From asset optimization to core business recovery, Yuyuan Securities begins a structural repair cycle

[Text by Wang Li Edited by Zhou Yuanfang]

On March 23, Yu Yuan Co., Ltd. (600655.SH) officially released its 2025 annual report. The annual report shows that the company generated full-year operating revenue of 36.37 billion yuan, with ending cash and cash equivalents of 11.05 billion yuan, an increase of about 360 million yuan net compared with the end of the previous year; net cash flow from operating activities reached 2.45 billion yuan, and the cash generation capability of its main businesses remained steady and robust. At the same time, the jewelry segment’s gross profit margin rose quarter by quarter throughout the year, reaching 10.96% for the single quarter in the fourth quarter; the resilience of earnings from the core main business continued to strengthen.

In 2025, Yu Yuan Co. is in a critical phase of advancing its strategic transformation. The company is firmly implementing the top-priority strategy of “Eastern Lifestyle Aesthetics,” taking “slimming down and strengthening the body, embracing lightness while combining with heaviness, and maintaining balance between offense and defense” as its core measures. It focuses on core consumer industries such as jewelry fashion, cultural dining, and commercial retail, while accelerating the layout of its global business.

Judging from the signals released in this annual report, several key dimensions show positive momentum: First, the company completed a systematic revaluation of existing assets, and fully cleared historical valuation burdens, laying a foundation for moving forward lightly; Second, the upgrade in product structure of the jewelry core main business has achieved remarkable results, with a clear trend of gross margin recovery; Third, implementation of the “slimming down and strengthening the body” strategy has accelerated, management efficiency has improved significantly, and the cash flow structure has continued to be optimized; Fourth, the global layout is being advanced at a faster pace, and several business lines—including catering, jewelry, and cultural IPs—have achieved phased breakthroughs in overseas markets one after another.

Multiple institutional analysts point out that after going through this round of adjustment, Yu Yuan Co. has completed a phased performance bottoming out, with a clear recovery logic for its core main businesses and specific driving factors. Looking ahead to 2026, with the continued implementation of various strategic initiatives, the company’s performance is expected to enter a steady recovery channel.

Value revaluation completed, setting out lightly to meet a new cycle

In 2025, based on the principle of prudence in accounting, Yu Yuan Co. completed year-end impairment tests and provisions for certain assets showing impairment indicators. This move is an important arrangement for the company to comply with financial regulations and proactively clear historical valuation pressures, marking the end of the systematic value revaluation of the relevant assets.

From the perspective of financial accounting, impairment provisions are non-cash profit-and-loss adjustments; they do not result in actual cash outflows and do not affect the company’s normal day-to-day operations. In 2025, Yu Yuan Co. recorded net cash flow from operating activities of 2.45 billion yuan, and the cash-generating capability of its main business remained steady. The underlying fundamentals of the core segments were not materially affected. After completing a full value revaluation, the valuation burdens of existing assets are systematically released; the foundation for the robustness of subsequent financial statements is instead further strengthened.

Taking a horizontal view, affected by the overall deep industry adjustment in 2025, many real-estate-related listed companies disclosed large-scale asset impairment and performance losses. Data from the National Bureau of Statistics show that in 2025, the nationwide sales area of newly built commercial housing decreased by 8.7% year on year, and sales revenue fell by 12.6% year on year. By comparison, the scale of losses of Yu Yuan Co. is within a relatively controllable range among similar companies. More importantly, Yu Yuan Co. is not a company whose main business is real estate development. Consumer-oriented industries such as jewelry fashion, cultural dining, and commercial retail constitute the core of the company’s revenue, and the related development business accounts for a limited share of total revenue, which helps maintain the overall resilience of its operations.

Yan Yuejin, Deputy Director of the Shanghai E-House Real Estate Research Institute, believes that Yu Yuan Co.’s “setting out lightly” approach is very clear. “From the perspective of losses, this is closely related to the company’s actions such as divesting businesses and selling assets. For industries with weaker liquidity or lower levels of market recognition, the company has actively removed them.” In his view, this strategy is especially critical in the current market environment: “Based on the new market situation, systematically sorting out internal businesses and industrial segments is the very correct choice, which will help the company set out lightly.”

Regarding the reaction of the capital market and corporate valuation, Yan Yuejin generally holds a positive view. “By proactively divesting these businesses, the company may bear some pressure on financial data in the short term. However, from a medium- to long-term perspective, after setting out lightly, in the first year of the ‘15th Five-Year Plan’ period, it will encounter very good market opportunities.”

From the policy perspective, measures to stabilize the housing market are being rolled out intensively. Various regions have successively introduced policies such as lowering the down payment ratio, optimizing purchase restriction measures, and promoting the renovation of urban villages.

