Yik Wo International Holdings Limited

All figures are RMB million and FY ends 31 December. Source: AR2025 Financial Summary (pages 6–8) unless otherwise noted. EBITDA, cash flow and certain balance-sheet line items are from S&P Global Market Intelligence via StockAnalysis. Ratios are analyst-computed.

Income statement

Notes on the table:

Weighted shares: are per S&P.

EPS: equals basic because no dilutive instruments are disclosed. Sina Finance reports FY2025 basic EPS of -1.00 HK cents and FY2024 of +3.93 HK cents, consistent with the derived RMB figures after FX translation.

Margins and growth

Revenue CAGR:

• FY2021–FY2025: -9.2% p.a.

• FY2021–FY2024 (pre-collapse): +5.7% p.a.

Commentary — income statement. The five-year record divides cleanly into two regimes.

FY2021–FY2023: steady growth: Revenue compounded at roughly 10–12% a year to a peak of RMB323.3 million. Gross margin was remarkably stable at 28.9–29.3%, which suggests disciplined cost pass-through on PP resin and a defensible regional brand.

Operating margin, however, was already eroding — from 18.3% to 13.0% — as the Group layered on public-company costs. Administrative expenses nearly doubled from RMB15.9 million to RMB30.2 million. Two other cost sources also weighed: e-commerce build-out costs (selling expenses rose from RMB12.2 million to RMB20.1 million) and amortisation of acquired intangibles (app development costs and trademark).

The effective tax rate drifted above the PRC statutory 25% (to ~34%) because losses and expenses at the holding company and e-commerce entities are non-deductible against manufacturing profits.

FY2024: the first inflection: Revenue declined 4.2%, but the Group trimmed selling and admin costs and kept net profit flat at RMB27.2 million. The non-operating drag from the film investment (fair value loss of RMB4.2 million) and impairments (RMB4.0 million) became visible.

FY2025: the break: Revenue fell 42.5% to RMB178.2 million. Management attributes the fall to:

• intense competition;

• reduced post-COVID demand for plastic boxes;

• higher US tariffs depressing PRC demand for disposable plastic products (an indirect effect, since the Group's own revenue is 100% domestic);

• a market preference shift to biodegradable products; and

• provincial bans on non-degradable plastics (Hainan and Shanghai cited) (AR2025 MD&A).

Gross margin fell 4.3 percentage points to 25.0%. The cost base proved sticky: administrative expenses rose 30.6% to RMB33.4 million, which management ascribes mainly to higher R&D for the product transition. Combined with a further RMB5.4 million fair value loss on the film asset, the result was a RMB6.8 million net loss — the first since listing.

Data integrity flag. The Chairman's Statement in AR2025 attributes the loss substantially to the Group's products being "included in the National Centralised Drug Procurement programme". This programme is a PRC pharmaceutical pricing policy with no evident application to food containers. The MD&A gives the coherent explanation summarised above. The anomaly appears to be a drafting error, possibly a template carried over from another issuer.

H1 2026 update (IR2026).

• Revenue RMB60.401 million (-44.85% YoY).

• Loss attributable to owners RMB8.599 million (H1 2025: profit RMB8.951 million).

• Basic loss per share RMB1.09 cents.

• S&P trailing-twelve-month data to 30 June 2026: revenue RMB129.06 million, gross margin 20.6%, operating margin -16.9%, net loss RMB24.32 million.

The run-rate has therefore deteriorated further. Half-year revenue has fallen from ~RMB155 million (H1 2024) to ~RMB60 million (H1 2026), a ~61% decline in two years.

Balance sheet

Sources: totals per AR2025; line items per S&P via StockAnalysis and IR2025.

Notes:

• The FVTPL film investment was disposed of in March 2026.

• The "short-term debt" line represents interest-free promissory notes from the June Pictures acquisition, repayable on film release.

