Frost & Sullivan Insights According to data statistics, as of June 23, this year, 15 listed companies have released plans to stabilize their stock prices. In terms of triggering conditions, all 15 companies were due to their stocks falling below net asset value or breaking below par, and they have chosen to increase shareholdings by controlling shareholders, directors, supervisors, etc., to stabilize their stock prices. In terms of company nature, 6 are banks, all triggered the stabilization of stock prices due to their stocks falling below net asset value for 20 consecutive days, and they have stabilized their stock prices through increased shareholdings. Why are bank stock prices sluggish this year, with frequent occurrences of continuous falls below net asset value? Why is there a lack of repurchases, and has increased shareholding become the unanimous choice for stabilizing stock prices? What are the positive effects of stock price stabilization measures? Fundamentally, how should listed companies maintain long-term stock price stability? Jia Pang, Partner and Managing Director of Frost & Sullivan Greater China, was interviewed by Securities Daily to analyze the stock price stabilization measures of various enterprises. Within the year, 15 listed companies issued plans to stabilize their stock prices, all using the method of increasing shareholdings Securities Daily For listed companies, stabilizing stock prices is not only a short-term strategy but also a long-term goal.   On June 22, Lux shares announced that since the termination conditions of the stock price stabilization measures had not been triggered, the company's directors and executives will increase their shareholdings again and continue implementing the stock price stabilization plan. This is already the third time this year that Lux shares have implemented a stock price stabilization plan.   According to Tonghuashun iFinD data statistics, as of June 23, this year, 15 listed companies have released plans to stabilize their stock prices. In terms of triggering conditions, all 15 companies were due to their stocks falling below net asset value or breaking below par, and they have chosen to increase shareholdings by controlling shareholders, directors, supervisors, etc., to stabilize their stock prices.   The benefits of implementing stock price stabilization measures are obvious for listed companies. "Stock price stabilization measures reflect the active fulfillment of social responsibilities by listed companies, effectively safeguarding shareholder rights and interests, helping to boost investor confidence, and maintaining a continuously improving situation for listed companies." Zhang Yuancheng, Managing Director of the Investment Banking Department of Union Securities, said in an interview with Securities Daily reporters.   "In addition to boosting market confidence, stock price stabilization measures more importantly represent the firm belief of the company and management in the company's future business development and long-term intrinsic value enhancement." Jia Pang, Partner and Managing Director of Frost & Sullivan Greater China, told Securities Daily reporters. Among the groups of listed companies stabilizing their stock prices this year, the number of banks is particularly high. Tonghuashun iFinD data shows that among the 15 companies, 6 are banks, accounting for 40%, and all were triggered by their stocks falling below net asset value (the closing price of the stock has been lower than the most recent audited net asset per share for 20 consecutive trading days).   In addition, some companies are triggered by their stocks breaking below par. For example, as mentioned earlier, Lux shares triggered the start of the stock price stabilization measures on March 18 this year, because the closing price of the company's stock was lower than the issue price for 5 consecutive trading days.   One major factor in the fall in net asset value of many bank stocks is the decrease in investors' expectations and concerns about bank stocks.   "Currently, the negative impact of the pandemic on economic development and the uncertainty about bank profitability have had a certain impact on investors' expectations and confidence." Jia Pang told Securities Daily reporters. The development of domestic banking has entered a relatively mature period, and the performance growth of listed banks has generally tended to be stable, making it difficult to find new performance growth points. Especially for small and medium-sized banks, due to continuous challenges from industry digital transformation, the uncertainty of future development is relatively high.   Generally speaking, listed companies choose to increase shareholdings or repurchase shares to stabilize their stock prices, but there has been no repurchase method this year.   "Affected by factors such as the pandemic, some listed companies have insufficient cash flow and lack effective financing means to raise funds for repurchase. The possibility of implementing share repurchase in this situation is relatively small." Zhang Yuancheng analyzed.   In addition, currently, the operability of bank repurchases is not strong. For example, a rural commercial bank frankly stated that since the repurchase of stocks by domestic commercial banks is a major precedentless matter, and according to laws, regulations, and relevant regulatory provisions, after the bank repurchases shares, it can only cancel and reduce its registered capital. Reducing the registered capital requires approval from the China Banking and Insurance Regulatory Commission or its local branches, and it also involves a series of legal procedures such as creditor announcements. It is not feasible to adopt the method of repurchasing shares and reducing registered capital.   Zhang Yuancheng said that in comparison, the means of increase shareholdings are more diverse. They can be directly increased by controlling shareholders, directors, supervisors, etc., or through trust plans and asset management products established by employees of the company's controlling shareholders and affiliated enterprises to increase their company shares. This not only effectively reduces the financial pressure on all parties and plays a certain role in protecting the market, but also helps achieve a rebalancing of interests among internal group members and jointly boost the future business development of listed companies.   In the long run, although methods such as increasing shareholdings can stabilize stock prices in the short term, fundamentally, listed companies need to cultivate internal strength and deepen cultivation.   Zhang Yuancheng believes that listed companies need to concentrate advantageous resources to highlight the development of main businesses, operate legally and compliantly, and strive to repay investors through good company performance and active dividend policies, so as to promote the long-term stability of listed company stock prices.   "Listed companies not only need to bring value to shareholders but also create value for society and fulfill social responsibilities." Jia Pang said. Listed companies continuously enhance the core competitiveness and influence of the enterprise through endogenous growth and external expansion, so as to truly promote the long-term stability and growth of listed company stock prices. Frost & Sullivan Insights ·>Extended Reading   Q: Why are bank stock prices sluggish this year, with frequent occurrences of continuous falls below net asset value?   A: In the short term, although the government adopted a relatively loose monetary policy in the first half of 2022, affected by the COVID-19 pandemic, credit demand fluctuated significantly, economic indicators weakened, consumption was weak, short-term market confidence was dampened, and the market generally worried about the negative impact of an increase in non-performing loan rates on banks, leading to sluggish bank stock price performance.   In the long run, the development of domestic banking has entered a relatively mature period, and the performance growth of each listed bank has tended to be stable, making it difficult to find new performance growth points. Especially for small and medium-sized banks, due to continuous challenges from industry digital transformation, the uncertainty of future development is relatively high. Therefore, whether it is the current negative impact of the COVID-19 pandemic on economic development or the long-term concern about the improvement of bank profitability, both have had a certain impact on investors' expectations and confidence.   Q: Why is there a lack of repurchases, and has increased shareholding become the unanimous choice for stabilizing stock prices?   A: The roles of repurchase and increase shareholding are both to stabilize market sentiment and boost market confidence, thereby stabilizing stock prices. The subject of repurchase is the listed company itself, using its own cash to buy its own shares in the open market. While increase shareholding is when the major shareholders and management of the listed company purchase their own company's shares through the secondary market. Increase shareholding is usually due to the low stock price of the company, and the major shareholders and management carry out operations to increase investor confidence without affecting the equity structure of the listed company.   Q: What are the positive effects of stock price stabilization measures? Fundamentally, how should listed companies maintain long-term stock price stability?   A: When the stock price of a listed company is seriously undervalued due to certain subjective or objective factors, the listed company can generally take the measure of repurchase, or shareholders, directors, supervisors, and senior management can take the measure of increase shareholding to boost market confidence and stabilize stock prices. In addition to boosting the confidence of the capital market, stock price stabilization measures more importantly represent the firm belief of the company and management in the company's future business development and long-term intrinsic value enhancement.   Fundamentally, listed companies not only need to bring value to shareholders but also create value for society and fulfill social responsibilities. As representatives of outstanding enterprises in various industries, listed companies achieve high-quality and sustainable development through endogenous growth and external expansion, continuously enhancing the core competitiveness and influence of the enterprise, thereby helping listed companies maintain long-term stock price stability and growth.   *This article is reprinted from Securities Daily, with reporter Xing Meng, and the original title is 'Within the Year, 15 Listed Companies Released Plans to Stabilize Their Stock Prices, All Using the Method of Increasing Shareholdings'.  

