the privacy
compliance officer.
HOW TO APPLY FOR HONG KONG OFFER SHARES
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--- page 444 ---
The following is the text of a report on Guming Holdings Limited, prepared for the
purpose of incorporation in this prospectus received from the independent reporting
accountants of the Company, Ernst & Young, Certified Public Accountants, Hong Kong.
⭰㰟㛪姯⸒Ṳ⋀㈧
榀㸖毩歁㵳勘䙮怺979噆
⤑⏋✱ᷧ⺎27㧺
Tel 曢婘: +852 2846 9888
Fax ₚ䜆: +852 2868 4432
ey.com
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hon
g Kong
ACCOUNTANTS’ REPORT ON HISTORICAL FINANCIAL INFORMATION TO THE
DIRECTORS OF GUMING HOLDINGS LIMITED, GOLDMAN SACHS (ASIA) L.L.C.
AND UBS SECURITIES HONG KONG LIMITED
Introduction
We report on the historical financial information of Guming Holdings Limited (the
“Company”) and its subsidiaries (together, the “Group”) set out on pages I-4 to I-85, which
comprises the consolidated statements of profit or loss, the consolidated statements of
comprehensive income, the consolidated statements of changes in equity and the consolidated
statements of cash flows of the Group for each of the years ended 31 December 2021, 2022 and
2023 and the nine months ended 30 September 2024 (the “Relevant Periods”), and the
consolidated statements of financial position of the Group and the statements of financial
position of the Company as at 31 December 2021, 2022 and 2023 and 30 September 2024, and
material accounting policy information and other explanatory information (together, the
“Historical Financial Information”). The Historical Financial Information set out on pages I-4
to I-85 forms an integral part of this report, which has been prepared for inclusion in the
prospectus of the Company dated 4 February 2025 (the “Prospectus”) in connection with the
initial listing of the shares of the Company on the Main Board of The Stock Exchange of Hong
Kong Limited (the “Stock Exchange”).
Directors’ responsibility for the Historical Financial Information
The directors of the Company are responsible for the preparation of the Historical
Financial Information that gives a true and fair view in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively, and for such internal control as the directors determine is necessary
to enable the preparation of the Historical Financial Information that is free from material
misstatement, whether due to fraud or error.
Reporting accountants’ responsibility
Our responsibility is to express an opinion on the Historical Financial Information and to
report our opinion to you. We conducted our work in accordance with Hong Kong Standard on
Investment Circular Reporting Engagements 200 Accountants’ Reports on Historical Financial
Information in Investment Circulars issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”). This standard requires that we comply with ethical standards and
plan and perform our work to obtain reasonable assurance about whether the Historical
Financial Information is free from material misstatement.
APPENDIX I ACCOUNTANTS’ REPORT
– I-1 –


--- page 445 ---
Our work involved performing procedures to obtain evidence about the amounts and
disclosures in the Historical Financial Information. The procedures selected depend on the
reporting accountants’ judgement, including the assessment of risks of material misstatement
of the Historical Financial Information, whether due to fraud or error. In making those risk
assessments, the reporting accountants consider internal control relevant to the entity’s
preparation of the Historical Financial Information that gives a true and fair view in accordance
with the basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the
Historical Financial Information, respectively, in order to design procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the entity’s internal control. Our work also included evaluating the
appropriateness of accounting policies used and the reasonableness of accounting estimates
made by the directors, as well as evaluating the overall presentation of the Historical Financial
Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion, the Historical Financial Information gives, for the purposes of the
accountants’ report, a true and fair view of the financial position of the Group and the Company
as at 31 December 2021, 2022, 2023 and 30 September 2024, and of the financial performance
and cash flows of the Group for each of the Relevant Periods in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively.
Review of interim comparative financial information
We have reviewed the interim financial information of the Group which comprises the
consolidated statement of profit or loss, the consolidated statement of comprehensive income,
the consolidated statement of changes in equity and the consolidated statement of cash flows
for the nine months ended 30 September 2023, and other explanatory information (the “Interim
Comparative Financial Information”). The directors of the Company are responsible for the
preparation and presentation of the Interim Comparative Financial Information in accordance
with the basis of presentation and the basis of preparation set out in notes 2.1 and 2.2 to the
Historical Financial Information, respectively. Our responsibility is to express a conclusion on
the Interim Comparative Financial Information based on our review. We conducted our review
in accordance with Hong Kong Standard on Review Engagements 2410 Review of Interim
Financial Information Performed by the Independent Auditor of the Entity issued by the
HKICPA. A review consists of making enquiries, primarily of persons responsible for financial
and accounting matters, and applying analytical and other review procedures. A review is
substantially less in scope than an audit conducted in accordance with Hong Kong Standards
on Auditing and consequently does not enable us to obtain assurance that we would become
aware of all significant matters that might be identified in an audit. Accordingly, we do not
express an audit opinion. Based on our review, nothing has come to our attention that causes
us to believe that the Interim Comparative Financial Information, for the purpose of the
accountants’ report, is not prepared, in all material respects, in accordance with the basis of
presentation and the basis of preparation set out in notes 2.1 and 2.2 to the Historical Financial
Information, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-2 –


--- page 446 ---
Report on matters under the Rules Governing the Listing of Securities on the Stock
Exchange and the Companies (Winding Up and Miscellaneous Provisions) Ordinance
Adjustments
In preparing the Historical Financial Information, no adjustments to the Underlying
Financial Statements as defined on page I-4 have been made.
Dividends
We refer to note 11 to the Historical Financial Information which states that no dividends
have been paid by the Company in respect of the Relevant Periods.
No historical financial statements for the Company
As at the date of this report, no statutory financial statements have been prepared for the
Company since its date of incorporation.
Ernst & Y oung
Certified Public Accountants
Hong Kong
4 February 2025
APPENDIX I ACCOUNTANTS’ REPORT
– I-3 –


--- page 447 ---
I. HISTORICAL FINANCIAL INFORMATION
Preparation of Historical Financial Information
Set out below is the Historical Financial Information which forms an integral part of this
accountants’ report.
The financial statements of the Group for the Relevant Periods, on which the Historical
Financial Information is based, were audited by Ernst & Y oung in accordance with Hong Kong
Standards on Auditing issued by the HKICPA (the “Underlying Financial Statements”).
The Historical Financial Information is presented in Renminbi (“RMB”) and all values
are rounded to the nearest thousand (RMB’000) except when otherwise indicated.
APPENDIX I ACCOUNTANTS’ REPORT
– I-4 –


--- page 448 ---
CONSOLIDATED STATEMENTS OF PROFIT OR LOSS
Y ear ended 31 December
Nine months ended
30 September
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
REVENUE /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185 4,383,901 5,559,222 7,675,665 5,570,882 6,441,288
Cost of sales /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(3,070,196) (3,996,290) (5,272,334) (3,844,469) (4,476,906)
Gross profit /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,313,705 1,562,932 2,403,331 1,726,413 1,964,382
Other income and gains /H1118/H1118/H11185 47,598 57,477 168,828 125,879 144,067
Selling and distribution
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(186,193) (268,143) (336,584) (239,291) (357,172)
Administrative expenses /H1118/H1118/H1118 (123,745) (187,605) (282,848) (180,689) (225,206)
Research and development
expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(65,030) (118,288) (198,736) (129,055) (165,826)
Other expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5,775) (1,069) (9,456) (9,434) (16,711)
OPERATING PROFIT /H1118/H1118/H1118 980,560 1,045,304 1,744,535 1,293,823 1,343,534
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187 (5,079) (5,424) (5,233) (4,299) (2,216)
Fair value changes of
financial liabilities at fair
value through profit or
loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111830 (728,388) (389,523) (294,215) (21,669) (10,556)
PROFIT BEFORE TAX /H1118/H11186 247,093 650,357 1,445,087 1,267,855 1,330,762
Income tax expense /H1118/H1118/H1118/H1118/H1118/H111810 (223,101) (278,332) (348,733) (265,818) (210,994)
PROFIT FOR THE
YEAR/PERIOD /H1118/H1118/H1118/H1118/H1118/H1118 23,992 372,025 1,096,354 1,002,037 1,119,768
Attributable to:
Owners of the parent /H1118/H1118/H1118/H1118 20,139 366,619 1,079,628 990,033 1,106,491
Non-controlling interests /H1118 3,853 5,406 16,726 12,004 13,277
23,992 372,025 1,096,354 1,002,037 1,119,768
EARNINGS PER SHARE
ATTRIBUTABLE TO
ORDINARY EQUITY
HOLDERS OF
THE PARENT
Basic and diluted /H1118/H1118/H1118/H1118/H1118/H111812 N/A N/A N/A N/A N/A
APPENDIX I ACCOUNTANTS’ REPORT
– I-5 –


--- page 449 ---
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
Y ear ended 31 December
Nine months ended
30 September
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited )
PROFIT FOR THE
YEAR/PERIOD /H1118/H1118/H1118/H1118/H1118/H1118/H111823,992 372,025 1,096,354 1,002,037 1,119,768
OTHER
COMPREHENSIVE
INCOME
Other comprehensive
income/(loss) that may be
reclassified to profit or
loss in subsequent
periods:
Exchange differences:
Exchange differences on
translation of foreign
operations /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (4,411) (3,132) 1,346 (97)
Net other comprehensive
income/(loss) that may be
reclassified to profit or
loss in subsequent periods /H1118 – (4,411) (3,132) 1,346 (97)
Other comprehensive
income/(loss) that will not
be reclassified to profit
or loss in subsequent
periods:
Equity investment designated
at fair value through other
comprehensive income:
Change in fair value /H1118/H1118/H1118/H111816 – 29,573 (19,951) (1,383) (9,027)
Income tax effect /H1118/H1118/H1118/H1118/H1118/H111818 – (4,880) 3,292 229 1,490
Net other comprehensive
income/(loss) that will not
be reclassified to profit or
loss in subsequent periods /H1118 – 24,693 (16,659) (1,154) (7,537)
OTHER
COMPREHENSIVE
INCOME/(LOSS) FOR
THE YEAR/PERIOD,
NET OF TAX /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118 – 20,282 (19,791) 192 (7,634)
TOTAL
COMPREHENSIVE
INCOME FOR THE
YEAR/PERIOD /H1118/H1118/H1118/H1118/H1118/H1118/H111823,992 392,307 1,076,563 1,002,229 1,112,134
Attributable to:
Owners of the parent /H1118/H1118/H1118/H1118 20,139 386,901 1,059,837 990,225 1,098,857
Non-controlling interests /H1118/H1118 3,853 5,406 16,726 12,004 13,277
23,992 392,307 1,076,563 1,002,229 1,112,134
APPENDIX I ACCOUNTANTS’ REPORT
– I-6 –


--- page 450 ---
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
31 December 30 September
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Property, plant and equipment /H1118/H1118/H1118/H1118/H1118/H1118/H111813 192,462 233,814 590,058 889,529
Right-of-use assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814(a) 126,635 215,751 178,401 169,287
Other intangible assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815 2,170 473 107 906
Equity investment designated at fair
value through other comprehensive
income /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111816 247,500 277,073 257,122 248,095
Other non-current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111817 24,262 3,337 36,934 3,782
Deferred tax assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818 42,932 46,661 40,245 34,966
Long-term trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111819 – – – 65,126
Contract assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111822 – – – 4,497
Long-term bank deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 40,000 90,000 41,390 272,747
Total non-current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118675,961 867,109 1,144,257 1,688,935
CURRENT ASSETS
Inventories /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820 706,789 705,560 881,141 818,455
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111821 34,401 37,511 70,416 151,207
Contract assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111822 – – 9,042 19,676
Prepayments, other receivables and
other assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823 232,862 236,945 298,809 327,401
Financial assets at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824 241,679 37,346 197,285 1,606,210
Restricted cash /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 – – 124,000 29,030
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 151,808 1,147,205 2,427,979 1,709,835
Total current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,367,539 2,164,567 4,008,672 4,661,814
CURRENT LIABILITIES
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111826 149,591 389,543 601,272 612,127
Other payables and accruals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111827 181,546 251,213 322,219 352,222
Tax payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118166,809 53,372 38,813 65,597
Contract liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111828 65,335 57,520 76,212 89,356
Interest-bearing other borrowings /H1118/H1118/H1118/H1118/H111829 – – 124,000 –
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111830 2,472,275 2,861,798 3,156,013 3,166,569
Lease liabilities
/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814(b) 44,664 52,196 43,674 39,903
Total current liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,080,220 3,665,642 4,362,203 4,325,774
NET CURRENT
ASSETS/(LIABILITIES) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,712,681) (1,501,075) (353,531) 336,040
TOTAL ASSETS LESS CURRENT
LIABILITIES /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,036,720) (633,966) 790,726 2,024,975
APPENDIX I ACCOUNTANTS’ REPORT
– I-7 –


--- page 451 ---
31 December 30 September
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT LIABILITIES
Deferred tax liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818 22,997 68,712 112,128 110,288
Contract liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111828 63,228 59,772 26,534 33,817
Interest-bearing bank borrowings /H1118/H1118/H1118/H1118/H111829 – – – 121,204
Deferred income /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111831 – – 10,042 11,030
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814(b) 82,866 54,144 26,516 20,996
Total non-current liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118169,091 182,628 175,220 297,335
NET ASSETS/(LIABILITIES) /H1118/H1118/H1118/H1118/H1118/H1118(1,205,811) (816,594) 615,506 1,727,640
EQUITY
Equity attributable to owners of the
parent
Share capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111832 112 112 127 127
Reserves /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111833 (1,216,305) (832,494) 582,865 1,681,722
(1,216,193) (832,382) 582,992 1,681,849
Non-controlling interests /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111810,382 15,788 32,514 45,791
TOTAL EQUITY/(DEFICIENCY IN
ASSETS) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,205,811) (816,594) 615,506 1,727,640
APPENDIX I ACCOUNTANTS’ REPORT
– I-8 –


--- page 452 ---
CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Exchange
fluctuation
reserve*
Accumulated
losses* Sub-total
Non-
controlling
interests
Total
deficits
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 32) (Note 33) (Note 33)
As at 1 January 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 105,582 6,075 – (1,365,215) (1,253,558) 6,529 (1,247,029)
Profit and total comprehensive income for the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – 20,139 20,139 3,853 23,992
Issuance of ordinary shares /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181 1 2 ( 1 1 2 ) – – –– ––
Equity-settled share option arrangements (Note 34) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 17,226 – – – 17,226 – 17,226
Transfer from retained earnings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 38,831 – (38,831) – – –
As at 31 December 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 122,696 44,906 – (1,383,907) (1,216,193) 10,382 (1,205,811)
APPENDIX I ACCOUNTANTS’ REPORT
– I-9 –


--- page 453 ---
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Fair value reserve
of financial assets
at fair value
through other
comprehensive
income*
Exchange
fluctuation
reserve*
Accumulated
losses* Sub-total
Non-
controlling
interests
Total
deficits
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 32) (Note 33) (Note 33)
As at 1 January 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 122,696 44,906 – – (1,383,907) (1,216,193) 10,382 (1,205,811)
Profit for the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – 366,619 366,619 5,406 372,025
Other comprehensive income/(loss) for the year:
Change in fair value of equity investment at fair value
through other comprehensive, net of tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 24,693 – – 24,693 – 24,693
Exchange differences on translation of
foreign operations /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – (4,411) – (4,411) – (4,411)
Total comprehensive income/(loss) for the year /H1118/H1118/H1118/H1118/H1118/H1118 – – – 24,693 (4,411) 366,619 386,901 5,406 392,307
Capital contribution from the then shareholders of
a subsidiary /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 66,782 – – – – 66,782 – 66,782
Capital reduction arising from the Reorganisation** /H1118/H1118/H1118/H1118 – (94,348) – – – – (94,348) – (94,348)
Equity-settled share option arrangements (Note 34) /H1118/H1118/H1118/H1118 – 24,476 – – – – 24,476 – 24,476
Transfer from retained earnings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 159,703 – – (159,703) – – –
As at 31 December 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 119,606 204,609 24,693 (4,411) (1,176,991) (832,382) 15,788 (816,594)
APPENDIX I ACCOUNTANTS’ REPORT
– I-10 –


--- page 454 ---
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Fair value reserve
of financial assets
at fair value
through other
comprehensive
income*
Exchange
fluctuation
reserve*
Accumulated
losses* Sub-total
Non-
controlling
interests
Total
equity/
(deficits)
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 32) (Note 33) (Note 33)
As at 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 119,606 204,609 24,693 (4,411) (1,176,991) (832,382) 15,788 (816,594)
Profit for the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – 1,079,628 1,079,628 16,726 1,096,354
Other comprehensive loss for the year:
Change in fair value of equity investment at fair value
through other comprehensive, net of tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – (16,659) – – (16,659) – (16,659)
Exchange differences on translation of
foreign operations /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – (3,132) – (3,132) – (3,132)
Total comprehensive income/(loss) for the year /H1118/H1118/H1118/H1118/H1118/H1118 – – – (16,659) (3,132) 1,079,628 1,059,837 16,726 1,076,563
Equity-settled share option arrangements (Note 34) /H1118/H1118/H1118/H1118 – 55,537 – – – – 55,537 – 55,537
Ordinary shares issued under equity-settled share option
arrangements (Note 32) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815 299,985 – – – – 300,000 – 300,000
Transfer to retained earnings arising from deregistration of
subsidiaries /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – (35,000) – – 35,00 0–––
Transfer from retained earnings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 71,740 – – (71,740) – – –
As at 31 December 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118127 475,128 241,349 8,034 (7,543) (134,103) 582,992 32,514 615,506
APPENDIX I ACCOUNTANTS’ REPORT
– I-11 –


--- page 455 ---
Attributable to owners of the parent
Share
capital
Capital
reserve
Statutory
surplus
reserve
Fair value reserve
of financial assets
at fair value
through other
comprehensive
income
Exchange
fluctuation
reserve
Accumulated
losses Sub-total
Non-
controlling
interests
(Total
deficits)/
total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
(Note 32) (Note 33) (Note 33)
As at 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 119,606 204,609 24,693 (4,411) (1,176,991) (832,382) 15,788 (816,594)
Profit for the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – 990,033 990,033 12,004 1,002,037
Other comprehensive income/(loss) for the period:
Change in fair value of equity investment at fair value
through other comprehensive, net of tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – (1,154) – – (1,154) – (1,154)
Exchange differences on translation of foreign
operations /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – 1,346 – 1,346 – 1,346
Total comprehensive income/(loss) for the period /H1118/H1118/H1118/H1118/H1118 – – – (1,154) 1,346 990,033 990,225 12,004 1,002,229
Equity-settled share option arrangements (Note 34) /H1118/H1118/H1118/H1118 – 18,981 – – – – 18,981 – 18,981
Transfer from retained earnings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 52,410 – – (52,410) – – –
As at 30 September 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118112 138,587 257,019 23,539 (3,065) (239,368) 176,824 27,792 204,616
APPENDIX I ACCOUNTANTS’ REPORT
– I-12 –


--- page 456 ---
Attributable to owners of the parent
Share
capital
Capital
reserve*
Statutory
surplus
reserve*
Fair value reserve
of financial assets
at fair value
through other
comprehensive
income*
Exchange
fluctuation
reserve*
Retained
earnings/
(accumulated
losses)* Sub-total
Non-
controlling
interests Total equity
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Note 32) (Note 33) (Note 33)
As at 1 January 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118127 475,128 241,349 8,034 (7,543) (134,103) 582,992 32,514 615,506
Profit for the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – – 1,106,491 1,106,491 13,277 1,119,768
Other comprehensive loss for the period:
Change in fair value of equity investment at fair value
through other comprehensive, net of tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – (7,537) – – (7,537) – (7,537)
Exchange differences on translation of foreign
operations /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – (97) – (97) – (97)
Total comprehensive income/(loss) for the period /H1118/H1118/H1118/H1118/H1118 – – – (7,537) (97) 1,106,491 1,098,857 13,277 1,112,134
Transfer from retained earnings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 31,699 – – (31,699) – – –
As at 30 September 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118127 475,128 273,048 497 (7,640) 940,689 1,681,849 45,791 1,727,640
* These reserve accounts comprise the negative reserves/deficits of RMB1,216,305,000 and RMB832,494,000, and the reserve of RMB582,865,000 and RM B1,681,722,000 in
the consolidated statements of financial position as at 31 December 2021, 2022 and 2023 and 30 September 2024, respectively.
** Capital reduction arising from the Reorganisation was deemed distribution to shareholders pursuant to the Reorganisation as mentioned in note 2. 1 to the Historical Financial
Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-13 –


--- page 457 ---
CONSOLIDATED STATEMENTS OF CASH FLOWS
Y ear ended 31 December
Nine months ended
30 September
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS FROM
OPERATING
ACTIVITIES
Profit before tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118247,093 650,357 1,445,087 1,267,855 1,330,762
Adjustments for:
Depreciation of property,
plant and equipment /H1118/H1118/H111813 27,347 62,579 73,110 56,051 58,342
Depreciation of right-of-
use assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814(a) 40,464 54,671 61,661 45,617 44,093
Amortisation of other
intangible assets /H1118/H1118/H1118/H1118/H111815 2,059 1,697 366 275 246
Losses/(gains) on disposal
of items of property,
plant and equipment /H1118/H1118/H11186 – (186) 974 402 5,286
Fair value changes of
financial assets at fair
value through profit or
loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185 (16,289) (10,933) (1,909) (1,721) (7,734)
Fair value changes of
financial liabilities at
fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111830 728,388 389,523 294,215 21,669 10,556
Equity-settled share-based
payment expenses /H1118/H1118/H1118/H11186 17,226 24,476 55,537 18,981 –
Interest income /H1118/H1118/H1118/H1118/H1118/H1118/H11185 (2,181) (5,375) (53,735) (35,583) (47,550)
Imputed interest for long-
term trade receivables
and non-current portion
of contract assets /H1118/H1118/H1118/H11185 – – – – (928)
Finance costs /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11187 5,079 5,424 5,233 4,299 2,216
Foreign exchange
differences, net /H1118/H1118/H1118/H1118/H1118/H11186 1,325 (7,935) (4,315) 782 8,261
1,050,511 1,164,298 1,876,224 1,378,627 1,403,550
Increase in long-term trade
receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – – (64,404)
Decrease/(increase) in
inventories /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(488,124) 1,229 (175,581) 32,840 62,686
Increase in trade
receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(9,033) (3,110) (32,905) (22,593) (80,791)
Increase in contract assets /H1118/H1118 – – (9,042) (25,985) (14,925)
Increase in prepayments,
other receivables and
other assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(104,803) (2,149) (61,864) (65,612) (28,592)
Increase/(decrease) in trade
payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(60,712) 239,952 211,729 41,542 10,855
Increase/(decrease) in other
payables and accruals /H1118/H1118/H1118 24,835 (23,124) 89,459 72,111 (1,011)
Increase/(decrease) in
contract liabilities /H1118/H1118/H1118/H1118/H1118 14,388 (11,271) (14,546) (7,856) 20,427
Cash generated from
operations /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118427,062 1,365,825 1,883,474 1,403,074 1,307,795
Income tax paid /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(159,592) (354,663) (310,168) (196,788) (179,281)
Net cash flows from
operating activities /H1118/H1118/H1118/H1118
267,470 1,011,162 1,573,306 1,206,286 1,128,514
APPENDIX I ACCOUNTANTS’ REPORT
– I-14 –


--- page 458 ---
Y ear ended 31 December
Nine months ended
30 September
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS FROM
INVESTING
ACTIVITIES
Purchases of items of
property, plant and
equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(163,533) (90,117) (398,845) (257,864) (332,647)
Proceeds from disposal of
items of property, plant
and equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118 1,112 5,740 10,815 6,857 35,226
Purchases of intangible
assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815 (1,077) – – – (1,045)
Prepayment for the right-of-
use of parcels of leasehold
land /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814(a) – (108,934) – – –
Purchase of financial assets
at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5,369,398) (2,258,175) (745,040) (135,880) (4,139,235)
Proceeds from disposal of
financial assets at fair
value through profit or
loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,581,928 2,473,441 587,010 143,986 2,738,044
Purchase of equity
investment designated at
fair value through other
comprehensive income /H1118/H1118/H1118 (247,500) – – – –
Purchase of bank deposits
with original maturity of
more than three months
when acquired /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 (40,000) (82,737) (541,048) (225,709) (290,767)
Proceeds from bank deposits
with original maturity of
more than three months
when acquired /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 – – 553,785 119,446 100,000
Receipt of government
grants for property, plant
and equipment /H1118/H1118/H1118/H1118/H1118/H1118/H111831 – – 10,042 – 988
Interest received /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118 873 3,441 52,327 30,557 45,011
Net cash flows used in
investing activities /H1118/H1118/H1118/H1118/H1118 (237,595) (57,341) (470,954) (318,607) (1,844,425)
APPENDIX I ACCOUNTANTS’ REPORT
– I-15 –


--- page 459 ---
Y ear ended 31 December
Nine months ended
30 September
Note 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
CASH FLOWS
FROM FINANCING
ACTIVITIES
Capital contribution from
the then shareholders of a
subsidiary /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 66,782 – – –
Repayment of redeemable
capital contribution
arising from the
Reorganisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118 – (648,976) (9,568) (9,568) –
Proceeds from issuance of
warrants and convertible
redeemable preferred
shares of the Company /H1118/H1118 – 648,976 9,568 9,568 –
Payment of capital reduction
arising from the
Reorganisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118 – – (94,348) (94,348) –
Proceeds from exercise of
share options /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118 – – 300,000 – –
Proceeds from interest-
bearing bank and other
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 171,048 148,048 121,000
Repayment of interest-
bearing other borrowings /H1118 – – (47,048) – (124,000)
Decrease/(increase) in
restricted cash /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118 – – (124,000) (148,048) 94,970
Interest paid /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – (1,272) (1,170) (1,308)
Principal portion of lease
payments /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111835 (37,781) (56,043) (60,461) (46,860) (44,270)
Interest portion of lease
payments /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111835 (5,079) (5,424) (3,961) (3,129) (2,216)
Net cash flows from/
(used in) financing
activities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(42,860) 5,315 139,958 (145,507) 44,176
APPENDIX I ACCOUNTANTS’ REPORT
– I-16 –


--- page 460 ---
Y ear ended 31 December
Nine months ended
30 September
Note 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
NET INCREASE/
(DECREASE) IN
CASH AND CASH
EQUIV ALENTS /H1118/H1118/H1118/H1118/H1118/H1118 (12,985) 959,136 1,242,310 742,172 (671,735)
Cash and cash equivalents at
beginning of year/period /H1118 166,118 151,808 1,114,468 1,114,468 2,357,961
Effect of foreign exchange
rate changes, net /H1118/H1118/H1118/H1118/H1118/H1118 (1,325) 3,524 1,183 564 (8,358)
CASH AND CASH
EQUIV ALENTS AT END
OF YEAR/PERIOD /H1118/H1118/H1118/H1118 151,808 1,114,468 2,357,961 1,857,204 1,677,868
ANALYSIS OF
BALANCES OF CASH
AND CASH
EQUIV ALENTS /H1118/H1118/H1118/H1118/H1118/H1118
Cash and bank balances /H1118/H1118/H1118 151,808 1,147,205 2,427,979 2,046,204 1,709,835
Long-term bank deposits /H1118/H1118/H1118 40,000 90,000 41,390 40,000 272,747
Cash and bank balances and
long-term bank deposits
as stated in the
consolidated statements of
financial position /H1118/H1118/H1118/H1118/H1118/H111825 191,808 1,237,205 2,469,369 2,086,204 1,982,582
Less: non-pledged bank
deposits with original
maturity of more than
three months when
acquired /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 (40,000) (122,737) (111,408) (229,000) (304,714)
Cash and cash equivalents
as stated in the
consolidated statements
of cash flows /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118151,808 1,114,468 2,357,961 1,857,204 1,677,868
APPENDIX I ACCOUNTANTS’ REPORT
– I-17 –


--- page 461 ---
STATEMENTS OF FINANCIAL POSITION OF THE COMPANY
31 December 30 September
Notes 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
NON-CURRENT ASSETS
Investments in subsidiaries /H1118/H1118/H1118/H11181 – 711,480 1,067,017 1,067,017
Total non-current assets /H1118/H1118/H1118/H1118/H1118 – 711,480 1,067,017 1,067,017
CURRENT ASSETS
Other receivable /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823 – 9,568 – –
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H111825 – –* –* 198
Total current assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 9,568 –* 198
CURRENT LIABILITIES
Amounts due to subsidiaries /H1118/H1118/H111827 – 9,568 12,883 31,300
Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H111830 – 2,861,798 3,156,013 3,166,569
Total current liabilities /H1118/H1118/H1118/H1118/H1118/H1118 – 2,871,366 3,168,896 3,197,869
NET CURRENT
LIABILITIES /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (2,861,798) (3,168,896) (3,197,671)
NET LIABILITIES /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (2,150,318) (2,101,879) (2,130,654)
EQUITY
Share capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111832 112 112 127 127
Reserves /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111833 (112) (2,150,430) (2,102,006) (2,130,781)
DEFICIENCY IN ASSETS /H1118/H1118/H1118 – (2,150,318) (2,101,879) (2,130,654)
* The amount is less than RMB1,000.
APPENDIX I ACCOUNTANTS’ REPORT
– I-18 –


--- page 462 ---
II. NOTES TO THE HISTORICAL FINANCIAL INFORMATION
1. CORPORATE INFORMATION
Guming Holdings Limited (the “Company”) is an exempted company incorporated in the Cayman Islands with
limited liability on 31 August 2021. The registered office address of the Company is 89 Nexus Way, Camana Bay,
Grand Cayman, KY1-9009, Cayman Islands.
The Company is an investment holding company. During the Relevant Periods and the nine months ended
30 September 2023, the Company’s subsidiaries were principally engaged in the operation of a franchised retail
network and trading of ingredients and other related products of freshly-made beverages and equipment in the
People’s Republic of China (the “PRC”).
The Company and its subsidiaries (collectively the “Group”) underwent the Reorganisation as set out in the
paragraph headed “History, Reorganization and Corporate Structure” in the Prospectus. The Reorganisation was
completed on 18 May 2022. Apart from the Reorganisation, the Company has not commenced any business or
operation since its incorporation.
Information about subsidiaries
As at the date of this report, the Company had direct or indirect interests in its subsidiaries, all of which are
private limited liability companies (or, if incorporated outside Hong Kong, have substantially similar characteristics
to a private company incorporated in Hong Kong), the particulars of which are set out below.
Name
Place and date of
incorporation/
registration and place
of operations
Nominal value of
issued ordinary/
registered share
capital
Percentage of
equity attributable
to the Company
Principal activitiesNotes Direct Indirect
Guming Holdings (BVI) Limited /H1118/H1118(1) BVI
13 September 2021
US$1 100% – Investment holding
Industry Consolidation (BVI)
Limited /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
(1) BVI
13 September 2021
US$1 100% – Investment holding
Guming (Hong Kong) Limited
(“̚প(ಥ)ʮ̡”) /H1118/H1118/H1118/H1118/H1118/H1118
(2) Hong Kong
22 November 2021
HK$1 – 100% Investment holding
Monoceros Orion Limited
(“ʮ̡”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
(2) Hong Kong
03 December 2021
HK$1 – 100% Investment holding
Hong Kong Hercules Trading
Limited
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) Hong Kong
24 October 2023
HK$1 – 100% Investment holding
Guming Technology Group Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(3) PRC/Mainland China
12 June 2018
RMB360,000,000 – 100% Provision of
franchise
management
service and
research and
development
Zhejiang Lichuan Food Technology
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(5) PRC/Mainland China
02 June 2020
RMB10,000,000 – 70% Processing and sale
of goods and
equipment
Zhejiang Guming Houan Information
Technology Co., Ltd.
(“ʮ
̡”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
(6) PRC/Mainland China
21 September 2020
RMB20,000,000 – 100% Development of
information
technology
Zhejiang Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
08 April 2022
RMB100,000,000 – 100% Warehousing and
logistics
management
Tianjin Lieqilin Technology Co., Ltd
(“ʮ̡”) /H1118/H1118/H1118
(4) PRC/Mainland China
02 March 2022
RMB200,000,000 – 100% Development of
information
technology
Tianjin Lieqilin Investment Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118
(4) PRC/Mainland China
16 February 2022
RMB200,000,000 – 100% Investment holding
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 463 ---
Name
Place and date of
incorporation/
registration and place
of operations
Nominal value of
issued ordinary/
registered share
capital
Percentage of
equity attributable
to the Company
Principal activitiesNotes Direct Indirect
Zhejiang Qiding Import and Export
Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118
(4) PRC/Mainland China
27 March 2019
RMB10,000,000 – 100% Sale of goods and
equipment
Zhejiang Qiding Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118
(4) PRC/Mainland China
27 August 2020
RMB20,000,000 – 100% Provision of supply
chain services and
sale of goods and
equipment
Hangzhou Guming Technology
Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
16 September 2021
RMB20,000,000 – 100% Development of
information
technology
Zhejiang Guming Food Technology
Service Co., Ltd.
(“ʮ
̡”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
(4) PRC/Mainland China
05 May 2019
RMB20,000,000 – 100% Processing and sale
of goods and
equipment
Shanghai Mingjian Technology
Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
23 March 2022
RMB30,000 – 100% Development of
information
technology
Zhejiang Guoru Food Technology
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
19 May 2022
RMB10,000,000 – 70% Processing and sale
of goods and
equipment
Hangzhou Guoru Food Technology
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
17 July 2020
RMB10,000,000 – 65% Processing and sale
of goods and
equipment
Hangzhou Guming Internet of
Things Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118
(4) PRC/Mainland China
02 August 2022
RMB5,000,000 – 100% Development of
information
technology
Y unnan Y anggaizhiwang Trading
Co., Ltd.
(“ப΂ʮ
̡”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
(4) PRC/Mainland China
27 October 2021
RMB10,000,000 – 100% Sale of goods and
equipment
Zhejiang Qiming Trading Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
08 October 2022
RMB50,000,000 – 100% Provision of supply
chain services and
sale of goods and
equipment
Zhejiang Guming Supply Chain
Management Co., Ltd.
(“ʮ̡”) /H1118
(4) PRC/Mainland China
10 October 2022
RMB100,000,000 – 100% Provision of supply
chain services and
sale of goods and
equipment
Zhejiang Shuicang Food Technology
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
19 May 2022
RMB10,000,000 – 70% Processing and sale
of goods and
equipment
Lishui Shuicang Trading Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
11 June 2020
RMB5,000,000 – 70% Sale of goods and
equipment
Guangxi Hengxian Sanhe Tea
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
04 June 2019
RMB1,000,000 – 70% Processing and sale
of goods and
equipment
Hainan Wujuzhiwang Trading
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
03 February 2023
RMB10,000,000 – 100% Sale of goods and
equipment
Taizhou Houtao Trading Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
17 May 2023
RMB10,000,000 – 100% Sale of goods and
equipment
Guangdong Ningxiang Trading
Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
25 May 2023
RMB10,000,000 – 100% Sale of goods and
equipment
Nanchang Mingxingpei Supply
Chain Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
14 March 2023
RMB1,000,000 – 100% Warehousing and
logistics
management
APPENDIX I ACCOUNTANTS’ REPORT
– I-20 –


--- page 464 ---
Name
Place and date of
incorporation/
registration and place
of operations
Nominal value of
issued ordinary/
registered share
capital
Percentage of
equity attributable
to the Company
Principal activitiesNotes Direct Indirect
Meishan Mingxingpei Supply Chain
Co., Ltd.
(“ʮ
̡”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
(4) PRC/Mainland China
30 March 2023
RMB1,000,000 – 100% Warehousing and
logistics
management
Zhumadian Mingxingpei Supply
Chain Co., Ltd.
(“ʮ̡”) /H1118
(4) PRC/Mainland China
27 April 2023
RMB1,000,000 – 100% Warehousing and
logistics
management
Fuzhou Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
28 April 2023
RMB1,000,000 – 100% Warehousing and
logistics
management
Zhangzhou Mingxingpei Supply
Chain Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
28 April 2023
RMB1,000,000 – 100% Warehousing and
logistics
management
Huzhou Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
13 April 2023
RMB1,000,000 – 100% Warehousing and
logistics
management
Wuhan Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
15 March 2023
RMB1,000,000 – 100% Warehousing and
logistics
management
Zhejiang Meiming Trading Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
08 May 2023
RMB30,000,000 – 100% Provision of supply
chain services and
sale of goods and
equipment
Zhejiang Jingming Import and
Export Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118
(4) PRC/Mainland China
09 August 2023
RMB30,000,000 – 100% Sale of goods and
equipment
Zhejiang Mingjian Technology
Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
05 September 2023
RMB10,000,000 – 100% Development of
information
technology
Sichuan Mangmangdawang Trading
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
07 September 2023
RMB10,000,000 – 100% Sale of goods and
equipment
Hefei Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
05 March 2024
RMB1,000,000 – 100% Warehousing and
logistics
management
Guizhou Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
26 March 2024
RMB1,000,000 – 100% Warehousing and
logistics
management
Zhaoqing Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
10 April 2024
RMB1,000,000 – 100% Warehousing and
logistics
management
Zhuji Mingxingpei Supply Chain
Co., Ltd.
(“ʮ̡”) /H1118/H1118
(4) PRC/Mainland China
21 May 2024
RMB1,000,000 – 100% Warehousing and
logistics
management
Hangzhou Huiyi Equipment
Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
13 June 2024
RMB1,000,000 – 100% Sale of equipment
Hangzhou Y oujia Fruit Co., Ltd.
(“ʮ̡”) /H1118/H1118/H1118/H1118
(4) PRC/Mainland China
10 July 2024
RMB1,000,000 – 100% Sale of food and
beverages
The English names of the companies registered in the PRC represent the best efforts made by the management
of the Company to translate the Chinese names of these companies as they do not have official English names.
(1) No audited financial statements have been prepared and issued for these entities as they are not subject
to any statutory audit requirement under the relevant rules and regulations in their jurisdiction of
incorporation.
APPENDIX I ACCOUNTANTS’ REPORT
– I-21 –


