Investment Rating - The industry investment rating is "Positive" [1] Core Insights - The report highlights strong growth in the number of coffee and Western fast-food outlets, while the tea beverage sector is experiencing increasing differentiation [2][3] - The net opening numbers for various brands indicate a competitive landscape, with some brands expanding rapidly while others are contracting [4][8] Summary by Sections Net Opening Trends - In the first four months of 2025, the net opening numbers for various sectors are as follows: - Coffee: 1,921 net openings, a 9% increase - Western fast food: 585 net openings, a 5% increase - Tea: -359 net openings, a 7% decrease [3][4] Customer Price Trends - Customer price trends for major brands show varying performance: - KFC: -1.6% in August 2023, worsening to -3.9% by December 2024 - McDonald's: -1.1% in August 2023, worsening to -0.1% by December 2024 - Starbucks: -1.1% in August 2023, worsening to -2.3% by December 2024 [7][12] Coffee and Hot Pot Sector - The coffee sector shows strong growth with notable net openings: - Luckin Coffee: 1,474 net openings, a 7% increase - Starbucks: 49 net openings, a 1% increase [10] - The hot pot sector shows mixed results with some brands experiencing declines in net openings [11] Tea Sector - The tea sector is characterized by a rapid expansion of certain brands like Mixue Ice Cream and Tea, which saw 3,123 net openings, a 9% increase, while others like Heytea and Nayuki are facing challenges with negative net openings [8][9] Other Food Categories - The report indicates a contraction in the number of outlets for categories like pickled fish and snacks, with brands like Tai Er and Yu Ni Zai Yi Qi showing negative net openings [13][14]

Macro Commentary - The US economy shows signs of slowing down, with significant declines in retail and manufacturing output due to tariff impacts, particularly affecting durable goods like automobiles and electronics [2] - Despite the slowdown, unemployment claims remain stable, indicating that the service sector is less affected, and employment in this sector remains robust [2] - Inflation is expected to rebound temporarily from May to August, with the Federal Reserve likely to maintain interest rates until September, when a potential rate cut may occur [2] Industry Commentary - The Chinese pharmaceutical sector is experiencing a strong trend in innovative drug exports, with several significant business development transactions occurring despite recent tariff tensions [5][6] - The MSCI China Healthcare Index has risen by 14.9% since early 2025, although it has underperformed compared to the broader MSCI China Index [5] - The US innovative drug prices are unlikely to decrease in the short term due to recent executive orders, but long-term pressures on healthcare spending are anticipated [7] Company Initiation - The report covers Angelalign Technology (6699 HK), a leading provider of invisible orthodontic solutions in China, which has maintained a market share of 42% in the domestic market [9][10] - The company is expected to achieve a revenue compound annual growth rate (CAGR) of 23.8% from 2019 to 2024, with a projected CAGR of 18.0% from 2024 to 2027 [9] - Angelalign is expanding internationally, with a goal to cover over 50 countries and achieve significant revenue growth from overseas markets, which is expected to account for 30% of total revenue by 2024 [11][12]

Investment Rating - The report maintains a positive outlook on certain sectors, particularly focusing on undervalued stocks and sectors that have shown resilience despite market fluctuations [1][11]. Core Insights - The report emphasizes the importance of monitoring quarterly changes in overseas assets, particularly in light of the ongoing US-China trade negotiations and the impact of tariffs on Chinese assets [1][11]. - It suggests that the difficulty in identifying undervalued stocks is increasing as the declines in overseas Chinese assets are being filled [1][11]. - The report highlights specific sectors and companies to watch, including Chinese concept stocks in the US, internet assets in Hong Kong, and consumer goods companies preparing for IPOs [1][11]. Summary by Sections 1. Current Perspectives - The report stresses the need to focus on quarterly changes in overseas assets and the implications of US-China tariff negotiations [1][11]. 2. Industry Tracking 2.1 Consumer & Internet - **Education**: The Chinese education index rose by 2.80%, outperforming major indices, with notable gains from companies like Gaotu and Youdao [10][21]. - **Luxury Goods**: The report notes mixed performance among luxury goods companies, with Richemont showing resilience in high-end jewelry despite macroeconomic fluctuations [24][28]. - **Coffee & Beverage**: The coffee and tea segment remains a key focus for delivery platforms, benefiting from subsidies [11][30]. - **E-commerce**: JD and Alibaba reported strong earnings, with JD's retail business performing particularly well [11][40]. 2.2 Platforms & Technology - **Streaming Platforms**: Tencent Music and NetEase Cloud Music reported strong earnings, with Tencent Music's revenue exceeding expectations [41][46]. - **Virtual Assets & Internet Brokers**: The global cryptocurrency market saw a slight increase, with Bitcoin and Ethereum prices rising [48][49]. 2.3 Media - The report highlights the recent changes in regulations regarding major asset restructuring, which may accelerate the pace of mergers and acquisitions in the media sector [11][28].