Frost & Sullivan Insights On the evening of June 15th, Guoxuan High-Tech announced that its GDR issuance and listing application had been accepted by the China Securities Regulatory Commission (CSRC). Previously, Keda Manufacturing, Green Motion, and Lepu Medical also announced in early May that their GDR applications had been accepted by the CSRC. Currently, going public on the Swiss Exchange has become the mainstream choice. This year, nine companies have planned to issue GDRs for overseas listing, with eight targeting the Swiss Exchange. What are the advantages of issuing GDRs? Is there a possibility that GDR issuance could become an alternative to private placements? Which types of companies are more suitable for financing through GDR issuance? From the current progress, when will the first Chinese company's GDR listing on the Swiss Exchange be finalized? Mr. Lu Jing, Partner and Managing Director of Frost & Sullivan Greater China, interviewed with the Securities Daily to discuss the impact of GDR financing on enterprises. Nine listed companies plan to issue GDRs overseas this year, with the first batch of "Zhongrui Tong" likely to land as soon as July Securities Daily Another A-share company plans to issue GDRs (Global Depository Receipts) overseas. On June 15th, Health Yuan announced that it plans to issue GDRs overseas and list on the Swiss Exchange. As a result, this year's number of companies planning to issue GDRs overseas has increased to nine, with eight targeting the Swiss Exchange and one choosing the London Stock Exchange.   Meanwhile, A-share listed companies are accelerating their pace of issuing GDRs overseas. On the same day, Guoxuan High-Tech disclosed that its GDR application had been accepted by the CSRC. Thus, the number of companies whose GDR applications have been accepted by the CSRC has increased to four. Industry forecasts suggest that the first batch of "Zhongrui Tong" GDRs may be issued as soon as July   Compared to previous years, the number of companies choosing to issue GDRs overseas this year has significantly increased, with the main destinations being the Swiss Exchange.   Currently, there are three destinations for overseas GDR issuance and listing: the UK, Switzerland, and Germany. Before 2022, four listed companies such as Huatai Securities had successfully achieved overseas GDR issuance and listing, all choosing the London Stock Exchange. This year, three companies—Sany Heavy Industry, Guoxuan High-Tech, Lepu Medical, Shanxi Shares, MingYang Intelligence, Keda Manufacturing, Fangda Carbon, Green Motion, and Health Yuan—have planned to issue GDRs overseas. Except for MingYang Intelligence which chose the London Stock Exchange, the other eight chose the Swiss Exchange.   “As one of Europe's largest stock exchanges, the Swiss Exchange offers relatively higher valuations for enterprises in terms of price-to-earnings ratio, making it competitive.” Sun Lijun, co-head of Global Investment Banking at UBS Securities, told the Securities Daily.     “The investors on the Swiss Exchange are internationalized, and their valuation level is among the top in major European securities markets. At the same time, the proportion of institutional investors from outside the country is high, and they also have a high degree of openness to overseas investors.” Mr. Lu Jing, Partner and Managing Director of Frost & Sullivan Greater China, told the Securities Daily. According to Sun Lijun, listed companies interested in issuing GDRs generally have the following demands: introducing international and domestic strategic investors to promote business development; enhancing internationalization levels and consolidating overseas financing channels; improving corporate governance and further optimizing shareholder structure; establishing a benchmark position and expanding market influence.   For example, Health Yuan mentioned three purposes for GDR issuance and listing: accelerating international strategic steps, using capital markets to support the enhancement of multi-channel financing capabilities, and improving corporate governance levels.   GDR can meet the various needs of relevant listed companies. Sun Lijun said that on one hand, GDRs can be freely converted into A shares, with relatively high liquidity, which can attract more investors; on the other hand, the issue price floor for GDRs is also higher than that for private placements, raising more funds, and diluting existing shareholders less, thus achieving higher financing efficiency.   Since Sany Heavy Industry announced its plan to issue GDRs overseas on March 15th, eight companies have followed suit within three months, accelerating the progress of GDR issuance and listing.   It is worth noting that, unlike previous years when state-owned enterprises were predominant, these nine companies are all private enterprises. Sun Lijun said that these private enterprises have strong demands for financing and expanding international business, which is an important reason for optimizing interconnectivity rules, allowing more private enterprises with high development levels, capital, and overseas business needs to accelerate their development through GDR issuance.   Lu Jing said that private enterprises are important market entities in China's economy. In recent years, China has actively guided and supported private enterprises to "go global," which not only helps to accelerate the formation of a higher level of opening up but also facilitates private enterprises to further explore international markets and continuously develop and grow. From the progress of the nine companies, four companies—Keda Manufacturing, Green Motion, Lepu Medical, and Guoxuan High-Tech—have received approval from the CSRC for their GDR applications, with the fastest progress. Additionally, the related GDR proposals for MingYang Intelligence, Shanxi Shares, and Fangda Carbon have been passed by the shareholders' meeting.   The Jindu Research Institute believes that the issuance of GDRs requires completing internal decision-making procedures and supporting system construction, as well as external regulatory authorities' declaration and approval procedures. The external approval procedures include not only the approval of the CSRC and Shanghai and Shenzhen stock exchanges involved with domestic issuers but also the approval of securities regulatory authorities and exchanges in overseas GDR listing destinations.   Lu Jing predicts that if the domestic and international reviews are successful, the GDR review time will be about 1 to 2 months, with an overall execution time expected to be 4 to 5 months. Based on current progress, the first batch of "Zhongrui Tong" GDRs is expected to be issued between July and August this year. Previously, Guoxuan High-Tech revealed that "this GDR project is conducive to accelerating the company's international strategic layout, building a global brand and image, and meeting the funding needs for overseas business development. Therefore, the company plans to complete the issuance and listing by the end of July."   Lu Jing believes that as the team of overseas financing enterprises continues to grow and their advantages gradually become apparent, it is expected that more domestic companies will consider raising funds through overseas GDR issuance to expand their overseas influence.   Frost & Sullivan Insights ·>Extended Reading   Q: Compared to traditional private placement financing, what are the advantages of issuing GDRs, and is there a possibility that GDR issuance could become an alternative to private placements?   A: GDR (Global Depository Receipts) refers to a situation where a listed company deposits its shares with foreign banks according to a depositary agreement, and the latter issues documents as proof of deposit. These documents are known as global depositary receipts. GDRs can be publicly issued globally and are a type of depositary instrument issued by depositary institutions, available to markets in multiple countries, and used to raise funds in US dollars or euros. GDRs allow companies' stocks to be traded in countries without a stock market, enabling investors to invest in companies not listed on local stock markets. Chinese companies can introduce international and domestic strategic investors through issuing GDRs, thereby achieving goals such as promoting business development, enhancing internationalization, consolidating overseas financing channels, and optimizing shareholder structure. GDRs have an advantage in overall issuance time. If the domestic and international reviews are successful, the GDR review time is about 1 to 2 months, with an overall execution time expected to be 4 to 5 months. A-share private placements typically take more than half a year from the board's proposal announcement to approval. H-share IPOs generally complete within 6 to 8 months. In the future, as the team of overseas financing enterprises continues to grow and their advantages gradually become apparent, it is expected that more companies will consider raising funds through overseas GDR issuance to expand their overseas influence.   Q: This year, all GDR issuances and listings were by large private enterprises. What do you think is the reason? Which types of companies are more suitable for financing through GDR issuance?   