Produced by Radar Finance and Economics, edited by Xiao Sa, Deep Sea
In the five trading days since its listing, the stock price of Chabaidao has been falling endlessly.
On April 29, Chabaidao fell nearly 7% intraday, and the stock price hit the lowest HK$11 mark, which was as much as 37% lower than the issue price of HK$17.5 per share. As of the close, the company's latest market capitalization is about HK$17 billion.
In the eyes of the outside world, there seems to be no surprise that Chabaidao broke and continued to fall. Recalling that on the day of the listing of Nai Xue's tea, the "first share of new tea drinks", the market value once exceeded HK $30 billion, but now the total market value has fallen to less than HK $5 billion.
The reason why the new tea drink has fallen into the "curse" of breaking hair may be many. Bai Wenxi, vice chairman of the China Enterprise Capital Alliance, told Radar Finance that the decline in the share price and market value of the new tea beverage industry may indeed reflect the capital market's concern about the industry's bubble.
"Especially when leading brands in the industry, such as Nayuki's Tea and Tea Baidao, underperform their share prices after listing, which may indicate that the market is reevaluating the value and potential of the new tea industry. Bai Wenxi said that whether the bubble has been completely punctured still needs to be comprehensively judged according to the subsequent development of the industry and market reaction.
At present, brands such as Gu Ming, Mixue Bingcheng, and Shanghai Auntie have all submitted their statements with the intention of entering the capital market. But under the haze of breaking, the pressure of the "Honey Snow Ice City" is not small. Some industry insiders pointed out that excluding external factors such as investor sentiment, the fierce competition and product homogeneity in the new tea beverage industry may also make the follow-up companies to be listed face greater challenges.
99% of revenue depends on franchisees
After the brutal growth of the new tea drink in the early stage, the track is becoming more and more crowded at this stage, and the competition is very fierce.
According to Frost & Sullivan's report, in 2023, the market size of China's ready-made tea shop market will be 247.3 billion yuan. In terms of retail sales, the top five players together accounted for about 40.2% of the market share.
According to the above report, in terms of retail sales in 2023, Chabaidao ranks third in the mainland freshly made tea shop market, with a market share of 6.8%, and the top two in the industry are Mixue Bingcheng and Gu Ming.
In the case that the industry leader, the second Mixue Bingcheng and Gu Ming failed to go public, why did Chabaidao go public first? This may be due to its brilliant performance.
According to the prospectus, from 2021 to 2023, the revenue of Tea Baidao will be 3.64 billion, 4.23 billion and 5.7 billion yuan respectively, with a compound annual growth rate of 25.1%.
In 2023, a total of 1.016 billion cups of tea will be sold, with an average retail sales of 27.4 yuan per order. From the perspective of profitability indicators, from 2021 to 2023, the gross profit margin of Chabaidao will reach 35.7%, 34.4% and 34.4% respectively, and the adjusted net profit in the same period will be 900 million yuan, 970 million yuan and 1.26 billion yuan respectively, with a compound annual growth rate of 18.2%.
It has been pointed out that from the perspective of profitability, Chabaidao has become one of the few Hong Kong IPO companies with a profit of more than 1 billion yuan in recent years.
However, in addition to showing investors its continued profitability, Chabaidao, which has only 6 directly operated stores, also reveals the sources and risks of the company's performance.
According to the prospectus, the revenue of Tea Baidao mainly comes from the sale of goods and equipment to franchisees, and only a small part of it is to collect royalties and franchise fees from franchisees.
From 2021 to 2023, the company's revenue through franchised stores will reach 3.625 billion yuan, 4.197 billion yuan and 5.659 billion yuan, all accounting for more than 99% of the total revenue. Among them, the revenue from the sale of goods and equipment to franchise stores accounts for about 95% of the annual income, while the revenue from royalties and franchise fees accounts for only about 4%.
According to the prospectus, as of mid-February 2024, Chabaidao has 7,921 franchise stores. In the prospectus, the company admitted that the performance of franchisees has a significant impact on operating performance, and if some franchisees terminate the cooperative relationship, or it is difficult to find new suppliers in the future, it will have an adverse impact on the performance.
According to Wang Peng, an associate researcher at the Beijing Academy of Social Sciences, the profit model of Chabaidao has brought it a stable source of income, but once the franchisee has mismanagement or violations, it will have a negative impact on the entire brand image.
Capital is not used to drinking new tea drinks?
According to public information, Tea Baidao is one of the earliest new tea brands.
In 2008, 25-year-old Wang Xiaokun and 27-year-old Liu Weihong founded Tea Baidao in Chengdu. The first Chamodo was just a small shop near a middle school that focused on fruit and medium-priced milk tea.
According to media reports, Xiao Kun used to be a senior tea artist, and his wife Liu Weihong graduated from Chengdu University of Traditional Chinese Medicine and is also a tea art lover.
In the initial stage, due to the relatively cheap price and the convenience of "buy and go", the store was very popular with student consumers. In the same year, the two soon opened a second branch at the Liulin Campus of Southwestern University of Finance and Economics.
At that time, domestic tea drinks were mainly powdered tea, and the freshly made tea market was still blank. In 2010, the trademark of "Tea Baidao" was officially registered and the brand transformation was carried out.
Almost at the same time, the two major Taiwanese milk tea brands of Yidian and Coco have entered the mainland one after another. Later, other strong players, such as Likes and Nayuki's tea, were born in 2012 and 2015 respectively.