--- page 465 ---
As at 31 December 2021, 2022 and 2023 and 30 September 2024, the balances of the Company’s
investments in subsidiaries were as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Industry Consolidation (BVI)
Limited,
at cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118––––
Guming Holdings (BVI) Limited,
at cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 658,544 658,544 658,544
Investments arising from equity-
settled share-based payment* /H1118/H1118 – 52,936 408,473 408,473
– 711,480 1,067,017 1,067,017
* The amount represents equity-settled share-based payment expenses and exercise prices received
arising from the share options of the Company to employees of the subsidiaries (note 34) in
exchange for their services provided to these subsidiaries, which were deemed to be investments
made by the Company into these subsidiaries.
(2) The statutory financial statements for the period from their dates of incorporation to 31 December 2022
and the year ended 31 December 2023 prepared in accordance with the Hong Kong Small and
Medium-sized Entity Financial Reporting Standard (“SME-FRS”) issued by the Hong Kong Institute of
Certified Public Accountants have been audited by ICS CPA Limited, a certified public accounting firm
registered in Hong Kong.
(3) The statutory financial statements for the years ended 31 December 2021 and 2022 prepared in
accordance with PRC generally accepted accounting principles and regulations have been audited by
Hangzhou Tianqi Certified Public Accountants, a certified public accounting firm registered in the PRC.
The statutory financial statements for the year ended 31 December 2023 prepared in accordance with
PRC generally accepted accounting principles and regulations have been audited by Zhejiang Zhonghui
Certified Public Accountants, a certified public accounting firm registered in the PRC.
(4) No statutory audited financial statements of the entities have been prepared since their incorporation or
establishment.
(5) The statutory financial statements for the year ended 31 December 2021 prepared in accordance with
PRC generally accepted accounting principles and regulations have been audited by Hangzhou Jinxiao
Certified Public Accountants, a certified public accounting firm registered in the PRC. No statutory
audited financial statements of the entity have been prepared for the years ended 31 December 2022 and
2023.
(6) The statutory financial statements for the year ended 31 December 2021 prepared in accordance with
PRC generally accepted accounting principles and regulations have been audited by Zhejiang Zhengxin
Y onghao United Certified Public Accountants, a certified public accounting firm registered in the PRC.
The statutory financial statements for the years ended 31 December 2022 and 2023 prepared in
accordance with PRC generally accepted accounting principles and regulations have been audited by
Zhejiang Zhonghui Certified Public Accountants, a certified public accounting firm registered in the
PRC.
APPENDIX I ACCOUNTANTS’ REPORT
– I-22 –


--- page 466 ---
2. ACCOUNTING POLICIES
2.1 Basis of Presentation
Pursuant to the Reorganisation, as more fully explained in the paragraph headed “Reorganization” in the
section headed “History, Reorganization and Corporate Structure” in the Prospectus, the Company became the
holding company of the companies now comprising the Group on 18 May 2022. As the Reorganisation only involved
inserting new holding companies at the top of an existing group and has not resulted in any change of economic
substance, the Historical Financial Information for the Relevant Periods has been presented as a continuation of the
existing group as if the Reorganisation had been completed at the beginning of the Relevant Periods.
Accordingly, the consolidated statements of profit or loss, the consolidated statements of comprehensive
income, the consolidated statements of changes in equity and the consolidated statements of cash flows of the Group
for the Relevant Periods and the nine months ended 30 September 2023 are prepared as if the current group structure
had been in existence throughout the Relevant Periods. The consolidated statements of financial position of the Group
as at 31 December 2021, 2022 and 2023 and 30 September 2024, have been prepared to present the assets and
liabilities of the companies now comprising the Group, as if the current group structure had been in existence at those
dates. No adjustments are made to reflect fair values, or recognise any new assets or liabilities as a result of the
Reorganisation.
Profit or loss and each component of other comprehensive income are attributed to the owners of the parent
and to the non-controlling interests, even if this results in the non-controlling interests having a deficit balance.
All intra-group transactions and balances have been eliminated on consolidation in full.
2.2 Basis of Preparation
The Historical Financial Information has been prepared in accordance with IFRS Accounting Standards, which
comprise all standards and interpretations issued by the International Accounting Standards Board (the “IASB”).
All IFRS Accounting Standards effective for the accounting period commencing from 1 January 2024, together
with the relevant transitional provisions, have been early adopted by the Group in the preparation of the Historical
Financial Information throughout the Relevant Periods and in the period covered by the Interim Comparative
Financial Information.
The Historical Financial Information has been prepared under the historical cost convention, except for equity
investment designated at fair value through other comprehensive income, financial assets at fair value through profit
or loss and financial liabilities at fair value through profit or loss, which have been measured at fair value.
2.3 Issued But Not Y et Effective IFRS ACCOUNTING Standards
The Group has not applied the following new and amended standards, that have been issued but are not yet
effective, in the Historical Financial Information.
IFRS 18 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Presentation and Disclosure in Financial Statements
3
IFRS 19 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Subsidiaries without Public Accountability: Disclosures 3
Amendments to IFRS 9 and IFRS 7 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Amendments to the Classification and Measurement of
Financial Instruments 2
Amendments to IFRS 10 and IAS 28 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Sale or Contribution of Assets between an Investor and its
Associate or Joint V enture 4
Amendments to IAS 21 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Lack of Exchangeability 1
Annual Improvements to IFRS Accounting
Standards – V olume 11 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Amendments to IFRS 1, IFRS 7, IFRS 9, IFRS 10 and IAS
72
1 Effective for annual periods beginning on or after 1 January 2025
2 Effective for annual periods beginning on or after 1 January 2026
3 Effective for annual/reporting periods beginning on or after 1 January 2027
4 No mandatory effective date yet determined but available for adoption
APPENDIX I ACCOUNTANTS’ REPORT
– I-23 –


--- page 467 ---
The Group is in the process of making an assessment of the impact of these new and amended standards upon
initial application. IFRS 18 introduces new requirements on presentation within the statement of profit or loss,
including specific totals and subtotals. It also requires disclosure of management-defined performance measures in
a note and introduces new requirements for aggregation and disaggregation of financial information. The new
requirements are expected to impact the Group’s presentation of the statement of profit or loss and disclosures of the
Group’s financial performance. So far, the Group considers that the new and amended standards are unlikely to have
a significant impact on the Group’s results of operations and financial position.
2.4 Material Accounting Policies
Subsidiaries
A subsidiary is an entity (including a structured entity), directly or indirectly, controlled by the Company.
Control is achieved when the Group is exposed, or has rights, to variable returns from its involvement with
the investee and has the ability to affect those returns through its power over the investee (i.e., existing rights that
give the Group the current ability to direct the relevant activities of the investee).
Generally, there is a presumption that a majority of voting rights results in control. When the Company has,
directly or indirectly, less than a majority of the voting or similar rights of an investee, the Group considers all
relevant facts and circumstances in assessing whether it has power over an investee, including:
(a) the contractual arrangement with the other vote holders of the investee;
(b) rights arising from other contractual arrangements; and
(c) the Group’s voting rights and potential voting rights.
The financial statements of the subsidiaries are prepared for the same reporting period as the Company, using
consistent accounting policies.
The Group reassesses whether or not it controls an investee if facts and circumstances indicate that there are
changes to one or more of the three elements of control described above. A change in the ownership interest of a
subsidiary, without a loss of control, is accounted for as an equity transaction.
Fair value measurement
The Group measures certain of its financial assets, equity investment and financial liabilities at fair value at
the end of each of the Relevant Periods. Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at the measurement date. The fair value
measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place
either in the principal market for the asset or liability, or in the absence of a principal market, in the most
advantageous market for the asset or liability. The principal or the most advantageous market must be accessible by
the Group. The fair value of an asset or a liability is measured using the assumptions that market participants would
use when pricing the asset or liability, assuming that market participants act in their economic best interest.
The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data
are available to measure fair value, maximising the use of relevant observable inputs and minimising the use of
unobservable inputs.
All assets and liabilities for which fair value is measured or disclosed in the Historical Financial Information
are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant
to the fair value measurement as a whole:
 Level 1 – based on quoted prices (unadjusted) in active markets for identical assets or liabilities
 Level 2 – based on valuation techniques for which the lowest level input that is significant to the
measurement is observable, either directly or indirectly
 Level 3 – based on valuation techniques for which the lowest level input that is significant to the fair value
measurement is unobservable
For assets and liabilities that are recognised in the Historical Financial Information on a recurring basis, the
Group determines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation
(based on the lowest level input that is significant to the fair value measurement as a whole) at the end of each of
the reporting periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-24 –


--- page 468 ---
Impairment of non-financial assets
Where an indication of impairment exists, or when annual impairment testing for an asset is required (other
than inventories, contract assets, deferred tax assets and financial assets), the asset’s recoverable amount is estimated.
An asset’s recoverable amount is the higher of the asset’s or cash-generating unit’s value in use and its fair value less
costs of disposal, and is determined for an individual asset, unless the asset does not generate cash inflows that are
largely independent of those from other assets or groups of assets, in which case the recoverable amount is
determined for the cash-generating unit to which the asset belongs.
In testing a cash-generating unit for impairment, a portion of the carrying amount of a corporate asset (e.g.,
a headquarters building) is allocated to an individual cash-generating unit if it can be allocated on a reasonable and
consistent basis or, otherwise, to the smallest group of cash-generating units.
An impairment loss is recognised only if the carrying amount of an asset exceeds its recoverable amount. In
assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount
rate that reflects current market assessments of the time value of money and the risks specific to the asset. An
impairment loss is charged to profit or loss in the period in which it arises in those expense categories consistent with
the function of the impaired asset.
An assessment is made at the end of each reporting period as to whether there is an indication that previously
recognised impairment losses may no longer exist or may have decreased. If such an indication exists, the recoverable
amount is estimated. A previously recognised impairment loss of an asset other than goodwill is reversed only if there
has been a change in the estimates used to determine the recoverable amount of that asset, but not to an amount higher
than the carrying amount that would have been determined (net of any depreciation/amortisation) had no impairment
loss been recognised for the asset in prior years. A reversal of such an impairment loss is credited to profit or loss
in the period in which it arises.
Related parties
A party is considered to be related to the Group if:
(a) the party is a person or a close member of that person’s family and that person
(i) has control or joint control over the Group;
(ii) has significant influence over the Group; or
(iii) is a member of the key management personnel of the Group or of a parent of the Group;
or
(b) the party is an entity where any of the following conditions applies:
(i) the entity and the Group are members of the same group;
(ii) one entity is an associate or joint venture of the other entity (or of a parent, subsidiary or fellow
subsidiary of the other entity);
(iii) the entity and the Group are joint ventures of the same third party;
(iv) one entity is a joint venture of a third entity and the other entity is an associate of the third entity;
(v) the entity is a post-employment benefit plan for the benefit of employees of either the Group or
an entity related to the Group;
(vi) the entity is controlled or jointly controlled by a person identified in (a);
(vii) a person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity); and
(viii) the entity, or any member of a group of which it is a part, provides key management personnel
services to the Group or to the parent of the Group.
APPENDIX I ACCOUNTANTS’ REPORT
– I-25 –


--- page 469 ---
Property, plant and equipment and depreciation
Property, plant and equipment, other than construction in progress, are stated at cost less accumulated
depreciation and any impairment losses. The cost of an item of property, plant and equipment comprises its purchase
price and any directly attributable costs of bringing the asset to its working condition and location for its intended
use.
Expenditure incurred after items of property, plant and equipment have been put into operation, such as repairs
and maintenance, is normally charged to profit or loss in the period in which it is incurred. In situations where the
recognition criteria are satisfied, the expenditure for a major inspection is capitalised in the carrying amount of the
asset as a replacement. Where significant parts of property, plant and equipment are required to be replaced at
intervals, the Group recognises such parts as individual assets with specific useful lives and depreciates them
accordingly.
Depreciation is calculated on the straight-line basis to write off the cost of each item of property, plant and
equipment to its residual value over its estimated useful life. The principal annual rates used for this purpose are as
follows:
Category Principal annual rates
Machinery /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11189.5%-31.7%
Office equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111819.0%-47.5%
Motor vehicles /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823.8%-47.5%
Leasehold improvements /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Over the shorter of the lease terms and 33.3%
Where parts of an item of property, plant and equipment have different useful lives, the cost of that item is
allocated on a reasonable basis among the parts and each part is depreciated separately. Residual values, useful lives
and the depreciation method are reviewed, and adjusted if appropriate, at least at each financial year/period end.
An item of property, plant and equipment including any significant part initially recognised is derecognised
upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss on disposal
or retirement recognised in profit or loss in the reporting period the asset is derecognised is the difference between
the net sales proceeds and the carrying amount of the relevant asset.
Construction in progress is stated at cost less any impairment losses, and is not depreciated. It is reclassified
to the appropriate category of property, plant and equipment when completed and ready for use.
Intangible assets (other than goodwill)
Software
Software is stated at cost less any impairment losses and is amortised on the straight-line basis over its
estimated useful life of 2 to 5 years, which is the license period of the software.
Research and development costs
All research costs are charged to the statements of profit or loss as incurred.
Expenditure incurred on projects to develop new products is capitalised and deferred only when the Group can
demonstrate the technical feasibility of completing the intangible asset so that it will be available for use or sale, its
intention to complete and its ability to use or sell the asset, how the asset will generate future economic benefits, the
availability of resources to complete the project and the ability to measure reliably the expenditure during the
development. Product development expenditure which does not meet these criteria is expensed when incurred.
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Leases
The Group assesses at contract inception whether a contract is, or contains, a lease. A contract is, or contains,
a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for
consideration.
Group as a lessee
The Group applies a single recognition and measurement approach for all leases, except for short-term leases
and leases of low-value assets. The Group recognises lease liabilities to make lease payments and right-of-use assets
representing the right to use the underlying assets.
(a) Right-of-use assets
Right-of-use assets are recognised at the commencement date of the lease (that is the date the underlying
asset is available for use). Right-of-use assets are measured at cost, less accumulated depreciation and any
impairment losses, and adjusted for any remeasurement of lease liabilities. The cost of right-of-use assets
includes the amount of lease liabilities recognised, initial direct costs incurred, and lease payments made at
or before the commencement date less any lease incentives received. Right-of-use assets are depreciated on a
straight-line basis over the shorter of the lease terms and the estimated useful lives of the assets as follows:
Office premises, company-operated stores and plant /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118 2-10 years
Leasehold land /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111850 years
If ownership of the leased asset transfers to the Group by the end of the lease term or the cost reflects
the exercise of a purchase option, depreciation is calculated using the estimated useful life of the asset.
(b) Lease liabilities
Lease liabilities are recognised at the commencement date of the lease at the present value of lease
payments to be made over the lease term. The lease payments include fixed payments (including in-substance
fixed payments) less any lease incentives receivable, variable lease payments that depend on an index or a rate,
and amounts expected to be paid under residual value guarantees. The lease payments also include the exercise
price of a purchase option reasonably certain to be exercised by the Group and payments of penalties for
termination of a lease, if the lease term reflects the Group exercising the option to terminate the lease. The
variable lease payments that do not depend on an index or a rate are recognised as an expense in the period
in which the event or condition that triggers the payment occurs.
In calculating the present value of lease payments, the Group uses its incremental borrowing rate at the
lease commencement date because the interest rate implicit in the lease is not readily determinable. After the
commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced
for the lease payments made. In addition, the carrying amount of lease liabilities is remeasured if there is a
modification, a change in the lease term, a change in lease payments (e.g., a change to future lease payments
resulting from a change in an index or rate) or a change in assessment of an option to purchase the underlying
asset.
(c) Short-term leases
The Group applies the short-term lease recognition exemption to its short-term leases of office premises
(that is those leases that have a lease term of 12 months or less from the commencement date and do not contain
a purchase option).
Lease payments on short-term leases are recognised as an expense on a straight-line basis over the lease
term.
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Financial investments
Wealth management products are classified as financial assets at fair value through profit or loss (“FVTPL
Assets”). FVTPL Assets are measured and recorded at fair value with net changes in fair value recognised in profit
or loss.
Upon initial recognition, the Group elected to classify irrevocably an equity investment designated at fair value
through other comprehensive income (“OCI”) when it meets the definition of equity under IAS 32 Financial
Instruments: Presentation and is not held for trading. The classification is determined on an instrument-by-instrument
basis. Gains and losses on the financial asset is never recycled to profit or loss. Dividends are recognised as other
income in profit or loss when the right of payment has been established, it is probable that the economic benefits
associated with the dividend will flow to the Group and the amount of the dividend can be measured reliably, except
when the Group benefits from such proceeds as a recovery of part of the cost of the financial asset, in which case,
such gains are recorded in OCI. Equity investment designated at fair value through OCI is not subject to impairment
assessment.
Purchases and sales of financial assets that require delivery of assets within the period generally established
by regulation or convention in the marketplace are recognised on the trade date, that is, the date that the Group
commits to purchase or sell the asset.
Trade and other receivables and long-term trade receivables
A receivable is recognised when the Group has an unconditional right to receive consideration. A right to
receive consideration is unconditional if only the passage of time is required before payment of that consideration
is due. The Group initially measures receivables, except for trade receivables and long-term trade receivables that do
not contain a significant financing component, at its fair value plus, in the case of a financial asset not at fair value
through profit or loss, transaction costs. Trade receivables and long-term trade receivables that do not contain a
significant financing component are measured at the transaction price determined under IFRS 15 in accordance with
the policies set out for “Revenue recognition” below.
Receivables are stated at amortised cost, using the effective interest method less allowance for credit losses.
In order for a financial asset to be classified and measured at amortised cost, it needs to give rise to cash flows
that are solely payments of principal and interest on the principal amount outstanding and the Group has a business
model to hold the asset in order to collect contractual cash flows.
Impairment of financial assets
The Group recognises an allowance for expected credit losses (“ECLs”) for all debt instruments not held at fair
value through profit or loss. ECLs are based on the difference between the contractual cash flows due in accordance
with the contract and all the cash flows that the Group expects to receive, discounted at an approximation of the
original effective interest rate. The expected cash flows will include cash flows from the sale of collateral held or
other credit enhancements that are integral to the contractual terms.
General approach
ECLs are recognised in two stages. For credit exposures for which there has not been a significant increase
in credit risk since initial recognition, ECLs are provided for credit losses that result from default events that are
possible within the next 12 months (a 12-month ECL). For those credit exposures for which there has been a
significant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over
the remaining life of the exposure, irrespective of the timing of the default (a lifetime ECL).
At each reporting date, the Group assesses whether the credit risk on a financial instrument has increased
significantly since initial recognition. When making the assessment, the Group compares the risk of a default
occurring on the financial instrument as at the reporting date with the risk of a default occurring on the financial
instrument as at the date of initial recognition and considers reasonable and supportable information that is available
without undue cost or effort, including historical and forward-looking information. The Group considers that there
has been a significant increase in credit risk when contractual payments are more than 30 days past due.
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The Group considers a financial asset in default when contractual payments are 90 days past due. However,
in certain cases, the Group may also consider a financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account
any credit enhancements held by the Group. A financial asset is written off when there is no reasonable expectation
of recovering the contractual cash flows.
Financial assets at amortised cost are subject to impairment under the general approach and they are classified
within the following stages for measurement of ECLs except for trade receivables, long-term trade receivables and
contract assets which apply the simplified approach as detailed below.
Stage 1 – Financial instruments for which credit risk has not increased significantly since initial recognition
and for which the loss allowance is measured at an amount equal to 12-month ECLs
Stage 2 – Financial instruments for which credit risk has increased significantly since initial recognition but
that are not credit-impaired financial assets and for which the loss allowance is measured at an
amount equal to lifetime ECLs
Stage 3 – Financial assets that are credit-impaired at the reporting date (but that are not purchased or
originated credit-impaired) and for which the loss allowance is measured at an amount equal to
lifetime ECLs
Simplified approach
For trade receivables, long-term trade receivables and contract assets that do not contain a significant financing
component or when the Group applies the practical expedient of not adjusting the effect of a significant financing
component, the Group applies the simplified approach in calculating ECLs. Under the simplified approach, the Group
does not track changes in credit risk, but instead recognises a loss allowance based on lifetime ECLs at each reporting
date. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for
forward-looking factors specific to the debtors and the economic environment.
Financial liabilities at amortised cost
Trade and other payables, and borrowings are initially recognised at fair value, net of directly attributable
transactions costs. Subsequent to initial recognition, trade and other payables, and borrowings are stated at amortised
cost unless the effect of discounting would be immaterial, in which case they are stated at cost.
Financial liabilities at fair value through profit or loss
Financial liabilities at fair value through profit or loss include financial liabilities held for trading and financial
liabilities designated upon initial recognition as at fair value through profit or loss. The redeemable ordinary shares
issued by Guming Technology Group Co., Ltd. and the warrants and convertible redeemable preferred shares issued
by the Company were designated upon initial recognition at fair value through profit or loss. They are initially
recognised at fair value. Any directly attributable transaction costs are recognised as finance costs in profit or loss.
The component of fair value changes relating to the issuer’s/Company’s own credit risk is recognised in other
comprehensive income. Amounts recorded in other comprehensive income related to credit risk are not subject to
recycling in profit or loss, but are transferred to retained earnings when realised. The net fair value changes relating
to market risk are recognised in profit or loss which do not include any interest charged on these financial liabilities.
Derecognition of financial liabilities
A financial liability is derecognised when the obligation under the liability is discharged or cancelled, or
expires.
When an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as
a derecognition of the original liability and a recognition of a new liability, and the difference between the respective
carrying amounts is recognised in profit or loss.
APPENDIX I ACCOUNTANTS’ REPORT
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Inventories
Inventories are stated at the lower of cost and net realisable value. Cost is determined on the weighted average
cost basis and, in the case of work in progress and finished goods, comprises direct materials, direct labour and an
appropriate proportion of overheads. Net realisable value is based on estimated selling prices less any estimated costs
to be incurred to completion and disposal.
Cash and cash equivalents
Cash and cash equivalents in the statements of financial position comprise cash on hand and at banks, and
short-term highly liquid deposits with a maturity of generally within three months that are readily convertible into
known amounts of cash, are subject to an insignificant risk of changes in value and held for the purpose of meeting
short-term cash commitments.
For the purpose of the consolidated statements of cash flows, cash and cash equivalents comprise cash on hand
and at banks, and short-term deposits as defined above, less bank overdrafts which are repayable on demand and form
an integral part of the Group’s cash management.
Income tax
Income tax comprises current and deferred tax. Income tax relating to items recognised outside profit or loss
is recognised outside profit or loss, either in OCI or directly in equity.
Current tax assets and liabilities are measured at the amount expected to be recovered from or paid to the
taxation authorities, based on tax rates (and tax laws) that have been enacted or substantively enacted by the end of
each reporting period, taking into consideration interpretations and practices prevailing in the countries in which the
Group operates.
Deferred tax is provided, using the liability method, on all temporary differences at the end of each reporting
period between the tax bases of assets and liabilities and their carrying amounts for financial reporting purposes.
Deferred tax liabilities are recognised for all taxable temporary differences, except:
 when the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in
a transaction that is not a business combination and, at the time of the transaction, affects neither the
accounting profit nor taxable profit or loss and does not give rise to equal taxable and deductible
temporary differences; and
 in respect of taxable temporary differences associated with investments in subsidiaries, when the timing
of the reversal of the temporary differences can be controlled and it is probable that the temporary
differences will not reverse in the foreseeable future.
Deferred tax assets are recognised for all deductible temporary differences, and the carryforward of unused tax
credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probable that taxable profit
will be available against which the deductible temporary differences, and the carryforward of unused tax credits and
unused tax losses can be utilised, except:
 when the deferred tax asset relating to the deductible temporary differences arises from the initial
recognition of an asset or liability in a transaction that is not a business combination and, at the time
of the transaction, affects neither the accounting profit nor taxable profit or loss and does not give rise
to equal taxable and deductible temporary differences; and
 in respect of deductible temporary differences associated with investments in subsidiaries, deferred tax
assets are only recognised to the extent that it is probable that the temporary differences will reverse in
the foreseeable future and taxable profit will be available against which the temporary differences can
be utilised.
The carrying amount of deferred tax assets is reviewed at the end of each reporting period and reduced to the
extent that it is no longer probable that sufficient taxable profit will be available to allow all or part of the deferred
tax asset to be utilised. Unrecognised deferred tax assets are reassessed at the end of each reporting period and are
recognised to the extent that it has become probable that sufficient taxable profit will be available to allow all or part
of the deferred tax asset to be recovered.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 474 ---
Deferred tax assets and liabilities are measured at the tax rates that are expected to apply to the period when
the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively
enacted at the end of the reporting period.
Deferred tax assets and deferred tax liabilities are offset if and only if the Group has a legally enforceable right
to set off current tax assets and current tax liabilities and the deferred tax assets and deferred tax liabilities relate to
income taxes levied by the same taxation authority on either the same taxable entity or different taxable entities which
intend either to settle current tax liabilities and assets on a net basis, or to realise the assets and settle the liabilities
simultaneously, in each future period in which significant amounts of deferred tax liabilities or assets are expected
to be settled or recovered.
Government grants
Government grants are recognised at their fair value where there is reasonable assurance that the grant will be
received and all attaching conditions will be complied with. When the grant relates to an expense item, it is
recognised as income on a systematic basis over the periods that the costs, for which it is intended to compensate,
are expensed.
Where the grant relates to an asset, the fair value is credited to a deferred income account and is released to
profit or loss over the expected useful life of the relevant asset by equal annual instalments or deducted from the
carrying amount of the asset and released to profit or loss by way of a reduced depreciation charge.
Revenue recognition
Revenue from contracts with customers
Revenue from contracts with customers is recognised when control of goods or services is transferred to the
customers at an amount that reflects the consideration to which the Group expects to be entitled in exchange for those
goods or services.
When the consideration in a contract includes a variable amount, the amount of consideration is estimated to
which the Group will be entitled in exchange for transferring the goods or services to the customer. The variable
consideration is estimated at contract inception and constrained until it is highly probable that a significant revenue
reversal in the amount of cumulative revenue recognised will not occur when the associated uncertainty with the
variable consideration is subsequently resolved.
When the contract contains a financing component which provides the customer with a significant benefit of
financing the transfer of goods or services to the customer for more than one year, revenue is measured at the present
value of the amount receivable, discounted using the discount rate that would be reflected in a separate financing
transaction between the Group and the customer at contract inception. When the contract contains a financing
component which provides the Group with a significant financial benefit for more than one year, revenue recognised
under the contract includes the interest expense accreted on the contract liability under the effective interest method.
For a contract where the period between the payment by the customer and the transfer of the promised goods or
services is one year or less, the transaction price is not adjusted for the effects of a significant financing component,
using the practical expedient in IFRS 15.
(a) Sale of goods and equipment
The Group generates revenue from the sale of goods, including ingredients and other related products
of freshly-made beverages, and equipment, which is recognised at the point in time when control of the asset
is transferred to the customer, generally on delivery of the goods and equipment.
(b) Provision of franchise management services
The Group enters into franchise agreements with all franchisees. As the franchisor, the Group provides
franchise management services under its franchise agreements with franchisees. Franchise is a right to sell
products in a particular area using the Group’s brand name and trademarks.
The Group’s franchise management services revenue mainly includes income from initial franchise fees,
income from continuing support services fees and income from the provision of training and other services.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 475 ---
For income from initial franchise fees, the franchisee pays a fixed upfront fee and revenue is recognised
over the franchise period. Initial franchise fees are generally charged for pre-opening support services provided
to the franchisees, including location analysis and certain advisory services like license application, marketing
advisory services and operational support. As those services are highly interrelated with the franchise right,
they are not individually distinct from the ongoing licensing arrangement provided to the franchisees.
For income from continuing support services fees, the franchisee receives ongoing operational support
services, which are highly interrelated with the franchise right, from the Group during the whole franchise
period, and pays continuing support services fee, which is determined based on a pre-determined fixed amount
per month multiplying the number of the applicable franchisee’s stores and a pre-determined rate range as a
percentage of the applicable franchisee’s stores procurement amounts, and the Group recognises revenue when
the franchisee’s subsequent usage occurs.
For income from the provision of training and other services, including pre-opening training services
and other training services, and store supervisory and maintenance services, revenue is recognised when the
related services are rendered as the customer simultaneously receives and consumes the benefits provided by
the Group. The pre-opening training services provided to the franchisees are considered to be distinct as the
training contents are largely unrelated to the Group’s brand name and trademarks.
(c) Sales from company-operated stores
The Group generates revenue from stores directly operated by the Group, revenue is recognised when
the control of the products is transferred to the customer.
(d) Rights of return
For contracts which provide a customer with a right to return the goods within a specified period, the
expected value method is used to estimate the goods that will not be returned because this method best predicts
the amount of variable consideration to which the Group will be entitled. The requirements in IFRS 15 on
constraining estimates of variable consideration are applied in order to determine the amount of variable
consideration that can be included in the transaction price. For goods that are expected to be returned, instead
of revenue, a liability is recognised. A right-of-return asset (and the corresponding adjustment to cost of sales)
is also recognised for the right to recover products from a customer.
Other income
Interest income is recognised on an accrual basis using the effective interest method by applying the rate that
exactly discounts the estimated future cash receipts over the expected life of the financial instrument or a shorter
period, when appropriate, to the net carrying amount of the financial asset.
Contract assets
If the Group performs by transferring goods or services to a customer before being unconditionally entitled to
the consideration under the contract terms, a contract asset is recognised for the earned consideration that is
conditional. Contract assets are subject to impairment assessment, details of which are included in the accounting
policies for impairment of financial assets. They are reclassified to trade receivables when the right to the
consideration becomes unconditional.
Contract liabilities
A contract liability is recognised when a payment is received or a payment is due (whichever is earlier) from
a customer before the Group transfers the related goods or services. Contract liabilities are recognised as revenue
when the Group performs under the contract (i.e., transfers control of the related goods or services to the customer).
Other employee benefits
Pension scheme
The employees of the Group’s subsidiaries which operate in Mainland China are required to participate in a
central pension scheme operated by the local municipal government. The subsidiaries operating in Mainland China
are required to contribute a certain percentage of their payroll costs to the central pension scheme. The contributions
are charged to profit or loss as they become payable in accordance with the rules of the central pension scheme.
APPENDIX I ACCOUNTANTS’ REPORT
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Share-based payments
The Company operates a share option scheme. Employees (including directors) of the Group receive
remuneration in the form of share-based payments, whereby employees render services in exchange for equity
instruments (“equity-settled transactions”). The cost of equity-settled transactions with employees is measured by
reference to the fair value at the date at which they are granted. The fair value is determined by an external valuer
using a binomial model, further details of which are given in note 34 to the Historical Financial Information.
The cost of equity-settled transactions is recognised in employee benefit expense, together with a
corresponding increase in equity, over the period in which the performance and/or service conditions are fulfilled.
The cumulative expense recognised for equity-settled transactions at the end of each reporting period until the vesting
date reflects the extent to which the vesting period has expired and the Group’s best estimate of the number of equity
instruments that will ultimately vest. The charge or credit to profit or loss for a period represents the movement in
the cumulative expense recognised as at the beginning and end of that period.
Service and non-market performance conditions are not taken into account when determining the grant date
fair value of awards, but the likelihood of the conditions being met is assessed as part of the Group’s best estimate
of the number of equity instruments that will ultimately vest. Market performance conditions are reflected within the
grant date fair value. Any other conditions attached to an award, but without an associated service requirement, are
considered to be non-vesting conditions. Non-vesting conditions are reflected in the fair value of an award and lead
to an immediate expensing of an award unless there are also service and/or performance conditions.
For awards that do not ultimately vest because non-market performance and/or service conditions have not
been met, no expense is recognised. Where awards include a market or non-vesting condition, the transactions are
treated as vesting irrespective of whether the market or non-vesting condition is satisfied, provided that all other
performance and/or service conditions are satisfied.
Where the terms of an equity-settled award are modified, as a minimum an expense is recognised as if the
terms had not been modified, if the original terms of the award are met. In addition, an expense is recognised for any
modification that increases the total fair value of the share-based payments or is otherwise beneficial to the employee
as measured at the date of modification. Where an equity-settled award is cancelled, it is treated as if it had vested
on the date of cancellation, and any expense not yet recognised for the award is recognised immediately.
This includes any award where non-vesting conditions within the control of either the Group or the employee
are not met. However, if a new award is substituted for the cancelled award, and is designated as a replacement award
on the date that it is granted, the cancelled and new awards are treated as if they were a modification of the original
award, as described in the previous paragraph.
Foreign currencies
These Historical Financial Information are presented in RMB, which is the Company’s functional currency
because the Group’s principal operations are carried out in the PRC. Each entity in the Group determines its own
functional currency and items included in the financial statements of each entity are measured using that functional
currency. Foreign currency transactions recorded by the entities in the Group are initially recorded using their
respective functional currency rates prevailing at the dates of the transactions. Monetary assets and liabilities
denominated in foreign currencies are translated at the functional currency rates of exchange ruling at the end of the
reporting period. Differences arising on settlement or translation of monetary items are recognised in profit or loss.
The functional currencies of certain overseas subsidiaries are currencies other than RMB. As at the end of the
reporting period, the assets and liabilities of these entities are translated into RMB at the exchange rates prevailing
at the end of the reporting period and their statements of profit or loss are translated into RMB at the exchange rates
that approximate to those prevailing at the dates of the transactions.
The resulting exchange differences are recognised in other comprehensive income and accumulated in the
exchange fluctuation reserve, except to the extent that the differences are attributable to non-controlling interests. On
disposal of a foreign operation, the cumulative amount in the reserve relating to that particular foreign operation is
recognised in profit or loss.
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 477 ---
3. SIGNIFICANT ACCOUNTING JUDGEMENT AND ESTIMATES
The preparation of the Group’s Historical Financial Information requires management to make judgements,
estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and their
accompanying disclosures, and the disclosure of contingent liabilities. Uncertainty about these assumptions and
estimates could result in outcomes that could require a material adjustment to the carrying amounts of the assets or
liabilities affected in the future.
Judgement
In the process of applying the Group’s accounting policies, management has made the following judgement,
apart from those involving estimations, which has the most significant effect on the amounts recognised in the
Historical Financial Information:
Deferred tax assets
Deferred tax assets are recognised for unused tax losses and deductible temporary differences to the extent that
it is probable that taxable profit will be available against which the losses and deductible temporary difference can
be utilised. Significant management judgement is required to determine the amount of deferred tax assets that can
be recognised, based upon the likely timing and level of future taxable profits together with future tax planning
strategies. Further details are included in note 18 to the Historical Financial Information.
Estimation uncertainty
The key assumptions concerning the future and other key sources of estimation uncertainty at the end of each
of the Relevant Periods, that have a significant risk of causing a material adjustment to the carrying amounts of assets
and liabilities within the next financial year, are described below.
V ariable consideration
The Group estimates variable consideration to be included in the transaction price for the sale of goods and
equipment with rights of return and the initial franchise fee for certain customers.
The Group has developed a statistical model for forecasting sales returns. The model used the historical return
data of each product to come up with expected return percentages. These percentages are applied to determine the
expected value of the variable consideration. Any significant changes in experience as compared to historical return
pattern will impact the expected return percentages estimated by the Group. The Group updates its assessment of
expected returns quarterly. Estimates of expected return are sensitive to changes in circumstances and the Group’s
past experience regarding returns may not be representative of customers’ actual returns in the future.
In addition, the Group estimates the variable consideration related to some initial franchise fee arrangements
to the extent that it is highly probable that a significant reversal in the amount of cumulative revenue recognised
would not occur when the uncertainty (i.e., closure of franchise shops within 12 months after the set up or closure
of franchise shops before the full settlement of franchise management services fees) associated with the variable
consideration is subsequently resolved.
Revenue recognition from the provision of franchise management services over time
During the years ended 31 December 2021, 2022 and 2023 and the nine months ended 30 September 2024,
revenue from initial franchise fees recognised over time amounted to RMB73,414,000, RMB87,911,000,
RMB109,509,000 and RMB87,626,000, respectively. As at 31 December 2021, 2022 and 2023 and 30 September
2024, the balances of contract liabilities amounted to RMB123,858,000, RMB109,261,000, RMB92,977,000 and
RMB109,137,000, respectively.
Franchise rights, which represent primarily the right to access the Group’s brand name and trademarks, are
granted to franchisees upon upfront initial payments for the first year and are renewable annually by the franchisees
at no cost, the control of services is transferred over time. Based on the historical franchise information of the
franchised shops, the management of the Group determined that license fees from the franchise business are
recognised as contract liabilities upon receipt of the upfront initial payments and are released to profit or loss as
revenue over the estimated franchise period of three years for each reporting period.
Actual franchise periods may differ from the estimated franchise periods. The management of the Group would
periodically review the estimated franchise periods of the franchisees and considers if any adjustment to the current
estimation is needed.
APPENDIX I ACCOUNTANTS’ REPORT
– I-34 –


