Cash flow turns positive, profit margins recover, Shui Jing Fang begins to "warm up"

Produced by | China Visitor Network

Reviewed by | Li Xiaoyan

As the baijiu industry moves from a “growth race” to a deep adjustment period focused on “quality competition,” what determines the value of a liquor company is no longer its ability to drive short-term volume. Instead, it is its operating resilience that can carry it through cycles. As Shui Jing Fang recently disclosed its 2025 annual report and its Q1 2026 report, although the revenue side remains under short-term pressure, the company has shown clear signs of stabilizing at a certain stage—from profitability recovery, to improved cash flow, to cost optimization, and to channel ecosystem development. Its long-term value is being realized step by step.

01

From scale-driven to operational growth

The financial reports show that in 2025, Shui Jing Fang achieved operating revenue of 3.038 billion yuan, net profit attributable to shareholders of 406 million yuan, and non-recurring net profit of 395 million yuan. In Q1 2026, the company achieved revenue of 816 million yuan, net profit attributable to shareholders of 171 million yuan, and non-recurring net profit of 169 million yuan. Since Q3 2025, Shui Jing Fang’s revenue and profit have both shown a trend of narrowing declines quarter by quarter. On the revenue side, the decline in Q4 2025 and Q1 2026 narrowed by about 7 percentage points and 37 percentage points, respectively, compared with the previous quarter. On the profit side, the narrowing reached 12 percentage points and 53 percentage points, respectively. Overall, a trend of marginal improvement in operating indicators is gradually becoming evident.

This change is not accidental.

Ouyang Qianli, a researcher in the liquor industry and founder of Qianli Think Tank, believes that the baijiu industry is currently in a “de-stocking + consumer scenario reconstruction” stage, in which the importance of channel movement has surpassed the importance of merely shipping volume. Shui Jing Fang’s phased pressure is, in essence, an operating choice of “trading time for space.” Behind this is the company’s logic upgrade—from “scale growth” to “operational growth.”

In fact, over the past year, Shui Jing Fang has proactively slowed its pace and carried out systematic adjustments around “balancing fundamentals, deepening adjustments, and solidifying development.” These include, among other things, phased optimization of its shipment schedule, dynamic adjustment of sales targets, reducing funding pressure on channels, and promoting continuous improvement in inventory structure. For the core product “Jing 18,” the company rolled out a “partner” mechanism and the policy of “three no restrictions and two limits plus one bottom line” (san bu liang xian yi tuo di). “First Fang” adopts a strategy of “light inventory, heavy movement,” putting more resources into operations for end consumers and maintaining channel value.

02

Cash flow and profitability quality improve in tandem

In Q1 2026, Shui Jing Fang’s revenue increased quarter over quarter by 18%, while profit increased quarter over quarter by 114.13%. During the same period, the company’s net operating cash flow reached 70.21 million yuan, turning from negative to positive. The management expense ratio decreased by 7 percentage points quarter over quarter. The gross margin increased by 1 percentage point quarter over quarter. The net profit margin increased by 1 percentage point year over year, improving by 7.6 percentage points compared with the net profit margin for all of 2025.

Cai Xuefei, an analyst in the baijiu industry, said that Shui Jing Fang has continued to follow a business strategy of “quality first.” The adjustments made earlier have already begun to show results in profit margins, cash flow, and the expense structure, and the company’s fundamentals show characteristics of phased stabilization.

At the same time, Shui Jing Fang has not given up on long-term development. According to the company’s recently released 2026 action plan titled “Improve Quality and Efficiency, Revert with Greater Returns,” in the future Shui Jing Fang will continue to increase investment in brand, product, and channel building.

At the brand level, the company will focus on key seasonal festival nodes. Through themed product development, scenario-based content dissemination, and private banquet tastings, it will further link “beautiful things” consumption scenarios. At the same time, the company continues to advance the dual-brand strategy of “Shui Jing Fang + First Fang.” The main brand focuses on the sub-premium price segment, while “First Fang” works to strengthen the cultural asset value of “Double National Protection.”

At the product level, during the reporting period, the company launched new products including “First Fang·Jing Shi,” “Jing 18,” and “Master of Zhen Brewing.” Among them, “First Fang·Jing Shi” uses base liquor made from genuine vintage liquor aged for more than 10 years, and it has been certified through the certification system of the China Alcoholic Drinks Association and Fangyuan. “Jing 18” further strengthens its layout in banquet and relationship-based consumption scenarios.

At the channel level, the company is accelerating the layout of new scenarios and cooperating with platforms such as JD Liquor World, Jiu Xiaoer, and Wima to achieve triple-digit growth in instant retail business. Meanwhile, it is also promoting online and offline integration with channels such as Sam’s Club, Yum City, and Hema.

Evidently, Shui Jing Fang is moving from a traditional channel-driven model to a new stage of deeper synergy in “brand operations + consumer operations.”

03

ESG is becoming Shui Jing Fang’s new moat

In 2025, Shui Jing Fang became the first company in China’s baijiu industry to pass SBTi (Science Based Targets initiative) verification. It clearly proposed a target to reduce emissions by 42% by 2030 and achieve net-zero emissions by 2050. The company has also been selected for the S&P Global “Sustainable Development Yearbook (China Edition)” for four consecutive years.

This means that Shui Jing Fang’s ESG system has gradually moved from the past “conceptual building” stage into a stage of “institutionalization, internationalization, and quantification.” At the same time, the company is further extending its ESG capabilities into the supply chain.

In 2025, Shui Jing Fang won Sedex’s Supply Chain Award for Social Contribution, becoming the only baijiu company worldwide to receive the award. Its ESG evaluation system has been embedded into supplier admission and selection processes, conducting social responsibility reviews for key suppliers, and promoting coordinated development among order planting, green agriculture, and rural revitalization.

Compared with most baijiu companies, Shui Jing Fang has another more unique advantage—cultural assets.

As a liquor enterprise that holds both “National Key Cultural Relics Protection Unit” and “National Intangible Cultural Heritage” dual Double National Protection status, Shui Jing Fang’s distillery site was selected for the fourth time on the “China World Cultural Heritage Tentative List.” The ability to deeply integrate ESG with cultural assets is helping Shui Jing Fang build a longer-term brand barrier that is harder to replicate.

As Song Shuyu, Chairman of the China Alcoholic Drinks Association, said: “Slow down, so you can go farther; settle down, so you can brew more fragrant wine.”

For Shui Jing Fang, slowing down is precisely what means that a new growth logic is taking shape.