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

Why did the resignation of the auditor over AI Ying Tong Holdings’ HKD 70 million prepayment trigger controversy?

Our reporter Fang Fengjiao, Shanghai

As the “No. 1 Chinese Perfume Stock” listed on the Hong Kong Stock Exchange, Ying Tong Holdings (06883.HK) has entered a storm just nine months after going public, due to a mysterious prepayment of HKD 70 million involving a “Rashomon” incident. On the evening of March 16, the company suddenly announced that its auditor, PwC, resigned at the board’s “request,” just as the company’s 2025/2026 fiscal year audit was about to commence.

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

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

Questions over Ying Tong Holdings’ Internal Controls

Ying Tong Holdings was listed on the main board of HKEX on June 26, 2025, raising a net amount of about HKD 883 million. As a well-known perfume distributor, the company’s revenue is almost entirely from distributing products for 72 external brands including Hermès and Chopard. According to the prospectus, the funds raised are planned to be used for developing proprietary brands, acquiring external brands, expanding direct sales channels, and accelerating digital transformation.

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

PwC stated in its resignation letter that management was asked to clarify several issues, including whether the payment was an IPO or listing expense, the background of the three suppliers and whether they participated in the company’s business during the IPO, whether internal approval procedures were followed before engagement, and whether the service fees, contracts, and payment terms were in line with market practices.

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

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

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

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

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

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

Performance “Slowdown” Emerges

Beyond the spotlight of the audit controversy, Ying Tong Holdings’ operational fundamentals are also under severe pressure. Once a high-profile brand management group with over HKD 2 billion in revenue, dubbed the “No. 1 Perfume Stock,” the company has shown signs of growth fatigue in its first post-listing interim report.

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

Ying Tong Holdings explained that the revenue decline was mainly due to strict price controls to cope with fierce competition and the sale of subsidiaries to streamline operations. Despite the continued optimism around the “scent economy” in China, as a leading enterprise, Ying Tong Holdings’ revenue decline reflects that its reliance on agency expansion alone is reaching a ceiling.

Zhan Junhao pointed out that the current predicament stems from the agency model, overly dependent on foreign perfume brand licenses, lacking proprietary brands, and with weak bargaining power. Coupled with industry price wars and channel shuffling, revenue has fallen for the first time. Meanwhile, cash flow has significantly tightened, and operational resilience is insufficient. In the “scent economy” track, the company’s growth model is overly simplistic, with poor risk resistance.

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

Despite the “first stock” halo, Ying Tong Holdings’ business model remains highly dependent on external brand licensing, with insufficient autonomous revenue generation. As of September 30, 2025, the company represented 74 external brands, including Hermès and Van Cleef & Arpels, while only one proprietary brand, Santa Monica, was maintained. Although launched in 1999 and attempting to enter the perfume and eyewear sectors, Santa Monica has remained marginal. Data shows that from 2023 to 2025, its revenue share never exceeded 1%, contributing only HKD 10.5 million in 2025, just 0.5% of total revenue.

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

On one side, the auditor’s resignation over “unclear” prepayments exposes potential internal control flaws; on the other, the first-year performance slowdown and weak proprietary brands reveal operational realities. For Ying Tong Holdings, which just entered the capital market less than a year ago, clarifying internal control doubts and reversing the “difficulties in increasing revenue but not profit, strong reliance on agents and weak proprietary brands” dilemma are critical tests. With the new auditor RSM involved, the final investigation into the HKD 70 million prepayment will be a key measure for market judgment on the company’s governance quality.

责任编辑：徐芸茜 主编：公培佳