A: Private enterprises are important market entities in China's economy. Facing new international situations and development requirements, in recent years, the Chinese government has actively guided and supported private enterprises to "go global," which not only helps to accelerate the formation of a higher level of opening up but also facilitates private enterprises to further explore international markets and continuously develop and grow. Through GDR issuance and listing, private enterprises can promote healthy and rapid business development by introducing international and domestic strategic investors; enhance internationalization levels and consolidate overseas financing channels; improve corporate governance and further optimize shareholder structure.   Compared to A-share refinancing and H-share IPOs, GDR issuance also has advantages such as shorter review time, free conversion with A shares, and flexible issuance ratios. It has a positive impact on large private enterprises that have 1) broadening international financing channels, 2) international development needs, 3) enhancing global brand influence, etc.   Q: From the current number of companies applying for GDR listing, it far exceeds previous levels and they are clustered around choosing the Swiss Exchange. What do you think are the reasons? From the current progress, when will the first Chinese company's GDR listing on the Swiss Exchange be finalized?   A: The reasons why the number of companies applying for GDR listing far exceeds previous levels and they are clustered around choosing the Swiss Exchange include:   1) Thanks to the "Regulations on the Supervision of Interconnectivity Depositary Receipt Business between Domestic and Overseas Stock Exchanges" issued by the CSRC on February 11th this year, which expanded the coverage of interconnectivity depositary receipts to Switzerland and Germany. This provides more diversified financing channels for enterprises.   2) Compared to A-share and H-share IPOs, GDR issuance has a shorter review time, which helps improve financing efficiency.   3) The headquarters of the Swiss Stock Exchange is located in Zurich, Switzerland, making it one of Europe's largest stock exchanges. Investors are internationalized, and their valuation level is among the top in major European securities markets. The proportion of institutional investors from outside the country on the Swiss Exchange exceeds 50%, and Swiss banks are world leaders in cross-border private asset management, with a high degree of openness to overseas investors.   Regarding GDR issuance, relevant Chinese rules have now been implemented. Based on current progress, the first batch of Zhongrui Tong GDRs is expected to be issued between July and August this year.   *This article is reprinted from the Financial News section of the Securities Daily, with reporter Xing Meng, and the original title is "Nine Listed Companies Plan to Issue GDRs Overseas This Year, with the First Batch “Zhongrui Tong” Likely to Land as Soon as July

Frost & Sullivan Insights On June 6th, Chongqing Dengkang Oral Care Products Co., Ltd., the parent company of Leng'an Ling toothpaste (referred to as 'Dengkang Oral'), officially submitted its prospectus and plans to be listed on the main board of the Shenzhen Stock Exchange. If successful, more than 50% of the total raised funds will be used for upgrading the omnichannel marketing network and brand promotion. Dengkang Oral has built channel barriers in third- and fourth-tier cities through its distribution model. In recent years, the company has gradually focused on online channels. What are the advantages and disadvantages of e-commerce channels and the distribution model in lower-income markets for Dengkang Oral? How far can Dengkang Oral still rely on its low-price advantage? Analysts Zhu Renjie and Meng Ge from Frost & Sullivan (referred to as 'Frost & Sullivan') recently spoke with 'Finance World' magazine to discuss the listing path of Leng'an Ling. Finance World Magazine Q: Dengkang Oral's gross profit margin is 42.1% (40.96% for adult oral care, 55.01% for children's oral care, and 35.23% for electric products), which is at a medium level in the industry. Why is the gross profit margin of oral care products generally higher?   Analyst Zhu Renjie from Frost & Sullivan Zhu Renjie: The gross profit margin of fast-moving consumer goods is generally high. Oral care products, as fast-moving consumer goods essential for daily use by consumers, are relatively less sensitive to price changes and have a higher brand loyalty. Therefore, oral care brands can sell at a higher gross profit price.   From the perspective of oral care brands, each brand will launch a large number of product SKUs with different efficacy and high-end product lines. The impact of different efficacies on raw material costs is not significant, and this part of the 'efficacy premium' is also a source of high gross profit. At the same time, oral care brands also need to spend a large proportion of their operating income on marketing and promotion each year. Only by ensuring a high gross profit can they maintain healthy revenue and development.   Q: Dengkang Oral has built channel barriers in third- and fourth-tier cities through its distribution model. In recent years, the company has gradually focused on online channels. Do you see an optimistic outlook for Dengkang Oral's channel transformation? What are the advantages and disadvantages of e-commerce channels and the distribution model in lower-income markets for Dengkang Oral?   Zhu Renjie: Online channels mainly include self-built brands, third-party platforms, live shopping, etc., and are currently the main retail channels for oral care products in China. According to Frost & Sullivan, online channels accounted for 38.5% of total retail sales of oral care products in 2020, with a compound annual growth rate of 30.6% from 2016 to 2020. It is expected that the proportion of online channels will increase to 44.7% by 2025. Therefore, focusing on online channels is one of Dengkang Oral's very important transformation strategies. However, as a latecomer in online channels, Dengkang Oral also faces many challenges, including the establishment of online channels, the cultivation of an online consumer group, and competition from other brands.   As an oral care brand focusing on mid- to low-end products, offline channels in lower-income markets will still be its foundation and an important sales channel, which can play a role in face-to-face consumer education. However, the company also needs to consider the impact of focusing on lower-income markets on its brand positioning. The label 'low-price in lower-income markets' may not be conducive for Leng'an Ling to launch higher-priced and more high-end product lines. Q: Are oral care products, especially toothpaste and toothbrushes, highly demanding on research and development? What are the moats for toothpaste and toothbrush categories?   Analyst Meng Ge from Frost & Sullivan Meng Ge: Since China's oral care product industry is relatively mature and competition among leading companies is fierce, innovation and R&D capabilities have become one of the key points for standing out. For example, Dengkang Oral has established the 'Leng'an Ling Tooth Sensitivity Resistance Research Center' and applied for more than 10 patents, proposing diversified and customized solutions for oral problems of special groups such as children, infants, pregnant women, and the elderly.   Currently, the main research and development innovations for toothpaste products focus on taste (especially for children's toothpaste), packaging, and efficacy (whitening, sensitivity resistance, gingival protection, fresh breath, etc.). Ordinary toothbrush products mainly focus on the material selection and design of their bristles to help consumers clean their mouths more comprehensively and improve oral health. In terms of electric toothbrushes, they can be divided into rotary electric toothbrushes and oscillating electric toothbrushes. Currently, the research and development innovation of electric toothbrushes mainly focuses on hardware technology, such as extending standby time, optimizing brush head accessories, and intelligent monitoring functions. Whether it is ordinary toothbrushes or electric toothbrushes, they will focus on enhancing product functionality while better protecting dental and gingival health. Q: The average price of Dengkang Oral toothpaste is 2.54 yuan, and the average price of toothbrushes is 1.77 yuan. The combined revenue proportion of both exceeds 90%. Do you think the company can still rely on its low-price advantage for how far?   Meng Ge: According to the definition by the China Oral Care Products and Nursing Association, products in China's toothpaste market are classified into five grades according to the standard stick (100 grams per stick) unit price: AAA-grade toothpaste (>22 yuan per stick), AA-grade toothpaste (15 yuan - 22 yuan per stick), A-grade toothpaste (9 yuan - 15 yuan per stick), B-grade toothpaste (7 yuan - 9 yuan per stick), and C-grade toothpaste (   Regarding toothbrushes, the current average price of toothbrushes (excluding electric toothbrushes) on the market is about 3 yuan per stick, which is higher than the average price of Dengkang toothbrushes. According to the data disclosed in the prospectus, the price of toothbrushes shows a downward trend year by year, mainly due to cost control. Overall, in the future, the penetration rate of electric toothbrushes will gradually increase, and ordinary toothbrushes will be further replaced. Therefore, the price of ordinary toothbrushes is expected to remain stable at a certain level.

