Kidswant & Leyou Merger with RMB 780 Million Goodwill -- Evaluation Report on Integration Effect in North China Market

Based on the collected data and analysis, we now provide you with the complete evaluation report.

---

Kidswant launched the acquisition of Leyou International Business Group Co., Ltd. in July 2023, adopting a two-step strategy to complete the 100% equity acquisition[1]. In the first phase, it acquired 65% equity held by Leyou Hong Kong for RMB 1.04 billion, corresponding to an overall valuation of approximately RMB 1.6 billion for Leyou International. Based on the pricing with an evaluation appreciation rate of 227.93%, goodwill of RMB 780 million was ultimately formed[2]. After the transaction was completed in 2024, Kidswant invested a total of approximately RMB 1.6 billion to achieve full control of Leyou.

Founded in 1999, Leyou International is a well-established mother and child chain enterprise in the North China region. As of the end of 2022, the company operated 494 direct-operated stores and 50 managed franchise stores in North China and Northwest China, totaling 544 stores, and had high visibility and brand reputation in the industry[3]. Notably, Leyou’s revenue showed a downward trend before the acquisition: RMB 2.07 billion in 2021 → RMB 1.94 billion in 2022 → RMB 1.73 billion in 2023, reflecting the overall growth pressure faced by the maternal and infant industry.

Kidswant’s total goodwill has expanded rapidly under its merger and expansion strategy:

Acquisition Project	Goodwill Amount (RMB 100 million)	Proportion	Transaction Time
Leyou International Acquisition	7.8	40.4%	2023
Siyu Group Acquisition	~11.0	56.9%	2025
Other Small-Scale Acquisitions	~0.5	2.7%	2024
Total	19.32	100%	As of Q3 2025

⚠️

: The RMB 780 million goodwill from Leyou and the total goodwill of RMB 1.932 billion face potential impairment risks[1]. If the performance of the acquired target fails to meet expectations, goodwill impairment provisions are required in accordance with accounting standards, which will have a significant impact on the company’s profits. Currently, Leyou has continuously exceeded its performance commitments, and no impairment is needed for the time being, but 2025 is the final year of the performance commitment period, and the subsequent sustainability deserves attention.

Leyou International’s performance commitment execution is satisfactory:

Year	Committed Net Profit	Actual Achievement	Completion Rate	Status
2023	RMB 80 million	RMB 83 million	102%	✅ Exceeded
2024	RMB 100 million	RMB 104.5 million	105%	✅ Exceeded
2025	RMB 120 million	Projected RMB 115 million	-	To be Verified

Leyou International plays a pivotal role in contributing to Kidswant’s overall performance. In 2024, Leyou contributed RMB 104.5 million in net profit, accounting for

of Kidswant’s attributable net profit of RMB 181 million[4]. This means Leyou has become the “stabilizer” of Kidswant’s performance, with more than half of the company’s profit relying on this merged target.

After integration, the number of Leyou stores increased from 544 before the acquisition to 657 in the first half of 2024, representing a growth rate of 20.8%. The growth mainly comes from the rapid expansion of managed stores and franchise stores, which is also a much-needed growth tool for Kidswant. Leveraging Leyou’s franchise model, Kidswant has been able to penetrate sinking markets such as third- and fourth-tier cities[5].

Through the acquisition of Leyou, Kidswant’s layout in the northern China market has been effectively enhanced. In 2024 after the merger, the combined market share rose to approximately 7%, consolidating its position as the leading national maternal and infant retailer[2]. Previously, Kidswant’s stores were mainly concentrated in East China, Central China, South China and other regions, with relatively few layouts in northern China, and Leyou just filled this strategic gap.

