Daily Brief China: SHEIN Global Holdings, Yuen Kee Food Group, Harbin Yuyantang Traditional Chinese Medicine Outpatient Group, Hand Enterprise Solutions, Changzhou Xingyu Automotive Lighting Systems, Shenzhen Han’s CNC Technology, Shenzhen Yueshi Holding, SMC Electric, COSMOPlat IoT Technology and more

• New regulations affecting SHEIN and other retailers are becoming visible on the horizon
• We believe coming changes will hit SHEIN and its peers harder than traditional retailers
• We look at California’s SB 707 law as an illustrative example of new challenges facing SHEIN

• Yuen Kee Food Group is the largest Chinese-style quick service restaurant (QSR) company in China by number of stores, serving dumplings, wontons, and related products.
• The company was the largest Chinese-style QSR by stores as of December 31, 2025, ranking 3rd with 0.7% market share in 2025 GMV.
• Revenue was RMB2,795,104 thousand in 2025, with profit for the year at RMB198,740 thousand and total assets of RMB2,043,474 thousand as of May 31, 2026.

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• A weekly summary of key developments in ECM and Event-Driven names tracked by us in Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Thailand, Korea, India, and Chinese ADRs.
• ECM developments: SHEIN Global Holdings (SHEIN HK) and Manipal Health Enterprises Ltd (1217834D IN) IPOs.
• Event-Driven developments: Future Corporation (4722 JP), Kakaku.com Inc (2371 JP), Tamron Co Ltd (7740 JP), Australian Strategic Materials (ASM AU), Perpetual Ltd (PPT AU). 

• Pure Self-Pay Model vs. Public Alternatives: Harbin Yuyantang operates an out-of-pocket model that does not participate in public medical insurance (GHI). While this shields the company from state-driven price caps, Volume-Based Procurement (VBP), and DRG/DIP cost controls, it exposes them entirely to consumer discretionary spending volatility and regulatory risks around the “以药养医” (using medicine sales to subsidize healthcare services) model.
• High Margin, High Attrition Unit Economics: Yuyantang’s high gross margin (62.5% in 2025) is driven by customized TCM decoction pastes (膏剂), where they hold the top national market share of 8.4%. However, their reliance on full-time employed doctors has led to a high physician turnover rate (26.1% in 2025), presenting a stark contrast to Gushentang’s capital-light, part-time “multi-site practice” model.
• Aggressive Capital Expansion and Liquidity Risks: The network’s rapid expansion from 14 clinics in 2023 to 59 in May 2026 has been funded almost entirely through operational cash flow and unpaid operational obligations, resulting in consecutive net current liabilities (RMB 15.10 million as of May 31, 2026). The plans to open 155 to 170 more clinics through 2029 will stress liquidity, especially given a 57.2% year-on-year drop in operating cash flow in early 2026.

• Strategic Evolution through “Active Slimming”: Hand has improved its consolidated gross margins to 35.67% (or 34.8% on an IFRS basis) in 2025 by actively contracting its legacy foreign ERP implementation business (declining 4.85% to RMB 1.015 billion) in favor of higher-margin proprietary solutions. This represents an active retreat from a highly competitive, low-margin space rather than a direct competitive victory.
• Hidden Balance Sheet & Compliance Vulnerabilities: Hand’s margin improvements are partly supported by tight human capital management, characterized by a massive surge in subcontractor costs (RMB 520 million in 2025, or 23.3% of sales costs) and a cumulative social security underpayment of RMB 155 million from 2023 through early 2026, creating severe regulatory exposure up to three times the deficit.
• Enterprise AI Monetization Obstacles: While Hand’s AI business grew to RMB 310 million in 2025, the business remains heavily weighted toward standard, man-day system integration projects. The transition to highly-valued software subscription modules faces structural friction because large Chinese enterprises resist recurring SaaS licensing models, preferring customized, one-time-payment architectures.