Frost & Sullivan Insights What is the current market outlook for online luxury retail in Asia? What are the main development trends of China's luxury industry after the COVID-19 pandemic? What is the recent outlook for second-hand luxury e-commerce? Recently, Cai Jinfeng, Executive Director of Frost & Sullivan Greater China, was interviewed by South China Morning Post to discuss the future development prospects of the luxury market and second-hand luxury e-commerce.   South China Morning Post Q: What is the current market outlook for online luxury retail in Asia?   Cai Jinfeng: Online luxury retail in Asia has always had higher growth potential compared to markets in Europe and America. In addition to benefiting from the relatively stable luxury consumption demand in the Japanese market, the main source of growth in the Asian market is the Chinese market. Among them, online luxury retail sales in the Chinese market also increased significantly in 2020.   The reasons for this change are mainly driven by the following aspects. First, it is due to the upgrade in consumer demand for luxury goods brought about by the consumption upgrading in the Chinese market; second, because overseas channels have become difficult to purchase luxury goods due to the impact of the pandemic, this part of consumption has also shifted to domestic channels for luxury goods consumption; third, due to pandemic control restrictions, many offline stores cannot operate, prompting them to open online channels and transfer some non-online consumption needs to online; fourth, the consumer group is getting younger, and the rise of these highly internet-dependent consumers has also promoted an increase in online luxury consumption. Cai Jinfeng Executive Director of Frost & Sullivan Greater China Q: What are the main development trends of China's luxury industry after the COVID-19 pandemic?   Cai Jinfeng: a) The trend of omnichannel integration is obvious Before the COVID-19 pandemic, Chinese consumers focused on offline consumption and overseas channels for purchasing luxury goods. At the same time, luxury brands also hoped to emphasize brand uniqueness and convey brand images through offline experiences. With the outbreak of the pandemic, due to pandemic control restrictions, many consumers were unable to make offline purchases, and overseas purchase channels were also restricted. This accelerated luxury brands to develop more online purchase channels and improve online shopping experiences, providing customers with a high-quality customer experience through omnichannel integration.   b) The consumer population is accelerating its youthfulness With the deepening process of urbanization in China and the increase in per capita disposable income, China has also entered an era of consumption upgrading. The young group growing during this period, due to their rich economic foundation from childhood, shows a stronger willingness to consume luxury goods. Before the pandemic, young people mostly relied on online purchase channels, but there were fewer online layouts for luxury goods, so the overall penetration rate of luxury goods was relatively low. After the pandemic, the development of online luxury channels has attracted many young consumers, and the overall penetration rate of luxury goods has increased significantly.   c) Digital customer experience Before the COVID-19 pandemic, luxury brands had relatively single contact customer channels, and the differences among customers were not very obvious. After the pandemic, with the completion of omnichannel layout, the number of consumers that can be reached and the differences have also been greatly improved, and the data that can be obtained is increasing. Luxury brands will also need to strengthen their digital capabilities, transform the customer experience journey into consumer insights, and while meeting the differentiated needs of consumers, they can also keep abreast of changing market trends and improve internal operational efficiency.     Q: What is the recent outlook for second-hand luxury e-commerce?   Cai Jinfeng: With the increase in luxury consumption, the scale of existing luxury goods is also constantly expanding. On the one hand, overall consumer consumption has become increasingly rational, emphasizing cost-effectiveness, and the second-hand luxury market will be accepted by more consumers. On the other hand, in terms of asset preservation, the stable high value of luxury goods provides a value-added space for second-hand goods, which will also prompt more consumers to buy second-hand luxury goods for investment. Market demand will gradually grow, but how market participants on the supply side identify the authenticity of goods and ensure the circulation of genuine second-hand luxury goods are urgent issues to be solved before seizing new market growth opportunities in the future.

Frost & Sullivan Insights On June 2nd, according to data released by the Shanghai Shipping Exchange, the latest SCFI (Shanghai Export Container) index rose by 0.78% to 4208.01 points, up 32.66 points from 4175.35 points on May 27th. The Shanghai container market is experiencing a 'retaliatory' rebound, with pent-up freight demand surging. With the resumption of business in Shanghai, container prices for ocean and near-ocean routes have risen to varying degrees. What are the main factors driving this increase? Is this an upside correction from a trough? Has the super cycle of container shipping returned? Wei Li, Executive Director of Frost & Sullivan Greater China recently interviewed by Securities Daily to analyze the development trend of the container industry. Securities Daily   Q: Recently, with the resumption of business in Shanghai, container prices for ocean and near-ocean routes have risen to varying degrees. What are the main factors driving this increase? Is this an upside correction from a trough? Has the super cycle of container shipping returned?   Wei Li Executive Director of Frost & Sullivan Greater China Wei Li: Container prices for ocean and near-ocean routes have risen to varying degrees recently. The main reasons are: 1) After the resumption of business in Shanghai, cargo transportation demand surged, leading to a shortage of available space. Since June 1st when Shanghai fully resumed normal production and life order, freight volumes at maritime and air ports have continued to recover. Calculated by container throughput, Shanghai Port is one of the busiest ports in the world and also the main channel for goods produced by nearby manufacturing centers. After two months of lockdown, with the recovery of manufacturing activities in Shanghai, there will be a wave of 'retaliatory cargo transportation surges,' and the transportation of goods accumulated over two months will further drive freight volumes in the shipping industry. Therefore, the shipping industry is also expected to see an increase in demand and freight rates in the near future; 2) June is traditionally a peak season for maritime shipping, with strong consumer demand for goods from Europe and the United States; and 3) The supply side remains tight, with limited port efficiency leading to signs of container congestion at several major ports including Los Angeles Port and Long Beach Port in the United States.   In the short term, freight rates are expected to continue rebounding within the next two months. With the control of the pandemic, the recovery of domestic import and export demand combined with the resumption of core routes such as trans-Pacific routes, it is expected that market freight rates will continue to recover.

