The chill of the baijiu industry's deep adjustment is being more directly reflected in the financial reports of distillers. In 2025, the company achieved operating revenue of 19.211 billion yuan, a year-on-year decrease of 33.5%. Net profit attributable to shareholders was 2.206 billion yuan, plummeting by 67% compared to the previous year. Cash flow came under pressure alongside profits. Cash flow from operating activities turned negative, shifting from 4.629 billion yuan the previous year to -763 million yuan. Entering the first quarter of 2026, the rate of the performance decline narrowed somewhat, but a substantive recovery has yet to materialize. The declines in revenue and net profit remained significant at 26% and 32%, respectively. As of the end of the first quarter, the company's inventory stood at 19.584 billion yuan, a decrease of 791 million yuan, or 3.89%, from the end of 2025, indicating that the destocking process is still underway. The performance decline stems from a combination of industry-wide conditions and the company's proactive strategic adjustments. The baijiu industry in 2025 was in a phase characterized by overlapping factors: "policy adjustments, shifting consumption patterns, and competition within a saturated market." This environment featured an overall market contraction alongside structural differentiation. Weakening demand coupled with pressure from channel inventory placed particular strain on the mid-range and sub-premium price segments. Facing dual pressures from inventory and its pricing system, Yanghe opted for a proactive contraction strategy in 2025. Its annual marketing strategy focused on "reducing inventory, stabilizing prices, and enhancing momentum." By controlling shipment volumes, optimizing sell-through, and streamlining its distribution channels, the company prioritized repairing its price structure. The number of distributors saw a net reduction of 495 for the full year, signaling a shift from channel expansion to improving channel efficiency. For its core products, Yanghe implemented a combined strategy of "direct supply at factory prices, retail price caps, and quota management." This included suspending orders for the sixth-generation Haizhilang within its home province and strictly controlling shipments to markets outside the province, effectively sacrificing some short-term revenue to facilitate price recovery. From a structural perspective, Yanghe continues to advance the rebalancing of its product mix and regional focus. In 2025, revenue from mid-to-high-end products was 16.542 billion yuan, down 32% year-on-year. However, their contribution to total revenue increased to 86.11%, indicating a continued shift towards the premium segment. Regionally, revenue from markets outside the home province reached 10.157 billion yuan, accounting for 54.1% of the total and surpassing domestic province revenue for the first time. Against the backdrop of overall industry pressure, structural optimization provided limited support for short-term performance. The company reported a net loss of approximately 1.8 billion yuan in the fourth quarter of 2025 alone, indicating that operational pressures were concentrated towards the year-end. Despite the pressures on profitability and cash flow, the company maintained a high dividend payout. The annual report disclosed a proposed cash dividend of 14.7 yuan per share (before tax), totaling 2.214 billion yuan, representing a payout ratio of 100.38%. Furthermore, the company's "Cash Dividend Return Plan (2025-2027)" explicitly states that the total annual cash dividend in the coming years will not be less than 100% of that year's net profit attributable to shareholders. However, the sustainability of these dividends ultimately depends on the recovery of profit quality and cash flow. With operating cash flow turning negative in 2025, and contract liabilities falling to 5.41 billion yuan by the end of Q1 2026 from 6.424 billion yuan at the end of 2025—coupled with a revenue decline still in the double digits—the reserve of revenue available for future recognition has contracted. In this context, if the recovery in end-consumer sell-through and the reduction of channel inventory fall short of expectations, the balance between high dividend payouts and cash flow health remains uncertain. Overall, Yanghe is currently in a phase of "temporary deceleration" due to its proactive adjustments. The performance decline has largely been realized, while the reconstruction of its channel and product structure is still in progress. For the company, the more critical question is not short-term stabilization, but whether, once inventory levels gradually return to a reasonable range and the price system is repaired, channel confidence can genuinely translate into a sustained recovery in sell-through. Furthermore, the key challenge is whether Yanghe can successfully make the leap from a regional leader to a truly national brand following this industry consolidation.
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