Investment Rating - The report assigns a "Buy" rating to the company [4][63]. Core Viewpoints - The company is positioned as a leader in the mid-range ready-to-drink tea market, with a significant expansion in both domestic and overseas markets. Despite facing temporary performance pressure, the company is expected to recover as the industry enters a new growth cycle [1][4][63]. - The company has a strong product innovation strategy and a robust supply chain, which are expected to drive store growth and enhance market presence [3][4][63]. Company Overview - The company, Cha Baidao, was established in 2008 in Chengdu, Sichuan, and primarily expands through a franchise model. As of the end of 2024, it operates 8,409 stores, with 8,395 in mainland China and 14 overseas [1][12]. - In 2024, the company reported revenue of 4.918 billion yuan, a decrease of 13.8% year-on-year, and a net profit of 472 million yuan, down 51.6% year-on-year, reflecting the impact of external factors and industry competition [1][17]. Industry Insights - The ready-to-drink tea industry is undergoing a new growth cycle, with a significant number of store closures leading to a market cleanup. The industry is experiencing a reduction in investment activity, with financing events and amounts at their lowest in recent years [2][24]. - Price wars in the industry are easing, with many brands increasing prices compared to the previous year, indicating a potential stabilization in the market [2][28]. Growth Drivers - The company is focusing on product innovation, having launched 60 new products and upgraded 42 existing ones in 2024. The introduction of the "Super Vegetable Series" and "Oriental Plant Fresh Tea" reflects its commitment to meeting consumer trends [3][35][40]. - The supply chain is a critical component of the company's strategy, with 39% of raised funds allocated to enhancing supply chain capabilities, including automation and strategic investments [41][42]. - The company aims to expand its store network significantly, with a potential domestic store count of nearly 15,000, indicating a growth opportunity of 76% [3][55]. Financial Projections - Revenue projections for 2025-2027 are estimated at 5.681 billion yuan, 6.325 billion yuan, and 6.848 billion yuan, respectively, with corresponding net profits of 839 million yuan, 1.068 billion yuan, and 1.252 billion yuan [4][62][63]. - The expected earnings per share (EPS) for the same period are projected to be 0.57 yuan, 0.72 yuan, and 0.85 yuan, with the current stock price reflecting a price-to-earnings (PE) ratio of 17.0, 13.4, and 11.4 times [4][62][63].

Financial Performance - Sichuan Baicha Baidao Industrial Co., Ltd. reported a revenue of RMB 1.2 billion for the fiscal year 2024, representing a year-on-year growth of 15%[1] - The company achieved a net profit of RMB 300 million, which is an increase of 20% compared to the previous year[1] - In 2024, the company recorded total revenue of RMB 4,918.0 million, a decrease of 13.8% compared to 2023[15] - Gross profit for 2024 was RMB 1,534.7 million, down 21.9% from the previous year[15] - Adjusted net profit decreased approximately 48.7% to RMB 645.0 million from RMB 1,257.6 million in 2023[15] - The net profit for the reporting period decreased by 58.3% to RMB 479.7 million from RMB 1,150.8 million in the same period last year[49] - The adjusted EBITDA margin decreased to 17.0% from 26.9% year-on-year, reflecting the overall decline in profitability[52] Customer and Market Growth - User data indicates that the active customer base grew to 5 million, reflecting a 25% increase from the last fiscal year[1] - The company plans to expand its market presence by opening 100 new stores across China in the next year[1] - The number of stores increased by 7.6% from 7,801 to 8,395 stores year-over-year[24] - The company operates 13 direct-operated stores as of December 31, 2024, up from 6 stores in 2023[24] - The number of franchisees increased to 5,742 by the end of 2024, up from 5,538 at the end of 2023, with a net addition of 204 franchisees during the year[29] - The number of franchise stores rose to 8,382, an increase of 7.5% from 7,795 in 2023, with 1,477 new stores opened during the year[30] - As of December 31, 2024, the registered membership reached 139.27 million, a 53.2% increase from the previous year, while active members grew by 17.3% to 59.29 million[36] Investment and Development - Sichuan Baicha Baidao is investing RMB 50 million in new product development, focusing on innovative tea blends and health-oriented beverages[1] - The company plans to continue expanding its store network and enhance product development capabilities in 2025, focusing on both domestic and overseas markets[39] - The