Valuation Risk Analysis of Yingshi Holdings' Infant Food Business

Based on the information provided, I will analyze the valuation risk issue of Yingshi Holdings’ infant food business.

• The average gross margin of the infant food industry is usually in the range of 35%-45% [1]
• A gross margin of 42% is above the industry average, indicating that the product has a certain market pricing power
• High gross margins may come from brand premium, channel advantages, or product differentiation

• R&D investment in the infant food industry is generally low, averaging 1.5%-3% [1]
• An R&D ratio of 1% is lower than the industry average, which may limit long-term product innovation capabilities
• Against the background of stricter food safety regulations, insufficient R&D investment may increase compliance risks

1. The infant food track has high growth certainty and benefits from demographic changes
2. A 42% gross margin shows strong profitability
3. Branded infant food enjoys a certain valuation premium

1. Insufficient R&D investment
   may affect product upgrades and new product reserves, and long-term competitiveness is questionable
2. Increased industry competition
   , leading players such as Feihe and Yili continue to squeeze the living space of small and medium-sized brands
3. Channel transformation risk
   , the increase in the proportion of online channels may compress gross profit margins
4. Uncertainty in regulatory policies
   , policies such as the registration system for infant formula milk powder have a significant impact

Company	Gross Margin	R&D Ratio	P/E Ratio
Industry Leader	45-55%	3-5%	15-25x
Yingshi Holdings	42%	1%	To be determined

• If Yingshi Holdings’ IPO valuation exceeds the industry average P/E ratio of 20x, overestimation risks need to be watched out for
• Low R&D investment may be reflected as a “growth discount” in valuation models

1. Short-term
   : A 42% gross margin supports a reasonable valuation premium, but market sentiment needs to be watched
2. Medium to long-term
   : Low R&D investment may limit the valuation ceiling; it is recommended to pay attention to R&D-related investment arrangements in subsequent fundraising projects
3. Risk Tips
   : Focus on food safety incidents, channel transformations, and policy regulatory changes

From the perspective of gross margin alone, the valuation has certain support, but the obviously low R&D investment does constitute a hidden concern for valuation. It is recommended that investors remain cautious when participating in the IPO and focus on reviewing the company’s long-term competitiveness and R&D strategic planning.

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[1] Infant Food Industry Research Report - Eastmoney Securities (http://data.eastmoney.com)