To ensure the healthy development of private higher education groups listed on the Hong Kong stock market and offer suggestions to relevant government decision-making departments, 6 month 10 On the same day, the Private Education Research Center of Soochow University held an internal seminar on 'Sustainable Development of Hong Kong-listed Private Higher Education Groups'.   Frost & Sullivan Frost & Sullivan Liu Wenjun, Executive Director of Greater China and Head of the Education Consulting Business Unit at Frost & Sullivan (referred to as 'Frost & Sullivan'), was invited to participate in a seminar and delivered a speech on 'Exploration and Practice of the Current Situation and Development Path of Private Higher Education in China with Capital Support'. The data shows, 2022 The number of applicants for the national college entrance examination reached 1193 Tens of thousands, setting a new historical high. Moreover, with the continuous expansion of enrollment at major national universities, the admission rate for the college entrance examination has decreased from 2013 year 76.7% Grew to 2021 year 92.9% .   However, this does not mean that higher education resources are already abundant domestically; competition for high-quality educational resources and higher education degrees remains fierce.   with 2021 Taking the year as an example, those who were admitted to colleges and universities through the college entrance examination 1,000 Among tens of thousands, less than half are admitted to undergraduate programs 450 Around 10,000 people), while first-tier universities and 985 The number of admissions to institutions is even more limited, with first-tier universities having an admission rate for that year 12.4% , and 985 The admission rate of the institution is only 1.7% . Liu Wenjun believes that if we use a numerical indicator to measure the development process of higher education in China and define milestones, then this indicator must be the gross enrollment rate in higher education. 1978 In that year, the gross enrollment rate of higher education in China was only 1.55% At that time, higher education was in the stage of elite education; by 2002 In that year, the gross enrollment rate of higher education in China reached 15% marks the entry of higher education in China into the popularization stage; by 2019 In [year], the gross enrollment rate of higher education in China exceeded 50% （ 51.6% ), marking the official entry of higher education in China into the popularization stage; as of 2021 In [year], this numerical indicator in China reached 57.8% . Compared with Western developed countries, the development of higher education in China is still a bit slower. Currently, the gross enrollment rate of higher education in the United States has exceeded 80% Developed countries such as the UK, France, Germany, and Japan have also surpassed 60% . Education is the foundation of a nation, and the highest leadership core has set a financial bottom line guarantee to support the development of education. 'One not lower than, two only increasing' demonstrates our Party's determination to develop education, while the continuously growing social demand for education also brings new challenges to its development. 2021 The release of the 'Notice on the Joint Efforts of the Ministry of Education, National Bureau of Statistics, and Ministry of Finance regarding 2020 According to the 'Statistical Bulletin on the Implementation of National Education Funds for the Year', the average general public budget education expenditure per student in regular institutions of higher learning nationwide is 22,407.39 Yuan, a year-on-year decrease 4.65% . Average public expenditure per student on education ( china ) , 2020 Source: Frost & Sullivan It can be seen that, against the backdrop of a continuous increase in the number of higher education students and rising popularization and enrollment rates, this has brought new pressures and challenges to the requirements for fiscal education funding in our country and the development of the education sector. Under the premise of limited growth in national financial funds, the efficiency of fund use becomes particularly important.   Liu Wenjun stated that private higher education is an important part of China's higher education and also a significant supplement to public higher education. The role of social forces in running schools is playing an indispensable role in cultivating higher education talents.   According to the data in the 'National Education Development Statistical Bulletin' disclosed by the Ministry of Education, 2020 Number of private general higher education institutions across the country 771 Colleges (including independent colleges 241 %), accounting for the total number of general higher education institutions in the country 28.2% ; Regular undergraduate and junior college students 791.34 Ten thousand, a year-on-year increase 11.6% , accounting for the undergraduate and junior college students in institutions of higher learning across the country 24.1% . 2019 In [year], the national financial education funds for private higher education institutions were approximately 145 Yuan, accounting for about 1.7% From this perspective, private higher education institutions in China do not need 2% The national financial education funds have cultivated nearly one-fourth of the undergraduate and junior college students nationwide. In addition, private higher education institutions also play an important role in the process of vigorously developing and constructing vocational and technical education, as well as in the action to improve the quality and excellence of vocational education.   2017 Since the beginning of this year, social education forces represented by private university organizers have embarked on the exploration of capitalizing private higher education. 2017 The year marked the first year of capitalization for private higher education. Yu Hua Education, Minsheng Education, New Higher Education Group, and China Education Holdings have successively listed on the Hong Kong Stock Exchange, officially bringing private higher education in China into the sight of international capital.   According to Frost & Sullivan statistics, 2017 till 2021 At the end of the year, there were a total of 20 An education group with higher education assets successfully went public in Hong Kong, raising a total of more than 214 HK$10 billion, with the current total market value being approximately 657 HK$10 billion.     "Going public is just the first step in the rapid development of private higher education groups," said Liu Wenjun. "Most listed private higher education groups use the funds raised through listing to carry out mergers and acquisitions, expanding beyond their original operating provinces or regions and embarking on a path of national expansion. Among them, the number of listed universities distributed in Southwest, South China, and East China is the most concentrated."   The influx of capital has helped private higher education achieve better development conditions and faster growth.     2019 In China, the capitalization process of private higher education accelerated in 2021, with mergers and acquisitions exceeding initial public offerings. (IPO) Become the main way for private universities to capitalize.   after    sand    According to a survey by Liewen, most acquisition targets either have serious debts or other funding shortages, indicating certain 'defects' in the target companies. The mergers and acquisitions of listed companies not only solve the debt problems of the targets but also provide necessary financial support for the expansion and sustainable development of schools. At the same time, the rich experience of listed companies in school operation and management is also very beneficial for the subsequent restructuring, upgrading, and other development actions of the acquired schools.   Over the past five years, Frost & Sullivan has served more than 60 Home Education Group and more than 120 Investment and financing of private schools IPO listing (listed) projects, and have successfully assisted over 40 An education group goes to Hong Kong / Going public in the US, among which there are more than 29 Home, covering all Chinese degree-earning education enterprises listed on the capital market. In the future, Frost & Sullivan will continue to empower the development of China's education industry, especially private higher education groups and schools, through professional services, contributing its part.

Frost & Sullivan insights Recently, there have been frequent violations of regulations by nucleic acid testing institutions. On June 7th, the official website of the National Medical Products Administration issued the 'Notice on Further Strengthening the Quality and Safety Supervision of COVID-19 Testing Reagents' (hereinafter referred to as the 'Notice'), bringing the nucleic acid testing industry into 'the strictest supervision'. Analyst Xu Chao from Frost & Sullivan (Frost & Sullivan, abbreviated as "Frost & Sullivan") Recently, an interview with Huaxia Daily was conducted to jointly interpret how the 'strictest regulatory order' will affect the nucleic acid testing industry. Huaxia Times Recently, there have been frequent violations of regulations by nucleic acid testing institutions. In response, the National Medical Products Administration has taken strong action to implement responsibilities, and the nucleic acid testing industry has faced 'the strictest supervision'.   On June 7, the official website of the National Medical Products Administration issued the 'Notice on Further Strengthening the Quality and Safety Supervision of COVID-19 Detection Reagents' (hereinafter referred to as the 'Notice'). The Notice requires that drug regulatory authorities at all levels continuously strengthen quality supervision during the product development phase for COVID-19 detection reagents, strictly implement the main responsibilities of enterprises and users, and strictly enforce local government supervision responsibilities. Registrants of COVID-19 detection reagents must effectively strengthen quality management throughout the entire life cycle of their products and legally assume responsibility for the safety and effectiveness of the products during the entire process of research, production, operation, and use. Frost & Sullivan analyst Xu Chao Xu Chao, a consulting analyst at Frost & Sullivan and interviewed by China Times, stated that overall, the 'Notice' has taken a step towards continuous supervision of the entire process in guiding and motivating COVID-19 testing reagent companies to carry out safe and effective research and development, production, and business operations. With the implementation of this 'Notice', it further promotes healthy competition and favorable development in the COVID-19 testing industry. chaos Before the COVID-19 pandemic, in the in vitro diagnostic (IVD) market, molecular diagnostics related to COVID-19 nucleic acid testing did not occupy a large market share. It was not until 2020 that the market for nucleic acid testing expanded. According to Tianyancha, in just 2021 alone, there were 437 new medical laboratory-related institutions added.   