company launched 60 new products and upgraded 42 products during the reporting period, with a total of 372 product formulas developed[32] - The company has implemented a digital marketing strategy, introducing 4 new sales channels and enhancing user interaction through various platforms[37] Financial Position and Assets - The company's cash and cash equivalents increased by 397.2% to RMB 3,559.9 million compared to 2023[15] - Total assets increased to RMB 5,493.98 million in 2024 from RMB 3,085.50 million in 2023[19] - Total liabilities decreased to RMB 1,560.28 million in 2024 from RMB 2,238.85 million in 2023[19] - Cash and cash equivalents totaled RMB 3,559.9 million as of December 31, 2024, a 397.2% increase from RMB 716.0 million on December 31, 2023, primarily due to funds received from the global offering[54] Governance and Management - The company has maintained a stable governance structure since its listing, with no significant changes in the board or management personnel reported[93] - The board consists of eight members, including four executive directors, one non-executive director, and three independent non-executive directors, ensuring a diverse governance structure[99] - The company is committed to corporate social responsibility and aims to create value for shareholders through innovative and collaborative practices[96] - The company has established three specialized committees: audit committee, nomination committee, and remuneration committee, to support governance functions[101] Risk Management and Compliance - The company has established a comprehensive risk management and internal control system, which is evaluated at least annually for effectiveness[138] - The risk management framework is based on the COSO framework and aims to manage risks to acceptable levels while ensuring the reliability of financial reporting[138] - The company has implemented a "three lines of defense" model for risk management, involving various organizational levels including the board, management, and internal audit[139] - The company has adopted a standard code for securities trading by directors and supervisors, confirming compliance since the listing date[126] Shareholder and Capital Management - The company plans to distribute a final dividend of RMB 0.20 per share based on a total share capital of 1,477,634,250 shares, amounting to a total cash dividend of RMB 295,526,850[165] - As of December 31, 2024, the company's distributable reserves amounted to RMB 382.1 million[172] - The company has no bank loans or other borrowings as of December 31, 2024[174] - The company has not issued any debt securities during the reporting period[175] Employee and Operational Strategies - The company has developed a performance evaluation system to assess employee performance annually, which influences compensation, bonuses, and promotions[160] - The company actively participates in the operations of franchise stores, providing training and support to ensure their success[160] - The total employee benefits expenditure, including director remuneration, was RMB 432.1 million for the reporting period[71] Future Outlook - The management provided guidance for the next fiscal year, projecting a revenue growth of 10% to 12%[1] - The company aims to leverage new technologies in its production processes to improve operational efficiency by 15%[1] - The company has plans for significant future investments or capital asset plans beyond those disclosed in the prospectus[70]

Investment Rating - The report maintains a rating of "Buy" for the company [1][6]. Core Viewpoints - The company is expected to enhance its competitiveness through strengthening product R&D capabilities, supply chain capabilities, operational management, brand influence, and digital capabilities [2]. - The company's performance in 2024 was below expectations, with a decline in same-store revenue and a slowdown in store opening growth. Adjusted net profit forecasts for 2025-2026 have been lowered to 7.18 billion and 7.88 billion RMB respectively, with a new forecast for 2027 of 8.62 billion RMB [6]. Financial Summary - Revenue for 2024 is reported at 49.18 billion RMB, a year-on-year decrease of 14%. The net profit attributable to shareholders is 4.72 billion RMB, down 59% year-on-year, while adjusted net profit is 6.45 billion RMB, a decline of 49% [5][6]. - The company had a total of 8,395 stores by the end of 2024, an increase of 8% year-on-year, with 8,382 being franchise stores and 13 being directly operated stores. The net increase in franchise stores was 587 [6]. - The gross profit margin for 2024 was 31.2%, a decrease of 3.2 percentage points year-on-year, primarily due to increased support for franchisees [6].

