Since the beginning of this year, the competition for the "second share of new tea drinks" has become more and more intense, and Gu Ming, Mixue Bingcheng, and Shanghai Auntie have all submitted their statements to the Hong Kong Stock Exchange. Under the watchful eye, the "second share of new tea drinks" is about to be born, which is Sichuan Baicha Baidao Industrial Co., Ltd. (hereinafter referred to as "Tea Baidao"), the head enterprise of new tea drinks submitted in August last year.
On April 15, Chabaidao officially opened its IPO and is expected to be listed on the Hong Kong Stock Exchange soon. In China's new tea industry, the position of tea Baidao cannot be shaken. According to Frost & Sullivan's report, in terms of retail sales in 2023, Chabaidao ranks third in China's freshly made tea shop market. As of February 29 this year, the number of its stores has exceeded 8,200, last year's revenue exceeded 5.7 billion yuan, and the adjusted net profit exceeded 1.2 billion yuan.
In this Hong Kong stock IPO, the issue price of Chabaidao is HK$17.5 per share, the number of new shares offered globally is 148 million shares (excluding over-allotment), and the expected fundraising scale is HK$2.59 billion (equivalent to US$330 million).
It is worth noting that according to the total share capital after the issuance, the market value of Chabaidao is about 23.7 billion yuan, and the estimated net profit of this year is 1.53 billion yuan, and the price-earnings ratio after the issuance is about 15 times, which is worth looking forward to.
The number of stores and performance are growing rapidly
In the new tea industry, Tea Baidao can be regarded as a "veteran", the company was born in Chengdu in 2008, and the first store is located near Wenjiang No. 2 Middle School in Chengdu. After more than ten years of development, the company's scale has become more and more mature, is in the stage of rapid development, and the leading position in the new tea industry has also been established.
In terms of the number of stores, in the five years since 2019, it has been the five years with the fastest growth in the number of tea Baidao stores, and at the end of 2019, the number of its stores has just exceeded 500, and in 2021, it has exceeded 5,000, achieving a tenfold increase in two years.
According to the manager of Chabaidao's overseas store on social platforms, as of February 29, 2024, the number of Chabaidao stores has reached 8,274. As of the end of last year, the number of Chabaidao stores was 7,801. This means that in just 2 months, Chabaidao has added more than 470 new stores. You must know that in today's fiercely competitive new tea beverage track, it is not easy for the sustained and rapid expansion of tea Baidao, showing strong development resilience and potential.
This resilience and potential is also reflected in the performance of Chabaidao. According to Frost & Sullivan's report, in terms of retail sales in 2023, Chabaidao ranks third in China's freshly made tea shop market, with a market share of 6.8%. Even though the current performance scale has ranked among the forefront of the industry, it has maintained a high growth rate in recent years, and even the revenue growth rate is still accelerating.
In 2023, Chabaidao's revenue will be 5.704 billion yuan, a year-on-year increase of 34.8%, a significant acceleration from the growth rate of 16.1% in 2022, and its adjusted net profit in 2023 will be 1.258 billion yuan, with a compound annual growth rate of 21.6% from 2021 to 2023. According to the above growth rate, it is conservatively estimated that the net profit of Chabaidao will reach 1.53 billion yuan in 2024.
According to the disclosure, the issue price of Chabaidao in this Hong Kong stock IPO is HK$17.5 per share, and the number of new shares offered globally is 148 million shares (excluding over-allotment).
According to this calculation, the scale of the tea Baidao fundraising is 2.59 billion Hong Kong dollars, after the completion of the issuance, the total share capital of the tea Baidao will reach 1.48 billion shares, the issue market value of about 23.7 billion yuan, and then this year's net profit is expected to be 1.53 billion yuan, and the price-earnings ratio after the issuance is about 15 times.
Differentiated business model
In fact, no matter in terms of the number of stores or performance, Tea Baidao is in the leading position in the industry. For new tea beverage enterprises, the number of stores is an important driving force for the development of enterprises, and the performance performance, especially the net profit performance, reflects the company's earning ability, which is the indicator that investors pay the most attention to.