Latest (30 June 2026, S&P via StockAnalysis, HKD-translated). Cash ~HK$264.9 million, total debt ~HK$6.4 million, net cash ~HK$258.5 million (~HK$0.31 per share), book equity ~HK$327.1 million (~HK$0.40 per share), working capital ~HK$287.2 million. The RMB-equivalent interim balance sheet was not captured in the sources reviewed.

Commentary — balance sheet. The balance sheet is the Group's defining strength and the core of any value argument.

• Cash grew roughly 2x from RMB107.6 million (FY2021) to RMB211.0 million (FY2025). This was funded entirely by retained operating cash flow; there have been no dividends and, before 2026, no follow-on equity.

• There is no bank borrowing, no charge on assets and no contingent liability (AR2025).

• Total "debt" consists only of lease liabilities and interest-free acquisition notes.

The equity jump in FY2022 (+RMB68.2 million) reflects consideration shares issued for June Pictures and Youpinhui rather than organic accumulation.

FY2025 shows a sharp working-capital unwind as the business shrank:

• receivables halved to RMB29.2 million;

• inventory fell to RMB5.0 million;

• trade payables collapsed from RMB27.9 million to RMB3.7 million.

The payables collapse is the most notable movement. It implies suppliers were paid down sharply — consistent with lower purchasing volume — and it removed a free financing source.

Distributable reserves at the Company level were RMB48.4 million at 31 December 2025 (AR2025). This is well below consolidated cash. Most cash sits in RMB with PRC banks and is subject to foreign-exchange controls on remittance (IR2025 note 19), which constrains its availability for distributions to offshore shareholders.

Cash flow

Source: S&P via StockAnalysis; cross-checked to IR2025 for H1 2025.

Half-year cash flow (IR2025):

• H1 2025: operating cash flow RMB11.783 million; capex RMB2.625 million.

• H1 2024: operating cash flow RMB7.617 million; capex RMB2.555 million.

TTM to 30 June 2026 (S&P):

• Operating cash flow ~RMB1.45 million, implying H1 2026 operating cash flow of roughly -RMB3.7 million (derived).

• FCF approximately -RMB10.5 million.

• Equity issuance inflow RMB7.92 million (the March 2026 subscription).

Commentary — cash flow. Cash conversion was historically excellent: OCF/net income exceeded 1.2x in most years, and FCF averaged ~RMB35 million over FY2021–FY2024. FY2025 OCF of RMB17.0 million flattered the economics because it included a RMB7.2 million working-capital release. On a TTM basis the business is now roughly cash-neutral before capex and modestly cash-negative after it. Capex rose to RMB12.1 million in FY2025, presumably including early biodegradable-related equipment.

Returns and efficiency ratios (analyst-computed)

Notes on methodology:

• Negative net debt/EBITDA indicates a net cash position.

• The FY2025 interest coverage figure is not meaningful because operating profit was negative.

• AR2025 itself reports a current ratio of 14.7x and a "gearing ratio" of 5.5% (FY2024: 16.1%). The company defines gearing as debts divided by total equity, where IR2025 states "debts" include trade and other payables plus lease liabilities. This explains the gap versus the narrower debt definition above.

• S&P reports TTM (June 2026) ROE of -8.38%, ROA of -4.25%, ROIC of -36.81% (S&P methodology), interest coverage of -120.8x and an Altman Z-score of 4.27.

Commentary — ratios. Optically, ROIC was very high through FY2024. This is because invested capital net of the cash pile is tiny (~RMB85–125 million). It indicates that the operating asset base (one leased factory, ~RMB40 million of PP&E) earned strong returns while the market permitted.

ROE fell steadily from 21% to 9% before turning negative. Two forces drove this: compression of operating margin, and cash hoarding that dilutes equity returns.

The FY2025 cash conversion cycle lengthened to 63.5 days. This was driven not by receivables (DSO actually improved) but by the near-elimination of supplier credit (DPO fell from 46.5 to 10.0 days). Analysts should monitor whether this reflects tighter supplier terms on a weakened credit profile, or merely timing.