An insider from a third-party peer institution in Beijing told the Huaxia Times, "The PCR technology used for COVID-19 nucleic acid testing has been outsourced by third-party medical laboratories and genetic testing companies for a long time, and was once operated as a marginal project with low throughput."   As the COVID-19 black swan rages on, the nucleic acid testing market has expanded rapidly in the past two years. At the beginning of August 2020, according to the Ministry of Industry and Information Technology, as of the end of July 2020, China's daily nucleic acid testing capacity had reached 4.84 million samples, with 4,946 medical institutions capable of conducting nucleic acid testing and more than 38,000 technical personnel involved in testing.   On May 13, 2022, Guo Yanhong, an inspector from the Medical Administration Bureau of the National Health Commission, stated at a press conference of the State Council's Joint Prevention and Control Mechanism that there are 13,100 medical and health institutions nationwide capable of conducting nucleic acid testing. The country has 153,000 professional technicians engaged in nucleic acid testing technology work, and the nucleic acid testing capacity can now reach 57 million tests per day per tube.   In comparison, in less than two years, the number of medical institutions in China capable of conducting nucleic acid testing has increased by nearly 160%. In response, the aforementioned individuals stated, 'In the IVD industry, nucleic acid testing mainly utilizes molecular biology methods and belongs to the subfield of molecular diagnostics. This field is not the mainstream market in the testing industry, with a relatively small demand. The segments that account for a higher proportion in the IVD track include biochemical diagnosis, immunodiagnosis, blood cell testing, and other sub-markets.'   In response to changes in market demand, companies within the industry have quickly made adjustments. However, both enterprises and capital are driven by profit-seeking motives. Therefore, behind the rapid growth, various chaotic phenomena have emerged.   It has been reported that multiple third-party testing institutions in Beijing, Hebei, Henan, Anhui, and other places have falsely reported results and been placed under investigation for suspected criminal offenses. The suspects have been taken into compulsory measures. Among these cases, there are many instances where testing institutions are suspected of violating the Law on the Prevention and Control of Infectious Diseases, with most violations involving the forgery of test results. Just taking Beijing as an example, in May 2022, three cases were exposed: artificially diluting samples to affect the accuracy of test results, which is suspected of constituting a crime against the prevention and control of infectious diseases.   "The demand for nucleic acid testing has increased, requiring more operators and occupying machines. In this situation, enterprises can only find ways to compress costs. Third-party institutions operate on a self-financing basis, and it is difficult to rely solely on corporate self-discipline under the premise of profit-making. This requires higher-level units to strengthen supervision and professional units to assist in supervision, thereby promoting third-party institutions to conscientiously and responsibly complete nucleic acid testing tasks. Nowadays, with large-scale and regular nucleic acid testing, enterprises need to bear significant labor and financial costs, which even affect the expansion of other businesses, but the income is minimal," the aforementioned person further revealed.   On May 21st, the Beijing Fangshan District Government website updated administrative penalty information, showing that due to the original test data being significantly less than the number of samples tested, Pushe Medical was revoked its 'Medical Institution Practice License' by the Fangshan District Health Commission. On June 6th, the Fangshan Branch of the Beijing Public Security Bureau charged seven suspects including Zhou Moumou and Wu Moumou with the crime of obstructing the prevention and control of infectious diseases, and requested the approval of the Beijing Fangshan District People's Procuratorate for their arrest. After examination, the procuratorial organs made an arrest approval decision against Zhou Moumou, Wu Moumou, and the other six individuals on suspicion of obstructing the prevention and control of infectious diseases according to the law.   On the afternoon of May 27th, Pan Xuhong, Deputy Director of the Beijing Public Security Bureau, reported that since April 25th this year, 'Beijing Jinzhun Medical Laboratory Co., Ltd.' has been illegally conducting tests on nucleic acid samples collected from multiple districts using multi-tube mixing methods. They artificially diluted the samples, affecting the accuracy of the test results and are suspected of violating the crime of obstructing the prevention and control of infectious diseases. Wang Moumou (male, 43 years old), the legal representative of the laboratory, and 16 others were arrested, and the case is under further investigation.   On May 28th, according to the WeChat account of 'Safe Beijing', it was discovered that 'Beijing Zhongtong Lanbo Medical Laboratory' was suspected of illegal and criminal activities during nucleic acid testing. Currently, the Beijing police have filed a case against the laboratory for investigation, apprehending the legal representative Zhang Moumou and others, and the case is under further work.   regulation Against this backdrop, on June 7th, the General Administration of Drug Supervision and Administration of China issued the 'Notice on Further Strengthening the Quality and Safety Supervision of COVID-19 Detection Reagents'. The 'Notice' proposes to implement 'the strictest supervision' for COVID-19 detection reagents, taking resolute and effective measures. It strictly enforces the main responsibilities of enterprises and users, as well as the local supervision responsibilities of local governments. Vigorous and meticulous supervision work will be carried out without relaxation, firmly holding the bottom line of quality and safety, consolidating hard-won supervision achievements, and providing strong support for epidemic prevention and control.   Specifically, the 'Notice' proposes 'four strictest' measures and 'three major requirements'. Drug regulatory authorities at all levels should earnestly implement supervision and inspections, and delve deeply into and investigate issues and clues discovered in supervision sampling, complaints and reports, online monitoring, risk consultations, etc. For illegal and irregular activities such as unlicensed production and operation, improper storage and transportation, or the use of unregistered or expired COVID-19 test kits, they should be dealt with strictly, swiftly, and according to law. If suspected of constituting a crime, they should be promptly transferred to the public security organs. Supervisors suspected of dereliction of duty should be promptly transferred to the discipline inspection and supervision organs.   The 'Notice' specifies that provincial drug regulatory authorities should, in accordance with the requirements of previous work, maintain regular supervision. They should continue to organize professional forces to conduct supervision and inspections on registrants of COVID-19 test reagents and their entrusted manufacturers within their jurisdictions. The authorities should supervise enterprises to strictly organize production in accordance with regulations, specifications, standards, and the technical requirements of registered products, ensuring that the quality management system remains compliant. Special attention should be paid to inspecting the source of product raw materials, standardization of production processes, product quality control, release from factory and market, adverse event monitoring, product quality analysis and evaluation, etc. If serious violations are found in production activities that cannot ensure product safety and effectiveness, the enterprise should be ordered to immediately suspend production, recall problematic products, and carry out effective disposal. In cases where the violation is particularly serious, the medical device production license should be revoked according to the law, and relevant responsible persons should be punished according to the law.   Drug regulatory authorities at all levels should continue to strengthen the quality supervision and random inspection of COVID-19 testing reagents. For COVID-19 testing reagent products produced by registrants and entrusted manufacturers within their jurisdiction, full coverage random inspections should be carried out in accordance with the special sampling plans formulated by the national bureau. For products that fail the supervision and random inspection, drug regulatory authorities should immediately take corresponding disposal measures, ordering the enterprise to suspend production, analyze the reasons for non-compliance and carry out rectification. Production can only resume after being re-inspected and found compliant by provincial-level drug regulatory authorities.   The municipal and county drug regulatory departments should, in accordance with their responsibilities, effectively strengthen the supervision of product quality and safety during the use of nucleic acid testing reagents for COVID-19. They should carefully inspect whether the product qualifications, procurement channels, expiration dates, etc., of nucleic acid testing reagents used by medical institutions (including third-party medical laboratories) meet the requirements and whether the quality is qualified. If any illegal or non-compliant activities are found, they should be promptly reported to the relevant departments.   In this regard, Xu Chao analyzed that 'since the COVID-19 pandemic, the state has issued multiple notices to strengthen the quality and safety supervision of COVID-19 testing reagents, including the previous 'Notice on Carrying Out Special Inspections of COVID-19 Testing Reagents', 'Notice on Carrying Out Special Sampling Inspections of COVID-19 Testing Reagents', and 'Notice on Further Strengthening Supervision and Inspection of COVID-19 Testing Reagents'. These regulatory measures have effectively promoted the implementation of corporate responsibilities and regional supervision, and strengthened the quality and safety of COVID-19 testing reagent products.' *This article is reprinted from 'Huaxia Times', authored by Guo Yilin, with the original title 'The Scattered Phenomena of COVID-19 Nucleic Acid Testing: The National Medical Products Administration Issues the 'Strictest Supervision Order''.