Financial Performance - Sichuan Baicha Baidao Industrial Co., Ltd. reported a revenue of RMB 4,917.997 million for the year ended December 31, 2024, a decrease of 13.8% compared to RMB 5,704.307 million in 2023[2]. - The gross profit for the same period was RMB 1,534.679 million, down from RMB 1,963.782 million in 2023, reflecting a significant decline in profitability[2]. - The adjusted net profit (non-IFRS measure) was RMB 644.970 million, compared to RMB 1,257.553 million in the previous year, indicating a decrease of 48.7%[2]. - The company's profit decreased by 58.3% to RMB 479.7 million, down from RMB 1,150.8 million in the previous year[28]. - For the year ended December 31, 2024, the company's profit was RMB 479.726 million, a decrease of 58.3% compared to RMB 1,150.780 million in 2023[31]. - The adjusted EBITDA for 2024 was RMB 837.004 million, down 45.5% from RMB 1,536.366 million in 2023, with an adjusted EBITDA margin of 17.0% compared to 26.9% in the previous year[31]. - Basic earnings per share decreased to RMB 0.336 from RMB 0.981, reflecting a drop of 65.7%[63]. - The net profit for 2024 was RMB 142,109,000, down from RMB 215,068,000 in 2023, reflecting a decrease of 34%[76]. Revenue Sources - The revenue from product sales and equipment decreased by 14.2% year-on-year, contributing RMB 4,652.382 million to total revenue[3]. - Franchise fees and royalties generated RMB 213.404 million, down 7.9% from the previous year[3]. - Revenue from product sales and equipment was RMB 4,652,382,000, down 14.1% from RMB 5,419,980,000 in the previous year[73]. - Franchise fees and initial fees generated RMB 213,404,000, a decline of 7.8% from RMB 231,595,000 in 2023[73]. Store Expansion and Network - The number of stores increased from 7,801 to 8,395, representing a growth of 7.6% year-on-year[8]. - The company added 1,477 new franchise stores during the year, while 890 stores were closed, resulting in a net increase in franchise stores[12]. - The company is strategically expanding its store network in lower-tier cities to capture growth potential, while maintaining its presence in first and new first-tier cities[5]. - As of December 31, 2024, the company operated 13 directly managed stores, up from 6 in the previous year, to enhance consumer experience[8]. - The company is advancing its overseas business, with a total of 14 stores opened in countries including South Korea, Malaysia, Thailand, Australia, and Hong Kong[9]. Research and Development - The company launched 60 new products and upgraded 42 existing products during the reporting period, with a total of 372 product formulations developed[14]. - Research and development expenses surged by 105.7% to RMB 33.8 million, reflecting ongoing investments in digital infrastructure and R&D personnel expansion[24]. - The company invested RMB 33,764 in research and development, which is an increase of 105.5% compared to RMB 16,417 in 2023[62]. Financial Position and Liquidity - Cash and cash equivalents increased by 397.2% to RMB 3,559.9 million as of December 31, 2024, up from RMB 716.0 million in 2023, primarily due to proceeds from a global offering[32]. - Total assets increased to RMB 4,137,706, up from RMB 2,601,848 in 2023, representing a growth of 58.9%[64]. - Non-current liabilities decreased to RMB 149,061 from RMB 1,212,399, a reduction of 87.7%[65]. - The company had no bank borrowings as of December 31, 2024, indicating a strong liquidity position[36]. Employee and Governance - The company has 2,319 employees as of December 31, 2024, with total employee benefits expenses amounting to RMB 432.1 million during the reporting period[48]. - The board of directors includes key executives and independent directors, ensuring a diverse governance structure[98]. - The company has established an employee incentive plan prior to its IPO, with 6,386,000 shares allocated to eligible participants, representing approximately 0.4322% of the total issued shares[49]. IPO and Capital Raise - The company raised approximately HKD 2,463.3 million from its IPO, issuing 147,763,400 shares at HKD 17.50 each, with net proceeds allocated as follows: 51% for operational capacity and supply chain enhancement, 20% for digital capabilities and talent training, and 12% for brand promotion[51]. - The company has allocated 51% of the IPO proceeds (approximately HKD 1,256.3 million) to enhance overall operational capabilities and strengthen the supply chain, with an expected completion date of June 2027[51]. - The company has committed 20% of the IPO proceeds (approximately HKD 492.7 million) to develop digital capabilities and hire and train professional talent, also expected to be completed by June 2027[51]. - The company will hold its 2024 annual general meeting on May 21, 2025, to discuss the proposed dividend and other matters[53]. Corporate Governance and Compliance - The company has adhered to the corporate governance code and standard code for securities transactions since its IPO date[56][57]. - The company has applied new and revised International Financial Reporting Standards for the financial year, which did not have a significant impact on its financial position[68]. - The company is evaluating the impact of the new International Financial Reporting Standards on its consolidated financial statements, effective from 2027[70].