Management guidance

No numeric guidance is provided. Qualitatively, management expects a "more challenging business environment in the near future" because of competition from new biodegradable products (AR2025). The strategic answer is a preliminary ~RMB268m biodegradable factory plan, plus continued development of the Yihe Tianxia retail business.

Consensus

No analyst coverage. The market-implied view, at 0.23x P/B and a negative EV, prices in continued losses and/or no realisable value for minority holders from the cash pile.

Bull case

1. Asset backing. Net cash of ~HK$258.5m (~HK$0.31 per share) and book value of ~HK$0.40 per share, versus a HK$0.090 price (S&P, Oct 2026), provide a large theoretical margin of safety. Any credible capital return — special dividend, buyback or tender — would re-rate the shares sharply.

2. Mix upgrade. Customised products more than doubled in H1 2025 (+110%). If the Group stabilises the legacy base and scales customised and biodegradable SKUs, gross margin could recover toward the historical ~29% on a smaller but higher-quality revenue base.

3. Optionality from regulation. Bans on non-degradable plastics create replacement demand. A debt-free balance sheet lets the Group build compliant capacity without leverage at a time when smaller rivals cannot.

Bear case

1. Terminal decline of the core product. Revenue fell from ~RMB155m (H1 2024) to ~RMB60m (H1 2026), and TTM operating margin is -16.9%. Every half-year of losses erodes the cash backing. The legacy PP business may be in irreversible decline.

2. Capital misallocation. The record is weak:

   • the film investment was bought from the Chairman for RMB20.6m and sold for RMB15m after ~RMB10.6m of fair value losses;

   • e-commerce intangibles have been impaired and segment revenue has collapsed;

   • management now proposes RMB268m of capex — more than its total cash — into a market where it acknowledges incumbents are stronger.

3. Governance and minority-access risk.

   • The controlling shareholder sold ~20% of the company in H2 2025.

   • Equity was issued at HK$0.12, well below book value.

   • AR2025 contains material disclosure errors.

   • Cash is held onshore in RMB, with Company-level distributable reserves of only RMB48.4m. Together these suggest minority shareholders may never realise the "net cash" value.

Key catalysts and monitorables (next 12 months)

Analyst verdict

Yik Wo International is a textbook "net-net with a governance discount".

On the surface, the numbers are arresting. A company with ~HK$258 million of net cash, essentially no debt and ~HK$327 million of book equity trades for ~HK$74 million. That is less than a third of its cash and under a quarter of its book value. For most of its listed life it also generated healthy free cash flow — roughly RMB35–48 million in its better years — from a modest, single-site plastics operation.

The deeper reality is less forgiving. The core product, non-degradable PP food containers, faces regulatory and consumer obsolescence. Half-year revenue has fallen by roughly 61% in two years, and the business has moved from comfortable profitability to sustained losses. Gross margin is now around 20% and still falling.

Management's diversification record has destroyed value:

• a film stake acquired from the Chairman and sold below cost;

• an e-commerce venture whose revenue fell 90% in a year.

The proposed answer — a ~RMB268 million biodegradable factory — would consume more than the entire cash balance, with no disclosed site, timetable, funding plan or evidence of competitive edge against larger fibre and biodegradable specialists.

Governance signals reinforce the discount. The controlling shareholder sold about a fifth of the company in late 2025. New shares were issued at HK$0.12, roughly 30% of book value. The independent board turned over completely within eight months. The 2025 annual report contains plainly erroneous explanations of the Group's losses. Much of the cash is onshore RMB, while distributable reserves at the listed-company level total only RMB48 million.

Verdict: the equity is a speculative deep-value situation, not an investable operating story. Upside depends almost entirely on a capital-return event or credible restructuring, neither of which has been signalled. Absent such a catalyst, continued operating losses and possible dilutive or unproductive capex will likely erode the asset backing faster than the market discount closes. Stance: avoid / monitor for capital-allocation catalysts.