70 million HKD prepayment sparks disagreement; Ying Tong Holdings' less-than-one-year listing suddenly switches auditing firm

The “King of Perfume,” Yingtong Holdings, which has been listed for less than a year, has found itself in the spotlight due to an announcement regarding the “replacement of auditors.”

According to Yingtong Holdings Limited (hereinafter referred to as “Yingtong Holdings”), due to various reasons, the company’s former auditor, PricewaterhouseCoopers (hereinafter referred to as “PwC”), resigned. Following a recommendation from the board’s audit committee, RSM Hong Kong (hereinafter referred to as “RSM”) has been appointed as the new auditor to fill the temporary vacancy, with a term lasting until the next annual general meeting of shareholders.

A closer look at the announcement reveals that PwC’s resignation as the auditing firm is not a simple matter; it is tied to a prepayment amounting to HKD 70 million, which appeared shortly after Yingtong Holdings’ IPO. This has led to a series of disagreements between PwC and Yingtong Holdings.

HKD 70 Million Prepayment Triggers Audit “Stalemate”

The catalyst for the disagreements points to the agreements signed by Yingtong Holdings with three service providers.

According to PwC’s resignation letter, Yingtong Holdings completed its IPO on June 26, 2025, and was listed on the main board of the Hong Kong Stock Exchange. Shortly after the IPO, in order to obtain years of public relations services, data analysis and consulting services, and social media promotion services, Yingtong Holdings entered into several agreements with three service providers and made a prepayment of HKD 70 million.

This action raised significant concerns for PwC, which requested that Yingtong Holdings’ management provide explanations, information, and relevant documents regarding four key issues.

First, background information about the three service providers, as well as their roles and participation in the company’s IPO; second, the internal control and approval processes Yingtong Holdings undertook before engaging these service providers, and the recommendations considered; third, whether the service fee levels, contracts, and payment terms align with the market prices and conditions offered by other service providers for similar services; and fourth, whether this prepayment constitutes listing expenses or was planned for the use of IPO fundraising as per the profit forecast memorandum approved by the board during the IPO period.

Yingtong Holdings stated that the company has engaged an independent professional advisor to investigate the prepayment matter, under the supervision of the audit committee.

In PwC’s view, the investigation results would serve as the basis for its audit work on Yingtong Holdings’ consolidated financial statements for the year ending March 31, 2026, significantly impacting the nature, timing, and scope of the audit procedures. Therefore, PwC needed to be fully informed of the investigation’s progress.

However, by the time of its resignation, PwC had not received detailed information about the scope of the investigation or the explanations, documents, and information it had requested.

In this situation, PwC stated that it was unable to establish a specific timetable for the additional procedures required regarding the relevant matters. Moreover, the handling of these matters would incur additional costs, which would need to be negotiated with Yingtong Holdings.

For Yingtong Holdings, the lack of a specific timetable and the inability to accept additional audit costs ultimately led to the decision to replace the auditor and request PwC’s resignation. After careful consideration, PwC agreed to resign as the auditor.

Cloaked in the Aura of “China’s First Perfume Stock,” Mid-Year Revenue Declines by 3.4%

Faced with the audit stalemate, Yingtong Holdings adopted a “multi-front” strategy.

On one hand, in January of this year, it established an independent investigation committee composed of all independent non-executive directors of the company, responsible for conducting the investigation, and engaged Baker McKenzie (hereinafter referred to as “Baker”) as legal counsel to provide advice; on the other hand, it maintained communication with PwC to assist in the audit work and held meetings between PwC and Baker regarding the investigation.

Additionally, Yingtong Holdings appointed RSM as the new auditor to complete the annual audit for the fiscal year 2025/2026. “The board believes that changing the auditor is in the overall interest of the company and its shareholders,” Yingtong Holdings pointed out in the announcement.

Although the board of directors committed to providing the necessary information to assist RSM in completing the related audit work, as the new auditing firm, RSM may also face the “hot potato” of the HKD 70 million prepayment.

Looking back at Yingtong Holdings’ listing journey, the company first submitted its prospectus to the Hong Kong Stock Exchange in July 2024; due to the expiration of the six-month validity period, its listing application was marked as “invalid” in January 2025. In February 2025, Yingtong Holdings submitted a second application and ultimately succeeded in ringing the bell on June 26, cloaked in the aura of “China’s First Perfume Stock.”

In December last year, Yingtong Holdings delivered its first “report card” post-listing, revealing that for the six months ended September 30 of last year, the company achieved revenue of HKD 1.028 billion, a year-on-year decrease of 3.4%; net profit was approximately HKD 133 million, a year-on-year increase of 15.3%.

As for the revenue decline, Yingtong Holdings indicated in its mid-year report for 2025 that the primary reasons included the implementation of strict price controls to maintain competitive positioning in a challenging market environment; the sale of subsidiaries, streamlining operations to focus the company on core brands with greater growth potential.

From an operational perspective, Yingtong Holdings primarily sells and distributes products procured from third-party brand licensors, generating revenue while also carrying out market deployment for these brand licensors, such as brand management. As of September 30 of last year, the company’s external brand portfolio covered a total of 74 brands, with the number of brands providing perfume leading at 53.

However, this reliance on external brands has forced the company to maintain market competitiveness through data analysis, social media promotion, and other methods.

In the mid-year report for 2025, Yingtong Holdings noted that it conducted more marketing and promotional activities for several external brands to drive growth and enhance brand awareness in a competitive market environment. During the reporting period, the company spent approximately HKD 288 million on sales and marketing, accounting for 28% of total revenue.

On the other hand, Yingtong Holdings’ own brand Santa Monica still “struggles to take the lead.” For the fiscal years ending March 31, 2023, March 31, 2024, and March 31, 2025, the brand’s revenues were HKD 5.3 million, HKD 17 million, and HKD 10.5 million, respectively, with revenue shares of 0.3%, 0.9%, and 0.5%, all below 1%.

With the change of auditors, Yingtong Holdings faces challenges not only in balancing its own brand and external brands, but also in clearly explaining to the market the concerns arising from the HKD 70 million prepayment.

Beijing News, Shell Finance Reporter Li Zheng

Editor Yang Juanjuan

Proofreader Zhao Lin