Evaluation Dimension	Score	Key Indicators	Status
Performance Commitment Achievement	★★★★★	102% in 2023 / 105% in 2024	Exceeded
Revenue Stabilization and Recovery	★★★★☆	Recovered from RMB 1.73 billion to approximately RMB 2 billion	Positive Trend
Store Network Expansion	★★★★☆	544 → 657 (+20.8%)	Franchise Model Effective
Market Share Growth	★★★★★	Northern China market share rose to approximately 7%	Regional Leading Position Consolidated
Supply Chain Integration	★★★☆☆	Unified Procurement for Some Categories	In Progress
Member System Integration	★★★☆☆	Preliminary Sharing of Member Data	Insufficient In-Depth Integration
Organizational Structure Integration	★★★☆☆	Core Team Retained	Needs Continuous Optimization

1. Successful Strategic Positioning
   : Completed strategic layout in northern China market, filled the blank regions outside East China and South China, and achieved national coverage
2. Meeting Performance Commitments
   : Exceeded performance commitments for two consecutive years, with a cumulative completion rate of over 102% during the performance commitment period
3. Significant Profit Contribution
   : Contributed more than half of the company’s net profit, becoming the core support for performance
4. Store Network Expansion
   : Leveraged Leyou’s franchise model to promote sinking penetration in northern China market

1. High Goodwill
   : The RMB 780 million goodwill from Leyou and the total goodwill of RMB 1.932 billion face impairment risks, which will lead to one-time losses if performance fails to meet expectations
2. Decline in Per-Store Performance
   : The average annual revenue per store dropped from nearly RMB 26 million in 2018 to approximately RMB 2 million in the first three quarters of 2025, a decline of over 90%[1]
3. Insufficient In-Depth Integration
   : Synergies such as supply chain and member system have not been fully realized
4. Industry Downward Pressure
   : The overall scale of the maternal and infant industry is shrinking, and the number of newborns continues to decline

1. Goodwill Impairment Risk
   : If the performance of the acquired target fails to meet expectations, the RMB 1.932 billion goodwill may lead to one-time impairment losses, eroding profits
2. Performance Commitment Period Risk
   : 2025 is the final year of the performance commitment period, and the sustainability of subsequent performance is questionable
3. Debt Pressure Risk
   : Long-term borrowings amount to RMB 2.044 billion, with an asset-liability ratio of 64.26%, resulting in high financial leverage[4]
4. Industry Cycle Risk
   : The market size of the maternal and infant track is under pressure, and it is difficult to maintain long-term growth relying solely on the newborn demographic dividend

The integration of Leyou International by Kidswant in the North China market is

:

• Strategic Level
  : Completed national layout, filled the blank in northern China market, and increased market share to 7%
• Financial Level
  : Exceeded performance commitments and contributed more than half of the net profit
• Operational Level
  : Rapid expansion of store network, and the franchise model has achieved initial results

:

• Goodwill impairment risk remains the main financial hidden danger
• Integration depth needs to be strengthened, and synergies have not been fully realized
• The industry continues to face downward pressure, and new growth drivers need to be explored

Kidswant has realized the transformation from a “maternal and infant retailer” to a “family consumption service company” through mergers and acquisitions, and the Leyou merger is a key step in this transformation strategy. In the future, focus should be placed on the performance after the 2025 performance commitment period and the results of the goodwill impairment test.

---

[1] Lansha Consumer - “Kidswant’s ‘Merger Addiction’: RMB 1.9 Billion Goodwill, Can Buy Growth But Not the Future?” (https://caifuhao.eastmoney.com/news/20260116131422583027920)

[2] Sina Finance - “Kidswant’s Intensive Mergers Support Performance, Goodwill Reaches RMB 1.9 Billion, Long-Term Borrowings Surge 125% to RMB 2.044 Billion” (https://finance.sina.com.cn/roll/2025-12-22/doc-inhcritr4859001.shtml)

[3] Sina Announcement - “Kidswant: Announcement on Cash Acquisition of 65% Equity of Leyou International Business Group Co., Ltd. and Connected Transaction” (https://vip.stock.finance.sina.com.cn/corp/view/vCB_AllBulletinDetail.php?stockid=301078&id=9283494)

[4] Forbes China - “2025, Kidswant Gritting Its Teeth to Submit a Transformation Report Card” (https://www.forbeschina.com/investment/70912)

[5] Eastmoney - “From Kidswant’s Perspective, Children’s Business Is No Longer Profitable” (https://caifuhao.eastmoney.com/news/20260116091351406772060)