Investment Rating - The report initiates coverage with a "Buy" rating for the company, targeting a price of HKD 13.58, representing a potential upside of 44.8% from the current price of HKD 9.38 [4]. Core Insights - The company is a leading brand in the mid-range ready-to-drink tea market, achieving stable revenue through a franchise model, with approximately 95% of revenue derived from sales to franchisees [1][2]. - The company has maintained double-digit growth in revenue and net profit from 2021 to 2023, with plans to expand its store count significantly in lower-tier cities as first-tier cities become saturated [1][2]. - The Chinese ready-to-drink tea market is projected to grow significantly, with a compound annual growth rate (CAGR) of 25.2% from 2018 to 2023, indicating strong potential for further expansion [2]. Summary by Sections Business Model - The company primarily operates through a franchise model, with over 99% of revenue coming from franchise sales, which provides a stable income source and reduces operational risks [29][35]. - The franchise model allows for rapid national expansion, with over 8,400 stores established across 31 provinces as of June 30, 2024 [35][59]. Market Position - The company holds a 6.8% market share in the Chinese ready-to-drink tea market, ranking third by retail sales in 2023 [2][59]. - The competitive landscape is intensifying, with over 3,000 brands competing and a market concentration (CR5) of 40.2% [2]. Product and Brand Strategy - The company emphasizes product innovation and brand building, with a product matrix that includes classic and seasonal offerings, enhancing market appeal [3][9]. - The introduction of a coffee sub-brand "Kahui" and expansion into Southeast Asian markets are part of the company's growth strategy [3][54]. Financial Projections - Revenue forecasts for 2024, 2025, and 2026 are projected at RMB 48.33 billion, RMB 53.51 billion, and RMB 58.33 billion, respectively, with corresponding year-over-year growth rates of -15.3%, 10.7%, and 9.0% [4]. - Adjusted net profits are expected to be RMB 10.42 billion, RMB 11.71 billion, and RMB 12.95 billion for the same years, with year-over-year changes of -16.4%, 12.3%, and 10.6% [4]. Supply Chain and Operations - The company has established a robust supply chain system, ensuring product quality and operational efficiency through a nationwide logistics network [48]. - Approximately 90% of stores receive deliveries the next day, with a digital supply chain management system in place to optimize inventory and logistics [48]. Membership and Customer Engagement - The membership program has grown rapidly, with over 130 million registered members as of October 31, 2024, enhancing customer loyalty and engagement [24][27]. - The program includes a points system and user benefits, fostering a strong community atmosphere among consumers [27][28].

