Summary of Key Points
Junlebao, a dairy company founded in Hebei, has now become the third-largest comprehensive dairy enterprise in China and the second-largest in the low-temperature liquid milk market. It has established its position with two flagship products: "Jianchun Zero-Sugar Yogurt" and "Yuehuoxing High-End Fresh Milk." Jianchun is the pioneer of zero-sugar yogurt, while Yuehuoxing has become a standard of quality for new tea drinks (popularly used by milk tea shops). However, its path to listing has been fraught with challenges: it had to switch from A-share market preparation to the Hong Kong stock market, only for its prospectus to be invalidated. The reasons behind this include complex historical equity structures (it was once affiliated with Sanlu and Mengniu), significant financial pressures (with debts of 17.5 billion yuan and a debt-to-asset ratio of 77%), and concerns from investment institutions (private equity firms like Sequoia have been invested for 6 years, approaching the 5-7 year exit window). Whether this regional dairy company can break the "difficult-to-list" curse remains uncertain.
Detailed Analysis
1. From Three Small Rooms to Industry Third Place: Choosing the Right Track + Meeting Consumer Needs
Junlebao began in 1995 with just three small rooms in Shijiazhuang, founded by Wei Lihua who resigned from a government position with 90,000 yuan and a yogurt machine. Initially, it grew rapidly by relying on giants like Sanlu and Mengniu, but later it pursued a differentiated strategy:
- Jianchun: Seizing the Health Trend: In 2017, it launched zero-sugar yogurt, the first of its kind in China, tapping into consumers' fear of gaining weight and desire for healthier options. Jianchun has led sales of zero-sugar yogurt for five consecutive years, with a market share of over 50%, and by 2025, it became the top seller in the low-temperature yogurt category.
- Yuehuoxing: Technological Innovation + Channel Expansion: Launched in 2019, Yuehuoxing used a "0.09-second ultra-fast sterilization" technology developed in collaboration with Jiangnan University to extend the shelf life of low-temperature fresh milk from 7 days to 19 days, expanding its distribution range from 300 kilometers to 1500 kilometers (allowing it to reach southern markets). Its popularity surged when milk tea shops began using it, with staff pouring the milk directly for customers and displaying empty bottles on shelves, effectively promoting the product. Now, Yuehuoxing holds a 24% market share in the high-end fresh milk segment.
These two products helped Junlebao achieve revenue of nearly 20 billion yuan in 2024 and a net profit of 1.16 billion yuan, with the low-temperature business accounting for 42.5% of total sales, indicating a shift towards a more premium product lineup.
2. What's Stopping the Listing Process?
The difficulty in listing is not due to lack of scale (it ranks third in the industry) but rather due to:
- Complex Historical Equity: Junlebo was once invested in by Sanlu (34%) and later had its shares repurchased after the melamine scandal; it was then controlled by Mengniu for 51% before being sold back to a Hebei-based institution. These changes raised regulatory concerns about compliance, leading to six major inquiries from the Securities Regulatory Commission regarding shareholder structure and employee stock incentives.
- Financial Challenges:
- High Debt: As of September 2025, Junlebao has total debts of 17.5 billion yuan and a debt-to-asset ratio of 77% (compared to industry averages of 45%-58% for Sanlu and Mengniu).
- Inefficient Capacity: The utilization rate of its liquid milk production capacity is only 58.3%, while that of milk powder is 51.8%, indicating underutilization of resources.
- Dividend Disputes: While the company needs to raise funds for listing, it has distributed a total of 2.6 billion yuan in dividends from 2023 to 2025 (mostly to founders and controlling shareholders). Regulators will question why it distributes cash when it is in such financial distress.
These issues are hindering its listing process.
3. Why Is Yuehuoxing So Popular in Milk Tea Shops?
The success of Yuehuoxing is not accidental but results from a combination of technological innovation and strategic partnerships:
- Technological Advancements: The breakthrough in sterilization technology extended the shelf life of low-temperature fresh milk, making it suitable for nationwide distribution.
- Milk Tea Shop Partnership: Milk tea shops use Yuehuoxing, with staff pouring the milk directly for customers, which builds trust and perception of quality. Social media platforms like REDnote and Douyin have also promoted the product, creating a positive consumer image.
- Mutual Boost between B2B and B2C Channels: The popularity of Yuehuoxing in milk tea shops drives sales in supermarkets, and vice versa, forming a cycle that enhances its overall market presence.
4. Limited Capital: The PE Exit Window is Approaching
Junlebao attracted investment from Sequoia, SpringHua, Hillhouse, and other firms with a typical investment period of 5-7 years. Six years have passed, and it's time for them to exit (e.g., by selling their shares after the company goes public). The delay in listing is concerning for these investors, as they may lose their returns if Junlebao fails to go public on time.
5. Challenges Faced by Regional Dairy Companies
Regional dairy companies often face difficulties in listing due to smaller scales, limited brand recognition, and irregular financial practices. Although Junlebo has achieved national prominence, it still faces significant hurdles:
- Compliance Issues: Regulatory scrutiny of historical equity changes, high debt levels, and dividend policies must be addressed before approval.
- Sustainable Growth: The future lies in low-temperature milk, but Junlebo's low capacity utilization and high debt levels raise concerns about its ability to sustain growth and profitability.
If Junlebo can resolve these issues, it could become one of the few companies to break the "difficult-to-list" barrier. However, any delays may lead to a loss of investor patience and impact its development.
In summary, Junlebao has strong products (Yuehuoxing and Jianchun), but it must clear its historical burdens and financial challenges to successfully list. Its success depends on its ability to quickly address these issues and satisfy both investors and regulators.