--- page 478 ---
Fair values of redeemable ordinary shares, warrants and convertible redeemable preferred shares
The fair values of the redeemable ordinary shares, warrants and convertible redeemable preferred shares
measured at fair value through profit or loss are determined using the valuation techniques, including the discounted
cash flow method and the option-pricing method. Such valuation is based on key parameters about risk-free interest
rate, discounts for lack of marketability (“DLOM”) and volatility, which are subject to uncertainty and might
materially differ from the actual results. The fair values of redeemable ordinary shares, warrants and convertible
redeemable preferred shares at 31 December 2021, 2022 and 2023 and 30 September 2024 were RMB2,472,275,000,
RMB2,861,798,000, RMB3,156,013,000 and RMB3,166,569,000, respectively. Further details are included in notes
30 and 41 to the Historical Financial Information.
Fair value of an unlisted equity investment
The unlisted equity investment has been valued based on a market-based valuation technique as detailed in
note 41 to the Historical Financial Information. The valuation requires the Group to determine the price-to-sales ratio
(“P/S”) for similar instruments, adjusted by discount for lack of marketability. The Group classifies the fair value of
the unlisted equity investment as Level 3. The fair values of the unlisted equity investment at 31 December 2021,
2022 and 2023 and 30 September 2024 were RMB247,500,000, RMB277,073,000, RMB257,122,000 and
RMB248,095,000, respectively. Further details are included in notes 16 and 41 to the Historical Financial
Information.
Fair value measurement of share-based payments
The Group has set up the 2019 share incentive plan and the 2022 share incentive plan and granted options to
the Group’s directors and employees. The fair values of the options are determined by the binomial option-pricing
model at the date of grant to employees. Significant estimates on assumptions, including the underlying equity value,
risk-free interest rate, expected volatility, and dividend yield, are made by the board of directors of the Company.
Further details are included in note 34 to the Historical Financial Information.
Leases — Estimating the incremental borrowing rate
The Group cannot readily determine the interest rate implicit in a lease, and therefore, it uses an incremental
borrowing rate (“IBR”) to measure lease liabilities. The IBR is the rate of interest that the Group would have to pay
to borrow over a similar term, and with a similar security, the funds necessary to obtain an asset of a similar value
to the right-of-use asset in a similar economic environment. The IBR therefore reflects what the Group “would have
to pay”, which requires estimation when no observable rates are available (such as for subsidiaries that do not enter
into financing transactions) or when it needs to be adjusted to reflect the terms and conditions of the lease (for
example, when leases are not in the subsidiary’s functional currency). The Group estimates the IBR using observable
inputs (such as market interest rates) when available and is required to make certain entity-specific estimates (such
as the subsidiary’s stand-alone credit rating).
4. OPERATING SEGMENT INFORMATION
Management has determined the operating segments based on the reports reviewed by the chief operating
decision maker. The chief operating decision maker, who is responsible for allocating resources and assessing
performance of the operating segment, has been identified as the executive directors of the Company. During the
Relevant Periods and the nine months ended 30 September 2023, the Group is principally engaged in the operation
of a franchised retail network and the trading of ingredients and other related products of freshly-made beverages and
equipment. Management reviews the operating results of the Group’s business as one operating segment for the
purpose of making decisions about resource allocation and performance assessment. Therefore, the chief operating
decision maker of the Company regards that there is only one segment which is used to make strategic decisions.
Geographical information
No geographical information is presented as the Group’s revenue from the external customers is derived solely
from its operations in Mainland China and no non-financial long term assets of the Group are located outside
Mainland China.
Information about major customers
No revenue from sales to a single customer or a group of customers under common control accounted for 10%
or more of the Group’s revenue for each of the Relevant Periods and the nine months ended 30 September 2023.
APPENDIX I ACCOUNTANTS’ REPORT
– I-35 –


--- page 479 ---
5. REVENUE, OTHER INCOME AND GAINS
Revenue represents income from the sale of goods and equipment, franchise management services and sales
from company-operated stores during the Relevant Periods and the nine months ended 30 September 2023.
An analysis of revenue is as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue from contracts with
customers
Sale of goods and equipment /H1118/H1118/H1118/H1118/H11183,546,918 4,505,145 6,144,711 4,477,504 5,153,346
Franchise management services /H1118/H1118/H1118831,645 1,044,290 1,518,646 1,083,910 1,277,085
Sales from company-operated stores /H1118 5,338 9,787 12,308 9,468 10,857
4,383,901 5,559,222 7,675,665 5,570,882 6,441,288
Revenue from contracts with customers
(a) Disaggregated revenue information
Types of services
Sale of goods and
equipment
Franchise
management
services
Sales from
company-
operated stores Total
RMB’000 RMB’000 RMB’000 RMB’000
For the year ended 31 December 2021
Types of goods or services
Sale of goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,348,943 – – 3,348,943
Sale of equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118197,975 – – 197,975
Initial franchise fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 73,414 – 73,414
Continuing support services fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118– 699,488 – 699,488
Provision of training and other services /H1118/H1118 – 58,743 – 58,743
Sales from company-operated stores /H1118/H1118/H1118/H1118/H1118 – – 5,338 5,338
3,546,918 831,645 5,338 4,383,901
Geographical market
Mainland China /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,546,918 831,645 5,338 4,383,901
Timing of revenue recognition
Revenue recognised over time /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 831,645 – 831,645
Revenue recognised at a point in time /H1118/H1118/H11183,546,918 – 5,338 3,552,256
3,546,918 831,645 5,338 4,383,901
APPENDIX I ACCOUNTANTS’ REPORT
– I-36 –


--- page 480 ---
Types of services
Sale of goods and
equipment
Franchise
management
services
Sales from
company-
operated stores Total
RMB’000 RMB’000 RMB’000 RMB’000
For the year ended 31 December 2022
Types of goods or services
Sale of goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,282,733 – – 4,282,733
Sale of equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118222,412 – – 222,412
Initial franchise fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 87,911 – 87,911
Continuing support services fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118– 898,883 – 898,883
Provision of training and other services /H1118/H1118 – 57,496 – 57,496
Sales from company-operated stores /H1118/H1118/H1118/H1118/H1118 – – 9,787 9,787
4,505,145 1,044,290 9,787 5,559,222
Geographical market
Mainland China /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,505,145 1,044,290 9,787 5,559,222
Timing of revenue recognition
Revenue recognised over time /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,044,290 – 1,044,290
Revenue recognised at a point in time /H1118/H1118/H11184,505,145 – 9,787 4,514,932
4,505,145 1,044,290 9,787 5,559,222
Types of services
Sale of goods and
equipment
Franchise
management
services
Sales from
company-
operated stores Total
RMB’000 RMB’000 RMB’000 RMB’000
For the year ended
31 December 2023
Types of goods or services
Sale of goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,778,264 – – 5,778,264
Sale of equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118366,447 – – 366,447
Initial franchise fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 109,509 – 109,509
Continuing support services fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,311,905 – 1,311,905
Provision of training and other services /H1118/H1118 – 97,232 – 97,232
Sales from company-operated stores /H1118/H1118/H1118/H1118/H1118 – – 12,308 12,308
6,144,711 1,518,646 12,308 7,675,665
Geographical market
Mainland China /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186,144,711 1,518,646 12,308 7,675,665
Timing of revenue recognition
Revenue recognised over time /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,518,646 – 1,518,646
Revenue recognised at a point in time /H1118/H1118/H11186,144,711 – 12,308 6,157,019
6,144,711 1,518,646 12,308 7,675,665
APPENDIX I ACCOUNTANTS’ REPORT
– I-37 –


--- page 481 ---
Types of services
Sale of goods and
equipment
Franchise
management
services
Sales from
company-
operated stores Total
RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
For the nine months ended
30 September 2023
Types of goods or services
Sale of goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,175,719 – – 4,175,719
Sale of equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118301,785 – – 301,785
Initial franchise fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 80,794 – 80,794
Continuing support services fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118– 929,906 – 929,906
Provision of training and other services /H1118/H1118 – 73,210 – 73,210
Sales from company-operated stores /H1118/H1118/H1118/H1118/H1118 – – 9,468 9,468
4,477,504 1,083,910 9,468 5,570,882
Geographical market
Mainland China /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,477,504 1,083,910 9,468 5,570,882
Timing of revenue recognition
Revenue recognised over time /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,083,910 – 1,083,910
Revenue recognised at a point in time /H1118/H1118/H11184,477,504 – 9,468 4,486,972
4,477,504 1,083,910 9,468 5,570,882
Types of services
Sale of goods and
equipment
Franchise
management
services
Sales from
company-
operated stores Total
RMB’000 RMB’000 RMB’000 RMB’000
For the nine months ended
30 September 2024
Types of goods or services
Sale of goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,872,023 – – 4,872,023
Sale of equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118281,323 – – 281,323
Initial franchise fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 87,421 – 87,421
Continuing support services fees /H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,141,904 – 1,141,904
Provision of training and other services /H1118/H1118 – 47,760 – 47,760
Sales from company-operated stores /H1118/H1118/H1118/H1118/H1118 – – 10,857 10,857
5,153,346 1,277,085 10,857 6,441,288
Geographical market
Mainland China /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,153,346 1,277,085 10,857 6,441,288
Timing of revenue recognition
Revenue recognised over time /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,277,085 – 1,277,085
Revenue recognised at a point in time /H1118/H1118/H11185,153,346 – 10,857 5,164,203
5,153,346 1,277,085 10,857 6,441,288
APPENDIX I ACCOUNTANTS’ REPORT
– I-38 –


--- page 482 ---
The following table shows the amounts of revenue recognised in the Relevant Periods and the nine months
ended 30 September 2023 that were included in the contract liabilities at the beginning of each reporting period:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Revenue recognised that was
included in contract liabilities at
the beginning of the year/period:
Sale of goods and equipment /H1118/H1118/H1118/H1118/H11185,030 4,705 8,031 8,031 9,704
Franchise management services /H1118/H1118/H111856,338 60,630 49,489 33,118 42,224
61,368 65,335 57,520 41,149 51,928
(b) Performance obligations
Information about the Group’s performance obligations is summarised below:
Sale of goods and equipment
The performance obligation of the sale of goods and equipment is satisfied upon delivery of the goods and
equipment and payment in advance is normally required, except for customers with credit terms, where payment is
generally due within 2 days to 90 days from delivery or issuance of billings. Some contracts provide customers with
a right of return which gives rise to variable consideration.
There is unsatisfied performance obligation for the sale of goods and equipment at the end of each of the
Relevant Periods and the nine months ended 30 September 2023. As permitted under IFRS 15, the Group applies the
practical expedient and does not disclose the transaction price allocated to the unsatisfied performance obligations
for contracts of the sale of products, which are generally with an original expected length of one year or less.
Franchise management services
For franchise management services, the Group recognises revenue over time as services are rendered, and
payment in advance is normally required. Some initial franchise fee arrangements contain variable consideration.
There is unsatisfied performance obligation for franchise management services at the end of each of the Relevant
Periods and the nine months ended 30 September 2023.
Sales from company-operated stores
The performance obligation of sales from company-operated stores is satisfied upon delivery of the products
and payment is received upon delivery. There is no unsatisfied performance obligation for sales from company-
operated stores at the end of each of the Relevant Periods and the nine months ended 30 September 2023.
The amounts of transaction prices allocated to the remaining performance obligations (unsatisfied or partially
unsatisfied) related to franchise management services at the end of each of the Relevant Periods and the nine months
ended 30 September 2023, which do not include any variable consideration that are constrained, are as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Amounts expected to be recognised
as revenue:
Within 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111860,630 49,489 66,443 9,781 75,320
1 year to 2 years /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111847,139 45,887 23,118 61,806 29,564
2 years to 3 years /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111816,089 13,885 3,416 26,796 4,253
123,858 109,261 92,977 98,383 109,137
APPENDIX I ACCOUNTANTS’ REPORT
– I-39 –


--- page 483 ---
The amounts of transaction prices allocated to the remaining performance obligations which are expected to
be recognised as revenue after one year relate to franchise management services, of which the performance
obligations are to be satisfied within two to three years.
Other income and gains
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Other income
Government grants
– related to income* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,475 18,576 90,009 77,506 72,900
Bank interest income /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,181 5,375 53,735 35,583 47,550
Imputed interest income for long-term
trade receivables and non-current
portion of contract assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118–––– 9 2 8
Additional tax deduction** /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,131 3,959 3,908 3,203 4,623
Sale of scraps /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118448 1,398 1,100 772 1,417
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,074 9,115 13,852 7,094 8,915
31,309 38,423 162,604 124,158 136,333
Gains
Foreign exchange differences, net /H1118/H1118/H1118 – 7,935 4,315 – –
Fair value changes of financial assets
at fair value through profit or loss /H1118/H1118 16,289 10,933 1,909 1,721 7,734
Gains on disposal of items of property,
plant and equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1 8 6–––
16,289 19,054 6,224 1,721 7,734
Total other income and gains /H1118/H1118/H1118/H1118/H1118/H111847,598 57,477 168,828 125,879 144,067
* The government grants related to income mainly represent incentives received from the local government in
connection with certain financial support to local business enterprises for the purpose of encouraging business
development. These grants are recognised in profit or loss upon receipt of these grants. There are no unfulfilled
conditions or contingencies relating to these grants.
** The amounts represent the additional input value added tax deduction, pursuant to the announcement of the
State Administration of Taxation, which became effective from 1 April 2019 onwards.
APPENDIX I ACCOUNTANTS’ REPORT
– I-40 –


--- page 484 ---
6. PROFIT BEFORE TAX
The Group’s profit before tax is arrived at after charging/(crediting):
Y ear ended 31 December Nine months ended 30 September
Notes 2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Cost of services provided and
inventories sold* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,070,196 3,996,290 5,272,334 3,844,469 4,476,906
Depreciation of property, plant
and equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111813 27,347 62,579 73,110 56,051 58,342
Depreciation of right-of-use
assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814(a) 40,464 54,671 61,661 45,617 44,093
Amortisation of other
intangible assets** /H1118/H1118/H1118/H1118/H1118/H111815 2,059 1,697 366 275 246
Lease payments not included
in the measurement of lease
liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111814(c) 7,743 18,303 16,299 11,494 19,043
Research and development
expenses*** /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111865,030 118,288 198,736 129,055 165,826
Employee benefit expense
(including directors’ and
chief executive’s
remuneration as set out in
note 8):
Wages and salaries /H1118/H1118/H1118/H1118/H1118/H1118 266,120 399,121 505,268 356,895 429,887
Equity-settled share-based
payment expenses /H1118/H1118/H1118/H1118/H111834 17,226 24,476 55,537 18,981 –
Pension scheme
contributions and social
welfare**** /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,448 57,710 63,715 47,987 73,063
317,794 481,307 624,520 423,863 502,950
Foreign exchange differences,
net /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,325 (7,935) (4,315) 782 8,261
Fair value changes of
financial assets at fair value
through profit or loss /H1118/H1118/H1118/H1118/H11185 (16,289) (10,933) (1,909) (1,721) (7,734)
Fair value changes of
financial liabilities at fair
value through profit or loss /H1118 30 728,388 389,523 294,215 21,669 10,556
Losses/(gains) on disposal of
items of property, plant and
equipment, net /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185 – (186) 974 402 5,286
Listing expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,080 12,884 1,815 18,393
* Cost of services provided and inventories sold include expenses relating to depreciation of property, plant and
equipment, depreciation of right-of-use assets and staff costs, which are also included in the respective total
amounts disclosed separately above for each of these types of expenses.
** The amortisation of other intangible assets is included in administrative expenses in profit or loss.
*** Research and development expenses include expenses relating to depreciation of property, plant and
equipment, depreciation of right-of-use assets and staff costs, which are also included in the respective total
amounts disclosed separately above for each of these types of expenses.
**** There are no forfeited contributions that may be used by the Group as the employer to reduce the existing level
of contributions.
APPENDIX I ACCOUNTANTS’ REPORT
– I-41 –


--- page 485 ---
7. FINANCE COSTS
An analysis of finance costs is as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest on bank and other
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 1,272 1,170 1,512
Interest on lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,079 5,424 3,961 3,129 2,216
Less: Interest capitalised /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––– (1,512)
5,079 5,424 5,233 4,299 2,216
8. DIRECTORS’ AND CHIEF EXECUTIVE’S REMUNERATION
(i) On 31 August 2021, Mr. Wang Y un’an was appointed as an executive director, chief executive officer
and the chairman of the board of directors of the Company.
(ii) On 18 May 2022, Mr. Qi Xia was appointed as an executive director of the Company and Mr. Huang
Y aoxin was appointed as a non-executive director of the Company.
(iii) On 28 December 2023, Mr. Ruan Xiudi, Mr. Cai Y unjiang and Ms. Jin Y ayu were appointed as executive
directors of the Company.
Certain of the directors received remuneration from the subsidiaries now comprising the Group prior to their
appointment as the directors of the Company. Details of the remuneration received or receivable by the directors from
the group entities are as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Fees:
Directors /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––––
Other emoluments:
Salaries, allowances and benefits in
kind /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,724 1,998 3,499 2,764 3,193
Performance related bonuses* /H1118/H1118/H1118/H11182,156 2,380 1,916 1,785 423
Pension scheme contributions and
social welfare /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111899 179 264 190 251
Equity-settled share-based payments 2,167 2,748 4,726 2,096 –
6,146 7,305 10,405 6,835 3,867
6,146 7,305 10,405 6,835 3,867
* Certain executive directors of the Company are entitled to bonus payments which are determined as a
percentage of the profit after tax of the Group.
APPENDIX I ACCOUNTANTS’ REPORT
– I-42 –


--- page 486 ---
(a) Independent non-executive directors
Subsequent to the end of the Relevant Periods, Mr. Zhuo Y ue, Ms. Zheng Xiaodong and Mr. Li Jianbo were
appointed as independent non-executive directors of the Company. There were no fees and other emoluments paid
to the independent non-executive directors during the Relevant Periods and the nine months ended 30 September
2023.
(b) Executive directors, non-executive directors and the chief executive
Y ear ended 31 December 2021
Salaries,
allowances and
benefits in kind
Performance
related bonuses
Pension scheme
contributions
and social
welfare
Equity-settled
share-based
payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and executive
director:
Mr. Wang Y un’an(i) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118480 660 13 1,577 2,730
Executive directors:
Mr. Qi Xia (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118480 660 13 550 1,703
Mr. Ruan Xiudi (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118478 660 35 – 1,173
Mr. Cai Y unjiang (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118126 140 20 22 308
Ms. Jin Y ayu (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118160 36 18 18 232
1,244 1,496 86 590 3,416
Non-executive director:
Mr. Huang Y aoxin (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––––
1,724 2,156 99 2,167 6,146
Y ear ended 31 December 2022
Salaries,
allowances and
benefits in kind
Performance
related bonuses
Pension scheme
contributions
and social
welfare
Equity-settled
share-based
payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and executive
director:
Mr. Wang Y un’an(i) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118505 660 15 1,673 2,853
Executive directors:
Mr. Qi Xia (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118480 660 16 677 1,833
Mr. Ruan Xiudi (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118484 660 62 – 1,206
Mr. Cai Y unjiang (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118359 300 52 241 952
Ms. Jin Y ayu (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118170 100 34 157 461
1,493 1,720 164 1,075 4,452
Non-executive director:
Mr. Huang Y aoxin (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––––
1,998 2,380 179 2,748 7,305
APPENDIX I ACCOUNTANTS’ REPORT
– I-43 –


--- page 487 ---
Y ear ended 31 December 2023
Salaries,
allowances and
benefits in kind
Performance
related bonuses
Pension scheme
contributions
and social
welfare
Equity-settled
share-based
payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and executive
director:
Mr. Wang Y un’an(i) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,780 1,352 94 2,511 5,737
Executive directors:
Mr. Qi Xia (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118499 – 15 1,142 1,656
Mr. Ruan Xiudi (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118486 – 66 – 552
Mr. Cai Y unjiang (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118460 420 55 654 1,589
Ms. Jin Y ayu (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118274 144 34 419 871
1,719 564 170 2,215 4,668
Non-executive director:
Mr. Huang Y aoxin (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––––
3,499 1,916 264 4,726 10,405
Nine months ended 30 September 2023
Salaries,
allowances and
benefits in kind
Performance
related bonuses
Pension scheme
contributions
and social
welfare
Equity-settled
share-based
payments Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
Chief executive and executive
director:
Mr. Wang Y un’an(i) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,585 495 64 1,114 3,258
Executive directors:
Mr. Qi Xia (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118379 495 11 506 1,391
Mr. Ruan Xiudi (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118365 495 49 – 909
Mr. Cai Y unjiang (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118270 225 41 290 826
Ms. Jin Y ayu (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118165 75 25 186 451
1,179 1,290 126 982 3,577
Non-executive director:
Mr. Huang Y aoxin (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––––
2,764 1,785 190 2,096 6,835
APPENDIX I ACCOUNTANTS’ REPORT
– I-44 –


--- page 488 ---
Nine months ended 30 September 2024
Salaries,
allowances and
benefits in kind
Performance
related bonuses
Pension scheme
contributions and
social welfare Total
RMB’000 RMB’000 RMB’000 RMB’000
Chief executive and executive director:
Mr. Wang Y un’an(i) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,965 – 96 2,061
Executive directors:
Mr. Qi Xia (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118360 – 26 386
Mr. Ruan Xiudi (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118365 – 52 417
Mr. Cai Y unjiang (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118267 315 42 624
Ms. Jin Y ayu (iii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118236 108 35 379
1,228 423 155 1,806
Non-executive director:
Mr. Huang Y aoxin (ii) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118––––
3,193 423 251 3,867
No remunerations were paid or payable by the Group to the directors and a chief executive as an inducement
to join or upon joining the Group or a compensation for loss of office during the Relevant Periods and the nine months
ended 30 September 2023.
There was no arrangement under which a director waived or agreed to waive any remunerations during the
Relevant Periods and the nine months ended 30 September 2023.
9. FIVE HIGHEST PAID EMPLOYEES
The five individuals with the highest emoluments in the Group for the years ended 31 December 2021, 2022
and 2023 and the nine months ended 30 September 2023 and 2024 included one, one, one, one and one director
disclosed above, respectively. Details of the directors’ remuneration are set out in note 8 above. Details of the
remuneration of the remaining four, four, four, four and four highest paid employees, respectively, who are neither
a director nor chief executive of the Company for the years ended 31 December 2021, 2022 and 2023 and the nine
months ended 30 September 2023 and 2024 are as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Salaries, allowances and benefits in
kind /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,929 2,872 5,590 3,428 6,595
Performance related bonuses* /H1118/H1118/H1118/H1118/H1118/H1118684 984 1,108 816 943
Pension scheme contributions and
social welfare /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118308 293 301 211 331
Equity-settled share-based payments /H1118/H1118 4,916 5,793 23,990 5,648 –
8,837 9,942 30,989 10,103 7,869
* Certain highest paid employees of the Company are entitled to bonus payments which are determined as a
percentage of the profit after tax of the Group.
APPENDIX I ACCOUNTANTS’ REPORT
– I-45 –


--- page 489 ---
The numbers of non-director and non-chief executive highest paid employees whose remuneration fell within
the following bands are as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000
(Unaudited)
HK$1,500,001 to HK$2,000,000 /H1118/H1118/H1118/H1118 ––––1
HK$2,000,001 to HK$2,500,000 /H1118/H1118/H1118/H1118 2––23
HK$2,500,001 to HK$3,000,000 /H1118/H1118/H1118/H1118 13–––
HK$3,000,001 to HK$3,500,000 /H1118/H1118/H1118/H1118 11–1–
HK$3,500,001 to HK$4,000,000 /H1118/H1118/H1118/H1118 ––21–
HK$4,500,001 to HK$5,000,000 /H1118/H1118/H1118/H1118 ––1––
HK$22,000,001 to HK$22,500,000 /H1118/H1118 ––1––
44444
10. INCOME TAX EXPENSE
The Group is subject to income tax on an entity basis on profits arising in or derived from the tax jurisdictions
in which members of the Group are domiciled and operate. Pursuant to the rules and regulations of the Cayman
Islands and BVI, the Company and the Group’s subsidiaries incorporated in the BVI are not subject to any income
tax. The Group’s subsidiaries incorporated in Hong Kong were not liable for income tax as they did not have any
assessable profits arising in Hong Kong during the Relevant Periods and the nine months ended 30 September 2023.
PRC corporate income tax has been provided at the rate of 25% on the taxable profits of the Group’s PRC
subsidiaries for the Relevant Periods and the nine months ended 30 September 2023.
According to the notices (Zhe Zheng Ban [2015] No. 66, Jing Wei Fa [2017] No. 13 and Jing Zheng Ban
Investment Memorandum [2020] No. 22) on the economic development of Jingning She Autonomous County issued
by the General Office of the People’s Government of Zhejiang Province, the People’s Government of Jingning She
Autonomous County, and the General Office of the People’s Government of Jingning She Autonomous County,
respectively, investment enterprises registered in the Jingning She Autonomous County are entitled to a preferential
income tax policy for 10 years since the date of registration. Accordingly, certain of the Group’s PRC subsidiaries
registered in the Jingning She Autonomous County are entitled to a preferential income tax exemption for the
Relevant Periods and the nine months ended 30 September 2023.
Certain of the Group’s PRC subsidiaries are accredited as “High and New Technology Enterprises” and were
therefore entitled to a preferential income tax rate of 15% during the Relevant Periods and the nine months ended
30 September 2023. Such qualifications are subject to review by the relevant tax authority in the PRC for every three
years.
One of the Group’s PRC subsidiaries is qualified as a “Double Soft Enterprise” (“DSE”) under the Corporate
Income Tax Law during the Relevant Periods and the nine months ended 30 September 2023. According to the
relevant tax regulations, the qualified subsidiary was exempted from corporate income tax (“CIT”) for two years,
followed by a 50% reduction in the applicable tax rates for the next three years if the criteria of DSE are met each
year, commencing from 2021, the first year of profitable operation.
Certain of the Group’s PRC subsidiaries are qualified as small and micro enterprises and were entitled to
preferential corporate income tax rates of 2.5% to 10% during the years ended 31 December 2021 and 2022 and 5%
during the year ended 31 December 2023 and the nine months ended 30 September 2023 and 2024, respectively.
APPENDIX I ACCOUNTANTS’ REPORT
– I-46 –


--- page 490 ---
The income tax expense of the Group for the Relevant Periods and the nine months ended 30 September 2023
are analysed as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Current – PRC
Charge for the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118209,156 241,226 295,609 211,718 206,065
Deferred (Note 18) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111813,945 37,106 53,124 54,100 4,929
223,101 278,332 348,733 265,818 210,994
A reconciliation of tax expense applicable to profit before tax at the statutory rate for the jurisdictions in which
the Company and the majority of its subsidiaries are domiciled and/or operate to the income tax expense at the
effective income tax rate for each of the Relevant Periods and the nine months ended 30 September 2023 are as
follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Profit before tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118247,093 650,357 1,445,087 1,267,855 1,330,762
Tax at the PRC corporate income tax
rate of 25% /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111861,773 162,589 361,272 316,964 332,691
Effect of withholding tax at 10% on
the distributable profits of the
Group’s PRC subsidiaries /H1118/H1118/H1118/H1118/H1118/H1118/H111822,000 41,000 47,000 35,000 –
Effect of tax concessions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(39,014) (10,125) (114,133) (72,440) (107,386)
Expenses not deductible for tax /H1118/H1118/H1118/H1118/H11181,213 510 871 638 692
Research and development super
deduction /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(8,948) (20,557) (33,206) (23,272) (21,579)
Tax losses and temporary differences
not recognised /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118186,077 104,915 86,929 8,928 6,576
Tax charge at the Group’s effective
rate /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118223,101 278,332 348,733 265,818 210,994
11. DIVIDENDS
No dividends have been paid or declared by the Company since its date of incorporation.
12. EARNINGS PER SHARE ATTRIBUTABLE TO ORDINARY EQUITY HOLDERS OF THE PARENT
Earnings per share information is not presented as its inclusion, for the purpose of this report, is not considered
meaningful due to the basis of presentation of the results of the Group for the Relevant Periods and the nine months
ended 30 September 2023 as disclosed in note 2.1 to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-47 –


--- page 491 ---
13. PROPERTY, PLANT AND EQUIPMENT
Machinery
Office
equipment Motor vehicles
Leasehold
improvements
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
31 December 2021
At 1 January 2021:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111822,568 6,747 25,414 18,607 4,966 78,302
Accumulated depreciation /H1118/H1118/H1118(3,168) (1,450) (4,949) (3,648) – (13,215)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H111819,400 5,297 20,465 14,959 4,966 65,087
At 1 January 2021,
net of accumulated
depreciation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111819,400 5,297 20,465 14,959 4,966 65,087
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11186,630 8,889 43,054 7,645 89,616 155,834
Depreciation provided during
the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(6,692) (3,176) (10,774) (6,705) – (27,347)
Transfers /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,291 3,807 – 1,915 (40,013) –
Disposals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(573) (21) (518) – – (1,112)
At 31 December 2021, net of
accumulated depreciation /H1118/H1118/H111853,056 14,796 52,227 17,814 54,569 192,462
At 31 December 2021:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111862,141 19,383 67,363 28,167 54,569 231,623
Accumulated depreciation /H1118/H1118/H1118(9,085) (4,587) (15,136) (10,353) – (39,161)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H111853,056 14,796 52,227 17,814 54,569 192,462
Machinery
Office
equipment Motor vehicles
Leasehold
improvements
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
31 December 2022
At 1 January 2022:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111862,141 19,383 67,363 28,167 54,569 231,623
Accumulated depreciation /H1118/H1118/H1118(9,085) (4,587) (15,136) (10,353) – (39,161)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H111853,056 14,796 52,227 17,814 54,569 192,462
At 1 January 2022, net of
accumulated depreciation /H1118/H1118/H111853,056 14,796 52,227 17,814 54,569 192,462
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111812,747 14,792 15,680 4,919 61,347 109,485
Depreciation provided during
the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(16,433) (8,252) (17,306) (20,588) – (62,579)
Transfers /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111852,931 1,228 – 45,366 (99,525) –
Disposals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(4,727) (407) (420) – – (5,554)
At 31 December 2022, net of
accumulated depreciation /H1118/H1118/H111897,574 22,157 50,181 47,511 16,391 233,814
At 31 December 2022:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118122,765 35,304 81,240 78,452 16,391 334,152
Accumulated depreciation /H1118/H1118/H1118(25,191) (13,147) (31,059) (30,941) – (100,338)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H111897,574 22,157 50,181 47,511 16,391 233,814
APPENDIX I ACCOUNTANTS’ REPORT
– I-48 –


--- page 492 ---
Machinery
Office
equipment Motor vehicles
Leasehold
improvements
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
31 December 2023
At 1 January 2023:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118122,765 35,304 81,240 78,452 16,391 334,152
Accumulated depreciation /H1118/H1118/H1118(25,191) (13,147) (31,059) (30,941) – (100,338)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H111897,574 22,157 50,181 47,511 16,391 233,814
At 1 January 2023, net of
accumulated depreciation /H1118/H1118/H111897,574 22,157 50,181 47,511 16,391 233,814
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111821,441 13,605 19,070 3,211 383,816 441,143
Depreciation provided during
the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(19,332) (11,360) (20,051) (22,367) – (73,110)
Transfers /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,472 – – 308 (3,780) –
Disposals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(4,431) (3,488) (2,650) (1,220) – (11,789)
At 31 December 2023, net of
accumulated depreciation /H1118/H1118/H111898,724 20,914 46,550 27,443 396,427 590,058
At 31 December 2023:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118143,470 43,583 83,723 76,286 396,427 743,489
Accumulated depreciation /H1118/H1118/H1118(44,746) (22,669) (37,173) (48,843) – (153,431)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H111898,724 20,914 46,550 27,443 396,427 590,058
Machinery
Office
equipment Motor vehicles
Leasehold
improvements
Construction
in progress Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
30 September 2024
At 1 January 2024:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118143,470 43,583 83,723 76,286 396,427 743,489
Accumulated depreciation /H1118/H1118/H1118(44,746) (22,669) (37,173) (48,843) – (153,431)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H111898,724 20,914 46,550 27,443 396,427 590,058
At 1 January 2024, net of
accumulated depreciation /H1118/H1118/H111898,724 20,914 46,550 27,443 396,427 590,058
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111840,187 15,045 17,210 2,362 323,521 398,325
Depreciation provided during
the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(20,435) (9,149) (16,348) (12,410) – (58,342)
Transfers /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111887,369 – – 2,864 (90,233) –
Disposals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(38,375) (1,676) (367) (94) – (40,512)
At 30 September 2024, net of
accumulated depreciation /H1118/H1118/H1118167,470 25,134 47,045 20,165 629,715 889,529
At 30 September 2024:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118232,651 56,952 100,566 81,418 629,715 1,101,302
Accumulated depreciation /H1118/H1118/H1118(65,181) (31,818) (53,521) (61,253) – (211,773)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118167,470 25,134 47,045 20,165 629,715 889,529
As at 30 September 2024, the construction in progress held by a subsidiary of the Company with net carrying
amounts of approximately RMB45,674,000 was pledged to secure bank facilities granted to the Group as disclosed
in note 29 to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-49 –


--- page 493 ---
14. LEASES
The Group as a lessee
The Group has lease contracts for items of office premises, company-operated stores and plant used in its
operations. Lump sum payments were made upfront to acquire the leased land from the owners with lease periods
of 50 years, and no ongoing payments will be made under the terms of these land leases. Leases of office premises
and plant generally have lease terms between 2 and 10 years. Generally, the Group is restricted from assigning and
subleasing the leased office premises and plant outside the Group.
(a) Right-of-use assets
The carrying amounts of right-of-use assets and the movements during the Relevant Periods are as follows:
Office premises,
company-operated
stores and plant Leasehold land Total
RMB’000 RMB’000 RMB’000
As at 1 January 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111855,606 – 55,606
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118111,493 – 111,493
Depreciation charge /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(40,464) – (40,464)
As at 31 December 2021 and 1 January 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118126,635 – 126,635
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,853 108,934 143,787
Depreciation charge /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(53,659) (1,012) (54,671)
As at 31 December 2022 and 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118107,829 107,922 215,751
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,311 – 24,311
Depreciation charge /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(59,285) (2,376) (61,661)
As at 31 December 2023 and 1 January 2024 /H1118/H1118/H1118/H1118/H1118/H111872,855 105,546 178,401
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,979 – 34,979
Depreciation charge /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(42,610) (1,483) (44,093)
As at 30 September 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111865,224 104,063 169,287
As at 30 September 2024, the leasehold land held by subsidiaries of the Company with net carrying amounts
of approximately RMB49,743,000 was pledged to secure bank facilities granted to the Group as disclosed in note 29
to the Historical Financial Information.
(b) Lease liabilities
The carrying amount of lease liabilities and the movements during the Relevant Periods are as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Carrying amount at beginning of
year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111853,818 127,530 106,340 70,190
New leases /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118111,493 34,853 24,311 34,979
Accretion of interest recognised during
the year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,079 5,424 3,961 2,216
Payments /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(42,860) (61,467) (64,422) (46,486)
Carrying amount at end of year/period /H1118/H1118/H1118 127,530 106,340 70,190 60,899
Analysed into:
Current portion /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111844,664 52,196 43,674 39,903
Non-current portion /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111882,866 54,144 26,516 20,996
The maturity analysis of lease liabilities is disclosed in note 42(c) to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-50 –


--- page 494 ---
(c) The amounts recognised in profit or loss in relation to leases are as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Interest on lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,079 5,424 3,961 3,129 2,216
Depreciation charge of right-of-use
assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111840,464 54,671 61,661 45,617 44,093
Expense relating to short-term leases /H1118 7,743 18,303 16,299 11,494 19,043
Total amount recognised in profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111853,286 78,398 81,921 60,240 65,352
(d) The total cash outflows for leases are disclosed in note 35(c) to the Historical Financial Information.
15. OTHER INTANGIBLE ASSETS
Software
RMB’000
31 December 2021
At 1 January 2021:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,568
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(416)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,152
At 1 January 2021, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,152
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,077
Amortisation provided during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(2,059)
At 31 December 2021, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,170
At 31 December 2021:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,645
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(2,475)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,170
31 December 2022
At 1 January 2022:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,645
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(2,475)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,170
At 1 January 2022, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,170
Amortisation provided during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(1,697)
At 31 December 2022, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118473
At 31 December 2022:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,645
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(4,172)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118473
APPENDIX I ACCOUNTANTS’ REPORT
– I-51 –


--- page 495 ---
Software
RMB’000
31 December 2023
At 1 January 2023:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,645
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(4,172)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118473
At 1 January 2023, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118473
Amortisation provided during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(366)
At 31 December 2023, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118107
At 31 December 2023:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,573
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(4,466)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118107
30 September 2024
At 1 January 2024:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,573
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(4,466)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118107
At 1 January 2024, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118107
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,045
Amortisation provided during the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(246)
At 30 September 2024, net of accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118906
At 30 September 2024:
Cost /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,618
Accumulated amortisation /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(4,712)
Net carrying amount /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118906
16. EQUITY INVESTMENT DESIGNATED AT FAIR V ALUE THROUGH OTHER COMPREHENSIVE
INCOME
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Unlisted equity investment, at fair value:
Adopt A Cow Holding Group Co., Ltd. /H1118 247,500 277,073 257,122 248,095
The above equity investment was irrevocably designated at fair value through OCI as the Group considers the
investment to be strategic in nature.
The movement of this equity investment during the Relevant Periods are as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 247,500 277,073 257,122
Additions /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118247,500 – – –
Fair value gain/(loss) recognised in OCI /H1118/H1118 – 29,573 (19,951) (9,027)
At end of year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118247,500 277,073 257,122 248,095
APPENDIX I ACCOUNTANTS’ REPORT
– I-52 –


--- page 496 ---
17. OTHER NON-CURRENT ASSETS
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Prepayment for property, plant and
equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,262 3,337 36,934 3,782
18. DEFERRED TAX
The movements in deferred tax assets during the Relevant Periods are as follows:
Contract
liabilities
Losses
available for
offsetting
against future
taxable profits
Unrealised
profits arising
from intra-
group
transactions
Lease
liabilities
Deferred
income Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111827,286 4,060 2,943 9,950 – 44,239
Deferred tax
credited/(charged) to profit
or loss during the year /H1118/H1118/H1118/H11183,679 (3,621) 7,522 16,165 – 23,745
Gross deferred tax assets at
31 December 2021 /H1118/H1118/H1118/H1118/H1118/H111830,965 439 10,465 26,115 – 67,984
At 1 January 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111830,965 439 10,465 26,115 – 67,984
Deferred tax
credited/(charged) to profit
or loss during the year /H1118/H1118/H1118/H1118(3,650) 4,506 3,421 (2,626) – 1,651
Gross deferred tax assets at
31 December 2022 /H1118/H1118/H1118/H1118/H1118/H111827,315 4,945 13,886 23,489 – 69,635
At 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111827,315 4,945 13,886 23,489 – 69,635
Deferred tax
credited/(charged) to profit
or loss during the year /H1118/H1118/H1118/H1118(13,368) (1,926) 7,711 (15,294) 2,511 (20,366)
Gross deferred tax assets at
31 December 2023 /H1118/H1118/H1118/H1118/H1118/H111813,947 3,019 21,597 8,195 2,511 49,269
At 1 January 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111813,947 3,019 21,597 8,195 2,511 49,269
Deferred tax
credited/(charged) to profit
or loss during the period /H1118/H1118 2,424 2,493 (7,498) (2,836) 247 (5,170)
Gross deferred tax assets at
30 September 2024 /H1118/H1118/H1118/H1118/H1118/H111816,371 5,512 14,099 5,359 2,758 44,099
As at 31 December 2021, 2022 and 2023 and 30 September 2024, deferred tax assets have been recognised in
respect of all tax losses arising in Mainland China, respectively, which will expire in one to five years for offsetting
against future taxable profits.
As at 31 December 2021, 2022 and 2023 and 30 September 2024, certain subsidiaries of the Group had
deductible temporary differences of RMB744,307,000, RMB1,164,028,000, RMB1,507,521,000 and
RMB1,527,777,000, respectively. Deferred tax assets have not been recognised in respect of these deductible
temporary differences as it is not considered probable that the temporary differences will reverse in the foreseeable
future and taxable profit will be available against which the temporary differences can be utilised.
APPENDIX I ACCOUNTANTS’ REPORT
– I-53 –


