Core Viewpoint - Zheshang Securities initiates coverage on Hu Shang A Yi (02589) with a "Buy" rating, highlighting the company's strong product innovation and supply chain advantages in the fast-growing ready-to-drink beverage industry, which is expected to exceed 510 billion yuan in 2023 [1][2]. Group 1: Company Overview - Hu Shang A Yi is a leading ready-to-drink beverage company in China, focusing on providing high-quality, mid-priced products to consumers [2]. - The company's revenue is projected to grow from 2.2 billion yuan in 2022 to 3.28 billion yuan in 2024, representing a compound annual growth rate (CAGR) of approximately 22% [2]. - Hu Shang A Yi maintains a favorable profitability profile, with average gross and net profit margins of around 29% and 9% respectively from 2022 to 2024 [2]. Group 2: Industry Insights - The ready-to-drink beverage industry in China is valued at over 510 billion yuan in 2023, continuing to experience double-digit growth [3]. - The growth rates for sub-segments show that freshly brewed coffee is growing faster than ready-to-drink tea, with growth rates of approximately 36% and 19% from 2018 to 2023 [3]. - The market size for ready-to-drink tea and freshly brewed coffee in 2023 is estimated at over 250 billion yuan and 170 billion yuan respectively [3]. - There is significant room for growth in per capita consumption of ready-to-drink beverages in China, which stands at 22 cups per year, compared to 323 cups in the U.S. and 306 cups in the EU and UK [3]. Group 3: Product and Supply Chain Strategy - Hu Shang A Yi has launched over 300 new products and established a robust supply chain system comprising 12 storage bases, 4 equipment warehouses, 8 fresh product warehouses, and 15 front warehouses, ensuring stable supply [4]. - The company delivers fresh ingredients to stores 2-3 times a week, leading the mid-price segment in supply density [4]. - The number of stores is expected to grow from 5,307 in 2022 to 9,176 by 2024, with a rising proportion of new stores opened by existing franchisees [4].