• Smart System Verticalization is the Real Margin Savior: While basic LED assemblies have commoditized to under 500 RMB, driving severe price-erosion pressure, Xingyu has defended its gross margin around 19.67% by aggressively verticalizing into light controllers, actuators, and software. Designing its own control units—such as for the Aito M9—allows it to capture higher unit economics than legacy Tier 1s who outsource these components to Tier 2s.
• HK IPO is a Structural Bypassing of Capital Controls, Not a Cash Squeeze: The company’s recent July 29, 2026 Hong Kong listing application is not driven by a domestic funding crisis, given their strong domestic cash flow with Q1 2026 operating cash flow at 421.06 million RMB. Rather, it represents a structural bypass to establish an offshore capital pool, allowing Xingyu to fund aggressive global expansion in Europe and North America without getting snarled in Beijing’s capital export regulations.
• The Serbian Plant is a Necessary, but Costly Tariff Hedge: Operating in Nis, Serbia, generated 430 million RMB in revenue in 2025 but remains structurally loss-making. The facility serves as an essential regional backdoor into the EU, bypassing direct tariff headwinds, yet it suffers from low local-content supply chains, severe local engineering talent bottlenecks, and agonizingly slow OEM validation cycles that drag heavily on return on investment (ROI).

• AI Infrastructure Boom Driving Explosive Demand: Han’s CNC is experiencing unprecedented demand, with first half 2026 net profit forecasted at RMB 900 million to 1 billion (up over 240% year-on-year). This structural tailwind is driven by high-multilayer boards, HDI, and mSAP class carrier boards for AI servers and 1.6T transceivers.
• The Core Competitive Moat and Gaps: Han’s CNC dominates domestic market share, but a clear technical gap persists against global leaders. While Han’s mechanical drillers (±4μm precision) compete on price against Schmoll (±3μm precision), its laser drilling equipment relies heavily on imported key optical modules to narrow the gap with Mitsubishi and Via Mechanics.
• High Key-Component Import Dependencies: Despite efforts in domestic substitution, critical high-value components remain highly vulnerable. Sieb & Meyer AG remains the sole supplier of CNC systems for high-end mechanical drillers, and high-speed spindles above 200k RPM are still largely sourced from foreign providers like Westwind, leaving the margin pool concentrated upstream.

• SaaS as a Trojan Horse, Not a Revenue Driver: While Yueshi’s digital solutions carry high gross margins of over 90%, they contribute less than 1% of total revenue (0.7% in 2025). The software serves primarily to lock in operators and capture transaction data to power the capital-intensive, low-margin trading business.
• Working Capital Strain from Rapid Volume Scaling: The transition to physical trading of cold-chain agricultural products has driven a massive volume expansion to 200,000 tons in 2025, but at the cost of chronic operating cash flow deficits (expanding to a net outflow of RMB 315.00 million in the first four months of 2026), heavily squeezing liquidity.
• Low Gross Margin Profile Restricts True Profitability: Despite posting an adjusted net profit of RMB 35.88 million in the first four months of 2026, Yueshi’s core trading gross margins remain stuck in the low-2% range (2.60% in early 2026), meaning its financial viability remains highly sensitive to upstream meat/shrimp price fluctuations and working capital efficiency.

• SMC Electric operates a dual-pronged business model, manufacturing rechargeable electric tools for overseas brands (Non-SMC segment) and selling electric fans under its own ‘SMC’ brand, with the Non-SMC segment being the primary revenue driver.
• The company exhibits a concerning financial trajectory, with multi-year declines in revenue, net income, and cash flow, contrasting sharply with a recent surge in market capitalization. A profit warning for the first half of 2026 signals continued headwinds from weaker demand and higher costs.
• Valuation appears stretched, with key metrics like P/E and P/B ratios trading at a significant premium to peers, which is inconsistent with the company’s negative growth track record and recent profit warnings.

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• COSMOPlat IoT Technology Co., Ltd. provides industrial intelligence products and solutions for intelligent transformation across various industrial sectors.
• The company ranked first in China for platform-based industrial data intelligence solutions and edge intelligent controllers by 2025 revenue.
• COSMOPlat IoT Technology reported a net profit margin of 1.7% in 2023.

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