Core Viewpoint - Haitong International forecasts Green Tea Group (06831) to achieve revenues of 4.91 billion, 6.23 billion, and 7.65 billion CNY for 2025-2027, representing year-on-year growth of 28.0%, 26.7%, and 22.9% respectively, with adjusted net profits of 500 million, 650 million, and 800 million CNY, reflecting year-on-year increases of 37.9%, 30.0%, and 24.3% respectively, assigning a target price of 12.1 HKD based on a 15x PE for 2025, leading to a reasonable market value of 8.2 billion HKD [1] Company Overview - Green Tea is a well-known casual Chinese dining brand founded in 2008 in Hangzhou, characterized by affordable pricing, fusion cuisine, and Chinese aesthetic spaces, holding a 0.7% market share in the casual Chinese restaurant market in mainland China, ranking fourth by revenue and third by the number of restaurants with a total of 465 outlets [2] Industry Insights - The chain restaurant penetration rate in China is continuously increasing, with a projected compound annual growth rate (CAGR) of 8.2% for chain dining from 2024 to 2029, significantly higher than the 6.8% for non-chain dining and the overall average of 7.1%. The casual Chinese dining segment is the fastest-growing niche, expected to reach a market size of 0.5 trillion CNY in 2024, accounting for 17% of the Chinese restaurant market, and projected to grow to 0.8 trillion CNY by 2029, increasing its market share to 19% with a CAGR of 9.1% [3] Competitive Advantages - **Brand Strength**: High brand recognition and effective organizational structure drive growth, with 203 new dishes launched in 2024 and 68.07 million customers served, alongside over 16.2 million members, indicating significant brand loyalty and influence [4] - **Supply Chain Efficiency**: The supply chain combines third-party food processing and direct procurement, enhancing food consistency, safety, efficiency, and supporting rapid expansion. Plans include building small to medium-sized central kitchens in densely populated areas and integrating upstream capacity through partnerships [4] - **Store Expansion Strategy**: The company focuses on a direct-operated model with small store formats, expanding from high-tier to lower-tier cities, with a total of 502 stores by the end of 1H25, an increase of 37 stores from the end of 2024, and plans to open 150, 200, and 213 new restaurants in 2025-2027 [4] Store Performance - Despite a decline in same-store sales growth, average daily sales, and customer spending due to the current economic environment, the company has optimized its store model, reducing the payback period for new stores from 18 months to 14.5 months. The focus on small restaurants and cost optimization in rent and labor is expected to yield an operating profit margin of approximately 17% at the store level in 2025 [5]

Group 1: Company Overview - Green Tea Group is a well-known casual Chinese dining brand founded in 2008 in Hangzhou, focusing on affordable pricing, fusion cuisine, and Chinese aesthetic space [2] - The company holds a market share of 0.7% in the casual Chinese restaurant market in mainland China, ranking fourth by revenue and third by the number of restaurants with a total of 465 locations [2] Group 2: Market Insights - The casual Chinese dining segment is the fastest-growing niche in the Chinese restaurant market, with a projected market size of 0.5 trillion yuan in 2024, expected to grow to 0.8 trillion yuan by 2029, representing a compound annual growth rate (CAGR) of 9.1% [3] - The overall chain restaurant penetration rate in China is increasing, with a forecasted CAGR of 8.2% for chain dining from 2024 to 2029, surpassing the 6.8% growth rate for non-chain restaurants [3] Group 3: Competitive Advantages - The company has a strong brand presence, with high brand loyalty and influence, supported by a structured management system and employee incentive mechanisms [4] - The supply chain is diversified and efficient, combining third-party food processing with direct procurement to enhance food safety and operational efficiency [4] - The company is expanding its footprint in lower-tier cities through a strategy focused on small-sized restaurants, with plans to open 150, 200, and 213 new restaurants in 2025, 2026, and 2027 respectively [4] Group 4: Operational Efficiency - Despite a decline in same-store sales growth and average transaction value, the company is optimizing its store model, reducing the payback period for new store investments from 18 months to 14.5 months [5] - The operating profit margin at the store level is projected to be around 17% in 2025, aided by cost optimization in key areas such as rent and labor [5]