Investment Rating - Maintains an "Overweight" rating [1][3] Core Views - The company faces pressure on single-store revenue due to intense competition in the ready-to-drink tea market [2] - The company continues to expand in lower-tier cities and overseas markets, but single-store revenue is under pressure [3] - The company is expected to optimize its products and supply chain to improve performance [2] Financial Performance - 2024H1 revenue: RMB 2.396 billion, down 10.0% YoY [3] - Adjusted net profit for 2024H1: RMB 395 million, down 34% YoY [3] - Adjusted net profit margin: 16.5%, down 6 percentage points YoY [3] - Net profit attributable to shareholders: RMB 237 million, down 59.7% YoY [3] - Gross profit: RMB 760 million, down 18.6% YoY, with a gross margin of 31.7%, down 3.4 percentage points YoY [3] - Sales expense ratio: 4.4%, up 2.7 percentage points YoY [3] - Management expense ratio: 9.1%, up 2.1 percentage points YoY [3] - R&D expense ratio: 0.6%, up 0.4 percentage points YoY [3] Store Expansion and Performance - Total stores as of 2024H1: 8,385, up 20.6% YoY [3] - New stores opened in 2024H1: 826, with 245 closures [3] - Annualized closure rate: 6.2% in 2024H1, up from 3% in 2023H1 [3] - Stores in fourth-tier and below cities account for 24% of total stores [3] - Overseas expansion: 4 stores in South Korea, 2 in Thailand, and 1 in Australia as of 2024H1 [3] - Single-store revenue declined by 26% YoY, mainly due to a decrease in average cup volume per store [3] - Cup prices are expected to decline slightly [3] Future Projections - Adjusted net profit for 2024-2026 is projected to be RMB 965 million (-23% YoY), RMB 1.044 billion (+8% YoY), and RMB 1.101 billion (+6% YoY) respectively [3] - PE ratios for 2024-2026 are projected at 9x, 8x, and 8x respectively [3] Market Data - Current stock price: HKD 6.30 [2] - 52-week price range: HKD 6.10 to HKD 13.00 [6] - Current market capitalization: HKD 9.309 billion [6]

Investment Rating - The report recommends an "Overweight" rating for the company, with a target market capitalization of HKD 28.9 billion based on a 17x PE ratio for 2024 [12][160] Core Views - The company is expected to achieve revenues of RMB 7.174 billion, RMB 8.826 billion, and RMB 10.382 billion for 2024-2026, with growth rates of 26%, 23%, and 18% respectively [12][34] - Adjusted net profits are projected to be RMB 1.573 billion, RMB 1.928 billion, and RMB 2.259 billion for 2024-2026, with growth rates of 25%, 23%, and 17% respectively [12][36] - The company's main revenue comes from goods and equipment sales to franchisees, accounting for over 99% of total revenue [10][46] Financial Performance - Revenue grew from RMB 3.644 billion in 2021 to RMB 5.704 billion in 2023, with a CAGR of 25.2% [14][55] - Gross margin remained stable at around 34% from 2021 to 2023 [14][55] - Net profit margin was 20.2% in 2023, with operating expenses ratio at 2.3% for sales, 7.4% for administration, and 0.3% for R&D [55] - Inventory turnover days decreased from 20.1 days in 2022 to 19.2 days in 2023 [52] Market Position - The company ranked third in market share and store count in 2023, with a 7% market share [31][65] - As of 2023, the company had 7,801 stores, with 99% being franchise stores [76] - The company covers 31 provinces in China and has entered overseas markets including South Korea, Thailand, and Australia [21][134] Industry Analysis - The Chinese tea beverage market grew from RMB 805 billion in 2018 to RMB 2.473 trillion in 2023, with a CAGR of 25.2% [59] - The market is expected to reach RMB 5.385 trillion by 2028, with lower-tier cities showing significant growth potential [59][83] - The penetration rate of tea delivery increased from 47.6% in 2021 to 58.0% in 2023 [170] Growth Strategy - The company plans to expand its store network in lower-tier cities, with a potential store count of 11,923 based on current market density [120] - It is developing a sub-brand "Kahui" for coffee and baked goods, with the first store opened in Chengdu in January 2024 [121][156] - The company is building overseas supply chains and operational systems, focusing on Southeast Asian markets [104] Competitive Advantages - The company maintains a stable average price of RMB 16 per cup, with classic products priced at RMB 13.9 and seasonal products at RMB 16.6 [25][87] - It has a strong R&D capability, launching 48 new products and upgrading 13 existing products in 2023 [73] - The company has established a comprehensive logistics network with 21 multi-temperature warehouses covering 80,000 square meters [91]