CICC has issued a research report stating that MIXUE GROUP (02097) is expected to achieve double-digit performance growth next year, driven by steady store expansion and strong control over profitability. The firm has raised its net profit attributable to shareholders forecasts for 2025-26 by 9%/4% to RMB 59.3/67.4 billion. The current stock price corresponds to 27/23x P/E for 2025-26. The firm maintains its outperform industry rating. Considering the high base pressure next year due to delivery subsidies this year, it maintains the target price of HK$555, corresponding to 33/28x P/E for 2025/26, with 21% upside potential.

CICC's main viewpoints are as follows:

1H25 Performance Slightly Exceeded Expectations

The company's H1 revenue increased 39.3% year-over-year to RMB 14.87 billion, with net profit attributable to shareholders rising 42.9% year-over-year to RMB 2.69 billion. The net profit margin increased by 0.5 percentage points year-over-year to 18.1%. Performance slightly exceeded expectations, mainly due to better-than-expected single-store revenue growth. In H1, the company achieved a net increase of 6,535 stores to 53,014 stores (mainland China stores increased by a net 6,697 to 48,281, with franchise stores opening 7,721 new locations and closing 1,187).

H1 Delivery Subsidies Drive High Single-Store Revenue Growth; Maintaining Active Store Expansion Pace, Lucky Coffee Accelerating Layout

The firm estimates that 1H25 same-store sales increased approximately 13% year-over-year, mainly driven by delivery subsidies. The company maintains an active store expansion pace, planning to continue penetrating blank locations (such as tourist attractions, highway service areas, industrial parks, etc.) and sinking into township markets. Lucky Coffee has achieved certain results in refining its single-store model, with fruit coffee hot sales driving product strength improvement (multiple fruit coffee products entered TOP5 sales in June-July). This year, the company has increased store opening support policies (launching approximately RMB 50,000 store opening subsidies for existing franchisees in July, and approximately RMB 35,000 store opening subsidies for new franchisees in August) and accelerated store expansion. As of August 2, nationwide contracted stores have reached 7,300.

Persisting in Full Industrial Chain Efficiency Optimization, Sharing "Mutual Interests" with Franchisees to Ensure Long-term Growth, Expense Ratios Expected to Remain Stable in Second Half

The company continues to strengthen supply chain layout, with the new Hainan production base commissioned on schedule in H1, with production capacity scale second only to the Henan base. The company plans to further extend the industrial chain upstream, deploying factories around key agricultural products and improving the standardization level of cooperative planting bases. Looking ahead to the second half, the company will continue cost reduction and efficiency improvement while benefiting consumers and franchisees, achieving shared economies of scale. Considering resource investment and cost dilution brought by scale effects, the firm expects expense ratios to remain stable in the second half.

Focus on Overseas Existing Store Optimization Operating Results

In Southeast Asian markets, average daily store sales have achieved positive year-over-year growth, while actively adjusting and optimizing existing stores. Indonesia and Vietnam markets have seen net store closures. Additionally, the company is simultaneously optimizing store layouts, with relocated stores showing +50% daily sales per store. In Malaysia and Thailand, store numbers maintain steady growth. The company expects to optimize the Southeast Asian supply chain within 1-2 years to address taste differences, regulatory restrictions, inventory allocation and other issues. Meanwhile, the company demonstrates new breakthroughs in regional expansion, with Central Asia having signed more than ten stores awaiting opening, and the Americas preparing first stores in the US, Mexico, and Brazil.