Hidden income of 720 million yuan was audited back, and Juewei Duck Neck paid 340 million yuan in taxes, resulting in its first loss in 9 years since listing.

Ask AI · Behind the Internal Control Breakdown at Juewei Duck Neck, What Management Gaps Have Been Exposed?

On the evening of April 3, ST Juewei (Juewei Duck Neck’s parent company, “Juewei Food”) released an announcement stating that, following its own review, the company needs to pay additional taxes and late fees totaling RMB 342 million. The announcement also disclosed that this amount of several hundred million has already been paid in full.

This huge tax adjustment is linked to Juewei Duck Neck’s restaurant renovation business income that, over the past several years, had been kept outside the system. Juewei Duck Neck arranged for financial employees to lend their personal bank accounts to collect payments. From 2017 to 2021, the company accumulated unrecognized operating revenue of RMB 724 million. During this same period, Juewei Duck Neck was in the midst of a rapid nationwide expansion—frenetically grabbing market share and establishing its “leading position in braised foods.”

Now, this former braised-foods giant is trapped in a crisis it has never faced before. After being punished by the CSRC for violations in information disclosure and placed under “ST” status, the company expects that in fiscal year 2025 it will record attributable net losses of RMB 160 million to RMB 220 million—its first annual loss since it listed in 2017.

On the road where many stores are closing on a large scale and terminal consumer demand is soft, this RMB 342 million tax bill, without doubt, adds further burden to Juewei Food, which was already under pressure.

Behind the RMB 342 million Tax Adjustment

The announcement released by ST Juewei shows that, during a recent self-inspection related to taxes, the company confirmed that it needs to pay additional tax and late fees totaling RMB 342.0382 million (in ten-thousand-yuan terms: 34203.82). This payment will be booked as profit or loss for the current periods in 2025 and 2026 respectively, directly impacting net profits for those two years.

This large-scale “self-inspection and tax underpayment settlement,” in terms of the timing and causal direction, is connected to an earlier administrative penalty decision issued by the Hunan CSRC. On September 30, 2025, Juewei Food received from the Hunan CSRC an “Administrative Penalty Decision.” The regulator found that from 2017 to 2021, Juewei Food did not include renovation business income from franchise stores into the company’s financial accounting system.

Juewei Duck Neck’s expansion relies heavily on the franchise model. When franchisees open new stores, the store renovation business is typically managed by Juewei Food or designated by it, and franchisees must pay the corresponding renovation fees. Under normal accounting standards, these expenses should be recognized as the company’s revenue and tax should be declared in accordance with the law.

But the company’s management at the time did not comply with normal accounting standards. The penalty decision explicitly states that the then Chief Financial Officer, Peng Cai, had only arranged for employees in the financial department to lend their personal bank accounts, specifically to collect renovation business payments for franchise stores. These funds ran in circulation outside the books, completely bypassing the company’s regular accounts and tax declarations.

This method of operating “off the books” led to false records in Juewei Food’s annual reports for each year from 2017 to 2021. Over five years, the company cumulatively undercounted operating revenue of RMB 724 million, accounting for the range of 1.64% to 5.48% of the revenue disclosed for the corresponding years.

Since revenue was concealed, the corresponding taxes also “disappeared.” However, under tighter tax regulatory systems such as the Golden Tax Phase IV, this original method of intercepting funds using employees’ personal accounts is no longer easy to hide. Faced with the financial fraud facts that the CSRC has already verified, Juewei Food initiated a tax “self-inspection.”

The Tax Collection and Administration Law stipulates that underreporting income in ledgers for false tax filings constitutes tax evasion. In addition to paying the underpaid taxes and late fees, companies are typically also subject to fines ranging from 0.5 times to 5 times. By proactively “self-inspecting and settling” the underpayment and paying the full amount before the tax inspection department officially comes to the door, Juewei Food, to a large extent, aimed to seek leniency in order to avoid more severe administrative penalties.

The period from 2017 to 2021 when RMB 724 million of revenue was concealed coincided with Juewei Duck Neck’s most rapid development phase. In 2017, Juewei Food successfully listed on the SSE. In the following years, the number of its stores surged by thousands each year. At its peak, the total number of stores nationwide nearly reached 16,000. During rapid expansion, the company’s internal operations-finance-tax management for the franchise business was severely disconnected. A systemic pattern of violations led by executives, using private accounts to route funds, lasting for five years without correction, exposed that internal controls at this braised-food leader Juewei Duck Neck had failed, as well as its indifference to compliance bottom lines.