With the increase of competitors, in 2016, Chabaidao opened the Chengdu area to join, and two years later, the company opened the national franchise, officially opening the road to national expansion.
In the competition for the "second share of new tea drinks" in Hong Kong stocks, Tea Baidao won the first place and became the first new tea beverage company to be listed in 2024.
But the listing process has been full of twists and turns. On April 15, the first day of the public offering of Chabaidao, it attracted attention because the public offering was not fully subscribed.
In addition, at that time, Chabaidao did not introduce cornerstone investors. Many investors have said that if a company with a valuation of tens of billions does not bring in cornerstone investors, it may mean that the company's valuation is too expensive, or institutional investors are not optimistic about the company's future earnings prospects.
According to public information, on April 22, in the Futu grey market trading the day before the listing, Chabaidao opened low and closed down 13.26%. Generally speaking, there is a sharp decline in the grey market trading of new stocks, which means that the market acceptance is low, and investors have a cautious or negative view of its prospects.
On April 23, Chabaidao was officially listed on the main board of the Hong Kong Stock Exchange. According to the IPO results, the offer price was set at HK$17.5 per share, and the total proceeds from the global offering were HK$2.586 billion.
Based on the total share capital after issuance, the market value of Chabaidao is about HK $25.86 billion. However, due to the impact of the stock price decline in grey market trading, the company opened 10% lower on the first trading day of its listing, with the largest intraday decline of more than 38%. Some media said that the largest number of new investors can have a maximum loss of HK $4.7 million.
Coincidentally, Nai Xue's tea also fell by more than 10% on the first day of listing, a decline of 13.54%, and a cumulative decline of more than 85% so far.
In this regard, Bai Wenxi said that the poor performance of new tea brands in the capital market may be affected by a number of factors.
First of all, the competition in the new tea market is fierce, the homogeneity of products and services between brands is serious, and there is a lack of obvious differentiation and innovation, which may lead investors to be cautious about the long-term growth potential of the industry.
Secondly, there are concerns about profitability. The profitability of some new tea brands has been questioned. For example, Nayuki's tea share price continued to fall after listing, reflecting market concerns about its profitability.
Finally, the impact of slower growth. After an initial period of rapid growth, the new tea market may face a slowdown in growth. Capital markets are usually sensitive to growth rates, and a slowdown in growth could affect investor confidence.
In addition, supply chain and operational challenges, as well as divergences in investor expectations, will naturally affect share prices and market capitalization.
Pressure on the "Honey Snow Ice City"
At present, as the industry enters the stock market from the incremental market and enters a new stage of capitalization, many new tea brands have begun to go public.
In January this year, Mixue Bingcheng and Gu Ming submitted prospectuses to the Hong Kong Stock Exchange at the same time. Subsequently, on February 14, the tea brand Shanghai Auntie submitted a prospectus to the Hong Kong Stock Exchange.
Among them, as early as September 2022, Mixue Bingcheng submitted a prospectus to A-shares, but since then, due to factors such as the phased tightening of A-share IPOs, it has chosen to transfer to Hong Kong stocks for listing.
In addition, it was also rumored that Chayan Yuese planned to go public in Hong Kong. On April 11, the Hong Kong Economic Times also reported that Bawang Chaji will be listed in the United States as soon as the middle of this year.
In the face of the listing tide, some industry views believe that in the tea beverage category of "rolling out of the sky", whoever can take the lead in a successful IPO will be able to seize the opportunity.
But the reality is that it is not easy to get past the hurdle of going public.
On the one hand, the growth rate of new tea drinks has slowed down to the present. According to the "2023 New Tea Beverage Research Report" released by the China Chain Store & Franchise Association, the annual growth rate of China's new tea consumption market will further slow down from 19.7% in 2024 to 12.5% in 2025, while the annual growth rate of the tea industry will be above 20% from 2018 to 2021.
To this end, in order to find the second growth curve, various brands have been involved in the sinking market, overseas and coffee tracks. In January this year, Chabaidao opened its first directly-operated coffee shop "Coffee Ash" in Chengdu, and about 5% of the company's net proceeds from this fundraising will also be used to promote its own coffee brand "Coffee Ash" and build a coffee shop network across China.
On the other hand, from the perspective of capital, there are still some weaknesses in new tea beverage enterprises. Huang Lichong, President of Huisheng International Capital, believes that the current competition in the new tea beverage market is fierce, and the homogeneity of products and services is serious. In this case, the lack of innovation and differentiated competitive strategies makes it difficult for companies to stand out from the encirclement.
In this case, new tea beverage companies with higher valuations in the early stage may face more severe tests. Du Xianjie, investment director of Tianai Capital, believes that one of the reasons for the sharp drop on the first day of tea Baidao's listing is that the company's IPO pricing valuation is obviously high.
However, going public is not a panacea. Zhu Danpeng, an analyst of China's food industry, told Radar Finance that the listing will definitely be of good help to the comprehensive strength of new tea beverage companies, strengthen their ability to resist risks, and support the entire supply chain.
Zhu Danpeng said that on the whole, it is not that everything is fine when it is listed. Enterprises should upgrade and iterate more from the direction of supply chain integrity, quality stability, food safety assurance, and long-term innovative products. The upgrading of the service system and the strengthening of customer stickiness can be implemented, so as to achieve a long-term foundation for the brand.