Core Viewpoint - Haitong International initiates coverage on Cha Baidao (02555) with an "outperform" rating and a target price of HKD 9.3, anticipating a recovery in fundamentals by mid-2025 through product innovation, marketing optimization, and franchisee operations after a business adjustment in 2024 [1] Company Background - Cha Baidao, founded by Wang Xiaokun in 2008 in Chengdu, Sichuan, is a leading ready-to-drink tea brand in China, with 8,465 global stores as of 1H25, including 8,444 in China and 21 overseas [1] - The brand holds an 8% market share in China's ready-to-drink tea segment, ranking third by GMV in 2023, and is the second-largest in the mass market segment with a 15.6% market share [1] Business Adjustment and Innovation - The ready-to-drink beverage industry is entering an adjustment phase in 2024, with Cha Baidao optimizing its business model to return to a growth trajectory in 1H25 [2] - The company is restructuring its business around product capabilities, with a dual-team approach in R&D leading to 55 new products launched in 1H25, significantly up from 21 in the same period of 2024 [3] - Marketing strategies are shifting from passive to proactive, with increased advertising spending and enhanced precision marketing to boost customer retention [3] - Operational improvements include optimizing existing franchisees and encouraging expansion into county-level markets, resulting in a shorter payback period for stores by approximately 1-2 months compared to 2024 [3] - Supply chain enhancements have led to next-day delivery for most stores and a broader range of self-produced raw materials [3] Financial Forecast and Valuation - The company anticipates a high base effect in same-store sales due to delivery subsidies in 2025, with potential pressure in 2026 as subsidy levels decrease [4] - Cha Baidao plans to enhance same-store and single-store performance through channel expansion, product diversification, and increased marketing efforts [4] - Recent social security and tax policies are expected to promote a more regulated and sustainable industry, benefiting compliant leading brands like Cha Baidao [4] - Revenue projections for 2025-2027 are estimated at CNY 5.59 billion, 6.00 billion, and 6.55 billion, with adjusted net profits of CNY 840 million, 950 million, and 1.08 billion respectively [4] - The company is assigned a 15X PE valuation for 2025, leading to a target price of HKD 9.3 based on expected growth rates and industry average valuation levels [4]
海通国际：首予茶百道(02555)“优于大市”评级 产品创新驱动业务优化