In terms of the number of stores, the number of stores of Chabaidao has exceeded 8,000 so far, and it is moving towards the goal of 10,000 stores.
In terms of profitability, the net profit of Tea Baidao from 2020 to 2023 is positive, and its adjusted net profit in 2023 has exceeded 1.2 billion yuan.
From further analysis, Chabaidao takes franchise stores as the core, and more than 99% of its stores are franchised stores. On the one hand, it has expanded its business scale through cooperation with franchisees, and on the other hand, it has ensured that consumers get consistent and satisfactory products and services through the franchise model. According to the disclosure, Chabaidao will fully participate in the operation of franchise stores, and will also provide training, raw materials, equipment, logistics, marketing and other services for franchisees and store employees.
Looking at the entire new tea beverage industry and even the entire catering industry, the franchise model may become the choice of more and more enterprises, and improving the efficiency of store expansion, dispersing cost pressure, and enhancing brand influence have become recognized advantages of this model in the industry.
More than 90% of Chabaidao's revenue comes from the sale of goods and equipment, and about 4% of the revenue comes from royalties and franchise fees.
At the same time, Chabaidao adheres to the core product concept of "good tea as the base, manufacturing fresh", and its product portfolio includes a variety of classic teas, seasonal teas and regional teas.
Overseas and sinking markets are the incremental space of the industry
If you want to evaluate the growth of an enterprise, then in addition to evaluating the company's own business model, you also need to evaluate the overall market space of the industry.
For a long time, the new tea beverage industry in which Chabaidao is located has been regarded as an industry with a rapidly growing market scale and a broad market space in the future.
According to Frost & Sullivan's report, the compound growth rate of the mainland freshly made tea shop industry from 2018 to 2023 is as high as 25.2%, much higher than the overall growth rate of 4.4% in China's soft drink industry, and the compound growth rate of ready-made tea shops is expected to be as high as 15.4% from 2024 to 2028.
More room for growth in the domestic market comes from the sinking market. According to Frost & Sullivan's report, from 2018 to 2023, the market for ready-made tea shops in new first-tier cities, third-tier cities, fourth-tier cities and below has grown rapidly, with the market size increasing from 16.4 billion yuan, 16.3 billion yuan and 21.4 billion yuan in 2018 to 39.7 billion yuan, 71.6 billion yuan and 73.5 billion yuan in 2023, with a compound annual growth rate of 19.3%, 34.4% and 28.0% respectively.
The Frost & Sullivan report predicts that the market for ready-made tea shops in second-tier cities, third-tier cities, and fourth-tier cities and below is expected to grow further at a compound annual growth rate of 15.0%, 18.0% and 15.0% respectively from 2024 to 2028.
And this is also the market that Chabaidao is accelerating in recent years. As of the end of last year, the number of stores distributed in new first-tier cities still accounted for the largest proportion, accounting for 26.9%. The proportion of fourth-tier cities and below has climbed significantly, from 19.7% at the end of 2022 to 22.2%.
"While maintaining our position in Tier 1 and new Tier 1 cities to enhance brand awareness and keep pace with changing market trends, we have been and will continue to penetrate into lower-tier cities with huge potential for consumption growth. Tea Baidao said in the prospectus. Continuing to penetrate in the potential market that maintains rapid growth, the future growth of Chabaidao is worth looking forward to.
At the same time, overseas markets are another growth space for new tea beverage companies. On the one hand, in the context of intensified competition in the tea market, going overseas has become the best path for Chinese new tea brands to get rid of involution and seek the second curve of growth. As for Chabaidao, it landed its first overseas store in Seoul, South Korea in January this year, and the future expansion in overseas markets has added more imagination to the development of the company.
(The content of the article is for reference only and does not constitute investment advice.) Investors act accordingly at their own risk. ）
Source: National Business Daily