CICC: Maintaining Chabaidao (02555) outperforming the industry rating target price of HK$12

The Zhitong Finance App learned that CICC released a research report stating that it maintains the 25/26 profit forecast for Chabaidao (02555). The current transaction is 14/11 times 25/26 P/E; maintaining the target price of HK$12, which corresponds to 19/15 times 25/26 P/E and 36% upward space, maintaining an outperforming industry rating. The company announced 1H25 results, with revenue of 2.5 billion yuan/year on year +4.3%, net profit to mother of 330 million yuan/year on year +37.5%, and adjusted net profit of 340 million yuan. The results were basically in line with the forecast.

CICC's main views are as follows:

The same store performed well in the first half of the year, and revenue grew steadily

1H25 achieved steady growth with revenue +4.3% year-on-year. On the performance side of the same store, benefiting from increased takeout subsidies and the optimization of the store network since May, the average daily GMV for a single store in 2Q hit a new high of nearly one year, about +15% compared to 1Q. On the number of stores, the number of 1H25 stores increased net by 59 to 8,444 (average number of operating stores +4%). Among them, the number of stores in Tier 4 and below cities increased 9% year-on-year in the first half of the year, and the number of stores in other tier cities contracted, mainly because the company focused on cryptographic opportunities in the sinking market and accelerated coverage through regional incentive policies. On the product side, the company's product development changed from supply chain orientation to demand orientation. In the first half of the year, 55 new products were launched, focusing on core categories such as fresh fruit tea and fresh milk tea, and the market feedback was positive. At the same time, franchisee business conditions improved in the first half of the year, and the average payback cycle was shortened by 1-2 months compared to the same period last year. Overall, the company's 1H25 business direction is steady and upward.

Gross margin increased year-on-year, and precise marketing helped improve conversion rates

Benefiting from raw material structure optimization, supply chain efficiency improvement and refined cost control, 1H25's gross margin was +0.9ppt to 32.6% year-on-year, achieving a steady increase. The sales expense ratio was +1.6ppt to 6.0% year-on-year, mainly due to increased investment in marketing due to increased competition in the industry, and the marketing strategy shifted from brand image building to accurate marketing for specific groups and channels to promote the improvement of marketing conversion rates; the management expense ratio was +1.2ppt to 10.3% year-on-year, mainly due to increased employee remuneration and third-party consulting expenses; and the comprehensive net interest rate was +3.1 ppt to 13.0% year over year.

Continued improvements can be expected in the second half of the year. Product development results are remarkable, and overseas expansion is expected to increase long-term space

Medium- to long-term takeout subsidies are expected to cultivate a wider range of consumers and takeout consumption habits and enhance user stickiness; against the backdrop of declining subsidies, the company maintained healthy year-on-year growth in single stores in August. In the long run, the company will continue to work to launch high-quality and cost-effective products, improve supply chain efficiency, and strengthen digital operations to enhance store management resilience and consumer experience. At the same time, overseas development is progressing steadily. The bank expects the number of stores to reach around 30 throughout the year, which is expected to open up long-term space. The bank expects a significant increase in the number of net stores opened by the company in the second half of the year compared to the previous month. On the profit side, the bank expects gross margin to continue to rise, and the overall adjusted core net interest rate level is expected to increase.