Analysis Report on High Distributor Inventory of Changzhou Bairuiji Biopharmaceutical Co., Ltd.

Based on the searched materials, I have obtained detailed information regarding the high distributor inventory of

The systematic analysis is as follows:

According to the regulatory inquiry letter issued by the China Securities Regulatory Commission (CSRC) to Bairuiji, an

is defined as the threshold for “high ending inventory ratio” [1].

[1][2]:

Distributor Name	2022	2023	2024	2025
Jishitang Pharmaceutical Co., Ltd.	59.76%	70.39%	42.58%	30.69%
Shanghai Sanchuang Medical Devices Co., Ltd.	180.44%	49.04%	50.02%	42.65%
Hangzhou Huangtong Medical Devices Co., Ltd.	46.49%	29.46%	27.79%	29.26%
Hunan Ruikeweili Medical Devices Co., Ltd.	39.16%	38.91%	28.86%	45.86%
Beijing Xinherui Technology Co., Ltd.	35.20%	43.13%	41.81%	39.36%

• Shanghai Sanchuang Medical Devices Co., Ltd.
  : Its ending inventory ratio reached as high as 180.44% in 2022, mainly due to the impact of public health incidents leading to sales falling short of expectations [1]
• Hangzhou Huangtong Medical Devices Co., Ltd.
  : Its ending inventory ratio was 46.49% in 2022, also affected by public health incidents [1]

• Jishitang Pharmaceutical Co., Ltd.
  : From 2022 to 2024, it collaborated with Zhejiang Jishishangyang Medical Technology Co., Ltd. to expand the Zhejiang regional market, resulting in a high inventory ratio [1]
• Beijing Xinherui Technology Co., Ltd.
  : In 2024, it integrated distributor channel resources and expanded authorized distribution areas to Hebei, Inner Mongolia, and other regions, leading to increased sales and daily stockpiling [1]

• Some distributors maintain a high level of safety stock to ensure supply stability
• Under the buyout sales model, distributors bear inventory risks independently

• At the end of each reporting period, the book value of the issuer’s inventory was RMB 18.5005 million, RMB 15.6896 million, RMB 23.3834 million, and RMB 24.2623 million, accounting for 8.92%, 6.43%, 7.79%, and 7.19% of total assets respectively [2]
• High inventory levels increase the scale of current asset overstock and pressure on capital turnover

• If future inventory is subject to market price fluctuations, damage, or other issues, the cost of inventory may exceed its net realizable value [2]

• The company has not yet fully established an integrated information management system with distributors, which prevents it from conducting real-time purchase, sales, and inventory management for distributors [2]
• The distributor network is spread across the country, making management relatively difficult

• The CSRC has focused on “whether there are abnormal situations such as high ending inventory ratios of distributors or centralized purchases at the end of the year” during its review [3]
• It is necessary to verify the actual terminal sales performance of distributors

The phenomenon of high distributor inventory at Bairuiji reflects the following:

• Short-term Factors
  : Impact from external environments such as public health incidents
• Strategic Adjustments
  : A normal occurrence during periods of channel expansion and market integration
• Management Challenges
  : Lagging informatization construction for inventory management under the distributor model
• Potential Risks
  : Need to monitor inventory digestion capabilities and terminal sales performance

Overall, high inventory within a reasonable range may be a normal phenomenon during business expansion, but persistent high inventory requires vigilance regarding sales-side issues and capital turnover pressure.

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[1] Reply to the Second Round Regulatory Inquiry Letter Concerning the Application Documents for Public Offering of Shares and Listing on the Beijing Stock Exchange by Changzhou Bairuiji Biopharmaceutical Co., Ltd.
[2] Legal Opinion of China International Capital Corporation Limited on the Public Offering of Shares to Unspecified Qualified Investors and Listing on the Beijing Stock Exchange by Changzhou Bairuiji Biopharmaceutical Co., Ltd.
[3] Changzhou Bairuiji Biopharmaceutical Co., Ltd. and China International Capital Corporation Limited