6 month 7 On the same day, the Consulate General of Canada in Guangzhou held an online sharing session themed "Discovering New Opportunities in China's Medical Device Market".   Frost & Sullivan Frost & Sullivan Mao Hua, Partner and Managing Director of Frost & Sullivan's Greater China Region, was invited to attend and deliver a speech.   Mr. Mao Hua first introduced the overall development overview of the Chinese medical device market, followed by a brief analysis of opportunities foreign companies have in the Chinese medical device market.   He stated that China has become the world's second-largest medical device market, but China's per capita expenditure on medical devices is only one-ninth of that of the United States. There is still tremendous growth potential in China's medical device market.   Mao Hua pointed out that compared with the market share of global and Chinese medical device sub-sectors, low-value consumables still account for a relatively high proportion in China. However, orthopedic devices, ophthalmic devices, dental devices, plastic surgery devices, etc., which have a high global market share, still have significant development potential in China. In addition, the characteristics of China's 'economy-oriented' and 'high-end' medical device markets provide different market opportunities for import manufacturers. The 'economy-oriented' market places more emphasis on quality and value-added services under price sensitivity, while the 'high-end' market focuses more on technological innovation and solving clinical pain points. Therefore, even under the general trend of 'domestic substitution', multinational medical device companies still have growth opportunities in the Chinese market.   China has become the world's second-largest medical device market, while China's per capita medical device spending is nearly one-ninetyth that of the United States, demonstrating great growth potential. The Chinese medical device market has a low industry concentration and lacks large companies with strong brands and multi-product line layouts.   Low-value consumables still account for a relatively high market share in China, while ophthalmic devices, dental devices, orthopedic devices, and plastic surgery instruments, which account for a relatively high global share, still have great room for development in China.   The medical device market in China exhibits the characteristics of 'economical' and 'high-end', providing different market opportunities for multinational corporations.   Small foreign companies can leverage their technological advantages to target high-barrier fields and gradually establish brand advantages in the 'high-end' market.   Finally, Fred Mao said that multinational corporations can adapt to the local 'economic' markets through domestic plant construction or investment mergers and acquisitions.

Frost & Sullivan Insights In recent years, with strong support from national policies, specialized and innovative enterprises have continued to expand in scale and are accelerating their entry into the capital market. According to Wind Information data statistics, as of June 6th, this year, 32 specialized and innovative enterprises have successfully listed on the A-share market, raising over 40 billion yuan in initial public offerings. What are the attractions of the Sci-tech Innovation Board (STAR Market) for specialized and innovative enterprises? How do you view the concentrated listing of specialized and innovative companies in the machinery and equipment industry this year? Why are companies in the electronics industry favored by capital? What measures need to be improved to support the listing of specialized and innovative enterprises? Dr. Wang Xin, a global partner and President of Greater China at Frost & Sullivan (Frost & Sullivan, abbreviated as "Frost & Sullivan"), recently spoke with Securities Daily to discuss the listing path for specialized and innovative enterprises.   Securities Daily Q: What are the attractions of the STAR Market for specialized and innovative enterprises?   Dr. Wang Xin: Listed companies on the STAR Market often base themselves on technological innovation, providing an important driving force for the active development of China's market economy through a business model that combines "hard technology" + "technological model innovation." Especially since the "14th Five-Year Plan," the state has further encouraged the development of technology-driven real economies, treating high-tech and strategic emerging industries as a core link in promoting the high-quality development of China's economy. Whether it is the theme guidance of "technological innovation" or "hard technology," these align with the development positioning of specialized and innovative enterprises. As key technology researchers and industry leaders, hard-core technology itself is the foundation for enterprise commercialization. From the perspective of capital market development, the STAR Market is one of the best platforms for specialized and innovative enterprises to achieve further integration and upgrading from the innovation chain, talent chain to the scaled industrial chain and market capital chain.   In addition, the proportion of institutional investors on China's STAR Market is relatively higher, resulting in less market volatility, which can better protect the long-term corporate value of technology-driven enterprises and reduce value fluctuations during certain years or cycles. Therefore, it seems that specialized and innovative enterprises and the STAR Market platform develop and achieve together more so than against each other. Q: How do you view the concentrated listing of specialized and innovative companies in the machinery and equipment industry this year? Why are companies in the electronics industry favored by capital?   Dr. Wang Xin: The innovation, research and development, application, and commercialization of technology often require a certain development cycle, especially from product technology innovation to commercial verification, which requires sufficient market practice validation. Only when the commercial capabilities and profitability potential of technology companies are recognized by market investment can they receive greater affirmation in the secondary capital market.   Looking at the market development in 2021, industries such as smart cities and smart manufacturing in China have reached a mature commercial stage after several years of cultivation. Compared to other technology-driven companies, the business models of the electronics industry and machinery and equipment industry are basically mature, the profitability of enterprises has been widely verified, and investor education is more mature. Therefore, in recent years, "smart" manufacturing companies have received much attention from capital.   Q: What measures need to be improved to support the listing of specialized and innovative enterprises?   Dr. Wang Xin: From the perspective of enterprise services and product positioning, compared to general consumer enterprises whose products and services are closer to daily life, the product service models of specialized and innovative enterprises are more abstract and profound, often conveying new product service concepts to investors and the public. In this case, general investors often need a relatively mature vertical background in the industry to "understand" the core business essence and market development potential of specialized and innovative enterprises, thereby making a reasonable assessment of them.   However, on the other hand, managers and founding teams of specialized and innovative enterprises often focus deeply on technology itself, with insufficient investment in product service education, resulting in very limited market education effects. Eventually, actual market education still mainly focuses on internal communication, bringing pain points such as opaque industry information and difficult-to-understand company product positioning to general investors. To solve this problem in the future, specialized and innovative enterprises need to collaborate more with their respective industries, inviting professional institutional investors and industry analysis experts to discuss and explain innovative products and emerging models on a larger scale, and conducting market education for companies from three dimensions: company business, industry characteristics, and performance explanation.   In addition, with the continuous deepening of China's green economy strategy, technology-driven specialized and innovative enterprises need to better showcase their social value to various sectors of society, transmitting sustainable business models through the ESG development concept of the "green engine." This will also help improve the risk resistance capabilities of enterprises, optimize valuation results, and form a good development mechanism.

