Summary of Key Points
Sichuan-based dairy company Jule Food, a veteran in the industry, has gone through five IPO applications over eight years (four of which were unsuccessful due to incomplete documentation, internal control issues, audit errors, and policy changes), and finally succeeded in passing the review by the Beijing Stock Exchange in 2025. However, this regional dairy company, with nearly 1 billion yuan in cash on its books, has raised four major questions in the market: Why is it so determined to go public when it doesn't seem short of funds? What are the risks associated with its excessive focus on a specific region and product lines? Can the long-standing problems with internal control and distribution channels be resolved? And what about the concerns surrounding the management transition after the founder's death, with a "foreign son-in-law" taking over?
1. With 1 billion yuan in cash, why still raise funds? Is going public a way to "infuse new life" or to "share the profits"?
Jule has 652 million yuan in cash and 315 million yuan in financial investments, totaling nearly 1 billion yuan, yet it plans to raise an additional 552 million yuan. Where will this money be used? Initially, the company intended to expand into animal husbandry and build large production facilities; now, the plans have been scaled back to renovating and expanding its Wenjiang base, as well as upgrading marketing and research and development efforts. However, the market questions the logic of distributing dividends (97.11 million yuan in three years, 70% of which went to the controlling shareholder, Tong Zhu), while paying executives salaries of 8.87 million yuan per year (with the chairman receiving 5.8 million yuan). This approach seems to involve giving money to existing shareholders first and then seeking funds from the market for transformation, raising doubts about its合理性. Jule does have its arguments: maintaining the status quo doesn't require additional cash, but upgrading and expanding (such as increasing production capacity or investing in research and development) do. Nevertheless, this practice of distributing dividends while raising funds has puzzled investors.
2. Relying on Chengdu and a 30-year-old product for success—is its comfort zone about to collapse?
Jule's main challenges lie in two areas of concentration:
- Regional concentration: 72% of its revenue comes from Sichuan, with Chengdu accounting for the majority. Worse still, revenue from dairy drinks in Chengdu has seen its first year-on-year decline, and attempts to expand into the Northeast (through the acquisition of Hui Feng Dairy) were unsuccessful (revenue dropped from 152 million yuan to 130 million yuan), narrowing its market base.
- Product concentration: 60% of its revenue comes from the "Suan Le Milk" product, which has been on the market for 30 years, while its second-largest category, fermented dairy products, is seeing sales decline (from 308 million yuan to 270 million yuan).
More importantly, Jule's net profit growth (22% annually) is not due to the competitiveness of its products but rather because of lower prices for raw milk (from 4.22 yuan/kg to 3.77 yuan/kg)—the company is benefiting from industry trends rather than its own efforts. The Beijing Stock Exchange has questioned the sustainability of this growth.
3. With internal control issues and hidden dangers in distribution, can these problems be completely resolved?
Jule's problems are common among regional dairy companies:
- Old internal control issues: In 2019, a cashier misappropriated nearly 100 million yuan, a lingering issue that affects corporate governance and raises investor concerns about similar incidents occurring in the future.
- Waste of production capacity: The utilization rate of its cold storage facilities is only 54%, and it plans to invest another 278 million yuan to expand production by 120,000 tons. But to whom will this new capacity be sold?
- Distribution challenges: 70% of its revenue comes from distributors, and there are concerns about the accuracy of financial reports, such as cases where major distributors contribute significant amounts despite being deregistered or former employees still holding significant distribution roles (potentially leading to inflated revenue figures). These are all potential risks that could impact the company's stability.
4. With the founder's death and a "foreign son-in-law" taking over, will the 60-year-old business remain stable?
After founder Tong Enwen passed away in 2025, his daughter (a Canadian citizen) inherited 70% of the company's shares but does not participate in management. The actual operations are handled by her husband, Gao Zhaohui (an American citizen), who serves as both chairman and general manager but holds no shares. This separation of ownership and management raises questions: Does the son-in-law have the motivation to work long-term for the company's success? Could he prioritize short-term performance at the expense of long-term development? Additionally, regional dairy companies like Jule face competition from larger players such as Yili and Mengniu. If Jule cannot break through its regional and product limitations through the IPO, it may gradually be marginalized.
Conclusion
Jule's approval by the Beijing Stock Exchange marks the end of a lengthy IPO process but the beginning of its journey as a publicly traded company. Going public is not a panacea; it exposes the company's issues to all stakeholders: Can internal control weaknesses be addressed? Can the company move away from its reliance on a specific region and single product lines? Can succession issues be resolved effectively? These are the real concerns for investors. Today's success may just be the prelude to future challenges.