--- page 497 ---
The movements in deferred tax liabilities during the Relevant Periods are as follows:
Unrealised
gains from
financial
assets at fair
value through
profit or loss
Unrealised
gains from
equity
investment
designated at
fair value
through OCI
Right-of-use
assets
Withholding
taxes
Contract
assets Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
At 1 January 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 10,359 – – 10,359
Deferred tax charged to profit
or loss during the year /H1118/H1118/H1118/H1118111 – 15,579 22,000 – 37,690
Gross deferred tax liabilities
at 31 December 2021 /H1118/H1118/H1118/H1118111 – 25,938 22,000 – 48,049
At 1 January 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118111 – 25,938 22,000 – 48,049
Deferred tax
charged/(credited) to profit
or loss during
the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(106) – (2,137) 41,000 – 38,757
Deferred tax charged to OCI
during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 4,88 0––– 4,880
Gross deferred tax liabilities
at 31 December 2022 /H1118/H1118/H1118/H1118 5 4,880 23,801 63,000 – 91,686
At 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H11185 4,880 23,801 63,000 – 91,686
Deferred tax
charged/(credited) to profit
or loss during the year /H1118/H1118/H1118 81 – (15,679) 47,000 1,356 32,758
Deferred tax credited to OCI
during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (3,292) – – – (3,292)
Gross deferred tax liabilities
at 31 December 2023 /H1118/H1118/H1118/H1118 86 1,588 8,122 110,000 1,356 121,152
At 1 January 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111886 1,588 8,122 110,000 1,356 121,152
Deferred tax
charged/(credited) to profit
or loss during the period /H1118/H1118 (92) – (2,420) – 2,271 (241)
Deferred tax credited to OCI
during the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118– (1,490) – – – (1,490)
Gross deferred tax liabilities
at 30 September 2024 /H1118/H1118/H1118/H1118 (6) 98 5,702 110,000 3,627 119,421
Pursuant to the PRC Corporate Income Tax Law, a 10% withholding tax is levied on dividends declared to
foreign investors from the foreign investment enterprises established in Mainland China. The Group is therefore
liable for withholding taxes on dividends distributed by those subsidiaries established in Mainland China in respect
of earnings generated from 1 January 2008.
Deferred tax liabilities have been recognised for the withholding tax that would be payable on the earnings of
certain subsidiaries incorporated in PRC for the years ended 31 December 2021, 2022 and 2023 and 30 September
2024 that are expected to be distributed in the foreseeable future. As to the other subsidiaries incorporated in PRC,
the Group has no plan to distribute the respective retained earnings as at 31 December 2021, 2022 and 2023 and 30
September 2024.
APPENDIX I ACCOUNTANTS’ REPORT
– I-54 –


--- page 498 ---
For presentation purposes, certain deferred tax assets and liabilities have been offset in the statements of
financial position. The following is an analysis of the deferred tax balances of the Group for financial reporting
purposes:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Net deferred tax assets recognised in the
consolidated statements of financial
position /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111842,932 46,661 40,245 34,966
Net deferred tax liabilities recognised in
the consolidated statements of financial
position /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111822,997 68,712 112,128 110,288
19. LONG-TERM TRADE RECEIV ABLES
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Long-term trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 138,852
Less: due within one year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – (73,726)
– – – 65,126
According to the payment terms in the sales contracts of equipment with certain customers, certain part of the
sales consideration of equipment will be collected after one year. The above arrangements are finance lease
arrangements in accordance with IFRS 16 and the Group’s long-term receivables are lease receivables.
An ageing analysis of the long-term trade receivables as at the end of each of the Relevant Periods, based on
the dates of delivery of equipment are as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 month /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 41,391
1 to 3 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 20,972
3 to 6 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 2,763
– – – 65,126
An impairment analysis is performed at each reporting date using a provision matrix to measure expected
credit losses. The provision rates are based on days past due for groupings of various customer segments with similar
loss patterns (i.e., by customer type). The calculation reflects the probability-weighted outcome, the time value of
money and reasonable and supportable information that is available at the reporting date about past events, current
conditions and forecasts of future economic conditions. Management has assessed that the expected credit loss rate
for trade receivables is minimal as at 30 September 2024. In the opinion of the directors of the Company, the Group’s
long-term trade receivables relate to a large number of diversified customers with no recent history of default and
the balances are considered fully recoverable considering the historical records and forward-looking information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-55 –


--- page 499 ---
20. INVENTORIES
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Raw materials /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118151,281 86,465 106,792 108,146
Work in progress /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111818,768 24,635 37,187 127,284
Finished goods /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118536,740 594,460 737,162 583,025
706,789 705,560 881,141 818,455
21. TRADE RECEIV ABLES
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,401 37,511 70,416 151,207
The Group’s trade receivables arise from the sale of products. The Group’s trading terms with its customers
are mainly on credit, except for new customers, where payment in advance is normally required. The credit period
generally ranges from 2 days to one month, extending up to three months for major direct sales customers. The Group
seeks to maintain strict control over its outstanding receivables and has a credit control department to minimise credit
risk. Overdue balances are reviewed regularly by senior management. The Group does not hold any collateral or other
credit enhancements over its trade receivable balances. The balances of trade receivables are non-interest-bearing.
An ageing analysis of the trade receivables as at the end of each of the Relevant Periods, based on the dates
of delivery of goods and equipment/rendering of franchising services are as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 month /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111829,928 31,951 46,664 98,215
1 to 3 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,090 3,734 16,870 35,551
3 to 6 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,784 977 4,479 7,937
6 months to 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118599 849 2,403 9,504
34,401 37,511 70,416 151,207
An impairment analysis is performed at each reporting date using a provision matrix to measure expected
credit losses. The provision rates are based on days past due for groupings of various customer segments with similar
loss patterns (i.e., by customer type). The calculation reflects the probability-weighted outcome, the time value of
money and reasonable and supportable information that is available at the reporting date about past events, current
conditions and forecasts of future economic conditions. Management has assessed that the expected credit loss rate
for trade receivables is minimal as at 31 December 2021, 2022 and 2023 and 30 September 2024. In the opinion of
the directors of the Company, the Group’s trade receivables relate to a large number of diversified customers with
no recent history of default and the balances are considered fully recoverable considering the historical records and
forward-looking information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-56 –


--- page 500 ---
22. CONTRACT ASSETS
1 January 31 December 30 September
2021 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Contract assets arising from:
Franchise management services /H1118/H1118/H1118/H1118/H1118– – – 9,042 24,173
Analysed into:
Current portion /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 9,042 19,676
Non-current portion /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––– 4,497
Contract assets are initially recognised for revenue earned from the provision of franchise management
services as the receipt of some franchise management services fees are allowed to defer for three to twenty-four
months. The related balance of contract assets is reclassified to trade receivables at the end of the deferred period.
The increase in contract assets as at 31 December 2023 and 30 September 2024 was the result of the increase in the
ongoing income from the provision of franchise management services for those contracts with deferred terms at the
end of that year/period.
The expected timing of recovery or settlement for contract assets is as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 9,042 19,676
1 year to 2 years /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 4,497
– – 9,042 24,173
An impairment analysis is performed at each reporting date using a provision matrix to measure expected
credit losses. The provision rates for the measurement of the expected credit losses of the contract assets are based
on those of the trade receivables as the contract assets and the trade receivables are from the same customer bases.
Management has assessed that the expected credit loss rate for contract assets is minimal as at 31 December 2023
and 30 September 2024. In the opinion of the directors of the Company, the Group’s contract assets relate to a large
number of diversified customers with no recent history of default and the balances are considered fully recoverable
considering the historical records and forward-looking information.
23. PREPAYMENTS, OTHER RECEIV ABLES AND OTHER ASSETS
The Group
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Prepayments to suppliers /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118166,441 141,120 148,339 138,400
Prepaid expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,940 19,975 29,080 53,104
Deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111816,791 18,698 18,875 22,989
V alue-added tax recoverable /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111823,221 45,064 88,337 84,779
Others /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,469 12,088 14,178 28,129
232,862 236,945 298,809 327,401
Financial assets included in the above balances are unsecured, non-interest-bearing and repayable on demand.
These balances relate to receivables for which there was no recent history of default and past due amounts.
As at the end of each of the Relevant Periods, the loss allowance was assessed to be minimal.
APPENDIX I ACCOUNTANTS’ REPORT
– I-57 –


--- page 501 ---
The Company
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Due from a shareholder for issuance of
convertible redeemable preferred shares
of the Company /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 9,568 – –
24. FINANCIAL ASSETS AT FAIR V ALUE THROUGH PROFIT OR LOSS
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Wealth management products /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118241,679 37,346 197,285 1,606,210
The above unlisted investments were wealth management products issued by banks in Mainland China with
a maturity period within one year or due on demand. They were mandatorily classified as financial assets at fair value
through profit or loss as their contractual cash flows are not solely payments of principal and interest.
25. CASH AND BANK BALANCES, RESTRICTED CASH AND LONG-TERM BANK DEPOSITS
The Group
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash on hand and cash at banks /H1118/H1118/H1118/H1118/H1118/H1118/H1118151,808 1,114,468 2,357,961 1,677,868
Short-term bank deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 32,737 70,018 31,967
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118151,808 1,147,205 2,427,979 1,709,835
Restricted cash /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 124,000 29,030
Long-term bank deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111840,000 90,000 41,390 272,747
Denominated in:
Cash and bank balances
RMB /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118118,108 1,058,842 2,332,836 1,611,748
HKD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––5
USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111833,700 88,363 74,715 97,516
Thai Baht (“THB”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118––– 5 6 5
Swiss Franc (“CHF”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 20,428 1
151,808 1,147,205 2,427,979 1,709,835
Restricted cash
RMB /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 124,000 29,030
Long-term bank deposits
RMB /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111840,000 90,000 41,390 272,747
The RMB is not freely convertible into other currencies, however, under the PRC’s Foreign Exchange Control
Regulations and Administration of Settlement, and Sale and Payment of Foreign Exchange Regulations, the Group
is permitted to exchange RMB for other currencies through banks authorised to conduct foreign exchange business.
APPENDIX I ACCOUNTANTS’ REPORT
– I-58 –


--- page 502 ---
Cash and bank balances earn interest at floating rates based on daily bank deposit rates. The bank deposits are
made for varying periods between six months and three years depending on the cash management of the Group, and
earn interest at fixed rates between 0.2% and 5.8% per annum. The bank balances and deposits are deposited with
creditworthy banks with no recent history of default. The carrying amounts of the cash and cash equivalents
approximated to their fair values.
As at 31 December 2023, restricted cash of RMB124,000,000 was pledged for the Group’s interest-bearing
other borrowings and as at 30 September 2024, restricted cash of RMB20,000,000 was pledged for the Group’s bank
facilities as disclosed in note 29 to the Historical Financial Information.
The Company
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– –* –* 198
Denominated in:
RMB /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–– * –– *
USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– –* –* 198
– –* –* 198
* The amount is less than RMB1,000.
26. TRADE PAYABLES
An ageing analysis of the trade payables as at the end of each of the Relevant Periods, based on the invoice
date are as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 3 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118148,733 387,123 594,838 604,702
3 to 6 months /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118102 2,236 4,088 2,733
6 months to 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118632 44 2,346 4,692
Over 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118124 140 – –
149,591 389,543 601,272 612,127
As at 31 December 2021, 2022 and 2023 and 30 September 2024, included in the Group’s trade payables are
amounts due to the related parties of RMB412,000, RMB112,000, RMB152,000 and RMB1,286,000, respectively
(note 39(b)).
Trade payables are non-interest bearing and normally settled on terms of within 30 days.
As at 31 December 2021, 2022 and 2023 and 30 September 2024, the carrying amounts of trade payables
approximated to their fair values.
APPENDIX I ACCOUNTANTS’ REPORT
– I-59 –


--- page 503 ---
27. OTHER PAYABLES AND ACCRUALS
The Group
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Payroll and welfare payable /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111861,773 75,705 114,409 98,001
Tax payable other than corporate income
tax /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111849,164 14,465 15,051 17,837
Deposits received /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111820,445 24,195 36,482 46,319
Other payables for property, plant and
equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111812,730 11,173 87,068 118,082
Accrued expenses /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111832,741 27,806 59,337 69,586
Due to related parties arising from
the Reorganisation (Note 39(b)) /H1118/H1118/H1118/H1118/H1118/H1118 – 94,348 – –
Other payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,693 3,521 9,872 2,397
181,546 251,213 322,219 352,222
Other payables are unsecured, non-interest-bearing and repayable on demand. The fair values of other payables
at the end of each of the Relevant Periods approximated to their corresponding carrying amounts.
The Company
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Due to subsidiaries /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 9,568 12,883 31,300
28. CONTRACT LIABILITIES
1 January 31 December 30 September
2021 2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Advances received from
customers:
Sale of goods and equipment /H1118/H1118 5,030 4,705 8,031 9,769 14,036
Franchise management
services /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118109,145 123,858 109,261 92,977 109,137
114,175 128,563 117,292 102,746 123,173
Analysed into:
Current portion /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111861,368 65,335 57,520 76,212 89,356
Non-current portion /H1118/H1118/H1118/H1118/H1118/H1118/H111852,807 63,228 59,772 26,534 33,817
Contract liabilities of the Group mainly arise from the advance payments received from customers for products
yet to be delivered and services yet to be provided. The increase in contract liabilities as at 31 December 2021 and
30 September 2024, and the decrease in contract liabilities as at 31 December 2022 and 2023 were mainly due to the
increase or decrease of short-term advances received from customers in relation to the sale of goods and equipment
and the provision of franchise management services at the end of that year/period.
APPENDIX I ACCOUNTANTS’ REPORT
– I-60 –


--- page 504 ---
The expected timing of recognition of revenue is as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Within 1 year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111865,335 57,520 76,212 89,356
1 year to 2 years /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111847,139 45,887 23,118 29,564
2 years to 3 years /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111816,089 13,885 3,416 4,253
128,563 117,292 102,746 123,173
29. INTEREST-BEARING BANK AND OTHER BORROWINGS
31 December 2023 30 September 2024
Notes
Effective
interest rate
(%) Maturity RMB’000
Effective
interest rate
(%) Maturity RMB’000
Current
Other borrowings –
secured /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(i) 1.30 2024 124,000 N/A N/A –
Non-current
Bank borrowings –
secured /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(ii) N/A N/A – 3.01 2026~2029 121,204
Notes:
(i) As at 31 December 2023, all of the Group’s other borrowings are denominated in RMB, interest-bearing at
fixed rates and repayable within one year and are secured by restricted cash of RMB124,000,000 as disclosed
in note 25 to the Historical Financial Information.
(ii) As at 30 September 2024, the Group’s bank facilities amounted to RMB736,370,000, of which
RMB128,004,000 had been utilised. All of these bank facilities are guaranteed by subsidiaries of the Company
and secured by the construction in progress with net carrying amounts of approximately RMB45,674,000, the
leasehold land with net carrying amounts of approximately RMB49,743,000 and restricted cash with amounts
of approximately RMB20,000,000 held by subsidiaries of the Company as disclosed in notes 13, 14 and 25 to
the Historical Financial Information, respectively. As at 30 September 2024, all of the Group’s bank
borrowings are denominated in RMB and interest-bearing at floating rates.
30. FINANCIAL LIABILITIES AT FAIR V ALUE THROUGH PROFIT OR LOSS
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Redeemable ordinary shares /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,472,275 – – –
Convertible redeemable preferred shares /H1118/H1118 – 2,818,901 3,156,013 3,166,569
Warrants /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 42,897 – –
2,472,275 2,861,798 3,156,013 3,166,569
APPENDIX I ACCOUNTANTS’ REPORT
– I-61 –


--- page 505 ---
Redeemable ordinary shares
The Group
In 2020, Guming Technology Group Co., Ltd. (formerly known as Zhejiang Guming Technology Co., Ltd.)
(“Guming Technology”), a subsidiary of the Company, and the investors (the “Investors”) entered into a series of
share subscription agreements whereby the Investors agreed to make a total investment of RMB674,128,000 for
13.2% of the total equity interests in Guming Technology. All the considerations were received by Guming
Technology in 2020.
Pursuant to the Investors’ agreements (“the Agreements”), in the following circumstances, the Investors shall
have the right to require Guming Technology to repurchase all of the equity interests held by them at the price agreed
in the Agreements:
(1) Guming Technology fails to complete a Qualified IPO (defined in “ Convertible redeemable preferred
shares ” section below) on or before the seventh (7th) anniversary of the closing (i.e., 30 September
2027);
(2) any material breach of the financing transaction documents (including the financing documents signed
by Guming Technology and other related parties and the transaction documents) by any group company
and/or founding shareholders which results in a loss of more than RMB30,000,000 in the aggregate by
any investor due to the failure in taking timely remedial measures;
(3) any existing or future holder requests Guming Technology and/or any existing shareholders (if
applicable) to redeem the ordinary shares held by it; or
(4) the occurrence of criminal punishment to any group company or founding shareholders arising from any
criminal offences committed by any group company or founding shareholders in relation to taxation
liability, corruption, bribery, embezzlement of property, misappropriation of property or accounting
fraud.
The redemption price for each ordinary share of Guming Technology shall be an amount equal to 100% of the
applicable share issue price, minus all distributed dividends and compensation thereon, and plus interest accrued at
the rate of eight percentage (8%) of the share issue price per annum starting from the applicable issue date (the
“Series A Preference Amount”).
The redeemable ordinary shares issued by Guming Technology are designated as financial liabilities at fair
value through profit or loss and were subsequently measured at fair value.
On 18 May 2022, the Investors signed the offshore share subscription agreements, pursuant to which the
redeemable ordinary shares held by the Investors were replaced by the convertible redeemable series A preferred
shares issued by the Company (“Preferred Shares”).
The movements of redeemable ordinary shares included in financial liabilities at fair value through profit or
loss as at 31 December 2021 and 2022 are set out below:
31 December
2021 2022
RMB’000 RMB’000
At beginning of year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,743,887 2,472,275
Fair value change /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118728,388 267,396
Transfer to warrants /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (2,532,626)
Transfer to convertible redeemable preferred shares /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (207,045)
At end of year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,472,275 –
APPENDIX I ACCOUNTANTS’ REPORT
– I-62 –


--- page 506 ---
Convertible redeemable preferred shares
The Group and the Company
Since the date of incorporation, the Company has completed financing by issuing a series of Preferred Shares
as follows:
Date of issuance Purchase price Number of shares
Total
consideration
(RMB/share) RMB’000
Series A-1 Preferred Shares with
par value of US$0.00001 each /H1118/H1118/H1118/H1118/H1118/H1118/H11182022/05/18 2.3 21,739,140 50,613
Series A-2 Preferred Shares with
par value of US$0.00001 each /H1118/H1118/H1118/H1118/H1118/H1118/H11182023/09/15 2.2 4,347,820 9,568
Series A-3 Preferred Shares with
par value of US$0.00001 each /H1118/H1118/H1118/H1118/H1118/H1118/H11182022/08/23 2.3 173,913,040 404,907
Series A-4 Preferred Shares with
par value of US$0.00001 each /H1118/H1118/H1118/H1118/H1118/H1118/H11182022/08/23 2.4 86,956,540 209,040
Series A Preferred Shares with
par value of US$0.00001 each /H1118/H1118/H1118/H1118/H1118/H1118/H1118 2.35 286,956,540 674,128
The key terms of the Preferred Shares are summarised as follows:
(a) Conversion feature
Each Preferred Share shall be convertible, at the option of the holders of the Preferred Shares
(“Holders”) thereof, at any time after the date of issuance, and without the payment of any additional
consideration by the Holders thereof, into such number of fully paid ordinary shares of the Company as is
determined by dividing the applicable deemed original issue price for such series of Preferred Shares by the
conversion price for such series of Preferred Shares in effect (“Conversion Price”) at the time of conversion.
The Conversion Price shall be subject to adjustment from time to time, including but not limited to share splits
and combinations, share dividends and distributions, reorganisation, consolidations or reclassifications, and
adjustment upon issuance of new securities for a consideration per share less than the conversion price.
All outstanding Preferred Shares shall automatically be converted into ordinary shares of the Company
at the applicable ratio upon the closing of an initial public offering (“IPO”) implying a pre-offering market
capitalisation of the Company that is no less than RMB10,000,000,000 (the “Qualified IPO”), or with respect
to each series of Preferred Shares, the date and time, or the occurrence of an event, specified in a written
request for such conversion delivered to the Company by the Holders of at least a majority of the series of
Preferred Shares then outstanding, voting together as a single class on an as-converted to ordinary shares basis.
(b) Redemption feature
Notwithstanding anything to the contrary herein, if (i) the Company fails to complete a Qualified IPO
by 30 September 2027; (ii) any material breach of the transaction documents by any group company and/or
the founder parties which results in a loss of more than RMB30,000,000 in the aggregate by any investor due
to the failure incurring such material breach within fifteen (15) business days upon the request by any
Investors; (iii) any existing or future holder of the equity securities of the Company requests the Company to
redeem the equity securities held by it; or (iv) there is the occurrence of criminal punishment to any chief
founder party arising from any criminal offences committed by any group company and/or any chief founder
party in relation to taxation liability, corruption, bribery, embezzlement of property, misappropriation of
property or accounting fraud, the investors may initiate to request the Company to redeem all or part of the
outstanding Preferred Shares (the “Redemption”).
Pursuant to the shareholders’ agreement entered into between the Company and its investors on 26
December 2023, the redemption rights ceased to be exercisable immediately before the first filing of the listing
application by the Company with the Stock Exchange of Hong Kong Limited (the “Hong Kong Stock
Exchange”), and shall resume to be exercisable in accordance with below terms upon the earliest of (i) the
withdrawal or abandonment of such listing application by the Company; (ii) the rejection of such listing
application by the Hong Kong Stock Exchange; (iii) the lapse of such listing application and such listing
application is not renewed by the Company within six months; or (iv) the expiry of eighteen months from the
day of the first filing of the listing application by the Company with the Hong Kong Stock Exchange if no
Qualified IPO has been consummated by then (or such later date as the Parties herein unanimously agree in
writing).
APPENDIX I ACCOUNTANTS’ REPORT
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(c) Liquidation preferences
In the event of any voluntary or involuntary liquidation, dissolution or winding up of the Company or
any of the following events: (i) the liquidation, dissolution or winding-up of the Company or (ii) any trade sale
(“Deemed Liquidation Event”) that shall be distributed to holders of Preferred Shares in the sequence below:
If, upon any such liquidation, distribution, winding up or Deemed Liquidation Event of the Company,
the assets of the Company shall be insufficient to pay the Holders in full on all Series A Preferred Shares, then
such assets shall be distributed among the Holders, in proportion to the full amounts to which they would
otherwise be respectively entitled thereon.
After distribution or payment in full of the Series A Preference Amount, the remaining assets of the
Company available for distribution to members shall be distributed to all holders of issued and outstanding
ordinary shares and the Holders of Preferred Shares pro rata on an as-converted basis.
(d) V oting rights
Each Preferred Share shall carry a number of votes equal to the number of ordinary shares of the
Company then issuable upon its conversion into ordinary shares at the record date for determination of the
shareholders entitled to vote on such matters, or, if no such record date is established, at the date such vote
is taken or any written consent of shareholders is solicited. The Holders shall be entitled to vote on all matters
on which the holders of ordinary shares shall be entitled to vote.
(e) Presentation and classification
The Group designated the entire instruments including the host debt and conversion derivative of
Preferred Shares as financial liabilities measured as fair value through profit or loss. Changes in fair value of
Preferred Shares were recorded in “fair value changes of financial liabilities at fair value through profit or
loss”. Management considered that fair value changes in the Preferred Shares attributable to changes of own
credit risk are not significant.
The movements of the convertible redeemable preferred shares included in financial liabilities at fair
value through profit or loss as at 31 December 2021, 2022 and 2023 and 30 September 2024 are set out below:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 2,818,901 3,156,013
Transfer from redeemable ordinary shares
of Guming Technology /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 207,045 – –
Issuance of preferred shares upon
exercising warrants /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,491,674 43,303 –
Fair value change /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 120,182 293,809 10,556
At end of year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,818,901 3,156,013 3,166,569
Warrants
The Group and the Company
On 18 May 2022, the Company issued warrants to the Investors for the subscription of 4,347,820 Series A-2
Preferred Shares, 173,913,040 Series A-3 Preferred Shares and 86,956,540 Series A-4 Preferred Shares (together, the
“Warrants”), respectively. In accordance with the Warrants, the Company and the other parties thereto will execute
the shareholders’ agreements, pursuant to which, from the date thereof until termination or expiration of the Warrants
or of the exercise of the warrants, the holders of the Warrants are entitled to the rights specified in the shareholders’
agreements. The above issued warrants were converted into Preferred Shares upon exercise. The Group designated
the above issued warrants as financial liabilities measured as fair value through profit or loss.
APPENDIX I ACCOUNTANTS’ REPORT
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The movements of the warrants included in financial liabilities at fair value through profit or loss as at 31
December 2021, 2022 and 2023 are set out below:
31 December
2021 2022 2023
RMB’000 RMB’000 RMB’000
At beginning of year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 42,897
Transfer from redeemable ordinary shares of Guming
Technology /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 2,532,626 –
Issuance of preferred shares upon exercising warrants /H1118/H1118 – (2,491,674) (43,303)
Fair value change /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,945 406
At end of year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 42,897 –
The Group applied the discount cash flow method to determine the equity value of the Company/the then
holding company of the group entities and adopted the option-pricing method to determine the fair values of the
financial liabilities at fair value through profit or loss as at 31 December 2021, 2022 and 2023 and 30 September
2024. Key valuation assumptions used to determine the fair values of redeemable ordinary shares, convertible
redeemable preferred shares and warrants are set out below:
31 December 30 September
2021 2022 2023 2024
Discount rate /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111815.0% 15.0% 15.0% 13.0%
Risk-free interest rate /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182.7% 4.1% 4.0% 3.6%
Discounts for lack of marketability
(“DLOM”) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111821.0% 19.4% 11.1% 7.8%
V olatility /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111841.1% 42.2% 41.2% 40.0%
The Group estimated the risk-free interest rate based on the yield of the RMB China Government Bond and
USD America Government Bond with maturity close to the expected exit timing as of the valuation date. The DLOM
was estimated based on the option-pricing method. Under the option-pricing method, the cost of redemption option,
which can hedge the price change before the privately held share can be sold, was considered as a basis to determine
the lack of marketability discount. V olatility was estimated based on the annualised standard deviation of daily stock
price return of comparable companies for a period from the valuation date and with a similar time span to expiration.
31. DEFERRED INCOME
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Government grants /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 10,042 11,030
Movements in government grants of the Group during the Relevant Periods are as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
At beginning of year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 10,042
Government grants received /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 10,042 988
At end of year/period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 10,042 11,030
The Group received government grants for capital expenditure incurred for property, plant and equipment. The
amounts are deferred and amortised over the estimated useful lives of the respective assets.
APPENDIX I ACCOUNTANTS’ REPORT
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32. SHARE CAPITAL
The Group and the Company
The Company was incorporated on 31 August 2021 with authorised share capital of US$50,000 divided into
5,000,000,000 ordinary shares with a par value of US$0.00001 each. On the same day, 1,669,565,220 ordinary shares
were issued and allotted by the Company to various BVI holding platforms held by the founder shareholders at par
value with a consideration of US$16,696 in total.
Upon the completion of the Reorganisation on 18 May 2022, the authorised share capital of the Company was
re-designated as US$50,000 divided into 4,713,043,460 ordinary shares with a par value of US$0.00001 each and
286,956,540 Series A preferred shares, including 21,739,140 Series A-1 Preferred Shares, 4,347,820 Series A-2
Preferred Shares, 173,913,040 Series A-3 Preferred Shares, and 86,956,540 Series A-4 Preferred Shares, with a par
value of US$0.00001 each, as mentioned above in note 30 to the Historical Financial Information.
On 27 December 2023, the Company allotted and issued a total of 217,391,300 ordinary shares with a par value
of US$0.00001 each to the directors and employees, who exercised the share options at exercise price of RMB1.38
per share, under the 2022 Plan, as disclosed in note 34 to the Historical Financial Information. The resulting excess
over the fair value for the shares issued amounting to RMB299,985,000 were recognised as capital reserve.
31 December 30 September
2021 2022 2023 2024
Authorised:
Number of ordinary shares of
US$0.00001 each /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,000,000,000 4,713,043,460 4,713,043,460 4,713,043,460
Issued and fully paid:
Number of ordinary shares of
US$0.00001 each /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,669,565,220 1,669,565,220 1,886,956,520 1,886,956,520
Par value of ordinary shares (RMB’000) /H1118/H1118 112 112 127 127
A summary of movements in the Company’s share capital is as follows:
Number of
shares in issue Share capital Share capital
Ordinary shares USD RMB’000
As at 1 January 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118–––
Issuance of ordinary shares /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,669,565,220 16,696 112
As at 31 December 2021, 1 January 2022 and
31 December 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,669,565,220 16,696 112
Ordinary shares issued under equity-settled
share option arrangements /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118217,391,300 2,174 15
As at 31 December 2023 and 1 January 2024 and
30 September 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,886,956,520 18,870 127
33. RESERVES
The Group
The amounts of the Group’s reserves and the movements therein for the years ended 31 December 2021, 2022
and 2023 and the nine months ended 30 September 2023 and 2024 are presented in the consolidated statements of
changes in equity.
(i) Capital reserve
The capital reserve of the Group represents the paid-up capital of the companies comprising the Group prior
to the incorporation of the Company. Additionally, it also represents the additional contribution made by the
shareholders of the Company and reserves arising from equity-settled share-based payment transactions.
APPENDIX I ACCOUNTANTS’ REPORT
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(ii) Statutory surplus reserve
In accordance with the PRC Company Law and the articles of association of the subsidiaries established in the
PRC, the Group is required to allocate 10% of its net profit after tax, as determined under the Chinese Accounting
Standards, to the statutory surplus funds until the reserve balance reaches 50% of its registered capital. Subject to
certain restrictions set out in the relevant PRC regulations and in the articles of association of these subsidiaries, the
statutory surplus funds may be used either to offset losses, or to be converted to increase the share capital of the
subsidiaries provided that the balance after such conversion is not less than 25% of the registered capital of them.
The reserve cannot be used for purposes other than those for which it is created and is not distributable as cash
dividends.
The Company
A summary of the Company’s reserves/(negative reserves) is as follows:
Capital reserve Accumulated losses Total
RMB’000 RMB’000 RMB’000
As at 31 August 2021 (date of incorporation) and
31 December 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(112) – (112)
Loss for the year* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (2,203,254) (2,203,254)
Equity-settled share option arrangements /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111852,936 – 52,936
As at 31 December 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111852,824 (2,203,254) (2,150,430)
Loss for the year* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (307,098) (307,098)
Ordinary shares issued under equity-settled
share option arrangements /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118299,985 – 299,985
Equity-settled share option arrangements /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111855,537 – 55,537
As at 31 December 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118408,346 (2,510,352) (2,102,006)
Loss for the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– (28,775) (28,775)
As at 30 September 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118408,346 (2,539,127) (2,130,781)
* The amounts mainly represent the fair value changes of financial liabilities at fair value through profit or loss
at the Company’s level for the years ended 31 December 2022 and 2023 pursuant to the Reorganisation as
mentioned in note 2.1 to the Historical Financial Information.
34. EQUITY-SETTLED SHARE-BASED TRANSACTIONS
2019 Share Incentive Plan
On 10 June 2019 (the “Adoption Date”), the board of directors of Guming Technology approved the 2019 Share
Incentive Plan (the “2019 Plan”) for the purpose of attracting and retaining the best available personnel for positions
of substantial responsibility, providing additional incentives to eligible participants who contribute to the success of
Guming Technology’s business. Eligible participants of the 2019 Plan may include directors and employees of
Guming Technology or its subsidiaries. The 2019 Plan shall remain in force for 10 years from the Adoption Date,
unless otherwise cancelled or amended.
The maximum aggregate number of shares that may be issued under the 2019 Plan shall not exceed 12,000,000
ordinary shares of Guming Technology. Majority of outstanding share options granted to directors and employees will
become vested over a period of three years. Certain share options granted to directors and employees of the Group
will become vested in three tranches, in which 1/2, 1/4 and 1/4 of share options shall be vested in the twenty-four
months, thirty-six months and forty-eight months.
APPENDIX I ACCOUNTANTS’ REPORT
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The following share options were outstanding under the 2019 Plan during the year ended 31 December 2021:
Weighted average
exercise price Number of options
RMB
At 31 December 2020 and 1 January 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 10,203,700
Granted during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 300,000
At 31 December 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111825 10,503,700
The fair value of the shares included in the 2019 Plan granted before 1 January 2021 was determined at
RMB27,951,000, and the Group recognized equity-settled share-based payment expenses of RMB9,822,000,
RMB4,911,000 and nil in profit or loss for the above mentioned shares granted to directors and employees of the
Group for the years ended 31 December 2021, 2022 and 2023, respectively.
The fair value of the shares included in the 2019 Plan granted during the year ended 31 December 2021 was
determined at RMB26,280,000, and the Group recognized equity-settled share-based payment expenses of
RMB7,404,000, RMB5,201,000 and nil in profit or loss for the above mentioned shares granted to directors and
employees of the Group for the years ended 31 December 2021, 2022 and 2023, respectively.
The options granted under the 2019 Plan was replaced by the 2022 Share Incentive Plan (the “2022 Plan”)
granted on 24 June 2022 (the “New Adoption Date”) on a one for twenty basis with no incremental fair value exists.
The 10,503,700 share options granted by Guming Technology under the 2019 Plan were replaced by 210,074,000
share options granted by the Company under the 2022 Plan on 1 July 2022.
2022 Share Incentive Plan
On the New Adoption Date, the board of directors of the Company approved the 2022 Plan for the purpose of
attracting and retaining the best available personnel for positions of substantial responsibility, providing additional
incentives to eligible participants who contribute to the success of the Company’s business. Eligible participants of
the 2022 Plan may include directors and employees of the Company or its subsidiaries. The 2022 Plan shall remain
in force for 10 years from the New Adoption Date, unless otherwise cancelled or amended.
The maximum aggregate number of shares may be issued under the 2022 Plan shall not exceed 217,391,300
ordinary shares of the Company. The outstanding share options granted to directors and employees will become
vested in four equal tranches of 25% over a period of four years.
On 30 November 2023, the Group waived the vesting conditions of all the outstanding share options under the
2022 Plan. Accordingly, these share options were vested immediately, which was treated as an acceleration of vesting.
The following share options were outstanding under the 2022 Plan during the years ended 31 December 2022
and 2023:
Weighted average
exercise price Number of options
RMB
At 1 July 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.38 210,074,000
Granted during the period /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.38 4,549,183
At 31 December 2022 and 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.38 214,623,183
Granted during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.38 2,768,117
Exercised during the year /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181.38 (217,391,300)
At 31 December 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118––
APPENDIX I ACCOUNTANTS’ REPORT
– I-68 –


--- page 512 ---
The fair value of the shares granted under the 2022 Plan during the years ended 31 December 2022 and 2023
was determined at RMB32,192,000 and RMB22,050,000, respectively, and the Group recognized equity-settled
share-based payment expenses of RMB14,364,000 and RMB55,537,000 in profit or loss for the above mentioned
shares granted to directors and employees of the Group for the years ended 31 December 2022 and 2023, respectively.
The fair value of equity-settled share options granted was estimated as at the date of grant to directors and
employees using a binomial option-pricing model, taking into account the terms and conditions upon which the
options were granted. The following table lists the key assumptions that the model used for both the 2019 Plan and
the 2022 Plan:
31 December
2021 2022 2023
Dividend yield (%) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11180.00% 0.00% 0.00%
Expected volatility (%) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111841.25% 41.98% 41.90%
Historical volatility (%) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111841.25% 41.98% 41.90%
Risk-free interest rate (%) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183.09% 3.03% 3.98%
Expected life of options (year) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111810 10 10
Weighted average share price (RMB per share) /H1118/H1118/H1118/H1118/H1118/H11186.16 8.33 9.18
The expected volatility reflects the assumption that the historical volatility is indicative of future trends, which
may also not necessarily be the actual outcome.
35. NOTES TO THE CONSOLIDATED STATEMENTS OF CASH FLOWS
(a) Major non-cash transactions
During the Relevant Periods, the Group had non-cash additions to right-of-use assets and lease liabilities of
RMB111,493,000 and RMB111,493,000, RMB34,853,000 and RMB34,853,000, RMB24,311,000 and
RMB24,311,000, and RMB34,979,000 and RMB34,979,000, respectively, in respect of lease arrangements for office
premises and plant.
(b) Changes in liabilities arising from financing activities
Lease liabilities
Financial liabilities
at fair value
through profit or
loss
Interest-bearing
bank and other
borrowings
RMB’000 RMB’000 RMB’000
At 1 January 2021 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111853,818 1,743,887 –
Changes from financing cash flows /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(42,860) – –
New leases /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118111,493 – –
Interest expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,079 – –
Fair value changes /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 728,388 –
At 31 December 2021 and 1 January 2022 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118127,530 2,472,275 –
Changes from financing cash flows /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(61,467) – –
New leases /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,853 – –
Interest expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,424 – –
Fair value changes /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 389,523 –
At 31 December 2022 and 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118106,340 2,861,798 –
Changes from financing cash flows /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(64,422) – 122,728
New leases /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111824,311 – –
Interest expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,961 – 1,272
Fair value changes /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 294,215 –
At 31 December 2023 and 1 January 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111870,190 3,156,013 124,000
APPENDIX I ACCOUNTANTS’ REPORT
– I-69 –


