Yanghe Earnings: Results Missed, but Dividend Commitment Implies Decent Shareholder Returns

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.