In the end, long-standing complacency triggered a chain of risks. In September 2025, the company and related responsible parties were jointly fined a total of RMB 8.5 million by the CSRC (the company fined RMB 4 million; Chairman Dai Wenjun fined RMB 2 million; the financial controller fined RMB 1.5 million; and the secretary to the board fined RMB 1 million). The company’s stock was then relabeled as “ST Juewei.” The result that followed was this RMB 342 million tax bill.

First Annual Loss in Nine Years

The RMB 342 million tax adjustment directly pierced Juewei Food’s performance bottom line.

According to the company’s disclosure of its 2025 performance forecast, it expects a full-year attributable net loss to shareholders of listed companies of RMB 160 million to RMB 220 million. Before that, the company’s 2025 third-quarter report showed that in the first three quarters its attributable net profit was still RMB 280 million. This means the loss in the fourth quarter alone is close to RMB 500 million. This is also the first time Juewei Food has recorded an annual loss since it listed 9 years ago in 2017.

A sudden collapse in performance—while the tax adjustment was the direct trigger. This RMB 342 million expenditure recorded in the current profit or loss not only consumed all of the profits accumulated in the first three quarters, but also pulled the company further into the quagmire of losses. Even worse, according to the announcement, the remaining portion of the tax underpayment will also be recorded in 2026, meaning this year’s performance will still be dragged down by historical issues.

Beyond the impact of this one-time tax adjustment, Juewei Duck Neck’s core business itself is already mired in trouble.

In the first half of 2025, Juewei Food’s operating revenue declined year over year by 15.57%. In the terminal consumer market, Juewei Duck Neck’s high-pricing strategy is meeting consumer resistance. A 190-gram package of duck neck sells for more than RMB 20, which translates to over RMB 60 per jin—higher than the price of fresh beef at some fresh supermarkets. As consumers become more rational, this pricing—jokingly called “luxury goods” by netizens—combined with accusations that some stores repeatedly engage in “reverse decimal place rounding” and multiple-weighting practices, has led more and more young people to stop going to duck neck shops.

Weak sell-through at the terminals directly transmits pressure to franchisees. Juewei Duck Neck, which rapidly grew by relying on the franchise model, after the market became saturated, adopted an indiscriminate store-opening strategy (such as opening multiple stores within a short distance in the same commercial district), causing serious internal friction among franchisees. As single-store profitability declined, a wave of store closures began to spread. Data show that Juewei Duck Neck’s number of domestic stores has fallen from nearly 16,000 at its peak to 10,713, with a cumulative number of closed stores exceeding 5,000—nearly 10 stores quietly removing their signs every day on average.

At the same time that the core business shrank, Juewei Food’s failure in capital operations further intensified its financial difficulties. In recent years, the company had invested through investment platforms to take equity in restaurant and consumer brands such as Happy West Cake, Hemurong Noodles, and Yimazi. However, in the recent market environment, these targets have performed generally, and some investment projects even saw large-scale losses—becoming another “leak” that eroded Juewei’s book profits.

If you broaden your view to the entire leisure braised-food sector, Juewei’s slipping behind is especially conspicuous. The disclosed 2025 performance forecasts show that the other two industry giants—Zhou Heiya—are expected to grow full-year net profit year over year by 52.7% to 68.0%, and Huangshanghuang—expected to grow net profit year over year by 73.57% to 123.16%. In

In the capital markets, with the “ST” label on top of a “performance explosion,” Juewei Food’s stock price has experienced a long period of downward drift. Its market value has evaporated by hundreds of billions from its peak, and its current market value is only RMB 7.77 billion.

The cash outflow of RMB 342 million is not a small matter for Juewei Food. Although the announcement states it has been paid in full, for a company that has just fallen into losses and has seen its store scale reduced sharply, this chunk of real cash extracted in a short period of time is undoubtedly an extreme squeeze on its working capital. With the core business’s ability to generate cash weakening and external financing channels limited, how Juewei Food will maintain the operation of its large supply chain and stabilize the franchisee system next will be a difficult issue that management needs to address.