The China Index Academy expects that in 2026, more incremental policies will be introduced to accelerate the market’s stabilization and rebound from the downturn. As the market environment gradually improves, assets that have already completed full value revaluation are expected to stabilize and recover, providing positive contributions to the financial indicators of related enterprises. Huang Zepeng, Chief Analyst at Kaiyuan Securities, stated that after proactive value revaluation is completed, Yu Yuan Co. is expected to set out lightly, with the operation of its core main businesses continuing to repair, and long-term value remaining promising.

Significant results from slimming down, continuous optimization of cash flow quality

If value revaluation is Yu Yuan Co.’s move to “clear up the past,” then the continued advancement of the “slimming down and strengthening the body” strategy represents the company’s proactive future-oriented layout. In terms of cash flow management, the annual report data show noteworthy resilience: as of the end of 2025, the company’s cash and cash equivalents balance reached 11.05 billion yuan, a net increase of about 360 million yuan compared with the end of the previous year—while completing multiple asset disposals and debt repayments, its cash reserves increased rather than declined.

In cost reduction and efficiency enhancement, tangible results are also evident. In 2025, the company’s administrative and management expenses decreased significantly by about 540 million yuan year on year, with a decline of nearly 20%, which is the most direct quantitative reflection of the “slimming down and strengthening the body” strategy at the operational level. By continuously optimizing the organizational structure, cutting down non-essential management expenses, and improving operational efficiency, the company’s cost control capabilities have been significantly strengthened, creating room for profit release from core businesses. In addition, during 2025, all outstanding bonds were paid interest and repaid principal in full and on time, and its credit quality remained sound. In 2025, the company successfully issued multiple tranches of medium-term notes and super short-term financing bills, continuously enriching its financing instrument portfolio and further enhancing its liquidity management capability.

In terms of optimizing its asset structure, the company continues to accelerate the pace of exiting non-core assets, gradually consolidating capital into core industries with high strategic value such as jewelry fashion, cultural dining, and commercial retail. At the same time, by promoting an operating model of “embracing lightness while combining with heaviness,” leveraging commercial management and light-asset operations to unlock asset value, the company continues to improve its efficiency in allocating resources.

A research report from Guosheng Securities points out that Yu Yuan Co. continuously promotes the recovery of its main business through product structure upgrades, refined channel operations, and accelerated overseas market layout. As the disposal of non-core assets enters the final stage and its overseas business gradually contributes incremental revenue, the company’s overall operating quality is expected to see a systematic improvement. Founder Securities maintains a “recommend” rating. Huatai Securities also emphasized in its review after the annual report that the company’s cash flow performance is better than expected, and that the effectiveness of strategic focus is beginning to show. In addition, institutions such as Kaiyuan Securities and Huachuang Securities believe that Yu Yuan Co. has basically completed the bottoming of performance, and that in 2026 it is expected to enter a steady recovery trajectory.

Deepening transformation of the jewelry core business, with gross profit margin rising quarter by quarter to demonstrate brand value

The jewelry fashion segment is Yu Yuan Co.’s business pillar with the most strategic core position, accounting for more than 60% of revenue. In 2025, although the Yu Yuan jewelry segment faced some performance pressure due to objective factors such as significant fluctuations in gold prices, its financial data also show that the transformation of the jewelry segment has achieved fairly notable results: the gross profit margin of the jewelry segment reached 8.34% for the full year. It rose quarter by quarter along the trajectory of 7.34% in the first half of the year and 7.73% in the first three quarters, and the single-quarter gross profit margin in the fourth quarter further jumped to 10.96%. The full-year gross margin recovery trend is clear, robust, and compelling.

To understand this gross margin improvement path, it is necessary to consider the broader industry context of China’s gold and jewelry industry in 2025. Data from the National Bureau of Statistics show that in 2025, the retail sales value of gold, silver, and jewelry products by enterprises above designated size increased by 12.8% year on year, higher than the overall growth rate of retail sales of consumer goods. This indicates that the consumption potential in the jewelry industry remains strong. Meanwhile, as gold prices continue to run at a relatively high level, the industry is making a deep transition from “pricing by weight” to “pricing by value.” Companies that have design premiums and strong brand power are increasingly showing differentiated advantages in profitability.

The transformation directions of Yu Yuan Co.’s two major core brands—Laomiao and Yayi—are highly aligned with industry trends. Since 2025, Laomiao has accelerated product structure upgrades. At the beginning of the year, it launched the “One String of Good Luck” series, using a lightweight gold alloy-in-ink bracelet design that precisely targets younger consumers. In June, together with Guochuang Animation IP “Heaven Official’s Blessing,” it launched a co-branded series, with sales on Tmall exceeding one million yuan on the day of the debut. In September, it launched the “Ancient Charm Gold Works” series, enhancing the added value of product craftsmanship through hand-engraving and enamel techniques, thereby building a differentiated competitive advantage in the piece-based pricing track. According to disclosures in the interim report, sales of piece-based products under the Laomiao brand grew by about 66% year on year; this structural change and the sharp jump in gross profit margin in the fourth quarter strongly corroborate each other.

