Investment Highlights - Company is rated as outperforming the industry with a target price of HKD 12.00, based on a relative P/E valuation method corresponding to 19/15 times earnings for 2025/26 [1] - The ready-to-drink tea market is expected to maintain rapid growth, with a market size of RMB 258.5 billion in 2023 and a CAGR of 19% over the past five years, projected to continue high growth from 2024 to 2028 [1] - The industry remains fragmented with a CR5 of 46.8%, indicating room for leading brands to increase market penetration [1] Company Overview - Company ranks third in China's ready-to-drink tea market with a market share of 6.8% in 2023, rapidly expanding its store network through a franchise model, aiming for 8,395 stores by the end of 2024 with a CAGR of 68.4% from 2020 to 2024 [2] - The company has a balanced and diverse product matrix, with approximately 40% of sales from classic products and 60% from seasonal and new tea drinks, boasting over 139 million registered members by the end of 2024 [2] - The company benefits from a robust supply chain and a systematic franchise management system, supporting its nationwide expansion and efficient store operations [2] Performance Outlook - The company is expected to achieve a recovery in performance in 2025, with same-store sales growth and franchisee profitability anticipated to stabilize from Q2 2025 onwards after adjustments in store opening pace and store efficiency in 2024 [2] - Earnings per share (EPS) are projected to be RMB 0.59 and RMB 0.72 for 2025 and 2026 respectively, with a CAGR of 50% [3] - The company is currently trading at 14/12 times earnings for 2025/26, with a target price reflecting a 32% upside potential [3] Market Differentiation - The company distinguishes itself from market concerns regarding same-store sales sustainability by enhancing its new product development, category extension, and marketing capabilities, indicating a sustainable growth trajectory [3] - Potential catalysts for growth include same-store sales growth, new product development, and supply chain enhancements [3]