Investment Rating - The report initiates coverage with an OUTPERFORM rating, targeting a price of HK$12.10 from the current price of HK$6.69 [1]. Core Insights - Green Tea Group is positioned as a leading player in the casual Chinese dining sector, leveraging affordable pricing and fusion cuisine to attract consumers [2][6]. - The casual Chinese dining market is expected to grow significantly, with a projected compound annual growth rate (CAGR) of 9.1% from 2024 to 2029, reaching a market size of RMB 0.8 trillion by 2029 [2][26]. - The company has a strong brand presence, with a focus on menu innovation and customer loyalty, evidenced by over 16.2 million members in its loyalty program [3][33]. Company Overview - Green Tea Group was founded in 2008 in Hangzhou and has established itself as a prominent brand in the casual Chinese dining market, holding a 0.7% market share by revenue in 2024 [2][6]. - The company operates 502 restaurants as of mid-2025, ranking third in terms of the number of outlets in the casual dining segment [3][42]. Financial Performance - Revenue is projected to grow from RMB 3.84 billion in 2024 to RMB 7.65 billion by 2027, reflecting a CAGR of 27% [1][4]. - Net profit is expected to increase from RMB 350 million in 2024 to RMB 804 million by 2027, with a CAGR of 30% [1][4]. - The company has demonstrated strong profitability, with a gross profit margin of 69.5% in 2025 and a return on equity (ROE) of 51.3% [1][4]. Market Dynamics - The Chinese restaurant market is increasingly shifting towards chain operations, with a projected CAGR of 8.2% for chain restaurants from 2024 to 2029, outpacing non-chain establishments [22]. - Casual Chinese dining is identified as the fastest-growing segment within the Chinese restaurant market, driven by consumer demand for high cost-effectiveness and quality dining experiences [26][23]. Competitive Advantages - Green Tea Group's competitive edge lies in its strong brand recognition, efficient supply chain management, and strategic expansion into lower-tier cities with smaller restaurant formats [3][39][42]. - The company has established partnerships with 205 third-party food processing companies to enhance operational efficiency and maintain food quality consistency across its outlets [39][40]. Expansion Strategy - The company plans to continue its expansion strategy by opening 150, 200, and 213 new restaurants in 2025, 2026, and 2027, respectively, focusing on smaller formats to reduce costs [3][42]. - As of mid-2025, Green Tea Group has successfully increased its restaurant count by 37 outlets compared to the end of 2024, demonstrating its commitment to growth [42].

Core Viewpoint - Citigroup's research report indicates that Green Tea Group has issued a positive profit forecast, expecting a year-on-year increase of 38% to 42% in adjusted net profit for the first half of this year, reaching between 247 million to 254 million yuan, driven by a revenue growth of 21% to 25% and improved profitability at the store level [1] Group 1: Financial Performance - Green Tea Group anticipates adjusted net profit for H1 to be between 247 million to 254 million yuan, reflecting a year-on-year growth of 38% to 42% [1] - Revenue is expected to grow by 21% to 25%, contributing to the overall profit increase [1] Group 2: Growth Potential - Citigroup projects that the net profit for Green Tea Group will grow by 29% and 26% in 2025 and 2026 respectively, driven by accelerated revenue growth [1] - Revenue growth rates are forecasted to be 19% in 2025 and 21% in 2026, with a more modest growth of 7% in 2024 [1] - The number of new store openings is expected to increase, with projections of 150 stores in 2025 and 200 stores in 2026, compared to 105 stores in 2024 [1] Group 3: Investment Recommendation - Citigroup has set a target price of 11.1 HKD for Green Tea Group shares and has rated the stock as "Buy" [1]

Core Viewpoint - Green Tea Group (06831) is set to launch an IPO from May 8 to May 13, 2025, offering 168 million shares at a price of HKD 7.19 per share, with 10% allocated for Hong Kong and 90% for international sales, plus a 15% over-allotment option [1][2] Group 1: Company Overview - Green Tea Group is a well-known operator of casual Chinese restaurants in mainland China, with a focus on affordable pricing and a diverse menu [1] - The company opened its first restaurant in Hangzhou in 2008 and has since expanded to a network of 493 restaurants across 21 provinces, four municipalities, two autonomous regions, and Hong Kong [1] - According to a report by Zhaoshang Consulting, the company ranks third in terms of the number of restaurants and fourth in revenue among casual Chinese restaurant brands in mainland China as of 2024, holding a market share of 0.7% [1] Group 2: Growth and Expansion - The total number of restaurants increased from 276 as of December 31, 2022, to 465 by December 31, 2024, reflecting a compound annual growth rate (CAGR) of 29.8% [2] - The company plans to open 150, 200, and 213 new restaurants in 2025, 2026, and 2027, respectively, with 32 restaurants already operational and 17 more under lease agreements for 2025 [2] - The majority of the restaurants are located in shopping malls, which supports customer accessibility and foot traffic [2] Group 3: Financial Projections and Use of Proceeds - The estimated net proceeds from the global offering, assuming no exercise of the over-allotment option, will be approximately HKD 746 million after deducting underwriting fees and expenses [3] - Approximately 63.3% of the proceeds will be used to expand the restaurant network, while 26.3% will fund capital expenditures for a central food processing facility in Zhejiang Province [3] - About 5.4% will be allocated for upgrading the company's IT systems and infrastructure, and 5.0% will be used for working capital and other general corporate purposes [3]