Investment Rating - The report gives a "Strong Buy" rating for the company with a target price of HKD 11.8, while the current stock price is HKD 7.05 [3]. Core Insights - The company, Green Tea Group, is a leader in the Chinese casual dining sector, focusing on high-cost performance fusion cuisine and expanding its restaurant network primarily in East China, North China, and Guangdong [1][7]. - The company has shown rapid growth in revenue and profit, with a significant increase in the number of restaurants, reaching 502 by mid-2025, representing a year-on-year growth of 28.7% [7]. - The Chinese casual dining market is projected to grow, with the market size expected to reach RMB 534.7 billion in 2024, reflecting a year-on-year increase of 7.4% [51]. - Green Tea's strategy includes a focus on small store formats, regional expansion, and market penetration, which is expected to drive future growth [7][26]. Financial Data and Valuation - Total revenue is projected to grow from RMB 3,589 million in 2023 to RMB 8,386 million by 2027, with a compound annual growth rate (CAGR) of 27% [2]. - The net profit attributable to shareholders is expected to increase from RMB 295 million in 2023 to RMB 785 million by 2027, with a remarkable growth rate of 1,669% in 2023 [2]. - The company’s price-to-earnings (PE) ratio is projected to decrease from 14.7 in 2023 to 5.5 by 2027, indicating an attractive valuation [2]. Market Overview - The casual dining market in China is characterized by a strong demand for cost-effective dining options, with consumer preferences shifting towards high-value meals [51][59]. - The market for casual dining restaurants is expected to continue expanding, with a projected market share increase from 16% in 2020 to 19.3% by 2029 [51]. - The competitive landscape is evolving, with a trend towards standardization and digitalization in restaurant operations, which enhances efficiency and customer experience [62][63]. Competitive Advantages - Green Tea's unique selling proposition lies in its fusion cuisine, which combines various culinary styles to attract a diverse customer base [17][18]. - The company has a robust supply chain and a strong focus on menu innovation, with significant investments in research and development to maintain customer interest [7][20]. - The small store format strategy allows for quicker returns on investment, with a payback period of approximately 14-15 months for new openings [7][26].

Investment Rating - The report assigns a "Buy" rating for the company, marking its first coverage [6][15][19]. Core Insights - The company is a well-known operator of Chinese casual dining restaurants, focusing on cost-effectiveness and high-quality dining experiences. As of May 2025, it operates 493 stores across Hong Kong and various cities in mainland China [4][12][17]. - The company’s mature stores maintain healthy operations, with projected sales for 2024 expected to exceed 10 million yuan per store. The increase in takeaway orders is anticipated to help same-store sales recover [4][12][17]. - The company has recently experimented with smaller restaurant formats, which have higher table turnover rates and lower operating costs, leading to a reduced payback period of 14-15 months for new stores. With effective incentive mechanisms in place, the company is expected to accelerate its store expansion [4][12][17]. Summary by Sections Company Overview - The company started from Hangzhou West Lake and has expanded nationwide, opening its first restaurant in 2008. By May 2025, it has established a network of 493 restaurants across various city tiers in China [23]. - The main business model is direct-operated restaurants with a focus on fusion cuisine priced between 50-70 yuan, achieving a competitive edge through high cost-performance [25][26]. Industry Analysis - The Chinese restaurant market is projected to reach 5.6 trillion yuan in 2024, with a compound annual growth rate (CAGR) of 3.6% from 2019 to 2024. The casual dining segment is the fastest-growing within the Chinese restaurant market, with a CAGR of 5.6% [49][53]. - The chain restaurant penetration rate in China has increased to 23.3% in 2024, up 4.2 percentage points from 2019, indicating a gradual shift towards more standardized and scalable restaurant operations [55]. Competitive Advantages - The company boasts strong menu development capabilities, with its founder leading product innovation. The average annual sales for mature stores remain above 10 million yuan, and the investment payback period for new stores has decreased due to smaller, more efficient formats [14][19]. - The company has implemented a profit-sharing mechanism to align employee interests with operational quality and expansion goals, enhancing its competitive position [14][19]. Growth Outlook - Revenue is expected to grow significantly, with projections of 46.8 billion yuan in 2025, 59.0 billion yuan in 2026, and 75.0 billion yuan in 2027, reflecting year-on-year growth rates of 22.0%, 25.9%, and 27.3% respectively [15][19]. - The company plans to open 131, 176, and 183 new stores in 2025, 2026, and 2027, respectively, supported by a favorable market environment and improved operational efficiencies [18][19].

Core Viewpoint - After five attempts, Green Tea Restaurant successfully went public on the Hong Kong Stock Exchange, achieving a market value of over HKD 46 billion, with the founders' net worth exceeding HKD 30 billion [2][3][7]. Company Development - Green Tea Restaurant was founded by Wang Qinsong and Lu Changmei in 2004, initially starting as a youth hostel that transformed into a restaurant in 2008, quickly becoming a popular dining spot in Hangzhou [5][6]. - The restaurant's unique decor and affordable fusion dishes led to its rapid success, with the first location achieving a record of 14 table turnovers in a single day [5][6]. - By 2023, Green Tea Restaurant had expanded to nearly 500 locations across China, generating over CNY 38 billion in annual revenue [3][8][10]. Financial Performance - The company's revenue grew from CNY 23.75 billion in 2022 to CNY 35.89 billion in 2023, with projections of reaching CNY 38.38 billion in 2024 [10]. - Net profit surged from CNY 0.17 billion in 2022 to CNY 2.96 billion in 2023, with expectations of reaching CNY 3.5 billion in 2024 [10]. - Despite a decline in table turnover rates and average spending per customer, the company increased its focus on takeout services, generating CNY 7.23 billion in takeout revenue, a 39.8% increase year-on-year [10]. Expansion Plans - Green Tea Restaurant plans to open 150, 200, and 213 new locations in 2025, 2026, and 2027, respectively, aiming to double its store count within three years [11]. Industry Trends - The IPO of Green Tea Restaurant coincides with a wave of restaurant IPOs in Hong Kong, including other brands like Xiaocaiyuan and Laoxiangji, indicating a growing trend in the restaurant sector [12][13]. - The market is witnessing a resurgence, with many investors believing that 2025 will be a favorable year for profitable consumer brands to go public [14][15].