--- page 513 ---
Lease liabilities
Financial liabilities
at fair value
through profit or
loss
Interest-bearing
bank and other
borrowings
RMB’000 RMB’000 RMB’000
At 31 December 2023 and 1 January 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111870,190 3,156,013 124,000
Changes from financing cash flows /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(46,486) – (4,308)
New leases /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111834,979 – –
Interest expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,216 – 1,512
Fair value changes /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 10,556 –
At 30 September 2024 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111860,899 3,166,569 121,204
Lease liabilities
Financial liabilities
at fair value
through profit or
loss
Interest-bearing
bank and other
borrowings
RMB’000 RMB’000 RMB’000
(Unaudited) (Unaudited) (Unaudited)
At 31 December 2022 and 1 January 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118106,340 2,861,798 –
Changes from financing cash flows /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(49,989) – 146,878
New leases /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111812,858 – –
Interest expense /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,129 – 1,170
Fair value changes /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 21,669 –
At 30 September 2023 /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111872,338 2,883,467 148,048
(c) Total cash outflow for leases
The total cash outflow for leases included in the consolidated statements of cash flows is as follows:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Within operating activities /H1118/H1118/H1118/H11187,743 18,303 16,299 11,494 19,043
Within investing activities /H1118/H1118/H1118/H1118/H1118 – 108,93 4–––
Within financing activities /H1118/H1118/H1118/H1118/H111842,860 61,467 64,422 49,989 46,486
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111850,603 188,704 80,721 61,483 65,529
36. CONTINGENT LIABILITIES
As of the end of each of the Relevant Periods, the Group did not have any material contingent liabilities.
37. PLEDGE OF ASSETS
Details of the Group’s interest-bearing bank and other borrowings, which are secured by the assets of the
Group, are included in notes 13, 14 and 25 to the Historical Financial Information.
APPENDIX I ACCOUNTANTS’ REPORT
– I-70 –


--- page 514 ---
38. COMMITMENTS
The Group had the following contractual commitments at the end of each of the Relevant Periods:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Contracted, but not provided for:
Property, plant and equipment /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111811,913 265,953 183,065 25,080
39. RELATED PARTY TRANSACTIONS
(a) Transactions with related parties:
The Group had the following material transactions carried out with related parties during the Relevant Periods
the nine months ended 30 September 2023:
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Purchase of goods:
Companies controlled
by Mr. Wang Y un’an
and Mr. Qi Xia /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11184,950 18,133 14,783 12,402 11,411
The purchases from the related parties were conducted in the ordinary course of business and based on
commercial terms mutually agreed by the counterparties.
(b) Outstanding balances with related parties
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Trade related:
Trade payables
Companies controlled by Mr. Wang Y un’an
and Mr. Qi Xia /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118412 112 152 1,286
Non-trade related:
Other payables and accruals
Companies controlled by Mr. Wang Y un’an,
Ms. Pan Pingping, Mr. Qi Xia and
Mr. Ruan Xiudi /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 94,348 – –
As at 31 December 2021, 2022 and 2023 and 30 September 2024, the Group’s outstanding balances with
related parties were all unsecured, interest-free and repayable on demand.
APPENDIX I ACCOUNTANTS’ REPORT
– I-71 –


--- page 515 ---
(c) Compensation of key management personnel of the Group
Y ear ended 31 December Nine months ended 30 September
2021 2022 2023 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
(Unaudited)
Salaries, allowances and benefits
in kind /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,846 3,086 6,606 4,326 8,118
Performance related bonuses /H1118/H1118/H1118 2,300 2,524 3,961 2,193 934
Pension scheme contributions and
social welfare /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118253 348 558 395 518
Equity-settled share-based
payments /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185,233 5,153 23,546 5,249 –
Total compensation paid to key
management
personnel /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111810,632 11,111 34,671 12,163 9,570
Further details of directors’ and the chief executive’s emoluments are included in note 8 to the Historical
Financial Information.
40. FINANCIAL INSTRUMENTS BY CATEGORY
The carrying amounts of each of the categories of financial instruments as at the end of the reporting period
are as follows:
Financial assets
31 December 2021
Financial assets
at fair value
through profit
or loss
Financial asset at
fair value
through OCI
Mandatorily
Equity
investment
Financial assets
at amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 247,500 – 247,500
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118241,679 – – 241,679
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 34,401 34,401
Financial assets included in prepayments,
other receivables and other assets /H1118/H1118/H1118/H1118/H1118 – – 22,260 22,260
Long-term bank deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 40,000 40,000
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 151,808 151,808
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118241,679 247,500 248,469 737,648
APPENDIX I ACCOUNTANTS’ REPORT
– I-72 –


--- page 516 ---
31 December 2022
Financial assets
at fair value
through profit
or loss
Financial asset at
fair value
through OCI
Mandatorily
Equity
investment
Financial assets
at amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 277,073 – 277,073
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111837,346 – – 37,346
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 37,511 37,511
Financial assets included in prepayments,
other receivables and other assets /H1118/H1118/H1118/H1118/H1118 – – 30,786 30,786
Long-term bank deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 90,000 90,000
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 1,147,205 1,147,205
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111837,346 277,073 1,305,502 1,619,921
31 December 2023
Financial assets
at fair value
through profit
or loss
Financial asset at
fair value
through OCI
Mandatorily
Equity
investment
Financial assets
at amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 257,122 – 257,122
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118197,285 – – 197,285
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 70,416 70,416
Financial assets included in prepayments,
other receivables and other assets /H1118/H1118/H1118/H1118/H1118 – – 33,053 33,053
Restricted cash /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 124,000 124,000
Long-term bank deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 41,390 41,390
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 2,427,979 2,427,979
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118197,285 257,122 2,696,838 3,151,245
30 September 2024
Financial assets
at fair value
through profit
or loss
Financial asset at
fair value
through OCI
Mandatorily
Equity
investment
Financial assets
at amortised cost Total
RMB’000 RMB’000 RMB’000 RMB’000
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 248,095 – 248,095
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,606,210 – – 1,606,210
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 151,207 151,207
Long-term trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 65,126 65,126
Financial assets included in prepayments,
other receivables and other assets /H1118/H1118/H1118/H1118/H1118 – – 51,118 51,118
Restricted cash /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 29,030 29,030
Long-term bank deposits /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 272,747 272,747
Cash and bank balances /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 1,709,835 1,709,835
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,606,210 248,095 2,279,063 4,133,368
APPENDIX I ACCOUNTANTS’ REPORT
– I-73 –


--- page 517 ---
Financial liabilities
31 December 2021
Financial liabilities
at fair value
through profit
or loss
Financial liabilities
at amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,472,275 – 2,472,275
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 149,591 149,591
Financial liabilities included in other payables and
accruals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 70,609 70,609
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 127,530 127,530
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,472,275 347,730 2,820,005
31 December 2022
Financial liabilities
at fair value
through profit
or loss
Financial liabilities
at amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,861,798 – 2,861,798
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 389,543 389,543
Financial liabilities included in other payables and
accruals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 161,043 161,043
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 106,340 106,340
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,861,798 656,926 3,518,724
31 December 2023
Financial liabilities
at fair value
through profit
or loss
Financial liabilities
at amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,156,013 – 3,156,013
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 601,272 601,272
Financial liabilities included in other payables and
accruals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 192,759 192,759
Interest-bearing other borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 124,000 124,000
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 70,190 70,190
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,156,013 988,221 4,144,234
30 September 2024
Financial liabilities
at fair value
through profit
or loss
Financial liabilities
at amortised cost Total
RMB’000 RMB’000 RMB’000
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,166,569 – 3,166,569
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 612,127 612,127
Financial liabilities included in other payables and
accruals /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 236,384 236,384
Interest-bearing bank borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 121,204 121,204
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 60,899 60,899
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,166,569 1,030,614 4,197,183
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 518 ---
41. FAIR V ALUE AND FAIR V ALUE HIERARCHY OF FINANCIAL INSTRUMENTS
Management has assessed that the fair values of cash and bank balances, restricted cash, trade receivables,
trade payables, financial assets included in prepayments, other receivables and other assets, financial liabilities
included in other payables and accruals and interest-bearing other borrowings approximate to their carrying amounts
largely due to the short term maturities of these instruments.
The fair values of the financial assets and liabilities are included at the amount at which the instrument could
be exchanged in a current transaction between willing parties, other than in a forced or liquidation sale. The following
methods and assumptions were used to estimate the fair values:
The fair values of financial liabilities at fair value through profit or loss are determined using the
option-pricing method using significant unobservable market inputs. Details of the method were disclosed in note 30
to the Historical Financial Information.
The fair values of long-term bank deposits, long-term trade receivables and long-term interest-bearing bank
borrowings have been calculated by discounting the expected future cash flows using rates currently available for
instruments with similar terms, credit risk and remaining maturities. The carrying amounts of long-term bank
deposits, long-term trade receivables and long-term interest-bearing bank borrowings approximate to their fair
values.
The fair values of wealth management products included in financial assets at fair value through profit or loss
have been estimated using a discounted cash flow valuation model based on the market interest rates of instruments
with similar terms and risks.
The fair values of unlisted equity investment designated at fair value through other comprehensive income,
have been estimated using a market-based valuation technique based on assumptions that are not supported by
observable market prices or rates. Management has estimated the potential effect of using reasonably possible
alternatives as inputs to the valuation model.
The Group’s finance department headed by the finance manager is responsible for determining the policies and
procedures for the fair value measurement of financial instruments. The finance manager reports directly to the chief
financial officer. At each reporting date, the finance department analyses the movements in the values of financial
instruments and determines the major inputs applied in the valuation. The valuation is reviewed and approved by the
chief financial officer.
Below is a summary of significant unobservable inputs to the valuation of financial instruments together with
a quantitative sensitivity analysis as at 31 December 2021, 2022 and 2023 and 30 September 2024:
Valuation technique Significant unobservable input
Sensitivity of fair value
to the input
Equity investment designated at
fair value through OCI /H1118/H1118/H1118/H1118/H1118
Recent
transaction
price
Recent
transaction
price
31 December
2021: N/A
N/A
V aluation
multiples
Average P/S
multiple of
peers
31 December
2022: 4.64
5% increase/
decrease in the
multiple would
result in
increase/decrease
in fair value by
RMB13,854,000/
RMB13,854,000
APPENDIX I ACCOUNTANTS’ REPORT
– I-75 –


--- page 519 ---
Valuation technique Significant unobservable input
Sensitivity of fair value
to the input
Equity investment designated
at fair value through OCI
(continued) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
V aluation
multiples
Average P/S
multiple of
peers
31 December
2023: 3.30
5% increase/
decrease in the
multiple would
result in
increase/decrease
in fair value by
RMB12,856,000/
RMB12,856,000
30 September
2024: 2.97
5% increase/
decrease in the
multiple would
result in
increase/decrease
in fair value by
RMB12,405,000/
RMB12,405,000
DLOM 31 December
2022: 24.0%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB4,375,000/
RMB4,375,000
31 December
2023: 19.0%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB3,016,000/
RMB3,016,000
30 September
2024: 24.0%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB3,917,000/
RMB3,917,000
Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118
Option-pricing
method
Risk-free
interest rates
31 December
2021: 2.7%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB2,351,000/
RMB2,375,000
APPENDIX I ACCOUNTANTS’ REPORT
– I-76 –


--- page 520 ---
Valuation technique Significant unobservable input
Sensitivity of fair value
to the input
Financial liabilities at fair value
through profit or loss
(continued) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Option-pricing
method
Risk-free
interest rates
31 December
2022: 4.1%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB2,186,000/
RMB2,392,000
31 December
2023: 4.0%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB164,000/
RMB185,000
30 September
2024: 3.6%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB211,000/
RMB371,000
V olatility 31 December
2021: 41.1%
5% increase/
decrease in the
multiple would
result in
increase/decrease
in fair value by
RMB6,420,000/
RMB3,962,000
31 December
2022: 42.2%
5% increase/
decrease in the
multiple would
result in
increase/decrease
in fair value by
RMB2,453,000/
RMB2,262,000
31 December
2023: 41.2%
5% increase/
decrease in the
multiple would
result in
increase/decrease
in fair value by
RMB1,176,000/
RMB1,039,000
APPENDIX I ACCOUNTANTS’ REPORT
– I-77 –


--- page 521 ---
Valuation technique Significant unobservable input
Sensitivity of fair value
to the input
Financial liabilities at fair value
through profit or loss
(continued) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Option-pricing
method
V olatility 30 September
2024: 40.0%
5% increase/
decrease in the
multiple would
result in
increase/decrease
in fair value by
RMB197,000/
RMB167,000
DLOM 31 December
2021: 21.0%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB28,632,000/
RMB28,632,000
31 December
2022: 19.4%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB31,352,000/
RMB31,352,000
31 December
2023: 11.1%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB12,837,000/
RMB12,837,000
30 September
2024: 7.8%
5% increase/
decrease in the
multiple would
result in
decrease/increase
in fair value by
RMB13,226,000/
RMB13,226,000
The discount for lack of marketability represents the amounts of premiums and discounts determined by the
Group that market participants would take into account when pricing the investments.
APPENDIX I ACCOUNTANTS’ REPORT
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Fair value hierarchy
The following tables illustrate the fair value measurement hierarchy of the Group’s financial instruments:
Assets measured at fair value
Fair value measurement using
Quoted prices in
active markets
(Level 1)
Significant
observable inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 247,500 247,500
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 241,679 – 241,679
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 241,679 247,500 489,179
As at 31 December 2022
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 277,073 277,073
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 37,346 – 37,346
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 37,346 277,073 314,419
As at 31 December 2023
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 257,122 257,122
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 197,285 – 197,285
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 197,285 257,122 454,407
As at 30 September 2024
Equity investment designated at fair value
through OCI /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 248,095 248,095
Financial assets at fair value through profit
or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,606,210 – 1,606,210
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– 1,606,210 248,095 1,854,305
Liabilities measured at fair value
Fair value measurement using
Quoted prices in
active markets
(Level 1)
Significant
observable inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2021
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 2,472,275 2,472,275
As at 31 December 2022
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 2,861,798 2,861,798
APPENDIX I ACCOUNTANTS’ REPORT
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--- page 523 ---
Fair value measurement using
Quoted prices in
active markets
(Level 1)
Significant
observable inputs
(Level 2)
Significant
unobservable
inputs
(Level 3) Total
RMB’000 RMB’000 RMB’000 RMB’000
As at 31 December 2023
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 3,156,013 3,156,013
As at 30 September 2024
Financial liabilities at fair value through
profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – 3,166,569 3,166,569
During the Relevant Periods, there were no transfers into or out of Level 3 for both financial assets and
financial liabilities.
42. FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES
The Group’s principal financial instruments comprise lease liabilities and cash and bank balances. The main
purpose of these financial instruments is to raise finance for the Group’s operations. The Group has various other
financial assets and liabilities such as trade receivables and trade payables, which arise directly from its operations.
The main risks arising from the Group’s financial instruments are foreign currency risk, credit risk and
liquidity risk. The board of directors reviews and agrees policies for managing each of these risks and they are
summarised below.
(a) Foreign currency risk
The Group has transactional currency exposures. Such exposures arise from sales or purchases by operating
units in currencies other than the units’ functional currencies. The Group seeks to limit its exposure to foreign
currency risk by minimising its net foreign currency position.
The following table demonstrates the sensitivity as at 31 December 2021, 2022 and 2023 and 30 September
2024 to a reasonably possible change in the United States Dollars (“USD”) exchange rate, with all other variables
held constant, of the Group’s profit before tax (due to changes in the retranslated value of monetary assets and
liabilities) and the Group’s equity.
Increase/(decrease)
in USD/RMB rate
Increase/(decrease)
in profit before tax
Increase/(decrease)
in equity
% RMB’000 RMB’000
31 December 2021
If RMB weakens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185 1,685 1,345
If RMB strengthens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5) (1,685) (1,345)
31 December 2022
If RMB weakens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185 4,418 3,431
If RMB strengthens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5) (4,418) (3,431)
31 December 2023
If RMB weakens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185 3,736 2,989
If RMB strengthens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5) (3,736) (2,989)
30 September 2024
If RMB weakens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11185 4,876 4,110
If RMB strengthens against USD /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(5) (4,876) (4,110)
APPENDIX I ACCOUNTANTS’ REPORT
– I-80 –


--- page 524 ---
(b) Credit risk
The carrying amounts of cash and bank balances, trade receivables, long-term trade receivables, contract assets
and financial assets included in prepayments, other receivables and other assets included in the consolidated
statements of financial position represent the Group’s maximum exposure to credit risk in relation to its financial
assets as at 31 December 2021, 2022 and 2023 and 30 September 2024. The Group classifies financial instruments
on the basis of shared credit risk characteristics, such as instrument types and credit risk ratings for the purpose of
determining significant increases in credit risk and calculation of impairment.
Cash and bank balances and long-term bank deposits
As at 31 December 2021, 2022 and 2023 and 30 September 2024, all cash and bank balances and long-term
bank deposits were deposited in high-credit-quality financial institutions without significant credit risk. These
financial assets were not yet past due and their credit exposure is classified as stage 1.
Trade receivables, long-term trade receivables and contract assets
To manage the risk arising from trade receivables, long-term trade receivables and contract assets, the Group
has policies in place to ensure that credit terms are made only to counterparties with an appropriate credit history and
management performs ongoing credit evaluations of the Group’s counterparties. The credit period granted to the
customers is generally ranged from 2 days to three months and the credit quality of these customers is assessed,
taking into account their financial position, past experience and other factors. The Group also has other monitoring
procedures to ensure that follow-up action is taken to recover overdue receivables and contract assets. In addition,
the Group reviews regularly the recoverable amount of trade receivables, long-term trade receivables and contract
assets to ensure that adequate impairment losses are made. The Group has no significant concentrations of credit risk,
with exposure spread over a large number of counterparties and customers.
The Group applies the simplified approach to provide for ECLs prescribed by IFRS 9, which permits the use
of the lifetime expected loss provision for all trade receivables, long-term trade receivables and contract assets. The
expected credit losses also incorporate forward-looking information based on key economic variables such as
inflation rate. As at 31 December 2021, 2022 and 2023 and 30 September 2024, the expected credit loss rate for trade
receivables, long-term trade receivables and contract assets was assessed to be minimal.
Other receivables and assets
Management makes periodic collective assessments for financial assets included in prepayments, other
receivables and other assets as well as individual assessment on the recoverability of other receivables based on
historical settlement records and past experience. The Group has classified financial assets included in prepayments,
other receivables and other assets in stage 1 because there was no recent history of default. Management continuously
monitors their credit risk. As at 31 December 2021, 2022 and 2023 and 30 September 2024, the loss allowance was
assessed to be minimal.
Maximum exposure and year/period-end staging
The table below shows the credit quality and the maximum exposure to credit risk based on the Group’s credit
policy, which is mainly based on past due information unless other information is available without undue cost or
effort, and year/period-end staging classification as at 31 December 2021, 2022 and 2023 and 30 September 2024.
The amounts presented are gross carrying amounts for financial assets.
APPENDIX I ACCOUNTANTS’ REPORT
– I-81 –


--- page 525 ---
31 December 2021
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 34,401 34,401
Financial assets included in
prepayments, other receivables
and other assets
– Normal* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111822,26 0––– 22,260
Long-term bank deposits
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111840,00 0––– 40,000
Cash and bank balances
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118151,80 8––– 151,808
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118214,068 – – 34,401 248,469
31 December 2022
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 37,511 37,511
Financial assets included in
prepayments, other receivables
and other assets
– Normal* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111830,78 6––– 30,786
Long-term bank deposits
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111890,00 0––– 90,000
Cash and bank balances
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,147,205 – – – 1,147,205
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,267,991 – – 37,511 1,305,502
31 December 2023
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 70,416 70,416
Contract assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 9,042 9,042
Financial assets included in
prepayments, other receivables
and other assets
– Normal* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111833,05 3––– 33,053
Restricted cash
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118124,00 0––– 124,000
Long-term bank deposits
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111841,39 0––– 41,390
Cash and bank balances
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,427,979 – – – 2,427,979
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,626,422 – – 79,458 2,705,880
APPENDIX I ACCOUNTANTS’ REPORT
– I-82 –


--- page 526 ---
30 September 2024
12-month ECLs Lifetime ECLs
Stage 1 Stage 2 Stage 3
Simplified
approach Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade receivables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 151,207 151,207
Long-term trade receivables /H1118/H1118/H1118/H1118 – – – 65,126 65,126
Contract assets /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118– – – 24,173 24,173
Financial assets included in
prepayments, other receivables
and other assets
– Normal* /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111851,11 8––– 51,118
Restricted cash
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111829,03 0––– 29,030
Long-term bank deposits
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118272,74 7––– 272,747
Cash and bank balances
– Not yet past due /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,709,835 – – – 1,709,835
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,062,730 – – 240,506 2,303,236
* The credit quality of the financial assets included in prepayments, other receivables and other assets is
considered to be “normal” when they are not past due and there is no information indicating that the financial
assets had a significant increase in credit risk since initial recognition. Otherwise, the credit quality of the
financial assets is considered to be “doubtful”.
(c) Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting financial obligations due to
shortage of funds. The Group’s exposure to liquidity risk arises primarily from mismatches of the maturities of
financial assets and liabilities. The Group’s objective is to maintain a balance for continuity of funding to finance
its working capital needs as well as capital expenditure.
The maturity profile of the Group’s financial liabilities as at the end of each of the Relevant Periods, based
on contractual undiscounted payments, are as follows:
31 December 2021 Within 1 year
Over 1 year
and within
2 years
Over 2 years
and within
5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118149,59 1––– 149,591
Financial liabilities included in
other payables and accruals /H1118/H1118/H1118 70,60 9––– 70,609
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111849,502 43,797 41,621 1,979 136,899
Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118734,70 7––– 734,707
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,004,409 43,797 41,621 1,979 1,091,806
APPENDIX I ACCOUNTANTS’ REPORT
– I-83 –


--- page 527 ---
31 December 2022 Within 1 year
Over 1 year
and within
2 years
Over 2 years
and within
5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118389,54 3––– 389,543
Financial liabilities included in
other payables and accruals /H1118/H1118/H1118161,04 3––– 161,043
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111855,833 37,329 17,785 1,094 112,041
Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118788,63 7––– 788,637
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,395,056 37,329 17,785 1,094 1,451,264
31 December 2023 Within 1 year
Over 1 year
and within
2 years
Over 2 years
and within
5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118601,27 2––– 601,272
Financial liabilities included in
other payables and accruals /H1118/H1118/H1118192,75 9––– 192,759
Interest-bearing other
borrowings /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118124,00 0––– 124,000
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111845,843 22,629 5,171 141 73,784
Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118842,56 8––– 842,568
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,806,442 22,629 5,171 141 1,834,383
30 September 2024 Within 1 year
Over 1 year
and within
2 years
Over 2 years
and within
5 years Over 5 years Total
RMB’000 RMB’000 RMB’000 RMB’000 RMB’000
Trade payables /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118612,12 7––– 612,127
Financial liabilities included in
other payables and accruals /H1118/H1118/H1118236,38 4––– 236,384
Interest-bearing bank borrowings /H1118 204 11,850 109,150 – 121,204
Lease liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H111841,971 16,498 5,044 – 63,513
Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118882,46 1––– 882,461
Total /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,773,147 28,348 114,194 – 1,915,689
(d) Capital management
The primary objectives of the Group’s capital management are to safeguard the Group’s ability to continue as
a going concern and to maintain healthy capital ratios in order to support its business and maximise shareholders’
value.
The Group manages its capital structure and makes adjustments to it in light of changes in economic conditions
and the risk characteristics of the underlying assets. To maintain or adjust the capital structure, the Group may adjust
the dividend payment to shareholders, return capital to shareholders or issue new shares. The Group is not subject
to any externally imposed capital requirement. No change was made in the objectives, policies or processes for
managing capital during the Relevant Periods.
APPENDIX I ACCOUNTANTS’ REPORT
– I-84 –


--- page 528 ---
The Group monitors its capital structure on the basis of an adjusted net debt-to-capital ratio. For this purpose,
adjusted net debt is defined as total debt (which includes lease liabilities but excludes financial liabilities designated
at fair value through profit or loss). Adjusted capital comprises all components of equity and financial liabilities
designated at fair value through profit or loss. The adjusted net debt-to-capital ratios as at 31 December 2021, 2022
and 2023 and 30 September 2024 were as follows:
31 December 30 September
2021 2022 2023 2024
RMB’000 RMB’000 RMB’000 RMB’000
Total liabilities /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11183,249,311 3,848,270 4,537,423 4,623,109
Less: Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118(2,472,275) (2,861,798) (3,156,013) (3,166,569)
Adjusted net debt /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118777,036 986,472 1,381,410 1,456,540
Equity attributable to owners of the parent /H1118 (1,216,193) (832,382) 582,992 1,681,849
Add: Financial liabilities at fair value
through profit or loss /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11182,472,275 2,861,798 3,156,013 3,166,569
Adjusted capital /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H11181,256,082 2,029,416 3,739,005 4,848,418
Adjusted net debt-to-capital ratio /H1118/H1118/H1118/H1118/H1118/H111861.9% 48.6% 36.9% 30.0%
43. EVENTS AFTER THE RELEV ANT PERIODS
On 6 January 2025, the Company passed a board resolution and shareholders resolution to declare a dividend
of RMB1.74 billion to existing shareholders, of which RMB0.4 billion had been settled by cash in January 2025.
44. SUBSEQUENT FINANCIAL STATEMENTS
No audited financial statements have been prepared by the Company, the Group or any of the subsidiaries in
respect of any period subsequent to 30 September 2024.
APPENDIX I ACCOUNTANTS’ REPORT
– I-85 –


--- page 529 ---
The following information does not form part of the Accountants’ Report from Ernst &
Young, Certified Public Accountants, Hong Kong, the Company’ s Reporting Accountants, as set
out in Appendix I to this prospectus, and is included herein for information purpose only. The
unaudited pro forma financial information should be read in conjunction with the section
headed “Financial Information” in this prospectus and the Accountants’ Report set out in
Appendix I to this prospectus.
A. UNAUDITED PRO FORMA STATEMENT OF ADJUSTED CONSOLIDATED NET
TANGIBLE ASSETS
The following unaudited pro forma statement of adjusted consolidated net tangible assets
of the Group has been prepared in accordance with Rule 4.29 of the Rules Governing the
Listing of Securities on The Stock Exchange of Hong Kong Limited and with reference to
Accounting Guideline 7 Preparation of Pro Forma Financial Information for inclusion in
Investment Circulars issued by the Hong Kong Institute of Certified Public Accountants for
illustration purposes only, and is set out here to illustrate the effect of the Global Offering on
the consolidated net tangible assets of the Group attributable to owners of the Company as of
30 September 2024 as if the Global Offering had taken place on 30 September 2024.
The unaudited pro forma statement of adjusted consolidated net tangible assets of the
Group has been prepared for illustrative purposes only and because of its hypothetical nature,
it may not give a true picture of the consolidated net tangible assets of the Group attributable
to owners of the Company had the Global Offering been completed as of 30 September 2024
or any future dates.
Consolidated
net tangible
assets
of the Group
attributable to
owners of the
Company as at
30 September 2024
Estimated net
proceeds from the
Global Offering
Estimated impact
to the consolidated
net tangible assets
of the Group
attributable to
owners of the
Company upon
conversion
of convertible
redeemable
preferred shares
Unaudited
pro forma
adjusted
consolidated
net tangible assets
of the Group
attributable to
owners of the
Company as at
30 September 2024
Unaudited
pro forma
adjusted
consolidated
net tangible assets
of the Group
attributable to
owners of the
Company per
share as at
30 September 2024
RMB’000 RMB’000 RMB’000 RMB’000 RMB HK$
(note 1) (note 2) (note 3) (note 4) (note 5)
Based on an Offer Price of
HK$8.68 per Share /H1118/H1118/H1118 1,680,943 1,193,112 3,166,569 6,040,624 2.59 2.81
Based on an Offer Price of
HK$9.94 per Share /H1118/H1118/H1118 1,680,943 1,369,690 3,166,569 6,217,202 2.67 2.90
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-1 –


--- page 530 ---
Notes:
1. The consolidated net tangible assets of the Group attributable to owners of the Company as at 30 September
2024 are based on consolidated net assets of the Group attributable to owners of the Company as at
30 September 2024 of approximately RMB1,681,849,000, after netting off other intangible assets of the Group
as at 30 September 2024 of approximately RMB906,000 as shown in the Accountants’ Report set out in
Appendix I to this prospectus.
2. The estimated net proceeds from the Global Offering are based on the indicative Offer Price of HK$8.68 and
HK$9.94 per Share, being the low and high end of the indicative Offer Price range, respectively, after
deduction of underwriting fees and other listing related expenses payable by the Company (excluding listing
expenses which have been recognised in profit or loss during the Track Record Period) and do not take into
account any share which may be sold and offered upon exercise of the Offer Size Adjustment Option and the
Over-allotment Option.
3. Upon the Listing and the completion of the Global Offering, all the preferred shares will be automatically
converted into ordinary shares of the Company. The convertible redeemable preferred shares will then be
transferred from liabilities to equity. Accordingly, for the purpose of the unaudited pro forma statement of
adjusted consolidated net tangible assets, had the conversion of preferred shares into ordinary shares of the
Company been completed as of 30 September 2024, the unaudited pro forma adjusted consolidated net tangible
assets of the Group attributable to owners of the Company will be increased by RMB3,166,569,000, being the
carrying amounts of the preferred shares as of 30 September 2024.
4. The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the
Company per Share are arrived at after adjustments referred to notes 2 and 3 above and on the basis that
2,332,525,060 shares are in issue, assuming that the conversion of preferred shares into ordinary shares of the
Company, the issuance of shares under equity-settled share-based payment plan and the Global Offering had
been completed on 30 September 2024, without taking into account of any shares which may be allotted and
issued upon the exercise of the Offer Size Adjustment Option and the Over-allotment Option.
5. For the purpose of this unaudited pro forma statement of adjusted consolidated net tangible assets, the balances
stated in Renminbi are converted into Hong Kong dollars at an exchange rate of HK$1 to RMB0.9204. No
representation is made that the Hong Kong dollar amounts have been, could have been or may be converted
to Renminbi, or vice versa, at that rate or any other rates or at all.
6. No adjustment has been made to the unaudited pro forma adjusted consolidated net tangible assets of the Group
to reflect any trading results or other transactions for the Group entered into subsequent to 30 September 2024.
7. The unaudited pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the
Company as shown on page II-1 have not been adjusted to illustrate the effect of the following:
In January 2025, the Company declared a dividend of RMB1.74 billion to the existing shareholders prior to
the Listing based on the Company’s share premium and retained profits from subsidiaries of the Company as
of 30 September 2024. Had the payment of the declared dividend been made on 30 September 2024, the
unaudited pro forma adjusted consolidated net tangible assets of the Group would decrease from
RMB6,040,624,000 to RMB4,300,624,000 based on Offer Price of HK$8.68 per Share, or from
RMB6,217,202,000 to RMB4,477,202,000 based on Offer Price of HK$9.94 per Share. Had the Global
Offering and the dividend declaration been taken into account, the unaudited pro forma adjusted consolidated
net tangible assets of the Group attributable to owners of the Company as at 30 September 2024 per Share
would be RMB1.84 (equivalent to HK$2.00) based on an Offer Price of HK$8.68 per Share and RMB1.92
(equivalent to HK$2.09) based on an Offer Price of HK$9.94 per Share, respectively, on the basis that a total
of 2,332,525,060 shares were in issue assuming that the Global Offering had been completed on 30 September
2024. These amounts are converted from Renminbi to Hong Kong dollars or Hong Kong dollars to Renminbi
at an exchange rate of HK$1 to RMB0.9204. No representation is made that Renminbi/Hong Kong dollars
amount have been, could have been or may be converted to Hong Kong dollars/Renminbi at that rate or at all.
After the Listing, the Company intends to declare and distribute a special dividend in an amount of no less than
RMB2 billion to its shareholders, which has not been taken into account in the calculation of the unaudited
pro forma adjusted consolidated net tangible assets of the Group attributable to owners of the Company as at
30 September 2024.
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-2 –


--- page 531 ---
B. INDEPENDENT REPORTING ACCOUNTANTS’ ASSURANCE REPORT ON THE
COMPILATION OF PRO FORMA FINANCIAL INFORMATION
The following is the text of a report, prepared for inclusion in this document, received
from the independent reporting accountants of the Company, Ernst & Young, Certified Public
Accountants, Hong Kong, for the purpose of incorporation in this prospectus.
⭰㰟㛪姯⸒Ṳ⋀㈧
榀㸖毩歁㵳勘䙮怺979噆
⤑⏋✱ᷧ⺎27㧺
Tel 曢婘: +852 2846 9888
Fax ₚ䜆: +852 2868 4432
ey.com
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hon
g Kong
To the Directors of Guming Holdings Limited
We have completed our assurance engagement to report on the compilation of pro forma
financial information of Guming Holdings Limited (the “Company”) and its subsidiaries
(hereinafter collectively referred to as the “Group”) by the directors of the Company (the
“Directors”) for illustrative purposes only. The pro forma financial information consists of the
pro forma consolidated net tangible assets as at 30 September 2024, and related notes as set out
on pages II-1 to II-2 of the prospectus dated 4 February 2025 issued by the Company (the “Pro
Forma Financial Information”). The applicable criteria on the basis of which the Directors have
compiled the Pro Forma Financial Information are described in pages II-1 to II-2 to the
prospectus.
The Pro Forma Financial Information has been compiled by the Directors to illustrate the
impact of the global offering of shares of the Company on the Group’s financial position as at
30 September 2024 as if the transaction had taken place at 30 September 2024. As part of this
process, information about the Group’s financial position has been extracted by the Directors
from the Group’s financial statements for the period ended 30 September 2024, on which an
accountants’ report has been published.
Directors’ responsibility for the Pro Forma Financial Information
The Directors are responsible for compiling the Pro Forma Financial Information in
accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock
Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting
Guideline Preparation of Pro Forma Financial Information for Inclusion in Investment
Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (the
“HKICPA”).
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-3 –


--- page 532 ---
Our independence and quality control
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental
principles of integrity, objectivity, professional competence and due care, confidentiality and
professional behavior.
Our firm applies Hong Kong Standard on Quality Management 1 Quality Management for
Firms that Perform Audits and Reviews of Financial Statements, or Other Assurance or
Related Services Engagements which requires the firm to design, implement and operate a
system of quality management including policies or procedures regarding compliance with
ethical requirements, professional standards and applicable legal and regulatory requirements.
Reporting accountants’ responsibilities
Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the
Listing Rules, on the Pro Forma Financial Information and to report our opinion to you. We do
not accept any responsibility for any reports previously given by us on any financial
information used in the compilation of the Pro Forma Financial Information beyond that owed
to those to whom those reports were addressed by us at the dates of their issue.
We conducted our engagement in accordance with Hong Kong Standard on Assurance
Engagements 3420 Assurance Engagements to Report on the Compilation of Pro Forma
Financial Information Included in a Prospectus issued by the HKICPA. This standard requires
that the reporting accountants plan and perform procedures to obtain reasonable assurance
about whether the Directors have compiled the Pro Forma Financial Information in accordance
with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.
For purposes of this engagement, we are not responsible for updating or reissuing any
reports or opinions on any historical financial information used in compiling the Pro Forma
Financial Information, nor have we, in the course of this engagement, performed an audit or
review of the financial information used in compiling the Pro Forma Financial Information.
The purpose of the Pro Forma Financial Information included in the Prospectus is solely
to illustrate the impact of the global offering of shares of the Company on unadjusted financial
information of the Group as if the transaction had been undertaken at an earlier date selected
for purposes of the illustration. Accordingly, we do not provide any assurance that the actual
outcome of the transaction would have been as presented.
A reasonable assurance engagement to report on whether the Pro Forma Financial
Information has been properly compiled on the basis of the applicable criteria involves
performing procedures to assess whether the applicable criteria used by the Directors in the
compilation of the Pro Forma Financial Information provide a reasonable basis for presenting
the significant effects directly attributable to the transaction, and to obtain sufficient
appropriate evidence about whether:
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-4 –


--- page 533 ---
 the related pro forma adjustments give appropriate effect to those criteria; and
 the Pro Forma Financial Information reflects the proper application of those
adjustments to the unadjusted financial information.
The procedures selected depend on the reporting accountants’ judgment, having regard to
the reporting accountants’ understanding of the nature of the Group, the transaction in respect
of which the Pro Forma Financial Information has been compiled, and other relevant
engagement circumstances.
The engagement also involves evaluating the overall presentation of the Pro Forma
Financial Information.
We believe that the evidence we have obtained is sufficient and appropriate to provide a
basis for our opinion.
Opinion
In our opinion:
(a) the Pro Forma Financial Information has been properly compiled on the basis stated;
(b) such basis is consistent with the accounting policies of the Group; and
(c) the adjustments are appropriate for the purpose of the Pro Forma Financial
Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.
Ernst & Y oung
Certified Public Accountants
Hong Kong
4 February 2025
APPENDIX II UNAUDITED PRO FORMA FINANCIAL INFORMATION
– II-5 –


--- page 534 ---
The estimated consolidated profit attributable to owners of our Company for the year
ended December 31, 2024 is set out in “Financial Information–Profit estimate for the year
ended December 31, 2024” in this prospectus.
A. BASES
Our Directors have prepared the estimate of the consolidated profit attributable to owners
of our Company for the year ended December 31, 2024 (the “ Profit Estimate ”) on the basis
of (i) the audited consolidated results of our Group for the nine months ended September 30,
2024; and (ii) the unaudited consolidated results of our Group for the three months ended
December 31, 2024 based on the management accounts of our Group.
The Profit Estimate has been prepared on the basis of the accounting policies consistent
in all material respects with those currently adopted by our Group as summarised in the
Accountants’ Report as set out in Appendix I to this prospectus.
B. PROFIT ESTIMATE FOR THE YEAR ENDED DECEMBER 31, 2024
On the basis set out in Appendix IIA to this prospectus, and in the absence of unforeseen
circumstances, we estimate that our unaudited consolidated profit attributable to owners of our
Company for the year ended December 31, 2024 is as follows:
Estimated consolidated profit attributable
to owners of our Company .....................N o t less than RMB1.4 billion
APPENDIX IIA PROFIT ESTIMATE FOR YEAR ENDED DECEMBER 31, 2024
– IIA-1 –


