Major baijiu producers have recently released their first-quarter results. Amid widespread consensus of weak consumer demand, intensified competition from Kweichow Moutai, and sluggish sales across the sector, expectations for 2025 performance in the baijiu industry were generally pessimistic.
However, Wuliangye Yibin Co.,Ltd. reported astonishing first-quarter figures, with revenue growth reaching 33.67% and profit surging by 82%, significantly outperforming its peers. By comparison, industry leader Kweichow Moutai saw only 6.34% revenue growth and a modest 1.47% profit increase. Luzhou Laojiao, often considered in the same tier as Wuliangye, experienced a 19% profit decline, while most other baijiu companies also reported falling profits.
The key driver behind Wuliangye’s 82% profit growth lies in a substantial revision of its 2025 financial reports—covering the first quarter, interim, and third-quarter results. By significantly lowering the prior-year base, the company created the appearance of a dramatic earnings surge in the first quarter of 2026.
On April 29, Wuliangye announced a delay in its financial report release, leading to speculation about weak performance. However, the actual figures disclosed later shocked the market: approximately RMB 30 billion in revenue and RMB 15 billion in profit were erased, attributed to "correction of accounting errors based on the prudence principle."
The company stated that it reviewed its 2025 business model and adjusted revenue recognition for certain operations under the prudence principle. This adjustment, however, raised questions about the reliability of earlier financial disclosures.
Specifically, the first-quarter revenue was revised down from RMB 36.9 billion to RMB 17.1 billion, a reduction of nearly half, while profit was slashed from RMB 14.86 billion to RMB 4.4 billion, a 70% decrease. Interim revenue dropped from RMB 52.8 billion to RMB 23.5 billion, and profit fell from RMB 19.5 billion to RMB 4.6 billion. Third-quarter figures saw revenue reduced by RMB 30.3 billion and profit by RMB 15 billion.
As a result, full-year 2025 revenue declined by 54% and profit by 72%, with second-half profit plummeting 95.88%. The drastic downward revision of first-quarter 2025 profit to just RMB 4.4 billion artificially boosted the year-on-year growth rate for 2026’s first quarter. The sudden disappearance of RMB 12.4 billion in profit and RMB 30 billion in revenue has been described by industry observers as a "big bath" accounting practice.
Several critical issues have emerged from this episode:
1) **Potential Financial Misconduct**: Some investors have accused Wuliangye of financial fraud, calling for compensation and even delisting. Legally, the company's use of "prior-period error correction" follows the retrospective restatement procedure under Accounting Standard No. 28 and was approved by the board, making it compliant on the surface. However, a legal expert pointed out that the adjustment may involve multiple violations: serious inaccuracy in prior quarterly reports, misuse of accounting standards to bypass stricter disclosure requirements for policy changes, internal control failures, and delayed disclosure of major corrections.
2) **Disclosure Violations**: According to disclosure regulations, a cumulative performance deviation exceeding 50% from market expectations based on previously published reports constitutes a major change, requiring prompt correction announcements. Mainboard listed companies must disclose such revisions within one month after the fiscal year ends. Wuliangye, however, only released the restated figures alongside its annual report, potentially constituting a disclosure violation.
3) **Stock Price Impact**: Investors widely anticipate a significant drop in Wuliangye’s share price when trading resumes, with some predicting multiple limit-down sessions. The stock has already fallen more than 60% since its 2021 peak, dipping below the RMB 100 mark. How the company addresses investor anger remains a critical challenge.
4) **Auditor Responsibility**: Tianzhi International, Wuliangye’s auditor, received RMB 2 million in fees for the 2025 audit and internal control review. It issued a standard unqualified opinion on the annual report but did not audit the quarterly reports, which are not mandatory under current regulations. Thus, the firm is unlikely to face immediate repercussions from the earnings revision.
Industry analysis suggests that Wuliangye’s adjustment primarily involves changing its revenue recognition policy—shifting from recognizing revenue upon shipment to doing so only after final acceptance and transfer of control at the terminal point—a departure from longstanding industry practice.
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