Following a 300 million yuan loss last year, the company expects to continue losing 28-32 million yuan in the first half of this year.

LANCANG TEA, hailed as the "first Pu-erh tea stock," is experiencing its darkest period since going public. On August 8, LANCANG TEA released a profit warning, forecasting that for the six months ending June 30, 2025, the group's revenue would be approximately 117-120 million yuan, representing a year-on-year decline of 38.5% to 40.0%. The company expects a net loss attributable to owners of 28-32 million yuan.

This continues the dismal performance from 2024, when the company suffered a massive loss of 308 million yuan, wiping out three years of profits. Influenced by the profit warning, LANCANG TEA's shares fell 2.36% to close at HK$2.89 on August 8. As of August 18, the company's stock price closed at HK$3.02, remaining near bottom levels.

Notably, the company experienced dramatic management changes at the beginning of the year. Wang Juan, one of the core founders and joint controlling shareholders, was removed from her executive director position through a shareholder proposal and subsequently resigned as general manager. With Zhou Xinzhong, a shareholder with experience in taking Baoxiniao public, taking the helm, the market is watching whether this new leader can guide LANCANG TEA through its current crisis.

**Immediate Post-IPO Struggles with 300 Million Yuan Loss Last Year**

According to public information, LANCANG TEA's history dates back to 1966, when founder Du Chunyi came to Jingmai Mountain in Yunnan Province as a first-term student in a tea training program and began his tea-making career. In 1998, Lancang County Ancient Tea Co., Ltd. (predecessor of LANCANG TEA) was established and began operating the "LANCANG TEA" brand.

From a fundamental perspective, this nearly 60-year-old tea company, while having weathered historical changes, has not demonstrated the "stability" expected of an established enterprise.

LANCANG TEA, crowned as the "first Pu-erh tea stock" on the Hong Kong Stock Exchange, had made multiple attempts at going public. In July 2020, it submitted its prospectus to the A-share market alongside China Tea Company Limited, and even secured a listing hearing opportunity in June 2021. However, just before the review, the company suddenly withdrew its application.

Subsequently, it turned to the Hong Kong market. On May 30, 2022, LANCANG TEA submitted its application to the Hong Kong Stock Exchange. In February 2023, LANCANG TEA again submitted its application to the HKEX for a main board listing. On December 22, 2023, LANCANG TEA successfully listed on the HKEX under the halo of being the "first Pu-erh tea stock," becoming the only tea company to successfully go public in recent years.

Unexpectedly, the first complete accounting year after listing resulted in massive losses. The 2024 annual report revealed that the losses were far greater than anticipated. In 2024, LANCANG TEA achieved revenue of 361 million yuan, a significant year-on-year decrease of 31.48%, with losses reaching 308 million yuan, wiping out the total profits of the previous three years. From 2021 to 2023, the company's net profit attributable to shareholders was 131 million yuan, 72 million yuan, and 80 million yuan, respectively.

In the annual report, the company explained that the revenue decline resulted from multiple factors including the overall environment, channels, and market competition.

**Dual Crisis of Channel Loss and Inventory Backlog**

As a Pu-erh tea company with nearly 60 years of history, LANCANG TEA has long relied on distributor channels. From 2019 to 2023, revenue from distributor sales consistently accounted for 70%-80% of total revenue. In 2024, distributor channels still contributed over 50% of revenue, generating 181 million yuan, down 52.3% from the previous year. Although still contributing over half of revenue, the foundation of its offline channels has clearly weakened.

By year-end, the number of distributor stores had fallen to just 492, a sharp reduction of 56 stores within a year. Direct sales channels also suffered, with revenue declining 18.1%, putting the entire traditional sales network under pressure.

With offline operations struggling, the company gradually expanded its online business. In 2024, it invested 37.7 million yuan in real money, with online promotion and service fees surging 67.7% year-on-year. During the same period, online revenue reached 79.1 million yuan, growing only 11.4% year-on-year.

A more severe crisis lurks in the warehouses. From 2020 to 2024, LANCANG TEA's inventory grew annually from 470 million yuan to 903 million yuan, accounting for 67% of total assets. Inventory turnover days increased from 1,326 to 1,811 days, meaning inventory goods need to be stored for nearly five years before being sold.

The increasingly heavy inventory and turnover pressure may increase LANCANG TEA's risk of inventory impairment, thereby undermining the company's profitability. Large amounts of inventory sitting in warehouses while requiring continuous procurement investment poses a significant test for the company's capital resources.

In terms of cash flow, LANCANG TEA is also increasingly strained. In 2024, operating cash flow showed a net outflow of 108 million yuan, with investment activities showing a net outflow of 98.642 million yuan. Cash and cash equivalents on the balance sheet decreased to 65.37 million yuan, while short-term interest-bearing liabilities reached 231 million yuan.

Meanwhile, the company's receivables increased from 19.056 million yuan to 90.23 million yuan. The annual report disclosed that accounts receivable collection from distributors was slowing down.

To alleviate inventory pressure, the company was forced to adopt discount strategies to clear inventory, causing gross profit margin to fall from 67% to 52%. This 15 percentage point decline directly eroded profit margins.

Under the dual pressure of channel loss and inventory accumulation, this established tea company is falling into an unprecedented operational crisis.

**Management Upheaval: A Self-Rescue Signal?**

Against the backdrop of sharply declining performance, shareholders began planning a leadership change. On January 3, LANCANG TEA announced that the board had received a temporary proposal from shareholders requesting the removal of Wang Juan from her executive director position at the upcoming extraordinary general meeting.

The proposal directly pointed to the mismatch between Wang Juan's management philosophy and the company's development needs under current market conditions, considering her "unable to match the company's business development at this stage."

On January 5, Wang Juan resigned from her general manager position citing health reasons. This veteran, who joined as a distributor in 2007, had headed the marketing center for over a decade and was a core figure in the company's listing structure.

According to the prospectus, in LANCANG TEA's post-listing shareholder structure, Du Chunyi, Shi Ailing (Du Chunyi's daughter), Shi Yue (Du Chunyi's spouse), Wang Juan, and Guangzhou Tiansu (60% Wang Juan, 40% Zhang Muheng) were parties acting in concert, with Wang Juan being one of the joint controlling shareholders. Currently, Wang Juan remains a major shareholder of LANCANG TEA, holding approximately 9.915% of shares.

On May 13, LANCANG TEA announced significant personnel changes, appointing Zhou Xinzhong as general manager and executive director, taking full responsibility for operational management. This new leader was already one of the company's important shareholders, with impressive professional credentials - he worked at Baoxiniao Group from 2005 to 2017, serving as director and chairman, during which he led Baoxiniao's listing process and successfully introduced and incubated the new brand HAZZYS.

Currently, with the distributor system in disarray and the inventory crisis unresolved, the sudden change in core management makes the transformation path for this established tea company even more uncertain. Whether the new leader can successfully guide LANCANG TEA through the storm remains to be seen, with the market holding its breath in anticipation.