Summary of Key Issues Raised by the SSE
The Shanghai Stock Exchange (SSE) has raised five major concerns regarding Shuijingfang's 2025 annual report, revealing the company's operational difficulties: a significant decline in performance (revenue down 41%, profit down 70%), severe inventory accumulation (inventory exceeding annual revenue), a substantial change in distributors (loss of old partners and doubts about the qualifications of new ones), rapid cash consumption, and a sharp increase in borrowing. The stock price has fallen by more than 80% since its peak in 2021, with many small and medium-sized shareholders expressing distrust at the shareholders' meeting, questioning the authenticity and sustainability of the company's performance.
Detailed Analysis
1. Inventory Exceeds Annual Revenue!
By the end of 2025, Shuijingfang's inventory amounted to 3.911 billion yuan, 28% more than its annual revenue of 3.038 billion yuan, meaning that the amount of wine sold in a year was not even enough to cover the stockpiled inventory. Ninety percent of this inventory consisted of "self-produced semi-finished products" (i.e., base liquor), which the company explained is necessary to be stored for 3-15 years for quality reasons. However, as inventory accumulates, it ties up capital. If these products cannot be sold in the future, they may have to be discounted or even written off, directly affecting profits. Compared to other liquor companies, this proportion of inventory is notably high, leading the SSE to question whether the stockpiling is genuine or due to unsold goods.
2. Substantial Change in Distributors: Old Partners Leaving, New Ones with Unclear Credentials?
Last year, Shuijingfang added 40 new distributors, but their average sales volume plummeted from 82 million yuan to 28 million yuan (a 65% decrease). This year, another 43 distributors were lost. More suspiciously:
- The old distributor Yunfei Liquor Industry, once the company's second-largest customer with annual sales of 295 million yuan, only sold 4.84 million yuan in 2025, leading to the termination of their partnership.
- Among the new distributors, Hainan Jiukun Trading, established just a few months ago (in September 2024), purchased 100 million yuan worth of wine with a registered capital of only 5 million yuan.
- Beijing Hanjie Trade, founded in March 2025, sold 31.03 million yuan that same year and is actually owned by the same shareholder as another major distributor with annual sales of 184 million yuan.
These new distributors either have a short history or are closely affiliated with other companies, raising doubts about their actual selling capability.
3. Rapid Cash Consumption and Increased Borrowing: Where Did the Money Go?
By the end of 2025, Shuijingfang's cash reserves had dropped to 672 million yuan, a 70% decrease from 2.124 billion yuan in 2024, and further fell to 446 million yuan in March this year. Meanwhile, the company's credit line approved by banks increased from 900 million yuan in 2023 to 4 billion yuan in 2025 (a 344% increase), with interest-bearing debt rising from nearly zero to 14%. Where did all the money go? Part of it may have been used to stockpile base liquor, and another portion could have gone towards subsidizing distributors or maintaining operations. However, with decreasing cash and increasing borrowing, the company's financial risks are also growing; a lack of funding could severely impact its operations.
4. Profit Down 70%, but Management Salaries Higher than Two Years Ago: Can Shareholders Be Satisfied?
Although Shuijingfang's profit decreased by 70% in 2025, the total annual salary for directors and senior management was still 15.82 million yuan, higher than the 14.67 million yuan in 2023. Small and medium-sized shareholders are dissatisfied: with such poor performance, why haven't management salaries decreased? At the June shareholders' meeting, 15% of them voted against the salary proposal for directors and senior management, and many abstained. As a foreign-controlled company, it's understandable to link management salaries to market conditions, but when performance does not match salaries, shareholders naturally use their voting power to express disapproval.
5. The SSE's Core Question: Is the Performance Genuine? Can It Be Sustained?
The five issues raised by the SSE point to two main concerns: authenticity (e.g., whether there are any conflicts of interest with customers and suppliers, or whether large purchases from new distributors are artificial) and sustainability (high inventory levels, cash shortages, and unstable distribution channels—how will the company generate profits in the future?). If these questions are not addressed properly, it could not only undermine investor confidence but also lead to regulatory penalties. For Shuijingfang, now is not the time to blame external factors such as a poor macroeconomic environment; it must find real solutions to its inventory, distribution, and funding issues, or its stock price and performance may continue to decline.
Conclusion
Shuijingfang's difficulties are not isolated: during a downturn in the liquor industry, its problems with inventory, distribution, and cash flow have become more pronounced. For ordinary investors, companies with high inventory levels, unstable distributors, and significant borrowing should be viewed as risky. For Shuijingfang's management, relying solely on stockpiling base liquor and acquiring new distributors may not be enough; they need to address sales issues and restore performance to gain shareholders' trust.