Frost & Sullivan insights On May 19, Laoxiangji submitted its prospectus to the Shanghai Stock Exchange. The prospectus shows that the company has 991 direct-operated stores and 82 franchise stores. During the more than two years of continuous pandemic, Laoxiangji's store count increased from 769 at the end of 2019 to 1,073 by the end of 2021. However, the operating conditions of newly established subsidiaries outside the province in the past two years have not been very satisfactory. The issue of expanding profitability is facing Laoxiangji. Analyst Wang Zilun from Frost & Sullivan (hereinafter referred to as 'Frost & Sullivan') was interviewed by the Economic Observer to discuss how catering chain brands represented by Laoxiangji can make an impact in national expansion and how they can enhance their brand competitiveness. Laoxiangji IPO: The Dilemma of National Expansion and Competitiveness Economic Observer As the company was sprinting towards an IPO, Laoxiangji fell into a labor dispute over unpaid social insurance for its employees.   On May 30, media reports stated that in the past three years, Laoxiangji had a cumulative total of 16,000 employees who did not pay social insurance. On the afternoon of May 31, Su Congxuan, Chairman of Laoxiangji, posted on Weibo in response saying, 'As of the end of 2021, there were a total of 14,503 employees at Laoxiangji (1,033 of whom are rehired retirees), and 12,629 of them actually purchased social insurance. The actual participation rate of Laoxiangji employees has reached 93.75%. Although there are factors such as a high turnover rate among catering workers and some employees not having a strong willingness to participate in insurance, as the Chairman of Laoxiangji, I feel very ashamed and self-reproachful for failing to purchase social insurance for all employees. I express my deep apologies to all my employees and the general public.'   In fact, this situation has been explained in the prospectus. The prospectus shows that in 2021, the number of employees of Laoxiangji who were insured was 12,629, with 1,874 employees not paying social insurance, including 1,033 retirees who were rehired.   National expansion In 2003, KFC's number of stores in China exceeded 800, and it launched a landmark localized flavor adaptation product—Lao Bei Chicken Wraps, which has continued to this day. It was also in 2003 that a Chinese fast-food chain named 'Fuxi Old Hen' (the predecessor to Laoxiang Chicken) opened its doors in Hefei. Nineteen years have passed, and while KFC has now surpassed 8,000 stores, 'The No.1 Fast-Food Chain in China' still remains elusive. Laoxiang Chicken, which has grown to over 1,000 stores, is racing to claim the title.   On May 19, Laoxiangji Chicken submitted its prospectus to the Shanghai Stock Exchange. The prospectus shows that from 2019 to 2021, Laoxiangji Chicken's operating income was RMB 2.859 billion, RMB 3.454 billion, and RMB 4.393 billion respectively; the net profit attributable to the parent company was RMB 159 million, RMB 105 million, and RMB 135 million respectively.   The prospectus shows that the company has 991 direct-operated stores and 82 franchise stores. Over the past two years or so when the pandemic continued, Laoxiangji's store count increased from 769 at the end of 2019 to 1,073 by the end of 2021. In terms of growth, in addition to the expansion into the Anhui market, the development of markets outside the province such as Shanghai, Hubei, Jiangsu, and Shenzhen also contributed to the increase.   However, the operating conditions of newly established subsidiaries outside the province in the past two years have not been very satisfactory. Many subsidiaries in multiple locations such as Zhejiang, Guangdong, Beijing, and Henan have fallen into losses, with a total loss amounting to 162 million yuan. Taking Zhejiang Laoliangji Catering Co., Ltd. as an example, its net profit for 2021 was -1,390 yuan, while Laoliangji (Beijing) Catering Co., Ltd.'s net profit for 2021 was -20.22 million yuan.   Jiangsu and Hubei markets, which Jiangsu Fortune Capital has been involved in since 2017, have yet to achieve profitability. The prospectus shows that the subsidiaries in Jiangsu and Hubei incurred losses of 38.99 million yuan and 38.42 million yuan respectively in 2021.   The issue of expanding profitability is facing Laoxiangji. In fact, compared to the localized exploration of Western cuisine, Chinese cuisine needs to face up to a more refined requirement of localizing flavors. Zhang Jian, an expert in brand positioning and general manager of Red Arrowhead Brand Marketing Company, told reporters that there are still no truly national Chinese fast-food brands. One major constraint is the localization of flavors. If one wants to win the national market, products need to conform to local tastes, which is very important for Chinese cuisine. In this regard, Hunan and Sichuan's cuisine has an advantage, as 'spicy' and 'hot spicy' flavors have been proven to be national tastes with high acceptance. Frost & Sullivan analyst Wang Zilun pointed out that many local catering brands focus on local consumers and maintain relatively high foot traffic with lower unit prices. Therefore, for large chain Chinese fast-food brands like Laoxiangji, how to use a standardized menu to dominate the national market is a problem, as well as how to build barriers to prevent competitors from engaging in price wars. However, regarding the current national expansion of Laoxiangji Chicken, industry insiders believe that there is no need to worry too much about losses in markets outside the province. Zhang Jian stated that on one hand, Laoxiangji Chicken has indeed been affected by the pandemic, resulting in fewer customer visits. On the other hand, Laoxiangji Chicken's influence outside the province has not yet been fully established.   Next, internal cultivation The national expansion of Laoxiangji will continue to accelerate. The prospectus shows that Laoxiangji plans to open 700 new stores in key regions across the country in the future. However, with Anhui accounting for over 70% of its revenue, where does Laoxiangji's competitiveness lie when entering new markets?   Laoxiangji stated in its prospectus that, with the increasingly fierce homogeneous competition in the catering industry and consumers seeking new and innovative experiences, brand and culture have become the core competitiveness of catering enterprises.   Since the beginning of 2020, when the video 'Chairman Su Congxuan tears up a staff letter' has attracted widespread attention, Laoxiangji has frequently appeared on hot search lists, including local flavor strategy press conferences and the daily release of Weibo posts featuring 'cooing'.   Wang Zilun stated that when standardization, chain operation, and the provision of high-quality dishes have almost become a necessity for every catering enterprise, if catering businesses want to stand out, they also need to enhance their brand awareness and the transmission of brand culture that is deeply rooted in people's hearts. Judging from the current expansion achievements of Laoxiangji Chicken, there is still a long way to go before its brand awareness can be fully established.   In addition to this, the internal cultivation of catering enterprises also lies in multiple aspects including product power, standardization, and management. The catering report from LeadLeo Research Institute shows that these three are the core elements for the success of Chinese chain fast-food enterprises.   When discussing the direction of internal cultivation for catering brands, Wang Zilun stated that first and foremost, the brand needs to have good marketing capabilities to expand its influence. Secondly, the brand should also make appropriate local adaptations. Furthermore, balancing the speed of expansion with costs is also a crucial point. Generally speaking, having a relatively complete process-based and scaled system is one of the effective ways to ensure both an expansion rate and cost reduction. According to the '2021 China Chain Restaurant Industry Report', the chain restaurant penetration rate in China reached 15% in 2020, which represents a significant improvement compared to the United States and Japan where the chain restaurant penetration rates have already reached 54% and 49%, respectively.   The report from LeadLeo Research Institute points out that in addition to the diversified demand for Chinese cuisine, backward supply chain levels are also one of the factors contributing to the low degree of chain operation in China's catering industry. Currently, there are issues such as overly dispersed upstream operations, long supply chains, and a low prevalence of cold-chain logistics in the entire catering industry. Facilities such as central kitchens, cold-chain transportation, and ingredient bases need continuous upgrading.   Various constraints also make investors pay more attention to the brand's ability to break through in these areas. Wang Zilun stated that for catering chain brands, building their own central kitchens and cold chain transportation systems, creating upstream and downstream connection resources, and utilizing digital information technology can all become ways for them to reduce costs and increase efficiency in standardization and chain operation. These are also important factors when evaluating an investment target for a catering brand. Regarding Laoxiangji, according to the prospectus, Laoxiangji plans to raise 12 billion yuan through listing on the Shanghai Stock Exchange this time, which will be used for the construction of the East China headquarters, new catering outlets, and data informatization upgrades. Laoxiangji stated in its prospectus that the project for the East China headquarters will help enhance the company's central kitchen capacity; the new catering outlet construction project will help improve the national store layout; and the data informatization upgrade project will help strengthen the company's intelligent management level.   Frost & Sullivan Insight & Extended Readings   Q: Can the development of Laoxiangji in its early stages be understood as Laoxiangji standing firm amidst the wave of Western fast-food brands due to its healthy and light Chinese cuisine?   A: With people's increasingly fast-paced lifestyles, fast-food forms that are prepared and served quickly are gradually gaining popularity among consumers. However, as consumers pay more attention to their physical and dietary health, Western-style fast food, which mainly consists of fried foods, can no longer fully satisfy consumers' pursuit of healthy eating. In this context, Chinese-style fast food, characterized by 'healthiness, lightness, and convenience', has gradually developed.   In recent years, several Chinese fast-food brands such as Laolongjian, Rural Base, and Lao Niangjiao have been actively expanding their market presence through listing; among them, the number of Laolongjian and Rural Base stores has now exceeded 1,000, indicating that the influence and popularity of Chinese fast food have increased among consumers. In addition to its name, which suggests healthy dining options like chicken soup and chicken dishes, Laolongjian's core competitive advantage also lies in its integrated upstream breeding industry, slaughtering, processing, and retail business. Through the healthy cuisine at its restaurants and an integrated full industrial chain, Laolongjian has established itself in China's catering market.   *This article is reprinted from the Economic Observer Network, with reporter Ye Xinran. The original title was 'Laoxiangji IPO: Difficulties in National Expansion and Competitiveness'.