Group 1 - The first Yunnan Gems of Coffee CoE Pilot competition successfully concluded on May 16, 2025, with 19 winning coffee beans selected from 144 participating teams, and the top 10 beans auctioned to global buyers, with 100% of the proceeds benefiting local coffee farmers [1] - The CoE competition is recognized as the "Olympics of coffee bean competitions," marking a significant opportunity for Yunnan coffee to enter an international evaluation system for the first time [1] - Luckin Coffee, as the strategic partner of the event, demonstrates its commitment to promoting Yunnan's specialty coffee on the international stage [1] Group 2 - Luckin Coffee has established a comprehensive supply chain in Yunnan, contributing to the region's coffee production, which accounts for over 98% of China's coffee output [2] - In 2024, Yunnan's coffee exports reached 32,500 tons, a 358% increase year-on-year, with exports to 29 countries and regions [2] - Luckin Coffee's processing plant in Baoshan, Yunnan, began trial operations in March 2024, utilizing advanced processing lines to enhance the quality supply chain [2] Group 3 - By 2024, the specialty coffee rate in Yunnan increased from 8% in 2021 to 31.6%, and the deep processing rate rose from 20% to 80%, showcasing the improvement in quality and processing [3] - The strategic support for the CoE pilot competition reflects Luckin Coffee's strong focus on the development of Yunnan's specialty coffee and its role as a bridge to international markets [3]

Group 1: Luckin Coffee - Luckin Coffee plans to establish over 30 Brazilian coffee-themed stores nationwide and a Brazilian coffee museum as part of the "Luckin Brazilian Coffee Culture Festival 2.0" [1] - The company will collaborate with Brazilian entities to launch a "Support Program for Small and Medium Coffee Farmers," providing sustainable farming knowledge and technology [1] - CEO Guo Jinyi expressed the aim to promote Brazilian culture and enhance cooperation between China and Brazil in the coffee industry [1] Group 2: RUU Coffee - RUU Coffee, a brand under Lingji, opened franchise opportunities in February 2023, initially in Changsha and Shanghai, with an estimated investment of around 340,000 yuan [2] - The brand operates small stores focusing on takeout and delivery, with coffee prices ranging from 10 to 30 yuan [2] - RUU requires potential franchisees to first operate a Lingji store before upgrading to a dual-brand store, with initial investments between 150,000 to 200,000 yuan [2] Group 3: Starbucks - Starbucks has launched two new ready-to-drink tea coffee products: Jasmine Latte and Tieguanyin Oolong Latte, marking its entry into the tea coffee market [3] - The Jasmine Latte uses premium jasmine tea from Guangxi, while the Tieguanyin Oolong Latte features high-quality Tieguanyin from Anxi [3] - The new products are priced at 59.9 yuan for a pack of six 270ml bottles [3] Group 4: CoCo Milk Tea - CoCo Milk Tea faced operational challenges due to a surge in orders from JD's subsidy program, with some stores experiencing overwhelming demand [4] - During the subsidy period, prices for CoCo drinks dropped to as low as 1.9 yuan, leading to a significant increase in order volume [4] - The influx of orders caused equipment failures and shortages of raw materials, forcing some locations to temporarily suspend delivery services [4] Group 5: Pu'er Coffee - Pu'er Coffee has been recognized as one of the top 100 regional brand value products in China, with a brand value of 4.074 billion yuan [5] - The city of Pu'er is a major coffee production area in China, implementing various measures to enhance the coffee industry, including establishing quality standards [6] - The local government aims to promote the geographical indication of Pu'er Coffee to increase market share and brand recognition [6] Group 6: Algeria's Coffee Import Strategy - Algeria's government plans to involve state-owned enterprises in the import of coffee and bananas to stabilize prices and ensure supply [7] - The country imports approximately 130,000 tons of coffee beans annually, with an import value of around 300 million USD [7] - Recent supply shortages and price hikes have prompted the government to take action against speculation in the market [7]