--- page 535 ---
C. LETTER FROM THE REPORTING ACCOUNTANTS
The following is the text of a letter , prepared for the inclusion in this prospectus, received
from our Company’ s reporting accountants, Ernst & Young, Certified Public Accountants,
Hong Kong, in connection with the estimate of the consolidated profit attributable to owners
of our Company for the year ended 31 December 2024.
⭰㰟㛪姯⸒Ṳ⋀㈧
榀㸖毩歁㵳勘䙮怺979噆
⤑⏋✱ᷧ⺎27㧺
Tel 曢婘: +852 2846 9888
Fax ₚ䜆: +852 2868 4432
ey.com
Ernst & Young
27/F, One Taikoo Place
979 King’s Road
Quarry Bay, Hon
g Kong
The Board of Directors
Guming Holdings Limited
Goldman Sachs (Asia) L.L.C.
UBS Securities Hong Kong Limited
4 February 2025
Dear Sirs,
Guming Holdings Limited (“the Company”)
Profit estimate for year ended 31 December 2024
We refer to the estimate of the consolidated profit attributable to equity holders of the
Company for the year ended 31 December 2024 (“the Profit Estimate”) set forth in the section
headed “Summary” in the prospectus of the Company dated 4 February 2025 (“the
Prospectus”).
Directors’ responsibilities
The Profit Estimate has been prepared by the directors of the Company based on the
audited consolidated results of the Company and its subsidiaries (collectively referred to as
“the Group”) for the nine months ended 30 September 2024 and the unaudited consolidated
results based on the management accounts of the Group for the three months ended 31
December 2024.
The Company’s directors are solely responsible for the Profit Estimate.
APPENDIX IIA PROFIT ESTIMATE FOR YEAR ENDED DECEMBER 31, 2024
– IIA-2 –


--- page 536 ---
Our independence and quality control
We have complied with the independence and other ethical requirements of the Code of
Ethics for Professional Accountants issued by the Hong Kong Institute of Certified Public
Accountants (“HKICPA”), which is founded on fundamental principles of integrity, objectivity,
professional competence and due care, confidentiality and professional behavior.
Our firm applies Hong Kong Standard on Quality Management 1 Quality Management for
Firms that Perform Audits or Reviews of Financial Statements, or Other Assurance or Related
Services Engagements , and accordingly maintains a comprehensive system of quality control
including documented policies and procedures regarding compliance with ethical requirements,
professional standards and applicable legal and regulatory requirements.
Reporting accountants’ responsibilities
Our responsibility is to express an opinion on the accounting policies and calculations of
the Profit Estimate based on our procedures.
We conducted our engagement in accordance with Hong Kong Standard on Investment
Circular Reporting Engagements 500 Reporting on Profit Forecasts, Statements of Sufficiency
of Working Capital and Statements of Indebtedness and with reference to Hong Kong Standard
on Assurance Engagements 3000 (Revised) Assurance Engagements Other Than Audits or
Reviews of Historical Financial Information issued by the HKICPA. Those standards require
that we plan and perform our work to obtain reasonable assurance as to whether, so far as the
accounting policies and calculations are concerned, the Company’s directors have properly
compiled the Profit Estimate in accordance with the bases adopted by the directors and as to
whether the Profit Estimate is presented on a basis consistent in all material respects with the
accounting policies normally adopted by the Group. Our work is substantially less in scope
than an audit conducted in accordance with Hong Kong Standards on Auditing issued by the
HKICPA. Accordingly, we do not express an audit opinion.
Opinion
In our opinion, so far as the accounting policies and calculations are concerned, the Profit
Estimate has been properly compiled in accordance with the bases adopted by the directors as
set out in Appendix IIA of the Prospectus and is presented on a basis consistent in all material
respects with the accounting policies normally adopted by the Group as set out in our
accountants’ report dated 4 February 2025, the text of which is set out in Appendix I of the
Prospectus.
Y ours faithfully,
Ernst & Y oung
Certified Public Accountants
Hong Kong
APPENDIX IIA PROFIT ESTIMATE FOR YEAR ENDED DECEMBER 31, 2024
– IIA-3 –


--- page 537 ---
D. LETTER FROM THE JOINT SPONSORS
The Board of Directors
Guming Holdings Limitedʮ̡
February 4, 2025
Dear Sirs,
We refer to the profit estimate of the consolidated profit attributable to owners of Guming
Holdings Limited (the “ Company ”) for the year ended December 31, 2024 (the “ Profit
Estimate ”) set forth in the section headed “Financial Information — Profit estimate for the
year ended December 31, 2024” in the prospectus of the Company dated February 4, 2025 (the
“Prospectus ”).
The Profit Estimate, for which you as the Directors of the Company are solely responsible
for, has been prepared by the Directors of the Company based on the audited consolidated
results of the Company and its subsidiaries (collectively, the “ Group ”) for the nine months
ended September 30, 2024 and the unaudited consolidated results based on the management
accounts of the Group for the three months ended December 31, 2024.
We have discussed with you the bases made by the Directors of the Company as set forth
in Appendix IIA to the Prospectus, upon which the Profit Estimate has been made. We have also
considered, and relied upon, the letter dated February 4, 2025 addressed to you and us from
Ernst & Y oung, the reporting accountants of the Company (the “ Reporting Accountants ”),
regarding the accounting policies and calculations upon which the Profit Estimate has been
made.
On the basis of the information comprising the Profit Estimate and on the basis of the
accounting policies and calculations adopted by you and reviewed by the Reporting
Accountants, we are of the opinion that the Profit Estimate, for which you as the Directors of
the Company are solely responsible for, has been made after due and careful enquiry.
Y ours faithfully,
For and on behalf of
Goldman Sachs (Asia) L.L.C.
Jacky Yui Hei Leung
Managing Director
For and on behalf of
UBS Securities Hong Kong Limited
Fiona Ho
Executive Director
APPENDIX IIA PROFIT ESTIMATE FOR YEAR ENDED DECEMBER 31, 2024
– IIA-4 –


--- page 538 ---
Set out below is a summary of certain provisions of the Memorandum and Articles of
Association of our Company and of certain aspects of the Cayman Islands company law.
Our Company was incorporated in the Cayman Islands as an exempted company with
limited liability on 31 August 2021 under the Cayman Companies Act. Our Company’s
constitutional documents consist of its Memorandum of Association and its Articles of
Association.
1. MEMORANDUM OF ASSOCIATION
The Memorandum states, inter alia, that the liability of members of our Company is
limited to the amount from time to time unpaid on such member’s shares and that the objects
for which our Company is established are unrestricted (including acting as an investment
company), and that our Company shall have and be capable of exercising any and all of the
powers exercisable by a natural person or body corporate in any part of the world whether as
principal, agent, contractor or otherwise and in view of the fact that our Company is an
exempted company that our Company will not trade in the Cayman Islands with any person,
firm or corporation except in furtherance of the business of our Company carried on outside
the Cayman Islands.
2. ARTICLES OF ASSOCIATION
The Articles were conditionally adopted on January 27, 2025 with effect from the Listing
Date. The following is a summary of certain provisions of the Articles:
(a) Shares
(i) Classes of shares
The share capital of our Company consists of ordinary shares.
(ii) V ariation of rights of existing shares or classes of shares
Subject to the Cayman Companies Act, if at any time the share capital of our Company
is divided into different classes of shares, all or any of the special rights attached to the shares
or any class of shares may (unless otherwise provided for by the terms of issue of that class)
be varied, modified or abrogated either with the consent in writing of the holders of not less
than three-fourths of the voting rights of the issued shares of that class or with the sanction of
a special resolution passed at a separate general meeting of the holders of the shares of that
class. To every such separate general meeting the provisions of the Articles relating to general
meetings will mutatis mutandis apply, but so that the necessary quorum (including at an
adjourned meeting) shall be two persons holding or representing by proxy not less than
one-third of the issued shares of that class. Every holder of shares of the class shall be entitled
to one vote for every such share held by him.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-1 –


--- page 539 ---
Any special rights conferred upon the holders of any shares or class of shares shall not,
unless otherwise expressly provided in the rights attaching to the terms of issue of such shares,
be deemed to be varied by the creation or issue of further shares ranking pari passu therewith.
(iii) Alteration of capital
Our Company may by ordinary resolution of its members:
(aa) increase its share capital as provided in the Articles;
(bb) consolidate and divide all or any of its share capital into shares of larger amount than
its existing shares;
(cc) divide its shares into several classes and attach to such shares any preferential,
deferred, qualified or special rights, privileges, conditions or restrictions as our
Company in general meeting or as the Board may determine;
(dd) subdivide its shares or any of them into shares of smaller amount than is fixed by
the Memorandum;
(ee) cancel any shares, which at the date of passing of the resolution, have not been taken
and diminish the amount of its share capital by the amount of the shares so
cancelled;
(ff) make provision for the issue and allotment of shares which do not carry any voting
rights;
(gg) change the currency of denomination of its share capital; and
(hh) reduce its share premium account in any manner authorised and subject to any
conditions prescribed by law.
Our Company may by special resolution reduce its share capital or any capital redemption
reserve or other undistributable reserve in any way and subject to any conditions prescribed by
law.
(iv) Transfer of shares
All transfers of shares shall be effected by an instrument of transfer in the usual or
common form or in such other form as the Board may approve and which may be under hand
or, if the transferor or transferee is a clearing house or its nominee(s), under hand or by
machine imprinted signature or by such other manner of execution as the Board may approve
from time to time.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-2 –


--- page 540 ---
The instrument of transfer shall be executed by or on behalf of the transferor and the
transferee provided that the Board may dispense with the execution of the instrument of
transfer by the transferee or accept mechanically executed transfers. The transferor shall be
deemed to remain the holder of the share until the name of the transferee is entered in the
register of members in respect of that share.
The Board may, in its absolute discretion, at any time and from time to time transfer any
share upon the principal register to any branch register or any share on any branch register to
the principal register or any other branch register.
Unless the Board otherwise agrees, no shares on the principal register shall be removed
to any branch register nor shall shares on any branch register be removed to the principal
register or any other branch register. All removals and other documents of title shall be lodged
for registration, and be registered, in the case of any shares on a branch register, at the relevant
registration office, and, in the case of any shares on the principal register, at the transfer office.
The Board may decline to recognise any instrument of transfer unless a fee (not exceeding
the maximum sum as the Stock Exchange may determine to be payable) determined by the
Board is paid to our Company, the instrument of transfer is properly stamped (if applicable),
it is in respect of only one class of share, is lodged at the relevant registration office, the
registered office or the transfer office accompanied by the relevant share certificate(s) and such
other evidence as the Board may reasonably require to show the right of the transferor to make
the transfer (and if the instrument of transfer is executed by some other person on his behalf,
the authority of that person so to do), and the shares are free of any lien in favour of our
Company.
The registration of transfers may be suspended and the register may be closed on giving
notice by advertisement in any newspaper or by any other means in accordance with the
requirements of the Stock Exchange to that effect be suspended at such times and for such
periods (not exceeding in the whole 30 days in any year) as the Board may determine. The
period of 30 days may be extended for a further period or periods not exceeding 30 days in
respect of any year if approved by members by ordinary resolution.
Fully paid shares are free from any restriction on transfer (except when permitted by the
Stock Exchange) and free of all liens.
(v) Power of our Company to purchase its own shares
Our Company is empowered by the Cayman Companies Act and the Articles to purchase
its own shares subject to certain restrictions and the Board may only exercise this power on
behalf of our Company subject to any applicable requirements imposed from time to time by
the Stock Exchange.
The Board may accept the surrender for no consideration of any fully paid shares.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-3 –


--- page 541 ---
(vi) Power of any subsidiary of our Company to own shares in our Company
There are no provisions in the Articles relating to the ownership of shares in our Company
by a subsidiary.
(vii) Calls on shares and forfeiture of shares
The Board may from time to time make such calls as it thinks fit upon the members in
respect of any monies unpaid on the shares held by them respectively (whether on account of
the nominal value of the shares or by way of premium) and not by the conditions of allotment
thereof made payable at a fixed time. A call may be made payable either in one lump sum or
by instalments. If the sum payable in respect of any call or instalment is not paid on or before
the day appointed for payment thereof, the person or persons from whom the sum is due shall
pay interest on the same at such rate not exceeding 20% per annum as the Board may agree to
accept from the day appointed for the payment thereof to the time of actual payment, but the
Board may waive payment of such interest wholly or in part. The Board may, if it thinks fit,
receive from any member willing to advance the same, and either in money or money’s worth,
all or any part of the monies uncalled and unpaid or instalments payable upon any shares held
by him.
If a member fails to pay any call or instalment of a call on the day appointed for payment,
the Board may, for so long as any part of the call or instalment remains unpaid, serve notice
on the member requiring payment of so much of the call or instalment as is unpaid, together
with any interest which may have accrued and which may still accrue up to the date of actual
payment. The notice shall name a further day (not earlier than the expiration of 14 days from
the date of the notice) on or before which the payment required by the notice is to be made,
and shall also name the place where payment is to be made. The notice shall also state that, in
the event of non-payment at or before the time appointed, the shares in respect of which the
call was made will be liable to be forfeited.
If the requirements of any such notice are not complied with, any share in respect of
which the notice has been given may at any time thereafter, before the payment required by the
notice has been made, be forfeited by a resolution of the Board to that effect. Such forfeiture
shall include all dividends and bonuses declared in respect of the forfeited share and not
actually paid before the forfeiture.
A person whose shares have been forfeited shall cease to be a member in respect of the
forfeited shares, but shall, nevertheless, remain liable to pay to our Company all monies which,
at the date of forfeiture, were payable by him to our Company in respect of the forfeited shares,
together with (if the Board shall in its discretion so require) interest thereon from the date of
forfeiture until the date of actual payment (including the payment of such interest) at such rate
not exceeding 20% per annum as the Board may determine.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-4 –


--- page 542 ---
(b) Directors
(i) Appointment, retirement and removal
At each annual general meeting, one third of the Directors for the time being shall retire
from office by rotation. However, if the number of Directors is not a multiple of three, then the
number nearest to but not less than one third shall be the number of retiring Directors provided
that every Director shall be subject to retirement at an annual general meeting at least once
every three years. The Directors to retire by rotation shall include any Director who wishes to
retire and not offer himself for re-election. Any further Directors so to retire shall be those who
have been longest in office since their last re-election or appointment but as between persons
who became or were last re-elected Directors on the same day those to retire will (unless they
otherwise agree among themselves) be determined by lot.
Neither a Director nor an alternate Director is required to hold any shares in our Company
by way of qualification. Further, a Director is not required to retire upon reaching any
particular age.
The Board shall have power from time to time and at any time to appoint any person as
a Director either to fill a casual vacancy or as an additional Director subject to the maximum
number determined from time to time by the members in general meeting. Any Director
appointed by the Board to fill a casual vacancy or as an addition to the existing Board shall
hold office only until the first annual general meeting of our Company after his appointment
and shall then be eligible for re-election.
The members may by ordinary resolution remove any Director (including a managing
Director or other executive Director) before the expiration of his term of office (but without
prejudice to any claim which such Director may have for damages for any breach of any
contract between him and our Company) and may by ordinary resolution appoint another
person in his stead. Any Director so appointed shall be subject to the “retirement and rotation”
provisions. The number of Directors shall not be less than two.
The office of a Director shall be vacated if:
(aa) he becomes bankrupt or has a receiving order made against him or suspends payment
or compounds with his creditors generally; or
(bb) he dies or becomes of unsound mind as determined pursuant to an order made by any
competent court or official on the grounds that he is or may be suffering from mental
disorder or is otherwise incapable of managing his affairs and the Board resolves
that his office be vacated; or
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-5 –


--- page 543 ---
(cc) if he absents himself from the meetings of the Board during a continuous period of
six months, without special leave of absence from the Board, and his alternate
Director (if any) shall not during such period have attended in his stead, and the
Board pass a resolution that he has by reason of such absence vacated his office; or
(dd) he becomes prohibited by law from acting as a Director or he ceases to be a Director
by operation of law or is removed pursuant to the Articles; or
(ee) he has been validly required by the stock exchange of the Relevant Territory (as
defined in the Articles) to cease to be a Director and the relevant time period for
application for review of or appeal against such requirement has lapsed and no
application for review or appeal has been filed or is underway against such
requirement; or
(ff) he resigns; or
(gg) he is removed from office by an ordinary resolution pursuant to the Articles; or
(hh) he is removed from office by notice in writing served on him signed by not less than
three-fourths in number (or if that is not a round number, the nearest lower round
number) of the Directors (including himself) then in office.
The Board may appoint any one or more of them to the office of managing director, joint
managing director, deputy managing director or other executive director and/or such other
office in the management of the business of the Company as it may decide for such period and
upon such terms as it thinks fit. The Board may delegate any of its powers, authorities and
discretions to committees consisting of such Director(s) and other persons as it thinks fit, and
it may from time to time revoke such delegation or revoke the appointment of and discharge
any such committees either wholly or in part, and either as to persons or purposes, but every
committee so formed must, in the exercise of the powers, authorities and discretions so
delegated, conform to any regulations that may from time to time be imposed upon it by the
Board.
(ii) Power to allot and issue shares and warrants
Subject to the provisions of the Cayman Companies Act, the Memorandum and Articles
and without prejudice to any special rights or restrictions attaching to any shares or any class
of shares, (a) any share may be issued with or have attached to it such rights, or such
restrictions, whether with regard to dividend, voting, return of capital or otherwise, as the
Directors may determine; or (b) shares may be issued on the terms that may be, or at the option
of our Company or the holder are, liable to be redeemed.
The Board may issue warrants to subscribe for any class of shares or other securities of
our Company on such terms as the Board may determine.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-6 –


--- page 544 ---
Subject to the provisions of the Cayman Companies Act and the Articles and, where
applicable, the Listing Rules and without prejudice to any special rights or restrictions for the
time being attached to any shares or any class of shares, all unissued shares in our Company
are at the disposal of the Board, which may offer, allot, grant options over or otherwise dispose
of them to such persons, at such times, for such consideration and on such terms and conditions
as it in its absolute discretion thinks fit, but so that no shares shall be issued at a discount to
their nominal value.
Neither our Company nor the Board is obliged, when making or granting any allotment
of, offer of, option over or disposal of shares or other securities of our Company, to make, or
make available, any such allotment, offer, option or shares or other securities of our Company
to members or others with registered addresses in any particular territory or territories being
a territory or territories where, in the absence of a registration statement or other special
formalities, this would or might, in the opinion of the Board, be unlawful or impracticable.
Members affected as a result of the foregoing sentence shall not be, and shall be deemed not
to be, a separate class of members for any purpose whatsoever.
(iii) Power to dispose of the assets of our Company or any of its subsidiaries
There are no specific provisions in the Articles relating to the disposal of the assets of our
Company or any of its subsidiaries. The Directors may, however, exercise all powers and do
all acts and things which may be exercised or done or approved by our Company and which
are not required by the Articles or the Cayman Companies Act to be exercised or done by our
Company in general meeting.
(iv) Borrowing powers
The Board may exercise all the powers of our Company to raise or borrow money, to
mortgage or charge all or any part of the undertaking, property and uncalled capital of our
Company and, subject to the Cayman Companies Act, to issue debentures, bonds and other
securities of our Company, whether outright or as collateral security for any debt, liability or
obligation of our Company or of any third party.
(v) Remuneration
The Directors shall be entitled to receive, as ordinary remuneration for their services,
such sums as shall from time to time be determined by the Board or our Company in general
meeting, as the case may be, such sum (unless otherwise directed by the resolution by which
it is voted) to be divided among the Directors in such proportions and in such manner as they
may agree or, failing agreement, equally, except that in such event any Director holding office
for less than the whole of the relevant period in respect of which the ordinary remuneration is
payable shall only rank in such division in proportion to the time during such period for which
he has held office. The Directors are also entitled to be prepaid or repaid all travelling, hotel
and incidental expenses reasonably expected to be incurred or incurred by them in or about the
performance of their duties as Directors.
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Any Director who, at the request of our Company, goes or resides abroad for any purpose
of our Company or who performs services which in the opinion of the Board go beyond the
ordinary duties of such Director may be paid such extra remuneration as the Board may
determine and such extra remuneration may be in addition to or in substitution for any ordinary
remuneration as a Director. An executive Director or a Director appointed to be a managing
director, joint managing director, deputy managing director or any other executive officer may
receive such remuneration and such other benefits and allowances as the Board may from time
to time decide. Such remuneration may be either in addition to or in lieu of his remuneration
as a Director.
The Board may establish, either on its own or jointly with other companies (being
subsidiary companies of our Company or companies with which it is associated in business)
and maintain any funds or plans for providing pensions, allowances or emoluments for
employees and ex-employees of our Company and their dependants.
(vi) Compensation or payments for loss of office
Pursuant to the Articles, payments to any Director or past Director of any sum by way of
compensation for loss of office or as consideration for or in connection with his retirement
from office (not being a payment to which the Director is contractually entitled) must be
approved by our Company in general meeting.
(vii) Loans and provision of security for loans to Directors
Except as would, if the Company were a company incorporated in Hong Kong, be
permitted by the Companies Ordinance and the Cayman Companies Act, our Company shall not
directly or indirectly make a loan to a Director or a director of any holding company of our
Company or any of their respective close associates, enter into any guarantee or provide any
security in connection with a loan made by any person to a Director or a director of any holding
company of our Company or any of their respective close associates, or, if any one or more of
the Directors hold(s) (jointly or severally or directly or indirectly) a controlling interest in
another company, make a loan to that other company or enter into any guarantee or provide any
security in connection with a loan made by any person to that other company.
(viii) Disclosure of interests in contracts with our Company or any of its subsidiaries
A Director may hold any other office or place of profit with our Company (except that of
the auditor of our Company) in conjunction with his office of Director for such period and upon
such terms as the Board may determine, and may be paid such extra remuneration therefor in
addition to any remuneration provided for by or pursuant to the Articles. A Director may be or
become a director or other officer of, or otherwise interested in, any other company promoted
by our Company or any other company in which our Company may be interested, and shall not
be liable to account to our Company or the members for any remuneration, profits or other
benefits received by him as a director, officer or member of, or from his interest in, such other
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company. The Directors may exercise the voting power conferred by the shares in any other
company held or owned by our Company in such manner in all respects as they think fit,
including the exercise thereof in favour of any resolution appointing the Directors or any of
them to be directors or officers of such other company, or voting or providing for the payment
of remuneration to the directors or officers of such other company.
No Director or proposed or intended Director shall be disqualified by his office from
contracting with our Company either with regard to his tenure of any office or place of profit
or as vendor, purchaser or in any other manner whatsoever nor shall any such contract or any
other contract or arrangement in which any Director is in any way interested be liable to be
avoided, nor shall any Director so contracting or being so interested be liable to account to our
Company or the members for any remuneration, profit or other benefits realised by any such
contract or arrangement by reason of such Director holding that office or the fiduciary
relationship thereby established, provided that such Director shall declare the nature of his
interest in any such contract or transaction at or prior to the consideration and vote on such
contract or transaction, either specifically or by way of a general notice stating that, by reason
of the facts specified in such notice, he is to be regarded as interested in any such contract or
transaction.
A Director shall not vote (nor shall he be counted in the quorum) on any resolution of the
Board approving any contract or arrangement or any other proposal in which he or any of his
close associates has/have a material interest, and if he shall do so his vote shall not be counted
(nor shall he be counted in the quorum for that resolution), but this prohibition does not apply
to any of the following matters namely:
(aa) the giving of any security or indemnity either: (x) to the Director or his close
associate(s) in respect of money lent or obligations incurred or undertaken by him
or any of them at the request of or for the benefit of our Company or any of its
subsidiaries; or (y) to a third party in respect of a debt or obligation of our Company
or any of its subsidiaries for which the Director or his close associate(s) has
himself/themselves assumed responsibility in whole or in part and whether alone or
jointly under a guarantee or indemnity or by the giving of security;
(bb) any proposal concerning an offer of shares or debentures or other securities of or by
our Company or any other company which our Company may promote or be
interested in for subscription or purchase, where the Director or his close
associate(s) is/are or is/are to be interested as a participant in the underwriting or
sub-underwriting of the offer;
(cc) any proposal or arrangement concerning the benefit of employees of our Company
or its subsidiaries including the adoption, modification or operation of (x) any
employees’ share scheme, or any share incentive or share option scheme under
which the Director or his close associate(s) may benefit; or (y) a pension fund or
retirement, death or disability benefits scheme which relates both to Directors, his
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--- page 547 ---
close associates and employees of our Company or of any of its subsidiaries and
does not provide in respect of any Director, or his close associate(s), as such any
privilege or advantage not accorded generally to the class of persons to which such
scheme or fund relates; and
(dd) any contract or arrangement in which the Director or his close associate(s) is/are
interested in the same manner as other holders of shares or debentures or other
securities of our Company by virtue only of his/their interest in shares or debentures
or other securities of our Company.
(c) Proceedings of the Board
The Board may meet for the despatch of business, adjourn and otherwise regulate its
meetings as it thinks fit. Questions arising at any meeting shall be determined by a majority
of votes. In the case of an equality of votes, the chairman of the meeting shall have a second
or casting vote.
(d) Alterations to constitutional documents and our Company’s name
To the extent that the same is permissible under Cayman Islands law and subject to the
Articles, a special resolution shall be required to alter the provisions of the Memorandum, to
approve any amendment of the Articles or to change the name of our Company.
(e) Meetings of members
(i) Special and ordinary resolutions
A special resolution of our Company must be passed by a majority of not less than
three-fourths of the votes cast by such members as, being entitled so to do, vote in person or,
in the case of such members as are corporations, by their duly authorised representatives or,
where proxies are allowed, by proxy at a general meeting of which notice has been duly given
in accordance with the Articles.
Under the Cayman Companies Act, a copy of any special resolution must be forwarded
to the Registrar of Companies in the Cayman Islands within 15 days of being passed.
An ordinary resolution is defined in the Articles to mean a resolution passed by a simple
majority of the votes of such members of our Company as, being entitled to do so, vote in
person or, in the case of corporations, by their duly authorised representatives or, where proxies
are allowed, by proxy at a general meeting of which notice has been duly given in accordance
with the Articles.
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--- page 548 ---
(ii) V oting rights and right to demand a poll
Subject to any special rights or restrictions as to voting for the time being attached to any
class or classes of shares, at any general meeting on a poll every member present in person or
by proxy or, in the case of a member being a corporation, by its duly authorised representative
shall have one vote for every share of which he is the holder which is fully paid or credited
as fully paid but so that no amount paid up or credited as paid up on a share in advance of calls
or instalments shall be treated for the purposes of the Articles as paid on the share. On a poll,
a member entitled to more than one vote need not use all his votes or cast all the votes he uses
in the same way.
At any general meeting a resolution put to the vote of the meeting is to be decided by poll
save that the chairman of the meeting may, pursuant to the Listing Rules, allow a resolution
which relates purely to a procedural or administrative matter to be voted on by a show of hands.
On a show of hands every member who is present in person (or, in the case of a member being
a corporation, by its duly authorised representative) or by proxy shall (save as provided
otherwise in the Articles) have one vote.
Where a clearing house (or its nominee(s)) is a member of our Company, it may (subject
to the Articles) authorise such person or persons as it thinks fit to act as its representative or
representatives, at any meeting (including but not limited to any general meeting, creditors
meeting or at any meeting of any class of members) of our Company provided that, if more than
one person is so authorised, the authorisation shall specify the number and class of shares in
respect of which each such person is so authorised. A person authorised pursuant to this
provision shall be deemed to have been duly authorised without further evidence of the facts
and be entitled to exercise the same powers on behalf of the clearing house (or its nominee(s))
as if such person were an individual member including the right to speak and vote, and where
a show of hands is allowed, the right to vote individually on a show of hands.
Members must have the right to: (i) speak at general meetings of our Company; and (ii)
vote at a general meeting except where a member is required, by the Listing Rules, to abstain
from voting to approve the matter under consideration.
Where our Company has any knowledge that any member is, under the Listing Rules,
required to abstain from voting on any particular resolution or restricted to voting only for or
only against any particular resolution, any votes cast by or on behalf of such member in
contravention of such requirement or restriction shall not be counted.
(iii) Annual general meetings and extraordinary general meetings
In each financial year during the Relevant Period (as defined in the Articles), our
Company shall hold an annual general meeting within six months after the end of each
financial year in addition to any other meeting in that year and shall specify the meeting as such
in the notice calling it.
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Extraordinary general meetings shall be convened on the requisition of one or more
members holding, at the date of deposit of the requisition, not less than one-tenth of the paid
up capital of our Company having the right of voting at general meetings, on a one vote per
share basis in the share capital of our Company and the foregoing members shall be able to add
resolutions to the meeting agenda. Such requisition shall be made in writing to the Board or
the secretary for the purpose of requiring an extraordinary general meeting to be called by the
Board for the transaction of any business specified in such requisition. Such meeting shall be
held within two months after the deposit of such requisition. If within 21 days of such deposit,
the Board fails to proceed to convene such meeting, the requisitionist(s) himself (themselves)
may do so in the same manner, and all reasonable expenses incurred by the requisitionist(s) as
a result of the failure of the Board shall be reimbursed to the requisitionist(s) by our Company.
(iv) Notices of meetings and business to be conducted
An annual general meeting shall be called by a notice in writing of not less than 21 days.
All other general meetings shall be called by notice in writing of at least 14 days. The notice
shall be exclusive of the day on which it is served or deemed to be served and of the day for
which it is given, and shall specify the time and place and the agenda of the meeting and
particulars of resolutions to be considered at the meeting and, in the case of special business,
the general nature of that business.
In addition, notice of every general meeting must be given to all members of our
Company other than to such members as, under the provisions of the Articles or the terms of
issue of the shares they hold, are not entitled to receive such notices from our Company, and
also to, among others, the auditors for the time being of our Company.
Any notice or document to be given to or by any person pursuant to the Articles may be
served on or delivered to any member of our Company personally, by post to such member’s
registered address or by advertisement in newspapers in accordance with the requirements of
the Stock Exchange. Subject to the Cayman Companies Act and the Listing Rules, a notice or
document may also be served or delivered by our Company to any member by electronic
means.
All business that is transacted at an extraordinary general meeting shall be deemed
special. All business shall be deemed special that is transacted at an annual general meeting
with the exception of the following, each of which shall be deemed an ordinary business:
(aa) the declaration and sanctioning of dividends;
(bb) the consideration and adoption of the accounts and balance sheets and the reports of
the Directors and the auditors and other documents required to be annexed to the
balance sheets;
(cc) the election of Directors whether by rotation or otherwise in place of those retiring;
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--- page 550 ---
(dd) the appointment of auditors and other officers;
(ee) the fixing of, or the determining of the method of fixing of the remuneration of the
Directors and of the auditors;
(ff) the granting of any mandate or authority to the Board to offer, allot, grant options
over, or otherwise dispose of the unissued shares representing not more than 20% (or
such other percentage as may from time to time be specified in the Listing Rules)
in nominal value of its then existing issued share capital and the number of any
securities repurchased pursuant to paragraph (gg); and
(gg) the granting of any mandate or authority to the Board to repurchase securities of our
Company.
(v) Quorum for meetings and separate class meetings
No business shall be transacted at any general meeting unless the requisite quorum is
present at the time when the meeting proceeds to business.
The quorum for a general meeting shall be two members present in person (or, in the case
of a member being a corporation, by its duly authorised representative) or by proxy and entitled
to vote. In respect of a separate class meeting (including an adjourned meeting) convened to
sanction the modification of class rights the necessary quorum shall be two persons holding or
representing by proxy not less than one-third of the issued shares of that class.
(vi) Proxies
Any member of our Company entitled to attend and vote at a meeting of our Company
shall be entitled to appoint another person as his proxy to attend and vote instead of him. A
member who is the holder of two or more shares may appoint more than one proxy to represent
him and vote on his behalf at a general meeting of our Company or at a class meeting. A proxy
need not be a member of our Company and is entitled to exercise the same powers on behalf
of a member who is an individual and for whom he acts as proxy as such member could
exercise. In addition, every member being a corporation shall be entitled to appoint a
representative to attend and vote at any general meeting of our Company and, where a
corporation is so represented, it shall be treated as being present at any meeting in person. A
corporation may execute a form of proxy under the hand of a duly authorised officer and such
a proxy is entitled to exercise the same powers on behalf of a member which is a corporation
and for which he acts as proxy as such member could exercise as if it were an individual
member. On a poll or a show of hands, votes may be given either personally (or, in the case
of a member being a corporation, by its duly authorised representative) or by proxy.
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(f) Accounts and audit
The Board shall cause true accounts to be kept of the sums of money received and
expended by our Company, and the matters in respect of which such receipt and expenditure
take place, and of the assets and liabilities of our Company and of all other matters required
by the Cayman Companies Act or necessary to give a true and fair view of the state of our
Company’s affairs and to show and explain its transactions.
The accounting records shall be kept at the head office or at such other place or places
as the Board thinks fit and shall always be open to inspection by the Directors. No member
(other than a Director) or other person shall have any right to inspect any account or book or
document of our Company except as conferred by the Cayman Companies Act or ordered by
a court of competent jurisdiction or authorised by the Board or our Company in general
meeting. However, an exempted company must make available at its registered office in
electronic form or any other medium, copies of its books of account or parts thereof as may
be required of it upon service of an order or notice by the Tax Information Authority of the
Cayman Islands pursuant to the Tax Information Authority Act of the Cayman Islands.
A copy of every balance sheet and profit and loss account (including every document
required by law to be annexed thereto) which is to be laid before our Company at its annual
general meeting, together with a copy of the Directors’ report and a copy of the auditors’ report,
shall not less than 21 days before the date of the meeting and at the same time as the notice
of annual general meeting be sent to every person entitled to receive notices of general
meetings of our Company under the provisions of the Articles; however, subject to compliance
with the Cayman Companies Act and all applicable rules, including the Listing Rules, our
Company may send to such persons summarised financial statements derived from our
Company’s annual accounts and the directors’ report instead provided that any such person may
by notice in writing served on our Company, demand that our Company sends to him, in
addition to summarised financial statements, a complete printed copy of our Company’s annual
financial statement and the Directors’ report thereon.
At the annual general meeting or at a subsequent extraordinary general meeting in each
year, the members shall by ordinary resolution appoint an auditor to audit the accounts of our
Company and such auditor shall hold office until the next annual general meeting. Moreover,
the members may, at any general meeting, by ordinary resolution remove the auditor at any
time before the expiration of his term of office and shall, by ordinary resolution, at that meeting
appoint another auditor for the remainder of his term. The remuneration of the auditors shall
be fixed and approved by our Company by an ordinary resolution passed at a general meeting
or in such manner as the members may by ordinary resolution determine.
The auditor shall audit the financial statements of our Company in each year in
accordance with generally accepted auditing standards and prepare an auditors’ report thereon
to be annexed thereto. Such report shall be submitted to the members and laid before our
Company in the annual general meeting.
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--- page 552 ---
(g) Dividends and other methods of distribution
Our Company in general meeting may declare dividends in any currency to be paid to the
members but no dividend shall be declared in excess of the amount recommended by the Board.
The Articles provide dividends may be declared and paid out of the profits of our
Company, realised or unrealised, or from any reserve set aside from profits which the Directors
determine is no longer needed. With the sanction of an ordinary resolution, dividends may also
be declared and paid out of share premium account or any other fund or account which can be
authorised for this purpose in accordance with the Cayman Companies Act.
Unless and to the extent that the rights attaching to, or the terms of issue of, any share
may otherwise provide: (i) all dividends shall be declared and paid according to the amounts
paid up on the shares in respect whereof the dividend is paid, but no amount paid up on a share
in advance of calls shall for this purpose be treated as paid up on the share; and (ii) all
dividends shall be (as regards any shares not fully paid throughout the period in respect of
which the dividend is paid) apportioned and paid pro rata according to the amount paid up on
the shares during any portion or portions of the period in respect of which the dividend is paid.
The Board may deduct from any dividend or other monies payable to any member or in respect
of any shares all sums of money (if any) presently payable by him to our Company on account
of calls or otherwise.
Whenever the Board or our Company in general meeting has resolved that a dividend be
paid or declared on the share capital of our Company, the Board may further resolve either (i)
that such dividend be satisfied wholly or in part in the form of an allotment of shares credited
as fully paid up, provided that the members entitled thereto will be entitled to elect to receive
such dividend (or part thereof) in cash in lieu of such allotment, or (ii) that members entitled
to such dividend will be entitled to elect to receive an allotment of shares credited as fully paid
up in lieu of the whole or such part of the dividend as the Board may think fit.
Our Company may upon the recommendation of the Board by ordinary resolution resolve
in respect of any one particular dividend of our Company that it may be satisfied wholly in the
form of an allotment of shares credited as fully paid up without offering any right to members
to elect to receive such dividend in cash in lieu of such allotment.
Any dividend, interest or other moneys payable in cash to the holder of shares may be
paid by cheque or warrant sent through post. Every such cheque or warrant shall be made
payable to the order of the holder of the person to whom it is sent, and shall be sent at his or
their risk and payment of the cheque or warrant by the bank on which it is drawn shall
constitute a good discharge to our Company. Any one of two or more joint holders may give
effectual receipts for any dividends and other moneys payable or property distributable in
respect of the shares held by such joint holders.
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--- page 553 ---
Whenever the Board or our Company in general meeting has resolved that a dividend be
paid or declared, the Board may further resolve that such dividend be satisfied wholly or in part
by the distribution of specific assets of any kind.
All dividends, bonuses or other distributions or the proceeds of the realisation of any of
the foregoing unclaimed for one year after having been declared may be invested or otherwise
made use of by the Board for the benefit of our Company until claimed and our Company shall
not be constituted a trustee in respect thereof. All dividends or bonuses or other distributions
unclaimed for six years after having been declared may be forfeited by the Board and shall
revert to our Company.
No dividend or other monies payable by our Company on or in respect of any share shall
bear interest against our Company.
(h) Inspection of corporate records
Pursuant to the Articles, our Company’s register and branch register of members shall be
open to inspection during business hours by any members without charge, or by any other
person upon a maximum payment of HK$2.50 or such lesser sum specified by the Board, at the
registered office or such other place at which the register is kept in accordance with the
Cayman Companies Act or, upon a maximum payment of HK$1.00 or such lesser sum specified
by the Board, at the office where the branch register of members is kept, except the register
is closed in accordance with the Articles.
(i) Rights of minorities in relation to fraud or oppression
There are no provisions in the Articles relating to rights of minority shareholders in
relation to fraud or oppression. However, certain remedies are available to shareholders of our
Company under Cayman Islands law, as summarised in paragraph 3(f) of this Appendix III.
(j) Procedures on liquidation
Subject to the Cayman Companies Act, our Company may at any time and from time to
time be wound up voluntarily by a special resolution.
Subject to any special rights, privileges or restrictions as to the distribution of available
surplus assets on liquidation for the time being attached to any class or classes of shares:
(i) if our Company is wound up and the assets available for distribution amongst the
members of our Company shall be more than sufficient to repay the whole of the
capital paid up at the commencement of the winding up, the surplus assets remaining
after payment to all creditors shall be distributed pari passu and divided among the
members in proportion to the amount paid up on the shares held by them
respectively; and
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--- page 554 ---
(ii) if our Company is wound up and the assets available for distribution amongst the
members shall be insufficient to repay the whole of the paid-up capital, they shall
be distributed so that, as nearly as may be, the losses shall be borne by the members
in proportion to the capital paid up, or which ought to have been paid up, at the
commencement of the winding up on the shares held by them respectively.
If our Company is wound up (whether the liquidation be voluntary or by the court) the
liquidator may, with the authority of a special resolution and any other sanction required by the
Cayman Companies Act, divide among the members in specie or kind the whole or any part of
the assets of our Company whether the assets shall consist of property of one kind or shall
consist of properties of different kinds and the liquidator may, for such purpose, set such value
as he deems fair upon any one or more class or classes of property to be divided as aforesaid
and may determine how such division shall be carried out as between the members or different
classes of members and the members within each class. The liquidator may, with the like
authority, vest any part of the assets in trustees upon such trusts for the benefit of members as
the liquidator, with the like authority, shall think fit, but so that no members shall be compelled
to accept any shares or other assets upon which there is a liability.
(k) Subscription rights reserve
The Articles provide that to the extent that they are not prohibited by and are in
compliance with the Cayman Companies Act, if warrants to subscribe for shares have been
issued by our Company and our Company does any act or engages in any transaction which
would result in the subscription price of such warrants being reduced below the nominal value
of a share, a subscription rights reserve shall be established and applied in paying up the
difference between the subscription price and the nominal value of a share on any exercise of
the warrants.
3. CAYMAN ISLANDS COMPANY LA W
Our Company is incorporated in the Cayman Islands subject to the Cayman Companies
Act and, therefore, operates subject to Cayman Islands law. Set out below is a summary of
certain provisions of the Cayman Islands company law, although this does not purport to
contain all applicable qualifications and exceptions or to be a complete review of all matters
of the Cayman Islands company law and taxation, which may differ from equivalent provisions
in jurisdictions with which interested parties may be more familiar. For the avoidance of doubt,
special resolution used in the below summary shall have the meaning as set out in the Cayman
Companies Act.
(a) Company operations
As an exempted company, our Company’s operations must be conducted mainly outside
the Cayman Islands. The Company is required to file an annual return each year with the
Registrar of Companies of the Cayman Islands and pay a fee which is based on the amount of
its authorised share capital.
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--- page 555 ---
(b) Share capital
The Cayman Companies Act provides that where a company issues shares at a premium,
whether for cash or otherwise, a sum equal to the aggregate amount of the value of the
premiums on those shares shall be transferred to an account, to be called the “share premium
account”. At the option of a company, these provisions may not apply to premiums on shares
of that company allotted pursuant to any arrangement in consideration of the acquisition or
cancellation of shares in any other company and issued at a premium.
The Cayman Companies Act provides that the share premium account may be applied by
a company subject to the provisions, if any, of its memorandum and articles of association in
(i) paying distributions or dividends to members; (ii) paying up unissued shares of the company
to be issued to members as fully paid bonus shares; (iii) the redemption and repurchase of
shares (subject to the provisions of section 37 of the Cayman Companies Act); (iv) writing-off
the preliminary expenses of the company; and (v) writing-off the expenses of, or the
commission paid or discount allowed on, any issue of shares or debentures of the company.
No distribution or dividend may be paid to members out of the share premium account
unless immediately following the date on which the distribution or dividend is proposed to be
paid, the company will be able to pay its debts as they fall due in the ordinary course of
business.
The Cayman Companies Act provides that, subject to confirmation by the Grand Court of
the Cayman Islands (the “ Court ”), a company limited by shares or a company limited by
guarantee and having a share capital may, if so authorised by its articles of association, by
special resolution reduce its share capital in any way.
(c) Financial assistance to purchase shares of a company or its holding company
There is no statutory restriction in the Cayman Islands on the provision of financial
assistance by a company to another person for the purchase of, or subscription for, its own or
its holding company’s shares. Accordingly, a company may provide financial assistance if the
directors of the company consider, in discharging their duties of care and acting in good faith,
for a proper purpose and in the interests of the company, that such assistance can properly be
given. Such assistance should be on an arm’s-length basis.
(d) Purchase of shares and warrants by a company and its subsidiaries
A company limited by shares or a company limited by guarantee and having a share
capital may, if so authorised by its articles of association, issue shares which are to be
redeemed or are liable to be redeemed at the option of the company or a shareholder and the
Cayman Companies Act expressly provides that it shall be lawful for the rights attaching to any
shares to be varied, subject to the provisions of the company’s articles of association, so as to
provide that such shares are to be or are liable to be so redeemed. In addition, such a company
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--- page 556 ---
may, if authorised to do so by its articles of association, purchase its own shares, including any
redeemable shares. However, if the articles of association do not authorise the manner and
terms of purchase, a company cannot purchase any of its own shares unless the manner and
terms of purchase have first been authorised by an ordinary resolution of the company. At no
time may a company redeem or purchase its shares unless they are fully paid. A company may
not redeem or purchase any of its shares if, as a result of the redemption or purchase, there
would no longer be any issued shares of the company other than shares held as treasury shares.
A payment out of capital by a company for the redemption or purchase of its own shares is not
lawful unless immediately following the date on which the payment is proposed to be made,
the company shall be able to pay its debts as they fall due in the ordinary course of business.
Shares purchased by a company are to be treated as cancelled unless, subject to the
memorandum and articles of association of the company, the directors of the company resolve
to hold such shares in the name of the company as treasury shares prior to the purchase. Where
shares of a company are held as treasury shares, the company shall be entered in the register
of members as holding those shares, however, notwithstanding the foregoing, the company is
not to be treated as a member for any purpose and must not exercise any right in respect of the
treasury shares, and any purported exercise of such a right shall be void, and a treasury share
must not be voted, directly or indirectly, at any meeting of the company and must not be
counted in determining the total number of issued shares at any given time, whether for the
purposes of the company’s articles of association or the Cayman Companies Act.
A company is not prohibited from purchasing and may purchase its own warrants subject
to and in accordance with the terms and conditions of the relevant warrant instrument or
certificate. There is no requirement under Cayman Islands law that a company’s memorandum
or articles of association contain a specific provision enabling such purchases and the directors
of a company may rely upon the general power contained in its memorandum of association to
buy and sell and deal in personal property of all kinds.
Under Cayman Islands law, a subsidiary may hold shares in its holding company and, in
certain circumstances, may acquire such shares.
(e) Dividends and distributions
The Cayman Companies Act permits, subject to a solvency test and the provisions, if any,
of the company’s memorandum and articles of association, the payment of dividends and
distributions out of the share premium account. With the exception of the foregoing, there are
no statutory provisions relating to the payment of dividends. Based upon English case law,
which is regarded as persuasive in the Cayman Islands, dividends may be paid only out of
profits.
No dividend may be declared or paid, and no other distribution (whether in cash or
otherwise) of a company’s assets (including any distribution of assets to members on a winding
up) may be made to the company, in respect of a treasury share.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-19 –


