Huatai Securities gave Chabaidao (02555) a “buy” rating: it is expected to use economies of scale to achieve downward integration

The Zhitong Finance App learned that recently, Huatai Securities released a research report covering the leading stock in the new tea industry, Chabaidao (02555) for the first time, giving it a “buy” rating. According to the report, Chabaidao, as a comprehensive leader in the national layout of the current beverage industry, has obvious core competitiveness compared to other brands. Among them, the large-scale efficiency of the supply chain has brought Chabaidao's high inventory turnover rate and strong bargaining power, while the efficient and win-win small store franchise model has improved the store's operating efficiency.

The report points out that in the process of store expansion, Chabaidao followed the two major expansion logics of “high line to low line” and “regional to national”, and focused on building an advantage in store breadth. While continuing to consolidate its base in Sichuan, it has also established two major advantageous regions, East China and South China; at the same time, it continues to drive the pace of expansion of surrounding provinces and cities with advantageous regions. Compared to competing in the same price segment, the distribution of Chabaidao's stores is significantly more nationalized, and the distribution of provinces and cities is relatively average; the proportion of the company's high-tier city stores is also significantly higher than that of other leading tea brands. In the future, in the process of encrypting stores for a sinking market, the brand power brought about by nationwide distribution and a high share of high-tier cities will help Chabaidao form a “downsizing attack.”

According to the report, based on a large network of stores spread all over the country, Chabaidao has a clear advantage of scale efficiency in supply chain construction and management. Data show that from 2022 to the first half of 2024, Chabaidao's inventory turnover ratio was significantly higher than other tea brands of the same type and some leading catering brands, showing Chabaidao's excellent inventory management capabilities. In 2023, Chabaidao's procurement share of the top five suppliers reached 36.6%, which is higher than that of brands in the same price segment; this centralized procurement strategy can bring strong bargaining power.

Another core competitive advantage of Chabaidao comes from an efficient and high-quality small-store model. The report estimates that the gross margin of the Chabaidao franchise store is about 60%, the payback period of a single store is about 9-13 months, and the profitability of the store is higher than that of its peers. According to Huatai Securities estimates, the typical area of the Chabaidao single store model is 45 square meters, and its core indicators such as customer unit price, average daily floor efficiency, and net interest rate all rank among the highest in the industry. According to the report, takeout orders account for nearly 60% of orders at Chabaidao stores, which is significantly higher than that of peers. The efficient use of takeout channels has expanded the coverage area of Chabaidao stores, broken through the restrictions on geographical location, area and passenger traffic of offline stores, and further improved the efficiency of store operations.

There are some opinions in today's market that the ready-to-drink industry, including freshly made tea and coffee, already has an oversupply problem, which may increase competition among brands. In response, the Huatai Securities Report suggests that although fierce competition will temporarily squeeze the profit space of franchisees, it also gives the industry an opportunity to survive the fittest. The leading brand, represented by Cha Baidao, has strong supply chain scale efficiency and high resilience to risks. It is expected that in the future, it will continue to siphon franchisees and achieve downward integration with a mature management system.