Core Viewpoint - Luckin Coffee is signaling a new phase of expansion with a focus on targeted franchise recruitment in over 186 cities, aiming to capture key locations in underserved markets such as schools and hospitals [4][6][7]. Group 1: Expansion Strategy - The new franchise model launched in early 2024 allows franchisees to propose locations within a defined area set by Luckin [5]. - Luckin plans to open a total of 2,342 new stores in Q1 2024, with a gradual reduction in the number of new openings in subsequent quarters [12]. - The company has already approved over 500 targeted locations, leading to the opening of more than 400 stores by April [17]. Group 2: Financial Performance - In Q1 2024, Luckin reported a revenue increase of 41.2% to 8.865 billion yuan, with a net profit of 525 million yuan, marking a return to profitability [36]. - Same-store sales growth reached 8.1%, indicating a positive trend in customer demand [33]. - The gross profit margin for self-operated stores improved significantly, rising to 17.1%, an increase of over 10 percentage points year-on-year [34]. Group 3: Competitive Landscape - Luckin faces intense competition not only from Starbucks and Kudi but also from emerging tea brands like Mixue and Bawang Tea, which have recently completed financing rounds [43][44]. - The company is diversifying its product offerings by entering the tea market, launching new products like light milk tea to attract a broader customer base [46][55]. - Despite the challenges, Luckin's market share is expected to grow as it maintains competitive pricing strategies amid rising coffee bean costs [38]. Group 4: Management Changes - The recent management transition, with Li Hui stepping into a more visible role, is seen as a signal for accelerating business and capital strategies [19][24]. - Li Hui's experience in investment banking and private equity is expected to bolster Luckin's growth trajectory and governance stability [22][23].

Core Viewpoint - Luckin Coffee appears to be restarting its expansion efforts amid a slowdown in the coffee market share battle, with a new franchise recruitment plan targeting over 800 locations across 186 cities in China [1][2]. Group 1: Expansion Strategy - The new franchise model, set to launch in early 2024, allows local franchisees to propose site selections within designated areas released by Luckin [2]. - The primary goal is to leverage local franchisees' resources to secure key locations in underserved markets such as schools, tourist attractions, and hospitals [3]. - This marks the first significant expansion signal from Luckin since the arrival of Lei Hui, chairman of Dazhong Capital, who has been a key figure in Luckin's capital operations and development [4][5]. Group 2: Store Opening Trends - In 2024, Luckin opened 2,342, 1,371, 1,382, and 997 new stores in the first to fourth quarters, indicating a decreasing trend in new store openings [6]. - The year-on-year growth rate of new stores in the fourth quarter was only 13.5%, approaching pre-price war levels [7]. - However, in Q1 2025, Luckin accelerated its store opening pace, adding 1,757 new stores, surpassing the previous three quarters' average [9]. Group 3: Financial Performance - In Q1, Luckin's revenue grew by 41.2% year-on-year to 8.865 billion yuan, with a net profit of 525 million yuan, marking a return to profitability [25]. - Same-store sales growth turned positive at 8.1%, benefiting from increased cup volume and the introduction of new product categories [22][21]. - The gross profit margin for self-operated stores rose to 17.1%, an increase of over 10 percentage points year-on-year, alleviating concerns about store operating quality [23][24]. Group 4: Competitive Landscape - Luckin faces competition not only from Starbucks and Kudi but also from emerging tea brands like Mixue Ice City and Bawang Tea Princess, which have recently completed financing rounds [29]. - The trend of cross-industry competition is evident, with Luckin venturing into the tea market to capture additional sales [31]. - The introduction of new tea products, such as the "Freshly Brewed Light Milk Tea," has seen significant sales, with a single-day record of 1.67 million cups sold [32]. Group 5: Market Dynamics - The coffee market is experiencing a resurgence of low-price competition, with Kudi offering prices as low as 3.9 yuan, which has delayed the industry's consolidation process [27]. - Luckin has adjusted its pricing strategy, reducing the scope of its 9.9 yuan offers while maintaining competitive pricing to focus on market share growth [20][26]. - The company is also exploring new product categories to enhance profitability amid rising coffee bean prices, which are expected to pressure margins in the second half of the year [26][37].

