Investment Rating - The report maintains an OUTPERFORM rating for Chagee Holdings, with a current price of US$15.90 and a target price of US$19.10, indicating a potential upside of approximately 20% [2][6]. Core Insights - The company is experiencing short-term pressure in the domestic market, with a revenue decline of 9% year-on-year in Q3, while overseas growth is gaining momentum, particularly with a 75% increase in overseas GMV [3][4][15]. - The company plans to implement a high-quality development strategy in 2026, focusing on expanding operating hours and enhancing profitability despite anticipated pressures from the direct sales business [5][6][15]. Financial Performance Summary - Revenue for 2024 is projected at RMB 12.4 billion, with a growth rate of 167% year-on-year, followed by RMB 13.3 billion in 2025, representing a 7% increase [11][15]. - The adjusted net profit for 2025 is estimated at RMB 2.22 billion, down 12% from the previous year, with a net profit margin of 16.7% [11][15]. - The gross profit margin is expected to improve to 53.7% in 2025, up from 49.6% in 2024, driven by an increase in the proportion of revenue from company-owned stores [5][11]. Market and Operational Insights - The company opened 246 new stores in Q3, with a total of 7,076 stores, reflecting a 24% year-on-year increase in store count [4][5]. - The average monthly GMV per store in Greater China decreased by 28% year-on-year to RMB 379,000, while overseas stores reported an average monthly GMV of RMB 426,000, down 6% year-on-year [4][13]. - The company has entered new markets, including Vietnam and the Philippines, expanding its international footprint [4][5].

Core Viewpoint - The recent surge in lemon prices has garnered significant market attention, with wholesale prices increasing from 9.94 yuan/kg in April to 12.96 yuan/kg in June, marking a 30% rise [1][2]. Price Trends - The average price of lemons has shown a notable increase over the past year, particularly during the summer, which is a peak season for beverage consumption [2]. - The price hike is attributed to both supply constraints due to adverse weather and a rising demand driven by new product launches from major beverage brands [3][5]. Supply and Demand Dynamics - Adverse weather conditions have impacted lemon production, particularly in Sichuan, a major domestic production area, with global lemon production expected to decrease by 6% by 2025 [3][5]. - The demand for lemons has surged due to the introduction of new lemon-based products by leading tea and beverage brands, creating a significant market response [5]. Industry Response - Despite rising costs, many beverage companies are maintaining their lemon water products, with some adjusting recipes or sourcing lemons internationally to mitigate price impacts [7][8]. - Major brands like Mixue Ice City have a competitive advantage due to their scale, allowing them to negotiate lower procurement prices, which are reportedly 20% below market averages [7][8]. Market Outlook - The current price increase is seen as temporary, with expectations that prices will stabilize as new harvests come in after September [8]. - The lemon industry in China is experiencing rapid growth, with significant contributions from the ready-to-drink beverage sector, projected to reach a market size of approximately 1.16 trillion yuan by 2028 [10]. Long-term Industry Challenges - The recent price surge highlights the need for the industry to address the gap between growing market demand and declining production capacity [11]. - The sustainable growth of the lemon industry will require collaborative efforts from all stakeholders to ensure stability and long-term success [11].