Core Viewpoint - COMMUNE, a mid-to-high-end restaurant and bar chain, is set to challenge Helen's, the first stock of small taverns, as it files for an IPO in Hong Kong, with significant revenue growth and a different market positioning [1][2]. Company Overview - COMMUNE's parent company, Extreme Thinking Co., has submitted an IPO application to the Hong Kong Stock Exchange, with a projected revenue of 845 million yuan and 1.074 billion yuan for 2023 and 2024, respectively, and net profits of 50.52 million yuan and 53.98 million yuan, reflecting year-on-year growth rates of 27.1% and 6.8% [1]. - As of the first nine months of 2025, COMMUNE's 112 directly operated stores generated approximately 872 million yuan in revenue, a year-on-year increase of 14.2%, with net profit rising significantly by 46.9% to 66.70 million yuan [1]. Market Positioning - Unlike Helen's, which focuses on affordable taverns, COMMUNE targets the mid-to-high-end market with larger store formats ranging from 400 to 700 square meters, located in prime urban areas [2]. - COMMUNE's store distribution is concentrated in first and second-tier cities, with a significant increase in store numbers from 18 to 28 in first-tier cities and from 61 to 72 in second-tier cities between 2023 and 2025 [2]. Financial Performance - The average daily bill for COMMUNE's members decreased from 182.2 yuan to 167.9 yuan in 2023-2024 but rebounded to 169.9 yuan in the first nine months of 2025, with a notable 12.9% increase in first-tier cities [4]. - In contrast, Helen's average customer spending dropped from 112.9 yuan in Q1 2021 to 82 yuan and 71 yuan in 2023 and 2024, respectively, indicating a significant decline [5]. Business Model Comparison - COMMUNE operates on a direct management model, while Helen's has shifted towards franchising, which has led to operational challenges and declining same-store sales [5][7]. - Both companies have similar cost structures, with core expenses related to materials, labor, and depreciation accounting for 65%-70% of total costs [5]. Expansion Plans - Despite facing challenges, COMMUNE plans to aggressively expand, aiming to open 150-190 new stores from 2026 to 2029, which is 1.34 to 1.70 times the total number of stores opened in the past decade [7]. Valuation and Investment - COMMUNE's valuation has seen a dramatic increase, rising nearly 300% in three months, with a post-investment valuation reaching approximately 11.27 billion USD, indicating strong investor interest despite operational challenges [10][11]. - The competitive landscape in the tavern industry is intensifying, with numerous brands and varying levels of market penetration, raising questions about COMMUNE's ability to maintain its position in first and second-tier cities [11].

Industry Overview - The tavern industry has not yet recovered, with competition significantly higher than in 2019. The chain development process is slow. The "Tavern Development Report 2025" indicates that the national tavern market size is projected to reach 112 billion yuan in 2024, a year-on-year increase of 7.7%, but still below the 2019 level. It is expected to grow to 117.5 billion yuan in 2025, with a year-on-year increase of 4.9% [1] - As of March 2025, the number of tavern enterprises in the country exceeds 38,000, a year-on-year increase of 2.6%, and a 139.6% increase compared to 2019, indicating intensified competition amid weak demand [1] - The chain rate of taverns remains low, with most brands having five or fewer stores, accounting for 57.9%, while brands with over 100 stores only account for 5.1% [1] Company Performance - Helen's direct sales have rapidly declined, and the transition to a franchise model is still ongoing. In 2024, the company achieved revenue of 752 million yuan, a year-on-year decrease of 37.76%, and reported a net loss of 77.976 million yuan, reversing from a net profit of 180 million yuan last year. The adjusted net profit was 101 million yuan, down 65.5% year-on-year [2] - The decline in performance is attributed to the platform transformation leading to a drop in direct sales revenue. Since 2023, the company has significantly closed direct stores, with 511 stores shut down by March 19, 2025. The "Hi Beer Partner" franchise model has expanded to 424 stores, with a total of 499 signed agreements, while the number of licensed cooperative stores decreased from 92 to 42, with over 70% of the total 579 stores being franchise stores [2] - The company is in a transitional phase from direct sales to a franchise model, with its profit model still being refined. The rapid reduction of direct stores and the immature franchise system raise concerns about its cyclical resilience. The efficiency of store operations and product structure are still being adjusted, and the ability to enhance single-store repurchase rates and efficiency through multi-scenario combinations and mechanism optimization will be key to long-term performance [2] Profit Forecast and Investment Recommendation - The company forecasts earnings per share for 2025-2027 to be 0.05, 0.06, and 0.09 yuan respectively, down from the previous forecast of 0.21 yuan for 2025, mainly due to the rapid closure of direct stores and the increase in franchise proportion, leading to a decline in overall single-store profit contribution [2] - Based on comparable companies, the reasonable valuation level for the company is set at a 29 times price-to-earnings ratio for 2025, corresponding to a target price of 1.51 HKD (with 1 HKD = 0.9138 RMB), and the rating has been adjusted to "neutral" [2]