Soochow Securities Company Limited has issued a research report stating that considering Green Tea Group's (06831) remaining store penetration potential and promising new store formats, the firm believes the current valuation remains attractive. The brokerage initiates coverage with a "buy" rating.

The firm projects the company's revenue for 2025-2027 to reach RMB 4.801 billion, RMB 5.967 billion, and RMB 7.253 billion respectively, representing year-over-year growth rates of 25.09%, 24.28%, and 21.54%. Net profit attributable to shareholders is expected to be RMB 503 million, RMB 632 million, and RMB 811 million for 2025-2027, with growth rates of 43.70%, 25.64%, and 28.34% respectively.

**West Lake Banquet, Longjing Fragrance: From Hangzhou Origins to National Expansion**

Green Tea Group, founded in Hangzhou, Zhejiang Province, is a leading domestic casual Chinese restaurant chain specializing in fusion cuisine. As of the end of 2024, the company operated 465 restaurants across 141 cities, generating revenue of RMB 3.838 billion (with store count further increasing to 502 by H1 2025). In 2024, Green Tea Group ranked third by number of restaurants and fourth by revenue among casual Chinese restaurant brands in mainland China. Looking ahead, the company plans to further expand its restaurant network through strategies including regional densification, lower-tier market expansion, and scenic area store deployment.

**Thriving Casual Chinese Dining Market Propels Green Tea Group Forward**

China's mainland dining market maintains substantial scale, growing from RMB 3.953 trillion in 2020 to RMB 5.572 trillion in 2024, with a CAGR of 8.96%, showing continued steady growth potential. Chinese restaurants form the core of the mainland dining market, accounting for 55.13% of retail sales in 2024.

Chain casual Chinese dining enjoys developmental advantages: (1) From 2019-2024, chain and non-chain restaurant market scales recorded CAGRs of 13.60% and 7.72% respectively, with chain restaurants showing superior growth momentum; (2) The casual Chinese dining market expanded from RMB 351.3 billion in 2020 to RMB 534.7 billion in 2024, achieving an 11.1% CAGR, outpacing horizontal comparisons.

**Fusion Cuisine Appeals to Broader Audiences with Outstanding Value Proposition**

Among numerous brands, Green Tea distinguishes itself through universal fusion cuisine, value-focused dishes, and distinctive dining environments: (1) Unique fusion cuisine positioning: Green Tea organically combines ingredients, cooking techniques, and seasoning methods from different regions and cultures, achieving broader appeal. In 2024, existing stores in East China, Guangdong Province, North China, and other regions contributed 33%, 18%, 12%, and 37% of revenue respectively, showing balanced distribution and significantly broader city coverage compared to peers; (2) Outstanding value advantage: Green Tea's average spending per customer ranges RMB 50-70 in 2024, compared to Xi Bei/Xiao Cai Yuan/Tai Er Pickled Fish/Grandma's Home (RMB 80-90/60-70/70-80/60-70 respectively), demonstrating superior value proposition; (3) Store decoration incorporates classic elements of traditional Chinese culture and natural landscapes, creating unique dining experiences.

**Accelerated Store Expansion, Supply Chain Optimization, Same-Store Improvement Expected**

Through regional densification, market expansion, and scenic area deployment, the company plans to open 150, 200, and 213 new stores in 2025-2027 respectively, including: (1) Plans to open 159, 42, 50, 284, and 28 new stores in East China, Guangdong, North China, other regions, and overseas respectively; (2) Plans to open 146, 123, and 265 new stores in first-tier and new first-tier, second-tier, and third-tier and below cities respectively; (3) Plans to add 17 tourist attraction restaurants to enhance brand image.

Additionally, the company actively enhances menu R&D capabilities (launching 172, 168, and 203 new products in 2022-2024 respectively, showing significant acceleration), boosts delivery revenue (delivery revenue CAGR of 35% from 2022-2024), builds central kitchens, and optimizes supply chains, with same-store improvements anticipated.

**Risk Factors**: Intensifying restaurant market competition, rising raw material costs, brand aging risks leading to customer attrition.