Company Reports

Chinese baijiu sales have deteriorated since the second half of 2024, and the sector has lagged the broader market. An aging population and falling per capita drinking rates point to a shrinking pool of buyers, prompting us to reassess competitive strength across our coverage.

Second-quarter profits fell across China's subpremium baijiu makers amid continued industry headwinds. Shanxi Fen Wine reported a 43% year-on-year decline in net profit, Yanghe's core operating profit slipped to breakeven, and Swellfun widened its losses.

Jiangsu Yanghe Brewery has been among China's top five distilleries by revenue since 2008. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with an operating margin of 38% on average over the past 10 years.

Jiangsu Yanghe's earnings deteriorated sharply in 2025; revenue and net profit tumbled 34% and 67% year on year, respectively. The weakness extended into the first quarter of 2026, as revenue and net profit fell a further 26% and 33%.

Jiangsu Yanghe Brewery has become one of China's top five distilleries by revenue since 2008. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with operating margin of 38% on average over the past 10 years.

Despite continued sectorwide demand weakness, our recent channel checks indicate steady sales volume for leading baijiu brands during the Lunar New Year period, with lower inventory levels compared with a year ago.

Jiangsu Yanghe Brewery has become one of China's top five distilleries by revenue since 2008. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with operating margin of 41% on average over the past 10 years.

Our channel checks continue to indicate persistent weakness in baijiu demand, with the sector facing double-digit revenue declines ahead of the Lunar New Year holiday. However, performance varies across segments—premium baijiu, led by Moutai, is showing signs of modest demand improvement.

Subpremium baijiu companies' third-quarter results continue to reflect persistent demand weakness and elevated inventory levels. Among them, Swellfun posted a 75% year-on-year decline in net profit, while Yanghe and Jiugui reported net losses.

Jiangsu Yanghe Brewery has become one of China's top five distilleries by revenue since 2008. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with operating margin of 41% on average over the past 10 years.

Our channel checks continue to indicate persistent weakness in China's consumer sentiment and elevated inventory levels for Baijiu. Golden Week sales for the sector declined by 20%-30% year on year, and inventory levels have increased by about one month.

Yanghe posted sharply lower earnings in the second quarter of 2025, with revenue and net profit falling 44% and 63% year on year, respectively.

Jiangsu Yanghe Brewery has become one of China's top five distilleries by revenue since 2008. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with operating margin of 41% on average over the past 10 years.

Jiangsu Yanghe experienced a steep earnings drop, with revenue and net profit falling 13% and 33% year over year, respectively, in 2024. This was followed by a further decline of 32% in revenue and 40% in net profit for the first quarter of 2025.

Jiangsu Yanghe Brewery has become one of China's top five distilleries by revenue since 2008. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with operating margin of 41% on average over the past 10years.

Amid China's macroeconomic and consumption headwinds, our baijiu coverage trailed the broader market in 2024, falling 19% on average, compared with a 13% rise in the Shanghai Composite Index.

Near-term headwinds in the macroeconomy have weakened baijiu demand and the sector’s profitability, with slower year-over-year sales growth across all segments in the third quarter versus the previous quarter. We expect the cyclical weakness to persist in the next 1-2 quarters, and we remain selective, with a preference on premium and leading brands given their relatively resilient demand.

Jiangsu Yanghe Brewery has become China's third-largest distillery by revenue since its IPO in 2009. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with operating margin of 40% on average over the past five years.

In line with the weakening trend in subpremium baijiu demand, wide-moat Yanghe’s second-quarter performance was slightly disappointing, with revenue and net profit declining 3% and 10% year over year, respectively, compared with 8% and 5% growth in the prior quarter. The results missed our expectations, and cash flows were also disappointing with cash received from product sales falling 12% year over year and advanced payment dropped CNY 1.9 billion from a quarter ago to CNY 3.9 billion. Nevertheless, the firm’s dividend commitment is a positive surprise, which promises a payout ratio of no less than 70% with a minimal cash payout of CNY 7 billion per year between 2024 and 2026. This emphasizes the firm’s focus on shareholder returns and should lift investor confidence. The minimal cash dividend of CNY 7 billion implies a dividend yield of 6% currently, the highest among baijiu distilleries we cover.

Jiangsu Yanghe Brewery has become China's third-largest distillery by revenue since its IPO in 2009. Thanks to its strong brand equity and solid management execution, Yanghe has become the leader in the midrange to premium segment and enjoys sound profitability, with operating margin of 40% on average over the past five years.