In terms of policy dividends, in 2025, the Shanghai Municipal Government General Office issued the “Several Measures to Support Huangpu District in Building Shanghai International Jewelry and Fashion Function Zone.” The Dаyюuan business district is included as a core area within this function zone. The related action plan will introduce 24 specific funding policies, providing systematic support across multiple dimensions for Yu Yuan Co., such as aggregating industrial resources and promoting brand internationalization. This will further consolidate its leading advantages in the high-end jewelry and fashion segment.

Cultural globalization accelerates, and time-honored brands open a new chapter of global growth

As China’s domestic consumer market enters an era of stock competition, Yu Yuan Co.’s answer for incremental growth is to leverage its profound Chinese cultural heritage as its core competitive advantage and accelerate the global layout of its core business lines. In 2025, its overseas strategy moved from planning to intensive implementation. In April 2025, the traditional catering brand Song Helou opened its first overseas store in London, UK. From June to August, the Yu Yuan Lantern Festival was held along the banks of the Chao Phraya River in Bangkok, Thailand, lasting 50 days and attracting more than 4 million attendees, becoming one of the year’s most important cultural events. In October, the jewelry brand Laomiao opened its first overseas store in Kuala Lumpur, Malaysia. In January 2026, the Nanxiang Steamed Bun Shop entered Bangkok’s core commercial district. Laomiao’s first store in Cambodia officially opened and it also started exploring an overseas franchise model.

This series of overseas moves shows a clear logic of strategic synergy: cultural IPs such as the Yu Yuan Lantern Festival serve as the pioneer, traditional catering brands such as Song Helou and Nanxiang Steamed Bun Shops serve as the lifestyle entry points, and Laomiao jewelry acts as the carrier for converting interest into consumption. This forms a complete overseas loop of “cultural-driven attraction, lifestyle landing, and consumption conversion.” In recent years, departments including the Ministry of Commerce and the Ministry of Culture and Tourism have continued to issue policies to support Chinese time-honored brand names in expanding into international markets, providing important policy backing for Yu Yuan Co.’s global layout.

From the perspective of market selection, Yu Yuan Co. prioritizes deepening in the Southeast Asian market, which is strategically sound. Brand strategy expert and founder of Jingjie Brand Consulting, Chen Jingjing, analyzes that the reason this model is prioritized for deployment in Southeast Asia is that the region has a high proportion of Chinese people, lower cultural recognition costs, and that lantern festival content and similar offerings have communication power within the same cultural context. At the same time, catering supports high-frequency conversion, while jewelry completes value realization with low-frequency but high-ticket transactions. Through cross-business-operations synergy, per-customer value is enhanced and the consumption chain is extended. Southeast Asia’s Chinese communities are large in scale, with purchasing power continuing to rise. The natural affinity for Chinese culture and brands provides a good market foundation for time-honored brands to take root locally. At the same time, tourism economies across Southeast Asian countries are active, and the number of Chinese tourists visiting continues to grow, creating favorable conditions for broader brand exposure for Yu Yuan in those locations. The layout in key markets such as Thailand, Malaysia, and Cambodia covers core nodes in Southeast Asia with the strongest consumer purchasing power and the deepest influence of Chinese culture.

In the commercial retail segment, Yu Yuan Mall, as a landmark setting that blends Chinese culture with modern consumption, also continues to expand its global value. During the Spring Festival period of 2025 to 2026, the Ma-year Yu Yuan Lantern Festival for the first time expanded its lantern areas to the BFC Bund Financial Center, the Old City Park, Fangbang Middle Road, Fuyou Road, and the Bund, forming an immersive “six-in-one” consumption pattern. The 36-day event recorded total visitor traffic of 6 million and generated total sales of more than 1.2 billion yuan, up 21% year on year. This continued to refresh the influence boundaries of Yu Yuan Mall and accumulated rich materials for the international communication of business district brands.

Chen Jingjing also reminds that time-honored brands have the advantage of “cultural sentiment” domestically, but overseas growth cannot be sustained by culture alone; ultimately, it must return to the product and the experience itself. If growth stays at the level of the tourist economy and one-off consumption, it will be difficult to sustain. A relatively sustainable path still needs to start from products and consumption scenarios—to enter daily life and form stable repurchase. Looking even deeper, long-term development depends on the depth of localization—not only product design, but also brand expression, and even systematic localization of organizational forms and management culture. Looking ahead, an analyst at Kaiyuan Securities points out that Yu Yuan Co. is actively promoting its brand and product overseas strategy, and it expects overseas revenue to become one of the important engines of the company’s continuing growth. A research report by Huachuang Securities believes that as overseas business gradually scales up and core consumer industries stabilize and recover, the company’s performance is expected to bottom out and rebound, while maintaining a “recommend” rating. Yu Yuan Co.’s global chapter is steadily turning a new page under the name of Chinese culture.

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