Assessment of Data Compliance Risks and Governance Level in Proya's Hong Kong IPO

Proya encountered the “four soul-searching questions” from the Securities and Futures Commission during its Hong Kong IPO process, involving the following key compliance areas [1]:

The prospectus shows that the company’s business involves the boundary of foreign investment access policies, and regulators require a clear explanation of whether it touches the negative list restrictions.

Lack of transparency in data management has become a key focus of regulators. In the digital economy era, consumer data collection, storage, and cross-border transmission must strictly comply with regulations such as the Personal Information Protection Law and Data Security Law.

In 2025, its wholly-owned subsidiary Zhejiang Meiligu was fined CNY 200,000 for false advertising. When promoting the “Double Anti-Aging Essence 2.0”, it mislabeled the “component solution addition ratio” as “pure substance content”, omitting the word “solution” to mislead consumers [1]. This incident exposed obvious loopholes in the internal control system.

Regulators require an explanation of whether the raised funds involve overseas investment and approval procedures. The company is actively expanding into overseas markets (e.g., investing in Florasis, establishing a Paris branch). If cross-border fund flows do not go through compliance procedures, it may become an obstacle to listing [1].

---

[0]:

Indicator Dimension	Performance Characteristics	Risk Assessment
Profit Quality	Aggressive accounting policies, low depreciation/capital expenditure ratio	Medium-high risk
Debt Risk	Low risk, controllable financial leverage	Low risk
Growth Structure	Sales expense ratio exceeding 42%, R&D investment less than 2%	Structural imbalance
Internal Control Level	Frequent violations by subsidiaries, advertising compliance out of control	High risk

• “Marketing-heavy, compliance-light” model
  : Neglected compliance system construction during high-speed expansion
• Insufficient management stability
  : Core management team overhauled; “second-generation entrepreneurs” took over amid performance decline
• Weak internal control mechanism
  : Frequent violations by subsidiaries reflect insufficient group control capabilities

---

The company is facing its first quarterly performance decline since listing [1]:

Indicator	Actual Value	Market Expectation	Deviation
EPS (Q3)	$0.58	$0.73	-20.58%
Revenue (Q3)	$1.74 billion	$2.02 billion	-14.24%

Stock price performance is also under pressure: down 17.36% in the past year and 42.74% cumulatively over three years [0]. The performance inflection point and IPO regulatory pressure form a double test.

---

1. High compliance risk
   : Regulatory inquiries expose systematic governance defects; focus on rectification implementation
2. Internal control defects
   : Subsidiary violations reflect insufficient group control capabilities
3. Doubtful growth sustainability
   : Over-reliance on marketing-driven growth faces transformation pressure
4. Management change risk
   : Core management overhaul may affect strategic execution continuity

• Controllable debt risk and relatively stable financial fundamentals
• Leading market share (ranked first among local cosmetics groups for four consecutive years)
• Stable industry position with brand moat

---

The core challenge facing Proya’s Hong Kong IPO is not only the rectification of compliance issues but also a fundamental shift in governance philosophy.

[1].

For investors, focus on:

• Quality of regulatory inquiry responses and rectification measures
• Progress in improving internal control systems
• Compliance path for overseas business expansion
• Management stability and strategic execution continuity

The capital market never rejects flawed enterprises, but it will never shelter companies that refuse to correct. Whether Proya can understand that “compliance is a prerequisite for listing, not an option” will determine if it can become a benchmark case for domestic brands going overseas.

---

[1] Eastmoney.com - Proya’s Hong Kong IPO Suddenly Faces “Four Soul-Searching Questions”, Domestic Cosmetics First Stock Meets Compliance Exam (https://caifuhao.eastmoney.com/news/20260104095822593776290)