Core Points - Luckin Coffee has launched the "Luckin Brazil Coffee Culture Festival 2.0" in Beijing, symbolizing its ongoing deep cooperation with Brazil in cultural and economic fields [1][2] - The company signed a memorandum for the procurement of 240,000 tons of Brazilian coffee beans worth 10 billion yuan over five years, further enhancing its collaboration with Brazil [1] - Luckin Coffee plans to establish over 30 Brazilian coffee-themed stores nationwide and a Brazilian coffee museum, promoting cultural exchange and sustainable development in the coffee industry [2] Economic Cooperation - The partnership includes a significant economic agreement with Brazil, reflecting the company's commitment to fostering trade relations [1] - The procurement memorandum is a key aspect of this economic collaboration, indicating a long-term investment in Brazilian coffee [1] Cultural Exchange - The newly upgraded Brazilian coffee-themed store in Beijing serves as a cultural window for Chinese consumers to experience Brazilian culture [1] - The festival aims to promote Brazilian culture through various activities, including a Brazilian specialty coffee tasting competition [2] - The initiative is aligned with the upcoming "China-Brazil Cultural Year" in 2026, emphasizing the importance of cultural ties between the two nations [2][3]

Company Developments - Luckin Coffee has launched a new round of franchise recruitment, targeting over 800 specific locations across 186 cities in China, with more than 500 locations already approved and over 400 stores opened as of April this year [1] - Three Squirrels has acknowledged a reduction in the number of distributors, with a 20% decrease over the past two years, and plans to optimize distributor management services to enhance cooperation and satisfaction [3] - BR Foods from Brazil plans to open a factory in China on May 15, focusing on producing hamburgers, chicken nuggets, and bacon using Brazilian meat [4] - Qingdao Beer Group will integrate its beverage business after merging with Qingdao Beverage Group, ensuring no competition among similar products [4] - Kweichow Moutai has stated there are currently no plans for a Hong Kong stock listing [5] - Anheuser-Busch announced a $300 million investment plan in its U.S. factories, equivalent to approximately 2.1 billion RMB, as part of a broader strategy to enhance operations and meet consumer demands [5] Industry Trends - The Chinese beverage industry is undergoing significant changes, with five major shifts identified: global upheaval, China's rise, a new industrial cycle, technological advancements, and changes in the new generation [3][4] - Nestlé Italy is focusing on the silver economy, with 35%-38% of sales coming from consumers aged 50-65, and plans to invest 1.5%-2% of revenue in R&D to improve product quality for older consumers [6] - Ferrero North America is set to launch its largest innovation initiative, introducing new square-shaped Ferrero Rocher chocolates and a new peanut flavor of Nutella [6] Regulatory and Economic Developments - The U.S. and China have made significant progress in trade talks, with the U.S. canceling 91% of tariffs and China reciprocating, which is expected to benefit producers and consumers in both countries [8]

Group 1: Business Developments - Mixue Ice Cream and Tea signed a procurement memorandum with Brazil for coffee beans and other agricultural products worth 4 billion RMB, aiming to deepen economic cooperation [1] - The company plans to invest in Brazil over the next 3 to 5 years, creating approximately 25,000 jobs [1] - Luckin Coffee aims to enhance cultural exchange between China and Brazil, having signed a 5-year procurement memorandum for 240,000 tons of Brazilian coffee beans valued at over 10 billion RMB [3] Group 2: Market Expansion - Mixue Ice Cream and Tea has opened 4,895 stores outside mainland China, becoming the largest ready-to-drink tea brand in Southeast Asia [2] - Bawang Tea's first store in the U.S. has opened in Los Angeles, with plans for a second store underway [5] - Cha Baidao has opened its first store in Macau, experiencing high demand with long queues on opening day [6] Group 3: Product Offerings - Bawang Tea's U.S. store features 14 drink options and 9 baked goods, with prices ranging from $4.25 to $6.45 [4] - Cha Baidao continues to innovate its product offerings, launching localized menus based on local ingredients in international markets [6] Group 4: Strategic Initiatives - Lavazza is entering the Chinese university market with its first store at Fudan University, targeting the Gen Z demographic [7]