In-Depth Analysis Report on Goodwill Impairment Risk of Ruipai Pet Healthcare

Based on the above research materials, I will provide you with a

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According to the prospectus of Ruipai Pet Healthcare, the company’s key financial data as of June 30, 2025 are as follows:

Indicator Item	Data Value	Risk Rating
Book Balance of Goodwill	RMB 1.792 billion	Extremely High
Proportion of Total Assets	34.6%	Extremely High
Proportion of Non-Current Assets	68.4%	Extremely High
Proportion of Acquired Hospitals	78% (428/548)	Extremely High
Cumulative Loss Over Three Years	RMB 370 million	High
Redemption Liabilities	RMB 2.822 billion	Extremely High

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Ruipai Pet Healthcare’s scale expansion highly relies on a “buy, buy, buy” model. According to the Zhuoshi Consulting Report, as of June 30, 2025, among the company’s 548 operating pet hospitals,

, accounting for as high as 78% of the total[1][2]. This ratio is extremely high in the consumer goods chain industry.

The company pioneered the “Veterinary Development Partners (VDP)” model, typically acquiring only 60% equity in acquisitions, with the original team retaining 40% of the shares[3]. Although this model is relatively moderate in terms of capital occupation (compared to full acquisitions), it also lays hidden dangers of integration failure.

Based on the prospectus data, the book value of Ruipai Pet Healthcare’s goodwill shows a fluctuating trend at a high level[1][2]:

Time Node	Book Value of Goodwill (RMB 100 million)	Proportion of Total Assets	Proportion of Non-Current Assets
2022	1617	-	-
2023	1844	-	-
2024	1776	-	-
June 30, 2025	1792	34.6%	68.4%

: The RMB 1.792 billion goodwill scale is equivalent to 1.02 times the company’s full-year revenue in 2024, which means that if a one-time goodwill impairment occurs, it will directly erode the company’s entire annual revenue.

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According to the “Accounting Regulatory Risk Warning No. 8 - Goodwill Impairment” issued by the CSRC, listed companies should conduct impairment tests at the end of the year, and goodwill must be allocated to asset groups (combinations) before separate tests are conducted[4]. Typical triggering factors for goodwill impairment include[4]:

1. Continuous deterioration of cash flow or operating profit, or a significant shortfall from expectations at the time of goodwill formation
2. Overcapacity in the industry, and significant adverse changes in the degree of market competition
3. Significant adverse changes in the core team, which are difficult to recover in the short term
4. Changes in the objective environment leading to a significant increase in the market investment return rate

:

Trigger Factor	Specific Situation	Risk Level
Failure to Meet Performance Commitments	Cumulative loss of RMB 370 million over three years	High
Intensified Industry Competition	Top five institutions account for only 6.5% of the market share	Medium-High
Core Team Stability	Original team leads operations under the VDP model	Medium
Doubts About Industry Profit Model	Leading enterprises generally suffer losses or thin profits	High

The VDP model has the following in-depth problems, which directly affect the “synergy effect” assumption in goodwill impairment tests[3]:

• The headquarters only holds 60% equity, making it difficult to implement strong integration of acquired hospitals
• Acquired hospitals are “using the brand name but operating independently”, and are actually still run by the original team
• It is difficult to truly unify service standards and charging standards

• Consumers choose medical services more based on trust in individual doctors, rather than the Ruipai brand
• It is difficult to transfer customer stickiness of acquired hospitals to the Ruipai brand
• Brand premium capacity is limited, making it impossible to achieve scale effects

• Pet hospitals are highly dependent on the personal brands of doctors
• The original team, as minority shareholders, may exit at any time
• The loss of core doctors will directly lead to customer loss

Prospectus data shows that Ruipai Pet Healthcare closed 38 community hospitals in 2024, and closed another 23 community hospitals and 3 regional central hospitals in the first half of 2025[3]. Corresponding to this, the company accrued losses of RMB 12.58 million and RMB 10.37 million for closed hospitals in 2024 and the first half of 2025, respectively.

:

1. Quality of some acquisition targets is worrying
   : Closures due to failure to meet performance standards
2. High integration costs
   : Closure costs are directly recorded in profits and losses
3. Precursor to goodwill impairment
   : Store closures mean expected cash flow cannot be realized

The overall profit dilemma of the pet healthcare industry has exacerbated the risk of goodwill impairment[3][5]:

:

• In 2024, the average annual medical expenditure per dog/cat in China was only RMB 270
• Post-90s and post-00s account for 68% of pet owners, and their consumption decisions are prudent
• Pet healthcare satisfaction continues to decline (only 66.2% in 2024, a decrease of 4.6 percentage points compared to 2023)[1]

:

• Shortage of veterinary talents drives up labor costs
• Dependence on imports for drugs and high-end equipment
• The industry has not yet formed unified diagnosis and treatment standards, and price wars occur frequently

:

• In 2024, the industry’s CR5 was only 15.4%, highly fragmented
• Chain rate is 22%, approaching the ceiling
• The chain rate in mature markets (the US) is only 30%[3]

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In addition to goodwill impairment risk, Ruipai Pet Healthcare also faces pressure from huge redemption liabilities, which challenges the “going concern assumption” in goodwill impairment tests[1][2]:

Indicator	Data
Book Value of Redemption Liabilities	RMB 2.822 billion
Proportion of Total Liabilities	Over 60%
Changes in Book Value of Redemption Liabilities (2022-2024)	RMB 118 million, RMB 130 million, RMB 129 million

:

1. VAM (Valuation Adjustment Mechanism) Agreement Pressure
   : If listing fails, the company will face huge debt repayment pressure
2. Control Right Risk
   : May lead to the actual controller using equity to repay debts and changes in control rights
3. Distortion of Operational Decisions
   : The passive pattern of “listing for the sake of listing” deviates from the track of long-term sustainable development

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Scenario	Impairment Ratio	Impairment Amount (RMB 100 million)	Impact on Net Profit
Optimistic	10%	17.9	Current period loss expands by approximately RMB 170 million
Neutral	30%	53.8	Current period loss expands by approximately RMB 530 million
Pessimistic	50%	89.6	Current period loss expands by approximately RMB 890 million

• If the revenue growth rate of acquired hospitals is 10% lower than expected, the goodwill impairment pressure will increase significantly
• Referring to the experience of peer company New Ruipeng, low integration efficiency will accelerate goodwill impairment[3]

• If the CAGR of the pet healthcare industry drops from 12.6% to below 8%, the recoverable amount of goodwill will decrease
• The present value under the discounted cash flow model will decrease significantly

• If the risk-free rate rises leading to a 5% increase in WACC, the recoverable amount of goodwill will decrease by approximately 15-20%

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Goodwill impairment risk does not exist in isolation; it forms a vicious circle with the company’s compliance and operational risks:

According to public information, multiple stores under Ruipai have engaged in serious illegal operations[1]:

Time	Involved Store	Type of Violation	Penalty Amount
June 2025	Wuqing Branch of Tianjin Ruipai Anxin Pet Hospital	Use of counterfeit and inferior veterinary drugs	RMB 15,000
June 2025	Jinan Renuo Pet Hospital	Use of counterfeit veterinary drugs	RMB 20,000
September 2025	Hangzhou Ruipai Hongtai Huandong Pet Hospital	Violation of the “Regulations on Veterinary Drug Administration”	RMB 10,000

The Black Cat Complaint Platform shows that the number of complaints about Ruipai Pet Healthcare has exceeded 100, with core disputes including[1]:

• Misdiagnosis (diagnosis results inconsistent with subsequent follow-up visits)
• Non-transparent charging (single abdominal ultrasound costs RMB 550, which is RMB 200 higher than the market price)
• Exaggerating illness to induce consumption

The above compliance and service quality issues will cause the following chain reactions:

• Customer Churn
  : Improper complaint handling leads to customer loss
• Increased Customer Acquisition Costs
  : Need to increase marketing investment to make up for reputation losses
• Accelerated Goodwill Impairment
  : Customer loss is directly reflected in performance decline, triggering impairment tests

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Risk Dimension	Risk Level	Weight	Weighted Score
Goodwill Impairment Risk	Extremely High	35%	9.5
Redemption Liability Risk	Extremely High	25%	9.0
Integration Failure Risk	High	20%	8.0
Industry Profit Dilemma	High	15%	7.5
Compliance and Operational Risk	Medium	5%	6.0
Comprehensive Risk Rating	Extremely High	100%	8.3

:

1. Exercise Prudence
   : Goodwill impairment risk is extremely high, which may erode most of the company’s market value in one go
2. Post-Listing Performance
   : If listing is successful, closely track the results of goodwill impairment tests
3. Cash Flow Focus
   : Although operating cash flow is positive, it is insufficient to cover potential impairment shocks

:

1. Performance Commitments
   : The key is whether sustainable profitability can be achieved after listing
2. Store Closure Dynamics
   : Large-scale store closures may be a precursor to impairment
3. Management Stability
   : Changes in the core team will accelerate risk exposure

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The goodwill impairment risk of Ruipai Pet Healthcare can be summarized into the following core points:

1. Imbalance Between Scale and Quality
   : The 78% acquisition ratio means the company’s scale is built on a “buy, buy, buy” model, rather than organic growth
2. Inversion of Goodwill and Revenue
   : The RMB 1.792 billion goodwill is equivalent to the full-year revenue scale, and any impairment will have a devastating impact
3. Structural Defects of the VDP Model
   : Separation of control rights and operation rights leads to integration failure, making the “synergy effect” assumption of goodwill difficult to hold
4. Doubts About Industry Profit Model
   : The cumulative loss of RMB 370 million over three years proves that the pet healthcare industry has not yet found a sustainable profit path
5. Superimposed Pressure of Redemption Liabilities
   : The RMB 2.822 billion redemption liabilities and goodwill impairment risk form a dilemma of “double threats”

: The goodwill impairment risk of Ruipai Pet Healthcare is at an , and investors need to remain highly vigilant.

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[1] Money Week - Caishihui. “3-Year Loss of RMB 370 Million, Nearly RMB 1.8 Billion Goodwill Hanging Overhead, Ruipai Pet Healthcare Challenges HK IPO With ‘Shackles’” (https://finance.eastmoney.com/a/202601043607919572.html)

[2] Tencent News. “3-Year Loss of RMB 370 Million, Nearly RMB 1.8 Billion Goodwill Hanging Overhead, Ruipai Pet Healthcare Challenges HK IPO With ‘Shackles’” (https://view.inews.qq.com/a/20260105A02WTN00)

[3] 36Kr. “Pet Owners Can’t Afford to Support Pet Hospitals” (https://eu.36kr.com/zh/p/3628717277758725)

[4] New Era Securities. “Analysis of the Impact of Annual Report Goodwill Impairment Tests: Reducing the Risk of Concentrated Exposure to Goodwill Impairment in the Long Term” (http://pdf.dfcfw.com/pdf/H3_AP201812251279552855_1.pdf)

[5] Jiashe Consulting. “2025 - China Pet Healthcare Industry Status Report” (https://pdf.dfcfw.com/pdf/H3_AP202507201712315026_1.pdf)