--- page 557 ---
(f) Protection of minorities and shareholders’ suits
The Court ordinarily would be expected to follow English case law precedents which
permit a minority shareholder to commence a representative action against or derivative
actions in the name of the company to challenge (i) an act which is ultra vires the company or
illegal; (ii) an act which constitutes a fraud against the minority and the wrongdoers are
themselves in control of the company; and (iii) an irregularity in the passing of a resolution
which requires a qualified (or special) majority.
In the case of a company (not being a bank) having a share capital divided into shares,
the Court may, on the application of members holding not less than one fifth of the shares of
the company in issue, appoint an inspector to examine into the affairs of the company and to
report thereon in such manner as the Court shall direct.
Any shareholder of a company may petition the Court which may make a winding up
order if the Court is of the opinion that it is just and equitable that the company should be
wound up or, as an alternative to a winding up order: (i) an order regulating the conduct of the
company’s affairs in the future; (ii) an order requiring the company to refrain from doing or
continuing an act complained of by the shareholder petitioner or to do an act which the
shareholder petitioner has complained it has omitted to do; (iii) an order authorising civil
proceedings to be brought in the name and on behalf of the company by the shareholder
petitioner on such terms as the Court may direct; or (iv) an order providing for the purchase
of the shares of any shareholders of the company by other shareholders or by the company
itself and, in the case of a purchase by the company itself, a reduction of the company’s capital
accordingly.
Generally claims against a company by its shareholders must be based on the general laws
of contract or tort applicable in the Cayman Islands or their individual rights as shareholders
as established by the company’s memorandum and articles of association.
(g) Disposal of assets
The Cayman Companies Act contains no specific restrictions on the power of directors to
dispose of assets of a company. However, as a matter of general law, every officer of a
company, which includes a director, managing director and secretary, in exercising his powers
and discharging his duties must do so honestly and in good faith with a view to the best
interests of the company and exercise the care, diligence and skill that a reasonably prudent
person would exercise in comparable circumstances.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-20 –


--- page 558 ---
(h) Accounting and auditing requirements
A company must cause proper books of account to be kept with respect to (i) all sums of
money received and expended by the company and the matters in respect of which the receipt
and expenditure takes place; (ii) all sales and purchases of goods by the company; and (iii) the
assets and liabilities of the company.
Proper books of account shall not be deemed to be kept if there are not kept such books
as are necessary to give a true and fair view of the state of the company’s affairs and to explain
its transactions.
An exempted company must make available at its registered office in electronic form or
any other medium, copies of its books of account or parts thereof as may be required of it upon
service of an order or notice by the Tax Information Authority of the Cayman Islands pursuant
to the Tax Information Authority Act of the Cayman Islands.
(i) Exchange control
There are no exchange control regulations or currency restrictions in the Cayman Islands.
(j) Taxation
The Cayman Islands currently levy no taxes on individuals or corporations based upon
profits, income, gains or appreciations and there is no taxation in the nature of inheritance tax
or estate duty. There are no other taxes likely to be material to the Company levied by the
Government of the Cayman Islands save for certain stamp duties which may be applicable,
from time to time, on certain instruments executed in or brought within the jurisdiction of the
Cayman Islands. The Cayman Islands are a party to a double tax treaty entered into with the
United Kingdom in 2010 but otherwise is not party to any double tax treaties.
(k) Stamp duty on transfers
No stamp duty is payable in the Cayman Islands on transfers of shares of Cayman Islands
companies except those which hold interests in land in the Cayman Islands.
(l) Loans to directors
There is no express provision in the Cayman Companies Act prohibiting the making of
loans by a company to any of its directors.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-21 –


--- page 559 ---
(m) Inspection of corporate records
The notice of registered office is a matter of public record. A list of the names of the
current directors and alternate directors (if applicable) is made available by the Registrar of
Companies for inspection by any person on payment of a fee. The register of mortgages is open
to inspection by creditors and members.
Members of the Company have no general right under the Cayman Companies Act to
inspect or obtain copies of the register of members or corporate records of the Company. They
will, however, have such rights as may be set out in the Company’s articles of association.
(n) Register of members
An exempted company may maintain its principal register of members and any branch
registers at such locations, whether within or without the Cayman Islands, as the directors may,
from time to time, think fit. The register of members shall contain such particulars as required
by section 40 of the Cayman Companies Act. A branch register must be kept in the same
manner in which a principal register is by the Cayman Companies Act required or permitted
to be kept. The company shall cause to be kept at the place where the company’s principal
register is kept a duplicate of any branch register duly entered up from time to time.
There is no requirement under the Cayman Companies Act for an exempted company to
make any returns of members to the Registrar of Companies of the Cayman Islands. The names
and addresses of the members are, accordingly, not a matter of public record and are not
available for public inspection. However, an exempted company shall make available at its
registered office, in electronic form or any other medium, such register of members, including
any branch register of members, as may be required of it upon service of an order or notice by
the Tax Information Authority of the Cayman Islands pursuant to the Tax Information Authority
Act of the Cayman Islands.
(o) Register of directors and officers
A company is required to maintain at its registered office a register of directors and
officers which is not available for inspection by the public. A copy of such register must be
filed with the Registrar of Companies in the Cayman Islands and any change must be notified
to the Registrar within 30 days of any change in such directors or officers.
(p) Winding up
A company may be wound up (i) compulsorily by order of the Court; (ii) voluntarily; or
(iii) under the supervision of the Court.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-22 –


--- page 560 ---
The Court has authority to order winding up in a number of specified circumstances
including where the members of the company have passed a special resolution requiring the
company to be wound up by the Court, or where the company is unable to pay its debts, or
where it is, in the opinion of the Court, just and equitable to do so. Where a petition is
presented by members of the company as contributories on the ground that it is just and
equitable that the company should be wound up, the Court has the jurisdiction to make certain
other orders as an alternative to a winding-up order, such as making an order regulating the
conduct of the company’s affairs in the future, making an order authorising civil proceedings
to be brought in the name and on behalf of the company by the petitioner on such terms as the
Court may direct, or making an order providing for the purchase of the shares of any of the
members of the company by other members or by the company itself.
A company (save with respect to a limited duration company) may be wound up
voluntarily when the company so resolves by special resolution or when the company in
general meeting resolves by ordinary resolution that it be wound up voluntarily because it is
unable to pay its debts. In the case of a voluntary winding up, such company is obliged to cease
to carry on its business (except so far as it may be beneficial for its winding up) from the time
of passing the resolution for voluntary winding up or upon the expiry of the period or the
occurrence of the event referred to above.
For the purpose of conducting the proceedings in winding up a company and assisting the
Court therein, there may be appointed an official liquidator or official liquidators; and the court
may appoint to such office such person, either provisionally or otherwise, as it thinks fit, and
if more persons than one are appointed to such office, the Court must declare whether any act
required or authorised to be done by the official liquidator is to be done by all or any one or
more of such persons. The Court may also determine whether any and what security is to be
given by an official liquidator on his appointment; if no official liquidator is appointed, or
during any vacancy in such office, all the property of the company shall be in the custody of
the Court.
As soon as the affairs of the company are fully wound up, the liquidator must make a
report and an account of the winding up, showing how the winding up has been conducted and
how the property of the company has been disposed of, and thereupon call a general meeting
of the company for the purposes of laying before it the account and giving an explanation
thereof. This final general meeting must be called by at least 21 days’ notice to each
contributory in any manner authorised by the company’s articles of association and published
in the Gazette.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-23 –


--- page 561 ---
(q) Reconstructions
There are statutory provisions which facilitate reconstructions and amalgamations
approved by (i) 75% in value of shareholders or class of shareholders, or (ii) a majority in
number representing 75% in value of creditors, as the case may be, as are present at a meeting
called for such purpose and thereafter sanctioned by the Court. Whilst a dissenting shareholder
would have the right to express to the Court his view that the transaction for which approval
is sought would not provide the shareholders with a fair value for their shares, the Court is
unlikely to disapprove the transaction on that ground alone in the absence of evidence of fraud
or bad faith on behalf of management.
The Cayman Companies Act also contains statutory provisions which provide that a
company may present a petition to the Court for the appointment of a restructuring officer on
the grounds that the company (i) is or is likely to become unable to pay its debts within the
meaning of section 93 of the Cayman Companies Act; and (ii) intends to present a compromise
or arrangement to its creditors (or classes thereof) either, pursuant to the Cayman Companies
Act, the law of a foreign country or by way of a consensual restructuring. The petition may be
presented by a company acting by its directors, without a resolution of its shareholders or an
express power in its articles of association. On hearing such a petition, the Court may, among
other things, make an order appointing a restructuring officer or make any other order as the
Court thinks fit.
(r) Take-overs
Where an offer is made by a company for the shares of another company and, within four
months of the offer, the holders of not less than 90% of the shares which are the subject of the
offer accept, the offeror may at any time within two months after the expiration of the said four
months, by notice in the prescribed manner require the dissenting shareholders to transfer their
shares on the terms of the offer. A dissenting shareholder may apply to the Court within one
month of the notice objecting to the transfer. The burden is on the dissenting shareholder to
show that the Court should exercise its discretion, which it will be unlikely to do unless there
is evidence of fraud or bad faith or collusion as between the offeror and the holders of the
shares who have accepted the offer as a means of unfairly forcing out minority shareholders.
(s) Indemnification
Cayman Islands law does not limit the extent to which a company’s articles of association
may provide for indemnification of officers and directors, except to the extent any such
provision may be held by the Court to be contrary to public policy (e.g., for purporting to
provide indemnification against the consequences of committing a crime).
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-24 –


--- page 562 ---
(t) Economic substance requirements
Pursuant to the International Tax Cooperation (Economic Substance) Act (As Revised) of
the Cayman Islands (the “ ES Act ”) that came into force on 1 January 2019, a “relevant entity”
is required to satisfy the economic substance test set out in the ES Act. A “relevant entity”
includes an exempted company incorporated in the Cayman Islands as is the Company;
however, it does not include an entity that is tax resident outside the Cayman Islands.
Accordingly, for so long as the Company is a tax resident outside the Cayman Islands,
including in Hong Kong, it is not required to satisfy the economic substance test set out in the
ES Act.
4. GENERAL
Ogier, our Company’s legal counsel as to Cayman Islands law, have sent to our Company
a letter of advice summarising certain aspects of Cayman Islands company law. This letter,
together with a copy of the Cayman Companies Act, is available on display as referred to in
the section headed “Documents delivered to the Registrar of Companies and on display —
Documents Available on Display” in Appendix V to this prospectus. Any person wishing to
have a detailed summary of Cayman Islands company law or advice on the differences between
it and the laws of any jurisdiction with which he is more familiar is recommended to seek
independent legal advice.
APPENDIX III SUMMARY OF THE CONSTITUTION OF OUR COMPANY
AND COMPANY LA W OF THE CAYMAN ISLANDS
– III-25 –


--- page 563 ---
FURTHER INFORMATION ABOUT OUR GROUP
1. Incorporation
Our Company was incorporated under the laws of the Cayman Islands as an exempted
company with limited liability on August 31, 2021.
Our registered office address is at 89 Nexus Way, Camana Bay, Grand Cayman,
KY1-9009, Cayman Islands. Our Company’s corporate structure and Memorandum and
Articles of Association are subject to the relevant laws of the Cayman Islands. A summary of
our Memorandum and Articles of Association is set out in Appendix III to this document.
We were registered as a non-Hong Kong company under Part 16 of the Companies
Ordinance on January 8, 2024 with the Registrar of Companies in Hong Kong. Our principal
place of business in Hong Kong is at Room 1910, 19/F, Lee Garden One, 33 Hysan Avenue,
Causeway Bay, Hong Kong. Ms. Ying Man Sham has been appointed as the authorized
representative of our Company for the acceptance of service of process and any notices
required to be served on the Company in Hong Kong. The address for service of process is the
same as our principal place of business in Hong Kong as set out above.
As at the date of this document, our Company’s head office is located at 5/F, Tower A,
Science and Technology Innovation Center, 618 Boxue Road, Xiaoshan District, Hangzhou,
Zhejiang Province, China.
2. Changes in Share Capital of Our Company
Our Company was incorporated with an authorized share capital of US$50,000 divided
into 5,000,000,000 shares with a par value of US$0.00001 each.
The following sets out the changes in our Company’s issued capital within the two years
immediately preceding the date of this document:
(a) On September 15, 2023, our Company issued 4,347,820 Series A-2 Preferred Shares
to New Budding Capital Inc.
(b) On December 27, 2023, our Company issued an aggregate of 217,391,300 ordinary
shares to Modern Leaves Limited, Chivalrous Lancers Limited, Thriving Leafbuds
Limited and Nascent Sprouts Limited.
(c) On December 24, 2024, Thriving Leafbuds Limited and Nascent Sprouts Limited
surrendered 10,855,073 ordinary Shares and 1,376,812 ordinary Shares to our
Company, respectively, and on the same day, our Company issued 12,231,885
ordinary Shares to Flourishing Leaves Limited.
Save as disclosed above and in the section headed “History, Reorganization and Corporate
Structure” in this document, there has been no alteration in the share capital of our Company
within the two years immediately preceding the date of this document.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-1 –


--- page 564 ---
3. Changes in the Share Capital of Members of Our Group
On January 13, 2023, the registered capital of Guming Technology was decreased from
RMB454,347,826 to RMB360,000,000.
Save as disclosed above, there has been no alteration in the share capital of any members
of our Group within the two years immediately preceding the date of this document.
4. Resolutions Passed by Our Shareholders in Relation to the Global Offering
On January 27, 2025, the following resolutions, among other things, were duly passed by
our Shareholders by way of written resolutions:
(a) conditional on (i) the Listing Committee granting listing of, and permission to deal
in, the Shares in issue and to be issued as stated in this document and such listing
and permission not subsequently having been revoked prior to the commencement
of dealing in the Shares on the Stock Exchange; (ii) the Offer Price having been
determined; and (iii) the obligations of the Underwriters under each of the
Underwriting Agreements becoming unconditional (including if relevant, as a result
of the waiver of any condition(s) thereunder) and such obligations not having been
terminated in accordance with the terms of the Underwriting Agreements or
otherwise, in each case on or before such dates as may be specified in the
Underwriting Agreements:
(i) all of the Preferred Shares of par value US$0.00001 each, whether issued or
unissued, be converted as Shares of US$0.00001 each on a one-for-one basis
and each issued Preferred Share be converted into one Share with effect from
the Listing Date by way of repurchasing the relevant Preferred Shares by the
Company out of the proceeds made from the issue of the equivalent number of
new Shares;
(ii) the Global Offering, the Listing, the Offer Size Adjustment Option and the
Over-allotment Option were approved, and our Directors were authorized to
negotiate and agree the Offer Price and to allot and issue the Offer Shares
(including pursuant to the Offer Size Adjustment Option and the Over-
allotment Option);
(iii) a general mandate (the “ Sale Mandate ”) was granted to our Directors to allot,
issue, and deal with any Shares or securities convertible into Shares (including
the resale or transfer of treasury shares by our Company) and to make or grant
offers, agreements, or options which would or might require Shares to be
allotted, issued, or dealt with, provided that the number of Shares so allotted,
issued, or dealt with or agreed to be allotted, issued, or dealt with by our
Directors, shall not exceed 20% of the total number of Shares in issue
immediately following completion of the Global Offering;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-2 –


--- page 565 ---
(iv) a general mandate (the “ Repurchase Mandate ”) was granted to our Directors
to repurchase our own Shares on the Stock Exchange or on any other stock
exchange on which the securities of our Company may be listed and which is
recognized by the SFC and the Stock Exchange for this purpose, such number
of Shares will represent up to 10% of the total number of Shares in issue
immediately following completion of the Global Offering; and
(v) the Sale Mandate was extended by the addition to the total number of Shares
which may be allotted and issued or agreed to be allotted and issued (including
the resale or transfer of treasury shares) by our Directors pursuant to such
general mandate of an aggregate number of the Shares to be purchased by our
Company pursuant to the Repurchase Mandate, provided that such extended
number shall not exceed 10% of the total number of the Shares in issue
immediately following completion of the Global Offering; and
(b) the Memorandum and Articles of Association were approved and adopted
conditional upon Listing on the Listing Date.
Each of the general mandates referred to above will remain in effect until the earliest of:
(a) the conclusion of the next annual general meeting of our Company unless, by
ordinary resolution passed at that meeting, the authority is renewed, either
unconditionally or subject to condition;
(b) the expiration of the period within which the next annual general meeting of our
Company is required to be held under any applicable laws of the Cayman Islands or
the memorandum and articles of association of our Company; and
(c) the passing of an ordinary resolution by our Shareholders in a general meeting
revoking or varying the authority.
5. Explanatory Statement on Repurchase of Our Own Securities
The following summarizes restrictions imposed by the Listing Rules on share repurchases
by a company listed on the Stock Exchange and provides further information about the
repurchase of our own securities.
(a) Shareholders’ approval
A listed company whose primary listing is on the Stock Exchange may only purchase its
shares on the Stock Exchange, either directly or indirectly, if: (i) the shares proposed to be
purchased are fully-paid up, and (ii) its shareholders have given a specific approval or general
mandate by way of an ordinary resolution of shareholders.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-3 –


--- page 566 ---
(b) Size of mandate
The exercise in full of the Repurchase Mandate, on the basis of 2,332,525,060 Shares in
issue immediately following completion of the Global Offering (assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised and no Shares are issued
under the Post-IPO Share Scheme), could accordingly result in up to approximately
233,252,506 Shares being repurchased by our Company.
The total number of shares which a listed company may repurchase on the Stock
Exchange may not exceed 10% of the number of issued shares (excluding any treasury shares)
as of the date of the shareholders’ approval.
(c) Reasons for repurchases
Our Directors believe that it is in the best interests of our Company and the Shareholders
for our Directors to have general authority from the Shareholders to enable our Company to
repurchase Shares in the market. Such repurchases may, depending on market conditions and
funding arrangements at the time, lead to an enhancement of the net asset value per Share
and/or earnings per Share and will only be made where our Directors believe that such
repurchases will benefit our Company and the Shareholders.
(d) Source of funds
Repurchases must be funded out of funds legally available for the purpose in accordance
with the Memorandum and Articles of Association and the applicable Laws of the Cayman
Islands.
Our Company shall not repurchase its own Shares on the Stock Exchange for a
consideration other than cash or for settlement otherwise than in accordance with the trading
rules of the Stock Exchange from time to time.
Any repurchases by our Company may be made out of profits or out of an issue of new
shares made for the purpose of the repurchase or, if authorized by its Memorandum and Articles
of Association and subject to the Cayman Companies Act, out of capital, and, in the case of any
premium payable on the purchase out of profits or from sums standing to the credit of our share
premium account or, if authorized by its Memorandum and Articles of Association and subject
to the Cayman Companies Act, out of capital.
(e) Suspension of repurchase
A listed company shall not repurchase its shares on the Stock Exchange at any time after
inside information has come to its knowledge until the information is made publicly available.
In particular, during the period of 30 days immediately preceding the earlier of: (i) the date of
the board meeting (as such date is first notified to the Stock Exchange in accordance with the
Listing Rules) for the approval of the company’s results for any year, half-year, quarterly, or
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-4 –


--- page 567 ---
any other interim period (whether or not required under the Listing Rules); and (ii) the deadline
for the company to announce its results for any year or half-year under the Listing Rules, or
quarterly, or any other interim period (whether or not required under the Listing Rules), until
the date of the results announcement, the company may not repurchase its shares on the Stock
Exchange unless there are exceptional circumstances.
(f) Trading restrictions
As noted above, the number of shares which a listed company may repurchase on the
Stock Exchange is the number of shares representing up to a maximum of 10% of the number
of shares in issue (excluding treasury shares) as at the date of the shareholders’ approval. Our
Company may not issue Shares, sell or transfer treasury shares, or announce a proposed issue
of Shares, or a sale or transfer of any treasury shares for a period of 30 days immediately
following a repurchase of Shares without the prior approval of the Stock Exchange. Such
restriction does not apply to (i) a new issue of Shares, or a sale or transfer of treasury shares
under capitalization issue; (ii) a grant of share awards or options under a share scheme that
complies with Chapter 17 of the Listing Rules or a new issue of Shares or a transfer of treasury
shares upon vesting or exercise of shares awards or options under the share scheme that
complies with Chapter 17 of the Listing Rules; and (iii) a new issue of Shares or a transfer of
treasury shares pursuant to the exercise of warrants, share options or similar instruments
requiring our Company to issue Shares or transfer treasury shares, which were outstanding
prior to the purchase of its own Shares.
A listed company is prohibited from repurchasing its shares on the Stock Exchange if the
purchase price is 5% or more than the average closing market price for the five preceding
trading days on which its shares were traded on the Stock Exchange.
A listed company may not repurchase its shares if that repurchase would result in the
number of listed securities which are in the hands of the public falling below the relevant
prescribed minimum percentage as required by the Stock Exchange.
(g) Status of repurchased shares
Our Company may cancel any repurchased Shares (upon which the certificates for such
shares must be cancelled and destroyed) and/or hold them as treasury shares subject to, among
others, market conditions and its capital management needs at the relevant time of the
repurchases, which may change due to evolving circumstances. Shareholders and potential
investors should pay attention to any announcement to be published by us in the future,
including but without limitation, any next day disclosure return (which shall identify, amongst
others, the number of repurchased Shares that are to be held as treasury shares or cancelled
upon settlement of such repurchases).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-5 –


--- page 568 ---
The listing status of all Shares which are held as treasury shares will be retained. Our
Company will ensure that treasury shares are appropriately identified and segregated. For any
treasury shares deposited with CCASS pending resale on the Stock Exchange, our Company
will ensure that it would not exercise any shareholders’ rights or receive any entitlements
which would otherwise be suspended under the relevant laws if those shares were registered
in our Company’s own name as treasury shares by, including but not limited to, obtaining an
approval by the board of our Company that (i) our Company should procure its broker not to
give any instructions to HKSCC to vote at general meetings for the treasury shares deposited
with CCASS; and (ii) in the case of dividends or distributions, our Company should withdraw
the treasury shares from CCASS, and either re-register them in its own name as treasury shares
or cancel them, in each case before the record date for the dividends or distributions.
The listing status of all Shares which are purchased by our Company (whether on the
Stock Exchange or otherwise) but not held as treasury shares shall be automatically cancelled
upon repurchase. Our Company shall ensure that the documents of title of these repurchased
Shares are cancelled and destroyed as soon as reasonably practicable following settlement of
any such repurchase.
(h) Close associates and core connected persons
None of our Directors or, to the best of their knowledge having made all reasonable
enquiries, any of their close associates have a present intention, in the event the Repurchase
Mandate is approved, to sell any Shares to our Company.
No core connected person of our Company has notified our Company that they have a
present intention to sell Shares to our Company, or have undertaken to do so, if the Repurchase
Mandate is approved.
A listed company shall not knowingly purchase its shares on the Stock Exchange from a
core connected person (namely a director, chief executive or substantial shareholder of the
company or any of its subsidiaries, or a close associate of any of them), and a core connected
person shall not knowingly sell their interest in shares of the company to it.
(i) Takeover implications
If, as a result of any repurchase of Shares, a Shareholder’s proportionate interest in the
voting rights of our Company increases, such increase will be treated as an acquisition for the
purposes of the Takeovers Code. Accordingly, a Shareholder or a group of Shareholders acting
in concert could obtain or consolidate control of our Company and become obliged to make a
mandatory offer in accordance with Rule 26 of the Takeovers Code. Save as aforesaid, our
Directors are not aware of any consequences which would arise under the Takeovers Code as
a consequence of any repurchases pursuant to the Repurchase Mandate.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-6 –


--- page 569 ---
(j) General
If the Repurchase Mandate were to be carried out in full at any time, there may be a
material adverse impact on our working capital or gearing position (as compared with the
position disclosed in our most recent published audited accounts). However, our Directors do
not propose to exercise the Repurchase Mandate to such an extent as would have a material
adverse effect on our working capital or gearing position.
Our Directors will exercise the Repurchase Mandate in accordance with the Listing Rules
and the applicable laws in the Cayman Islands. Our Directors confirm that to the best of their
knowledge and belief, neither this explanatory statement for the Repurchase Mandate nor the
proposed share repurchase has any unusual features.
We have not made any repurchases of our Shares in the previous six months.
FURTHER INFORMATION ABOUT OUR BUSINESS
1. Summary of Material Contracts
The following are contracts (not being contracts entered into in the ordinary course of
business) entered into by any member of our Group within the two years immediately
preceding the date of this document that are or may be material:
(a) the Hong Kong Underwriting Agreement.
(b) a cornerstone investment agreement dated January 27, 2025 entered into among the
Company, Huang River Investment Limited, Goldman Sachs (Asia) L.L.C., UBS
Securities Hong Kong Limited, UBS AG Hong Kong Branch, China International
Capital Corporation Hong Kong Securities Limited, and The Hongkong and
Shanghai Banking Corporation Limited, pursuant to which Huang River Investment
Limited agreed to subscribe for Offer Shares at the Offer Price of an amount equal
to the Hong Kong dollar equivalent of US$25.0 million, in accordance with the
terms of the cornerstone investment agreement.
(c) a cornerstone investment agreement dated January 27, 2025 entered into among the
Company, GM Charm Yield (BVI) Limited, Goldman Sachs (Asia) L.L.C., UBS
Securities Hong Kong Limited, UBS AG Hong Kong Branch, China International
Capital Corporation Hong Kong Securities Limited, and The Hongkong and
Shanghai Banking Corporation Limited, pursuant to which GM Charm Yield (BVI)
Limited agreed to subscribe for Offer Shares at the Offer Price of an amount equal
to the Hong Kong dollar equivalent of US$15.0 million, in accordance with the
terms of the cornerstone investment agreement.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-7 –


--- page 570 ---
(d) a cornerstone investment agreement dated January 27, 2025 entered into among the
Company, Golden V alley Global Limited, Goldman Sachs (Asia) L.L.C., UBS
Securities Hong Kong Limited, UBS AG Hong Kong Branch, China International
Capital Corporation Hong Kong Securities Limited, and The Hongkong and
Shanghai Banking Corporation Limited, pursuant to which Golden V alley Global
Limited agreed to subscribe for Offer Shares at the Offer Price of an amount equal
to the Hong Kong dollar equivalent of US$7.5 million, in accordance with the terms
of the cornerstone investment agreement.
(e) a cornerstone investment agreement dated January 27, 2025 entered into among the
Company, Golden V alley V alue Select Master Fund, Goldman Sachs (Asia) L.L.C.,
UBS Securities Hong Kong Limited, UBS AG Hong Kong Branch, China
International Capital Corporation Hong Kong Securities Limited, and The
Hongkong and Shanghai Banking Corporation Limited, pursuant to which Golden
V alley V alue Select Master Fund agreed to subscribe for Offer Shares at the Offer
Price of an amount equal to the Hong Kong dollar equivalent of US$7.5 million, in
accordance with the terms of the cornerstone investment agreement.
(f) a cornerstone investment agreement dated January 27, 2025 entered into among the
Company, Long-Z Fund I, LP , Goldman Sachs (Asia) L.L.C., UBS Securities Hong
Kong Limited, UBS AG Hong Kong Branch, China International Capital
Corporation Hong Kong Securities Limited, and The Hongkong and Shanghai
Banking Corporation Limited, pursuant to which Long-Z Fund I, LP agreed to
subscribe for Offer Shares at the Offer Price of an amount equal to the Hong Kong
dollar equivalent of US$8.0 million, in accordance with the terms of the cornerstone
investment agreement.
(g) a cornerstone investment agreement dated January 27, 2025 entered into among the
Company, Duckling Fund, L.P ., Goldman Sachs (Asia) L.L.C., UBS Securities Hong
Kong Limited, UBS AG Hong Kong Branch, China International Capital
Corporation Hong Kong Securities Limited, and The Hongkong and Shanghai
Banking Corporation Limited, pursuant to which Duckling Fund, L.P . agreed to
subscribe for Offer Shares at the Offer Price of an amount equal to the Hong Kong
dollar equivalent of US$8.0 million, in accordance with the terms of the cornerstone
investment agreement.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-8 –


--- page 571 ---
2. Intellectual Property Rights
Save as disclosed below, as of the Latest Practicable Date, there were no other
trademarks, service marks, patents, intellectual property rights, or industrial property rights
which are or may be material in relation to our business.
(a) Trademarks
Trademarks registered in the PRC
As of the Latest Practicable Date, we had registered the following trademarks in
China which we consider to be or may be material to our business:
No. Trademark Registered Owner Class
1. /H1118/H1118
 Guming Technology 21
2. /H1118/H1118
 Zhejiang Guming Food
Technology Service Co., Ltd.
18
3. /H1118/H1118
 Guming Technology 43
4. /H1118/H1118
 Guming Technology 43
5. /H1118/H1118
 Guming Technology 43
6. /H1118/H1118
 Guming Technology 43
7. /H1118/H1118
 Guming Technology 43
Trademarks registered in Hong Kong
As of the Latest Practicable Date, we had registered the following trademark in
Hong Kong which we consider to be or may be material to our business:
No. Trademark Applicant Class
1. /H1118/H1118
 Our Company 16,29,30,32,43
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-9 –


