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On July 29, when the Hong Kong stock market opened, Oriental Selection (1797.HK) rose by more than 8% to HK$10.28 at the beginning of the session. As of press time, the share price was HK$10.18, up 7.16%.

On the 25th, Oriental Selection announced that Dong Yuhui had resigned, which continued to affect Oriental Selection in terms of business and the secondary market. At the close of Hong Kong stocks on the 26th, Oriental Selection fell 23.39%. Since the 25th, Chanmama data shows that the number of fans of Oriental Selection has dropped from 29.867 million to 29.792 million, a decrease of 75,000, with an average of 6.171 million views per game and an average sales of between 5 million and 7.5 million. The number of fans of Walking with Hui increased from 21.597 million to 22.044 million, an increase of 447,000, with an average of 7.365 million views per game and an average sales of between 7.5 million and 10 million.

In addition, small and medium-sized shareholders also expressed dissatisfaction with Yu Minhong's use of company assets to pay for the purchase of shares in Yuhui Tongxing. A partner of a law firm focusing on listed companies told reporters that the separation between Dongfang Zhenxuan and Dong Yuhui was focused on the significance of protecting the market. The damage to the interests of small and medium-sized shareholders is not currently within the company's consideration.

In response to this controversy, Yu Minhong responded at a shareholder exchange conference call, saying that the equity purchase payment of more than 70 million yuan will be paid through a certain cooperative relationship between New Oriental and Dong Yuhui, which complies with all regulations for New Oriental listed companies in the United States and does not infringe on the interests of Oriental Selection. Yu Minhong emphasized that he will not participate in any capital operation, investment and development of Yuhui Xingxing at any time now or in the future, because Yu Minhong is currently the chairman and CEO of Oriental Selection. Yuhui Xingxing and Oriental Selection compete with each other, but they hope that the competition is friendly.

According to the announcement of Oriental Selection, the company used the cost method rather than the market method or the income method to value the equity. The appraiser Jones Lang LaSalle Corporate Valuation and Consulting Co., Ltd. took into account the intangible assets involved in "Walking with Hui" such as the target company's registered trademarks, copyrights and related brand names (intellectual property rights) and contracts related to such intellectual property rights, and believed that there was no significant value. Most of these intellectual property rights are closely related to Dong Yuhui's name and likeness, and according to the sale agreement, Oriental Selection has no intention to use such intellectual property rights. Pursuant to the standard terms and conditions of the agency agreement of "Walking with Hui", Oriental Selection has signed several revenue contracts that generate commissions based on the sales of products promoted on platforms related to intellectual property rights. After the termination of the employment contract with Dong Yuhui, these revenue contracts are not expected to generate revenue for Oriental Selection.

However, one investor believes that the cost valuation method does not mean that this move is appropriate. "No sustainable operating value" should be accompanied by "prevention of potential competition" to protect the interests of listed company shareholders to the greatest extent. However, judging from the content of the conference call, Oriental Selection did not sign a non-compete agreement with Dong Yuhui, and sold Yuhui Tongxing according to the cost valuation method. The disposal plan is inappropriate.

At present, the negative impact of Dong Yuhui's departure on Oriental Selection in the short term is obvious. In Yu Minhong's view, this divestiture is good for both Oriental Selection and Yuhui Tongxing, and the internal conflicts and external disputes between the two companies can be resolved at one time. Oriental Selection can also carry out large-scale layout and reform without worrying about the imbalance of the relationship between the two sides. He sorted out the future strategic planning direction in the conference call, mainly including the product line of the joint development of self-operated products and external products, insisting on the combination of content and cultural products as the overall tone of the company, platform matrix expansion, and online and offline combined promotion.

Bocom International believes that excluding the profit contribution of Huitongxing, the corresponding P/E ratio in fiscal year 2025 is 18 times. In the future, attention should be paid to the construction of Dongfang Zhenxuan's own brand and multiple channels. If GMV remains stable, the company's business will gradually resume stable operation. Considering the current business adjustments, the neutral rating is maintained.