--- page 572 ---
(b) Patents
Patents granted in the PRC
As of the Latest Practicable Date, we had been granted the following patents in the
PRC which we consider to be or may be material to our business:
No. Patent Registered owner
1. /H1118/H1118/H1118A juice extraction system and its extraction
method
Guming Technology
2. /H1118/H1118/H1118A level two immersion extractor for stirring-
free oolong tea
Guming Technology
3. /H1118/H1118/H1118An ultrasonic plant extraction and separation
equipment for tea
Zhejiang Lichuan Food Technology Co., Ltd.
4. /H1118/H1118/H1118A tea residue removal device Zhejiang Lichuan Food Technology Co., Ltd.
5. /H1118/H1118/H1118An automatic drainage device for containers Zhejiang Guming Houan Information Technology Co.,
Ltd.
6. /H1118/H1118/H1118Steam engine anti-backdraft nozzle Zhejiang Guming Houan Information Technology Co.,
Ltd.
7. /H1118/H1118/H1118A refrigeration operating table Guming Technology
8. /H1118/H1118/H1118A mixing and discharging device Guming Technology
9. /H1118/H1118/H1118A fruit and vegetable grater Guming Technology
10. /H1118/H1118A tea extraction can Zhejiang Lichuan Food Technology Co., Ltd.
11. /H1118/H1118A tea cooling mixer Zhejiang Lichuan Food Technology Co., Ltd.
(c) Domain names
As of the Latest Practicable Date, we owned the following domain names which we
consider to be or may be material to our business:
No.(1) Domain Name Registered Owner
1. /H1118/H1118gumingnc.com Guming Technology
2. /H1118/H1118goottt.com Guming Technology
3. /H1118/H1118goottt.cn Guming Technology
4. /H1118/H1118lingyanghua.net Guming Technology
5. /H1118/H1118lingyanghua.cn Guming Technology
6. /H1118/H1118lingyanghua.com Guming Technology
7. /H1118/H1118iguming.net Guming Technology
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-10 –


--- page 573 ---
FURTHER INFORMATION ABOUT OUR DIRECTORS
1. Particulars of Directors’ Service Contracts and Appointment Letters
(a) Executive Directors
Each of our executive Directors entered into a service contract with us on January 27,
2025. The term of appointment shall be for an initial term of three years from the Listing Date
or until the third annual general meeting of the Company after the Listing Date, whichever is
sooner (subject to retirement and re-election as and when required under the Articles of
Association and the Listing Rules). Either party may terminate the agreement by giving not less
than three months’ written notice.
The executive Directors are not entitled to receive any remuneration in his/her capacity
as executive Director under his service contract.
(b) Non-executive Director
Our Non-executive Director entered into a letter of appointment with us on January 27,
2025. The term of appointment shall be for an initial term of three years from the Listing Date
or until the third annual general meeting of the Company after the Listing Date, whichever is
sooner (subject to retirement and re-election as and when required under the Articles of
Association and the Listing Rules). Either party may terminate the agreement by giving not less
than three months’ written notice.
The non-executive Director is not entitled to receive any remuneration and benefits in his
capacity as a non-executive Director under his appointment letter.
(c) Independent non-executive Directors
Each of our independent non-executive Directors entered into a letter of appointment with
us on January 27, 2025. The term of appointment shall be for an initial term of three years from
the Listing Date or until the third annual general meeting of the Company after the Listing
Date, whichever is sooner (subject to retirement and re-election as and when required under the
Articles of Association and the Listing Rules). Either party may terminate the agreement by
giving not less than three months’ written notice.
Under their appointment letters, each of the independent non-executive Directors is
entitled to an annual fixed fee.
2. Remuneration of Directors
(a) The aggregate amount of remuneration paid and benefits in kind granted to our
Directors by our Group for the years ended December 31, 2021, 2022 and 2023 was
approximately RMB6.1 million, RMB7.3 million and RMB10.4 million,
respectively, and for the nine months ended September 30, 2023 and 2024 was
approximately RMB6.8 million and RMB3.9 million, respectively. No Director
received other remuneration or benefits in kind from our Company in respect of each
of the years ended December 31, 2021, 2022 and 2023 and for the nine months
ended September 30, 2024.
(b) Under the arrangements currently in force, we estimate that the aggregate
remuneration (excluding any discretionary bonus which may be paid) payable to,
and benefits in kind receivable by, our Directors by any member of our Group in
respect of the year ending December 31, 2024 is approximately RMB6.0 million.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-11 –


--- page 574 ---
3. Disclosure of Interests
(a) Interests and short positions of our Directors and chief executive in the share capital
of our Company or our associated corporations following completion of the Global
Offering
Immediately following completion of the Global Offering and assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised and no Shares are issued
under the Post-IPO Share Scheme, the interests or short positions of our Directors and chief
executive of our Company in the Shares, underlying Shares and debentures of our Company or
any associated corporations, within the meaning of Part XV of the SFO, which will have to be
notified to our Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of
the SFO, including interests and short positions which he/she is taken or deemed to have under
such provisions of the SFO, or which will be required, pursuant to section 352 of the SFO, to
be recorded in the register referred to therein, or which will be required, pursuant to the Model
Code for Securities Transactions by Directors of Listed Issuers contained in the Listing Rules,
to be notified to our Company and the Stock Exchange are set out below:
Name Nature of interest Number of Shares
Approximate percentage of
interest in our Company
immediately after the
Global Offering (1)
Mr. Wang /H1118/H1118/H1118Beneficiary of a trust; Founder
of a trust; interest held jointly
with another person
1,728,260,872
(2) 74.09%
Mr. Qi /H1118/H1118/H1118/H1118/H1118Beneficiary of a trust; Founder
of a trust; interest held jointly
with another person
1,728,260,872
(2) 74.09%
Mr. Ruan /H1118/H1118/H1118Beneficiary of a trust; Founder
of a trust; interest held jointly
with another person
1,728,260,872
(2) 74.09%
Ms. Y ayu
Jin /H1118/H1118/H1118/H1118/H1118
Beneficiary of a trust 579,710 (3) 0.02%
Mr. Y unjiang
Cai /H1118/H1118/H1118/H1118/H1118
Beneficiary of a trust 724,638 (3) 0.03%
Notes:
(1) Assuming the Offer Size Adjustment Option and the Over-allotment Option are not exercised.
(2) Mr. Wang, Mr. Qi, Mr. Ruan and Ms. Pan and their respective intermediate holding companies entered into the
Acting-in-Concert Arrangement, details of which are set out in the section headed “History, Reorganization
and Corporate Structure — Acting-in-Concert Arrangement” of this prospectus.
For further details of Mr. Wang, Mr. Qi and Mr. Ruan’s interest in the Company, please refer to the section
headed “Substantial Shareholders.”
(3) Flourishing Leaves Limited holds 12,231,885 Shares immediately after the Global Offering as an employee
shareholding platform held by The Core Trust Company Limited in its capacity as trustee of a trust established
to hold Shares for the benefits of among others, Ms. Y ayu Jin and Mr. Y unjiang Cai. Each of Ms. Y ayu Jin and
Mr. Y unjiang Cai are interested in approximately 4.74% and 5.92% of the Shares held by such shareholding
platform, respectively.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-12 –


--- page 575 ---
Save as disclosed above, none of the Directors or the chief executive of the Company
will, immediately following the completion of the Listing, have an interest and/or short
position (as applicable) in the Shares, underlying Shares or debentures of the Company or any
interests and/or short positions (as applicable) in the shares, underlying shares or debentures
of the Company’s associated corporations (within the meaning of Part XV of the SFO) which
(i) will have to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and
8 of Part XV of the SFO (including interests and short positions which they are taken or
deemed to have under such provisions of the SFO), (ii) will be required, pursuant to Section
352 of the SFO, to be entered in the register referred to therein or (iii) will be required,
pursuant to the Model Code for Securities Transactions by Directors of Listed Issuers as set out
in Appendix C3 to the Listing Rules, to be notified to the Company and the Stock Exchange,
in each case once the Shares are listed on the Stock Exchange.
(b) Interests and short positions disclosable under Divisions 2 and 3 of Part XV of the SFO
For information, so far as is known to our Directors or chief executive, of each person,
who immediately following completion of the Global Offering and assuming the Offer Size
Adjustment Option and the Over-allotment Option are not exercised will have an interest or
short position in the Shares or underlying Shares of our Company which would fall to be
disclosed to our Company under the provisions of Divisions 2 and 3 of Part XV of the SFO or,
is, directly or indirectly, interested in 10% or more of the issued voting shares of the Company,
see “Substantial Shareholders.”
Substantial shareholders of other members of our Group
Member of our Group
Name of substantial
shareholder
Nature of
interests
Approximate %
held by the
substantial
shareholder
Hangzhou Guoru Food
Technology Co., Ltd.
(ࠢ
ʮ̡) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Lishui Qisheng Enterprise
Management
Partnership (Limited
Partnership) ( ᘆ˥փ᳅
Άุ၍ଣΥྫΆุ(ࠢ
Υྫ))
Beneficial
interest
35%
Zhejiang Guoru Food
Technology Co., Ltd.
(ࠢ
ʮ̡) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Lishui Qisheng Enterprise
Management
Partnership (Limited
Partnership) ( ᘆ˥փ᳅
Άุ၍ଣΥྫΆุ(ࠢ
Υྫ))
Beneficial
interest
30%
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-13 –


--- page 576 ---
Member of our Group
Name of substantial
shareholder
Nature of
interests
Approximate %
held by the
substantial
shareholder
Zhejiang Lichuan Food
Technology Co., Ltd.
(ࠢ
ʮ̡) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Hangzhou Qiyu
Enterprise Management
Partnership (Limited
Partnership) (ݍ
Άุ၍ଣΥྫΆุ(ࠢ
Υྫ))
Beneficial
interest
30%
Zhejiang Shuicang Food
Technology Co., Ltd.
(ࠢ
ʮ̡) /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Hangzhou Qiyu
Enterprise Management
Partnership (Limited
Partnership) (ݍ
Άุ၍ଣΥྫΆุ(ࠢ
Υྫ))
Beneficial
interest
30%
Save as set out above, as of the Latest Practicable Date, our Directors were not aware of
any persons who would, immediately following the completion of the Global Offering, be
interested, directly or indirectly, in 10% or more of the nominal of any class of share capital
carrying rights to vote in all circumstances at general meetings of any member of our Group
or had option in respect of such capital.
POST-IPO SHARE SCHEME
The following is a summary of the principal terms of the Post-IPO Share Scheme
conditionally adopted by our Shareholders’ resolutions dated January 27, 2025 with effect from
Listing. The terms of the Post-IPO Share Scheme will be governed by Chapter 17 of the Listing
Rules.
Purpose
The purpose of the Post-IPO Share Scheme is to provide selected participants with the
opportunity to acquire shareholding interests in the Company so as to align the interests of the
selected participants with those of our Company and to encourage selected participants to work
towards enhancing the value of our Company and its Shares for the benefit of our Company
and Shareholders as a whole. The Post-IPO Share Scheme will provide our Company with a
flexible means of retaining, incentivizing, rewarding, remunerating, compensating and/or
providing benefits to selected participants.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-14 –


--- page 577 ---
Selected participants
Any individual, who is:
(a) an employee (whether full-time or part-time), director or officer of any member of
the Group, provided that a person shall not cease to be an employee in the case of
(a) any leave of absence approved by the relevant member of the Group; or (b) any
transfer of employment amongst members of the Group or any successor, and
provided further that a person shall, for the avoidance of doubt, cease to be an
employee with effect from (and including) the date of termination of his/her
employment;
(b) an employee (whether full-time or part-time), director or officer of (i) a company of
which the Company is a subsidiary (“ Holding Company ”); (ii) subsidiaries of the
Holding Company other than members of the Group; or (iii) any company which is
an associate of the Company;
(c) a person providing services to the Group on a continuing or recurring basis in its
ordinary and usual course of business which are in the interests of the long term
growth of the Group as determined by the Board and/or any committee of the Board
or other persons to whom the Board has delegated its authority pursuant to the
criteria set out in the Post-IPO Share Scheme (“ Service Provider Participants ”),
as determined by the Board or its delegate(s) from time to time to be entitled to participate in
the Post-IPO Share Scheme. However, no individual who is resident in a place where the grant,
acceptance or vesting of options pursuant to the Post-IPO Share Scheme is not permitted under
the laws and regulations of such place or where, in the view of the Board or its delegate(s),
applicable laws and regulations in such place makes it necessary or expedient to exclude such
individual, is eligible to be offered or granted options. For the avoidance of doubt, placing
agents or financial advisors providing advisory services for fundraising, mergers or
acquisitions, or professional service providers such as auditors or valuers who provide
assurance or are required to perform their services with impartiality and objectivity may not
participate in the Post-IPO Share Scheme.
Maximum number of shares
The total number of Shares which may be issued upon exercise of all awards to be granted
under the Post-IPO Share Scheme together with the number of Shares which may be issued
under any other share schemes of the Company is 10% of the Shares in issue on the date the
Shares commence trading on the Stock Exchange (the “ Scheme Mandate Limit ”), being
233,252,506 Shares assuming the Offer Size Adjustment Option is not exercised at all or
235,631,666 Shares assuming the Offer Size Adjustment Option is exercised at full. Shares
which would have been issued pursuant to Awards which have lapsed in accordance with the
terms of the rules of the Post-IPO Share Scheme (or any other share schemes of the Company)
shall not be counted for the purpose of calculating the Scheme Mandate Limit. The total
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-15 –


--- page 578 ---
number of Shares which may be issued pursuant to awards granted to Service Provider
Participants under the Post-IPO Share Scheme is 1% of the Shares in issue on the date the
Shares commence trading on the Stock Exchange (the “ Service Provider Sublimit ”), being
23,325,250 Shares assuming the Offer Size Adjustment Option is not exercised at all or
23,563,166 Shares assuming the Offer Size Adjustment Option is exercised at full.
The Scheme Mandate Limit and the Service Provider Sublimit may be refreshed (i) from
the later of three years after the adoption date of the Post-IPO Share Scheme or three years after
the date of the previous shareholders’ approval for refreshment of the Scheme Mandate Limit
or Service Provider Sublimit (as the case may be) or (ii) by obtaining prior approval of our
Shareholders in general meeting and subject to compliance with any additional requirements
prescribed under the Listing Rules from time to time. However, the refreshed Scheme Mandate
Limit cannot exceed 10% of the Shares in issue (excluding treasury shares) as of the date of
such approval. Awards previously granted under the Post-IPO Share Scheme and any other
share schemes of our Company (and to which provisions of Chapter 17 of the Listing Rules are
applicable) (including those outstanding, cancelled or lapsed in accordance with its terms or
exercised), shall not be counted for the purpose of calculating the refreshed Scheme Mandate
Limit. Our Company may also grant awards in excess of the Scheme Mandate Limit to
specifically identified selected participants provided that such grant is first approved by
Shareholders in general meeting.
Maximum entitlement of a grantee
Unless approved by our Shareholders, the total number of Shares issued and to be issued
upon exercise of the options granted and to be granted under the Post-IPO Share Scheme and
any other share option scheme(s) of the Company to each selected participant (including both
exercised and outstanding options) in any twelve-month period shall not exceed 1% of the total
number of Shares in issue (excluding treasury shares) (the “ Individual Limit ”). Any further
grant of options to a selected participant which would result in the aggregate number of Shares
issued and to be issued upon exercise of all options granted and to be granted to such selected
participant (including exercised, cancelled and outstanding options) in the twelve months
period up to and including the date of such further grant exceeding the Individual Limit shall
be subject to separate approval of our Shareholders (with such selected participant and their
associates abstaining from voting). For any options to be granted in such circumstances, the
date of the Board meeting for proposing such further grant shall be the date of grant of such
options for the purpose of calculating the exercise price of the options.
Performance target
The Post-IPO Share Scheme does not set out any performance targets that must be
achieved before the options may be exercised. However, the Board or its delegate(s) may at
their sole discretion specify, as part of the terms and conditions of any award, such
performance conditions that must be satisfied before the award shall be vested.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-16 –


--- page 579 ---
Exercise price
For awards which take the form of options, the amount payable for each Share to be
subscribed for (the “ Exercise Price ”) in the event of the option being exercised shall be
determined by the Board or the committee of the Board or person(s) to which the Board has
delegated its authority (as applicable) but shall in any event be no less than the higher of:
(i) the closing price of the Shares as stated in the daily quotations sheet issued by the
Stock Exchange on the date of grant; and
(ii) the average closing price of the Shares as stated in the daily quotations sheets issued
by the Stock Exchange for the five business days immediately preceding the date of
grant.
Rights are personal to grantee
An award is personal to the grantee and shall not be transferable or assignable except in
circumstances where the written consent of the Company has been obtained and a waiver has
been granted by the Stock Exchange for such transfer in compliance with the requirements of
the Listing Rules and provided that any such transferee agrees to be bound by the rules of the
Post-IPO Scheme as if the transferee were the grantee.
Options granted to directors or substantial shareholders of the Company
Each grant of options to any director, chief executive or substantial shareholder of our
Company (or any of their respective associates) must first be approved by the remuneration
committee of the Board (excluding any member who is a proposed recipient of the grant of the
award) and the independent non-executive Directors (excluding any independent non-executive
Director who is a proposed recipient of the grant of options). In addition,
(a) where any grant of awards (but not any grant of options) to any Director (other than
an independent non-executive Director) or chief executive of the Company or any
of their associates would result in the Shares issued and to be issued in respect of
all awards granted (excluding any awards lapsed in accordance with the terms of the
Post-IPO Share Scheme) to such person in the 12-month period up to and including
the date of such grant representing in aggregate over 0.1% of the Shares in issue
(excluding treasury shares) at the date of such grant; or
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-17 –


--- page 580 ---
(b) where any grant of awards to an independent non-executive director or substantial
shareholder of the Company (or any of their respective associates) would result in
the number of Shares issued and to be issued upon exercise of all awards already
granted (excluding any awards lapsed in accordance with the terms of the Post-IPO
Share Scheme) to such person in the 12-month period up to and including the date
of such grant representing in aggregate over 0.1% (or such other higher percentage
as may from time to time be specified by the Stock Exchange) of Shares in issue
(excluding treasury shares) at the date of such grant,
such further grant of Awards must be approved by Shareholders in general meeting in the
manner required, and subject to the requirements set out, in the Listing Rules.
Vesting of Awards
The Board or person(s) to which the Board has delegated its authority may from time to
time while the Post-IPO Share Scheme is in force and subject to all applicable laws, determine
such vesting period, vesting criteria and conditions or periods for the award or option to be
vested hereunder, provided however that the vesting period for options and awards shall not be
less than 12 months, except that any options or awards granted to an employee may be subject
to a shorter vesting period, including where:
(a) grants of “make whole” awards or options to new employees to replace awards or
options such employees forfeited when leaving their previous employers;
(b) grants to an employee whose employment is terminated due to death or disability or
occurrence of any out of control event;
(c) grants of awards or options which are subject to the fulfilment of performance
targets as determined in the conditions of his/her grant;
(d) grants of awards or options that are made in batches during a year for administrative
and/or compliance requirements, in which case the vesting date may be adjusted to
take account of the time from which the award or options would have been granted
if not for such administrative or compliance requirements;
(e) grants of awards or options with a mixed or accelerated vesting schedule such that
the awards or options vest evenly over a period of 12 months; or
(f) grants of awards or options with a total vesting and holding period of more than 12
months.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-18 –


--- page 581 ---
Award letter and notification of grant of options
An offer shall be made to selected participants by a letter which specifies the terms on
which the award is to be granted. Such terms may include the number of Shares in respect of
which the award relates, the issue price or Exercise Price (as applicable), the vesting criteria
and conditions, the vesting date, any minimum performance targets that must be achieved, and
may include at the discretion of the Board or its delegate(s) such other terms either on a case
basis or generally.
Unless otherwise specified in the award letter, a grantee shall have 20 business days from
the date of grant to accept the award. A grantee may accept an award by giving written notice
of their acceptance to our Company, the Board or the committee of the Board or person(s) to
which the Board has delegated its authority (as applicable), together with remittance in favour
of the Company of any consideration payable upon grant of the award. Any award may be
accepted in whole or in part provided that it must be accepted in respect of a board lot for
dealing in Shares or a multiple thereof. To the extent that an award is not accepted within the
time and in the manner indicated above, it shall be deemed to have been irrevocably declined
and shall automatically lapse.
Time of exercise of an option
An option may, subject to the terms and conditions upon which such option is granted, be
exercised in whole or in part by the grantee giving notice in writing to the Company in such
form as the Board or the committee of the Board or person(s) to which the Board has delegated
its authority (as applicable) may from time to time determine stating that the option is thereby
exercised and the number of Shares in respect of which it is exercised.
Cancellation of awards
Any awards granted but not exercised may be cancelled by the Board or the committee
of the Board or person(s) to which the Board has delegated its authority (as applicable) at any
time with the prior consent of the grantee. Issuance of new awards to the same grantee whose
awards have been cancelled pursuant to rules of the scheme may only be made if there are
unissued awards available under the scheme mandate (excluding the awards of the relevant
grantee cancelled aforementioned) and in compliance with the terms of the Post-IPO Share
Scheme.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-19 –


--- page 582 ---
Lapse of option
Without prejudice to the authority of the Board or the committee of the Board or person(s)
to which the Board has delegated its authority to provide additional situations when an award
shall lapse in the terms of any award letter, an award shall lapse automatically (to the extent
not already vested and exercised) on the earliest of:
(i) the expiry of the applicable period within which an option may be exercised, and
shall not expire later than 10 years from the date of grant (the “ Exercise Period ”);
(ii) the expiry of any of the periods for exercising an option as referred to in the
sub-section headed “Ceasing to be an eligible participant”;
(iii) the date on which the Board makes a determination under the clawback mechanism
of the Post-IPO Share Scheme, as referred to in the sub-section headed “Clawback”
below; and
(iv) the date on which the grantee commits a breach of the rules of the Post-IPO Share
Global Option Scheme.
Voting and dividend right
Awards do not carry any right to vote at general meetings of the Company, nor any right
to dividends, transfer or other rights.
Alterations in the capital structure of the Company
In the event of any alteration in the capital structure of the Company by way of
capitalisation of profits or reserves, rights issue, subdivision or consolidation of Shares or
reduction of the share capital of the Company (other than any alteration in the capital structure
of the Company as a result of an issue of Shares as consideration in a transaction to which the
Company is a party) after the adoption date, the Board or the committee of the Board or
person(s) to which the Board has delegated its authority (as applicable) shall make such
corresponding adjustments, if any, as it in its discretion may deem appropriate to reflect such
change with respect to:
(a) the number of Shares constituting the Scheme Mandate Limit or Service Provider
Sublimit, provided that in the event of any Share subdivision or consolidation the
Scheme Mandate Limit and Service Provider Sublimit as a percentage of the total
issued Shares of the Company (excluding treasury shares) at the date immediately
before any consolidation or subdivision shall be the same on the date immediately
after such consolidation or subdivision;
(b) the number of Shares in each award to the extent any award has not been exercised;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-20 –


--- page 583 ---
(c) the Exercise Price of any option or issue price of any share award,
or any combination thereof, as the auditors or a financial advisor engaged by the Company for
such purpose have certified satisfy the relevant requirements of the Listing Rules and are, in
their opinion, fair and reasonable either generally or as regards any particular grantee, provided
always that (i) any such adjustments should give each grantee the same proportion of the equity
capital of the Company, rounded to the nearest whole Share, as that to which that grantee was
previously entitled prior to such adjustments, and (ii) no such adjustments shall be made which
would result in a Share being issued at less than its nominal value. The capacity of the auditors
or financial advisor (as the case may be) is that of experts and not of arbitrators and their
certification shall, in the absence of manifest error, be final and binding on the Company and
the grantees.
Clawback
To the extent required by applicable law or stock exchange listing standards, or as
otherwise determined by the Company, including but not limited to, in the event that:
(a) a grantee ceases to be a selected participant by reason of the termination of his/her
employment or contractual engagement with the Group, a Holding Company,
subsidiaries of the Holding Company other than members of the Group or any
company which is an associate of the Company (together with the Holding Company
and its subsidiaries other than members of the Group, the “ Related Entities ”) for
cause or without notice or with payment in lieu of notice;
(b) a grantee has been convicted of a criminal offence involving his/her integrity or
honesty; or
(c) in the reasonable opinion of the Board, a Grantee has engaged in serious misconduct
or breaches the terms of this Scheme in any material respect,
then the Board may make a determination at its absolute discretion that: (A) any awards issued
to that grantee but not yet exercised shall immediately lapse, regardless of whether such awards
have vested or not, (B) with respect to any Shares issued or transferred to that grantee, the
grantee shall be required to transfer back to the Company or its nominee (1) the equivalent
number of Shares, (2) an amount in cash equal to the market value of such Shares, or (3) a
combination of (1) and (2), and/or (C) with respect to any Award Shares held by the Trustee
for the benefit of the Grantee, those Award Shares shall no longer be held on trust for nor inure
to the benefit of the Grantee.
Ceasing to be a selected participant
If a grantee ceases to be a selected participant by reason of his/her retirement, (i) any
outstanding awards not yet vested shall continue to vest in accordance with the vesting dates
set out in the award letter, or such other period as the Board or the committee of the Board or
person(s) to which the Board has delegated its authority (as applicable) may determine at their
sole discretion, and (ii) any vested option may be exercised within the Exercise Period, failing
which such option shall lapse.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-21 –


--- page 584 ---
If a grantee ceases to be a selected participant by reason of (i) death of the grantee; or (ii)
the termination of his/her employment or contractual engagement with any member of the
Group or Related Entity by reason of his/her permanent physical or mental disablement:
(a) in the case of options: any vested option may be exercised within the Exercise
Period by the personal representatives of the grantee. In the case where a grantee no
longer has any legal capacity to exercise the option, the vested option may be
exercised within that period by the persons charged with the duty of representing the
grantee under applicable laws. If the vested option is not exercised within the time
mentioned above, the option shall lapse; and
(b) in the case of share awards: any outstanding share awards not yet vested shall
immediately vest, and the Company shall issue such number of Shares or pay an
amount equal to the actual price at which Shares are sold (net of brokerage, trading
fee, transaction levy and any other applicable costs) (hereinafter referred to as
“Benefits ”) pursuant to the vested share awards to the legal personal representatives
of the grantee or the persons charged with the duty of representing the grantee under
applicable laws as soon as practicable following the death or incapacity of the
grantee or, if the Benefits would otherwise become bona vacantia, the Benefits shall
be forfeited and shall lapse.
If a grantee is declared bankrupt or becomes insolvent or makes any arrangements or
composition with his/her creditors generally, they shall cease to be a selected participant under
the Post-IPO Share Scheme and any awards not yet vested and any outstanding options not yet
exercised shall immediately be forfeited and shall lapse, unless the Board or the committee of
the Board or person(s) to which the Board has delegated its authority (as applicable)
determines otherwise at their absolute discretion.
If a grantee ceases to be a selected participant other than in any of the circumstances
described above, unless otherwise determined by the Board or the committee of the Board or
person(s) to which the Board has delegated its authority, a grantee may exercise any vested
Share Options within 20 business days of such cessation or within the Exercise Period,
whichever is the shorter. If an option is not exercised within the stipulated time, the option
shall be forfeited and shall lapse. Any outstanding share awards not yet vested shall
immediately be forfeited and shall lapse, unless the Board or person(s) to which the Board has
delegated its authority, determines otherwise at their absolute discretion.
Change of control
If there is an event of change in control of the Company as the result of a merger, scheme
of arrangement or general offer, the Board or the committee of the Board or person(s) to which
the Board has delegated its authority shall at its sole discretion (subject to compliance with the
Listing Rules and the Takeovers Code) determine whether the vesting dates of any awards will
be accelerated and/or the vesting conditions or criteria of any awards will be amended or
waived, and notify grantees accordingly.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-22 –


--- page 585 ---
Ranking of Shares
The Shares to be allotted and issued or transferred from the treasury shares upon the
exercise of an option shall be identical to the then existing issued Shares of the Company and
subject to all the provisions of the memorandum and articles of association of the Company for
the time being in force and will rank pari passu with the other fully paid Shares in issue on
the date the name of the grantee is registered on the register of members of the Company. For
the avoidance of doubt, a grantee shall not have any voting rights, or rights to participate in
any dividends or distributions (including those arising on a liquidation of the Company)
declared or recommended or resolved to be paid to the Shareholders on the register on a date
prior to such registration.
At the discretion of the scheme administrator, any obligation to allot and issue award
Shares to a grantee may be satisfied by transferring the equivalent number of treasury shares
to the grantee.
Duration
The Post-IPO Share Scheme shall be valid and effective for the period of 10 years
commencing on the Listing Date and ending on the 10th anniversary of the Listing Date (the
“Scheme Period ”) (after which, no further options shall be offered or granted under the
Post-IPO Share Scheme), and thereafter for so long as there are any unvested awards granted
prior to the expiration of the aforementioned period, in order to give effect to the vesting of
such awards or otherwise as may be required in accordance with the provisions of the rules of
the Post-IPO Share Scheme.
Alteration of the Post-IPO Share Scheme
The Board or the committee of the Board or person(s) to which the Board has delegated
its authority (as applicable) may subject to the rules of the Post-IPO Share Scheme amend any
of the provisions of the Post-IPO Share Scheme or any awards granted under the Post-IPO
Share Scheme at any time and in any respect, provided that the terms of this Scheme or Awards
so altered must comply with the relevant requirements of Chapter 17 of the Listing Rules.
Any amendment or alteration to the terms of any award the grant of which was subject
to the approval of a particular body (such as the Board or any committee thereof, the
independent non-executive Directors, or the Shareholders in general meeting) shall be subject
to approval by that same body, provided that such requirement is not applicable where the
relevant alteration takes effect automatically under existing terms of the Post-IPO Share
Scheme. Without limiting the generality of the foregoing, any change in the terms of awards
granted to any grantee who is a Director, chief executive or substantial shareholder of the
Company, or any of their respective associates, must be approved by the Shareholders in
general meeting in the manner required in the Listing Rules if the initial grant of the awards
requires such approval (except where the changes take effect automatically under the rules of
Post-IPO Share Scheme).
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-23 –


--- page 586 ---
Termination
The Post-IPO Share Scheme shall terminate on the earlier of (a) the expiry of the Scheme
Period; and (b) such date of early termination as determined by the Board, following which no
further awards will be offered or granted thereunder, provided that notwithstanding such
termination, the Post-IPO Share Scheme and rules thereof shall continue to be valid and
effective to the extent necessary to give effect to the vesting and exercise of any awards granted
prior to the termination of the Post-IPO Share Scheme and such termination shall not affect any
subsisting rights already granted to any grantee thereunder. Awards complying with the
provisions of Chapter 17 of the Listing Rules which are granted during the life of the Post-IPO
Share Scheme and remaining unvested, unexercised and unexpired immediately prior to the
termination of the operation of the Post-IPO Share Scheme shall continue to be valid and
exercisable in accordance with their terms of issue after the termination of the Post-IPO Share
Scheme.
OTHER INFORMATION
1. Estate duty
Our Directors have been advised that no material liability for estate duty is likely to fall
upon any member of our Group.
2. Litigation
Save as disclosed in this document, no member of our Group is engaged in any litigation,
arbitration or claim of material importance, and no litigation, arbitration or claim of material
importance is known to our Directors to be pending or threatened by or against our Company
that would have a material adverse effect on our Company’s results of operations or financial
condition.
3. Joint Sponsors
The Joint Sponsors satisfy the independence criteria applicable to sponsors set out in Rule
3A.07 of the Listing Rules.
The Joint Sponsors will receive an aggregate of US$700,000 for acting as the sponsors
for the Listing.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-24 –


--- page 587 ---
4. Consent of experts
This document contains statements made by the following experts:
Name Qualification
Goldman Sachs (Asia) L.L.C. /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118A licensed corporation to conduct Type 1
(dealing in securities), Type 4 (advising
on securities), Type 5 (advising on futures
contracts), Type 6 (advising on corporate
finance) and Type 9 (asset management)
regulated activities as defined under the
SFO
UBS Securities Hong Kong Limited /H1118/H1118/H1118/H1118/H1118/H1118/H1118A licensed corporation to conduct Type 1
(dealing in securities), Type 2 (dealing in
futures contracts), Type 6 (advising on
corporate finance) and Type 7 (providing
automated trading services) regulated
activities as defined under the SFO
Shihui Partners /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Legal advisor to the Company as to PRC
laws
Ernst & Y oung /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Certified Public Accountants under
Professional Accountant Ordinance
(Chapter 50 of the Laws of Hong Kong)
and Registered Public Interest Entity
Auditor under Accounting and Financial
Reporting Council Ordinance (Chapter
588 of the Laws of Hong Kong)
China Insights Industry Consultancy
Limited /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118
Industry consultant
Ogier /H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118/H1118Legal advisor to the Company on Cayman
Islands law
Save as disclosed, as of the Latest Practicable Date, none of the experts named above has
any shareholding interest in any member of our Group or the right (whether legally enforceable
or not) to subscribe for or to nominate persons to subscribe for securities in any member of our
Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-25 –


--- page 588 ---
Each of the experts named above have given and have not withdrawn their respective
written consent to the issue of this document with copies of their reports, letters, opinions or
summaries of opinions (as the case may be) and the references to their names included herein
in the form and context in which they are respectively included.
5. Binding effect
This document shall have the effect, if an application is made in pursuance hereof, of
rendering all persons concerned bound by all the provisions (other than the penal provisions)
of sections 44A and 44B of the Companies (Winding Up and Miscellaneous Provisions)
Ordinance so far as applicable.
6. Bilingual document
The English language and Chinese language versions of this document are being
published separately in reliance upon the exemption provided by section 4 of the Companies
(Exemption of Companies and Prospectuses from Compliance with Provisions) Notice
(Chapter 32L of the Laws of Hong Kong).
7. Preliminary expenses
We have not incurred any material preliminary expenses in relation to the incorporation
of our Company.
8. Disclaimers
(a) Save as disclosed in this document, within the two years immediately preceding the
date of this document:
(i) there are no commissions for subscribing or agreeing to subscribe, or procuring
or agreeing to procure subscriptions, for any shares in or debentures of our
Company; and
(ii) there are no commissions, discounts, brokerages or other special terms granted
in connection with the issue or sale of any capital of any member of our Group,
and no Directors, promoters or experts named in the part headed “— Other
information — 4. Consent of experts” received any such payment or benefit.
(b) Save as disclosed in this document:
(i) there are no founder, management or deferred shares in our Company or any
member of our Group;
(ii) we do not have any promoter and no cash, securities or other benefit has been
paid, allotted or given within the two years immediately preceding the date of
this document, or are proposed to be paid, allotted or given to any promoters;
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-26 –


--- page 589 ---
(iii) none of the Directors or the experts named in the part headed “— Other
information — 4. Consent of experts” above has any interest, direct or indirect,
in the promotion of, or in any assets which have been, within the two years
immediately preceding the date of this document, acquired or disposed of by
or leased to, any member of our Group, or are proposed to be acquired or
disposed of by or leased to any member of our Group;
(iv) there are no bank overdrafts or other similar indebtedness by our Company or
any member of our Group;
(v) there are no hire purchase commitments, guarantees or other material
contingent liabilities of our Company or any member of our Group;
(vi) there are no outstanding debentures of our Company or any member of our
Group;
(vii) there are no other stock exchange on which any part of the equity or debt
securities of our Company is listed or dealt in or on which listing or permission
to deal is being or is proposed to be sought;
(viii) no capital of any member of our Group is under option, or is agreed
conditionally or unconditionally to be put under option; and
(ix) there are no contracts or arrangements subsisting at the date of this document
in which a Director is materially interested or which is significant in relation
to the business of our Group.
APPENDIX IV STATUTORY AND GENERAL INFORMATION
– IV-27 –


--- page 590 ---
DOCUMENTS DELIVERED TO THE REGISTRAR OF COMPANIES
The documents attached to the copy of this document delivered to the Registrar of
Companies in Hong Kong for registration were, among other documents:
(a) the written consents referred to in “Statutory and General Information — Other
Information — 4. Consent of Experts” in Appendix IV; and
(b) copies of the material contracts referred to in “Statutory and General Information —
Further Information About Our Business — 1. Summary of Material Contracts” in
Appendix IV .
DOCUMENTS A V AILABLE ON DISPLAY
Copies of the following documents will be published on the website of the Stock
Exchange at www.hkexnews.hk and our Company’s website at www.gumingnc.com up to and
including the date which is 14 days from the date of this document:
(a) the Memorandum and the Articles;
(b) the material contracts referred to in “Statutory and General Information — Further
Information About Our Business — 1. Summary of Material Contracts” in Appendix IV;
(c) the service contracts and the letters of appointment with our Directors referred to in
“Statutory and General Information — Further Information About our Directors — 1.
Particulars of Directors’ Service Contracts and Appointment Letters” in Appendix IV;
(d) the report issued by China Insights Industry Consultancy Limited, a summary of which
is set forth in “Industry Overview”;
(e) the PRC legal opinion issued by Shihui Partners, our PRC Legal Advisor, in respect of
certain general corporate matters and property interests in China of our Group;
(f) the Accountants’ Report and the report on the unaudited pro forma financial information
of our Group from Ernst & Y oung, the texts of which are set out in Appendices I and II,
respectively;
(g) the audited combined financial statements of our Company for the years ended December
31, 2021, 2022 and 2023 and for the nine months ended September 30, 2024;
(h) the letters in respect of the profit estimate of our Group from Ernst & Y oung, the reporting
accountants, and Goldman Sachs (Asia) L.L.C. and UBS Securities Hong Kong Limited,
the Joint Sponsors, the texts of which are set out in Appendix IIA;
APPENDIX V DOCUMENTS DELIVERED TO THE
REGISTRAR OF COMPANIES AND ON DISPLAY
– V-1 –


--- page 591 ---
(i) the letter of advice prepared by Ogier, our legal advisor on Cayman Islands law,
summarising certain aspects of Cayman company law referred to in Appendix III;
(j) the Cayman Companies Act;
(k) the written consents referred to in “Statutory and General Information — Other
Information — 4. Consent of Experts” in Appendix IV; and
(l) the terms of the Post-IPO Share Scheme.
APPENDIX V DOCUMENTS DELIVERED TO THE
REGISTRAR OF COMPANIES AND ON DISPLAY
– V-2 –


--- page 592 ---
古茗控股有限公司
Guming Holdings Limited
Joint Sponsors, Joint Sponsor-Overall Coordinators, Joint Global Coordinators, Joint Bookrunners and Joint Lead Managers
(A company incorporated in the Cayman Islands with limited liability)
Stock Code: 01364
古茗控股有限公司
Guming Holdings Limited
GLOBAL
OFFERING
古茗控股有限公司
Guming Holdings Limited
