CICC has released a research report maintaining its net profit forecasts for CHABAIDAO (02555) at RMB870 million and RMB1.06 billion for 2025 and 2026, respectively. The stock currently trades at 11x and 9x 2025/2026 P/E, with a target price of HK$9.3, implying 14x and 12x 2025/2026 P/E and 31% upside potential. The "Outperform Industry" rating is reiterated. Key points from CICC's analysis include:

The company is undergoing a deep adjustment phase in 2024-2025, showing initial results, with further improvements expected by 2026. In 2H25, CHABAIDAO actively restructured its R&D framework and product launch mechanism, shifting from a traditional R&D-brand-store model to an integrated production-research center approach. This new system emphasizes data analysis, field research, and systematic capability building to anticipate market trends through consumer insights.

Compared to the previous supply-chain-driven product launch model, the current decision-making mechanism is more market-oriented, better addressing genuine consumer demand. For instance, the recently launched solid mango pomelo sago dessert reflects enhanced product innovation capabilities. In November, same-store sales accelerated to double-digit growth driven by new products.

The company is exploring multi-scenario sales channels to improve store operational quality. In 2026, CHABAIDAO plans to expand into the coffee category using fresh milk and fruits to boost morning sales and enhance store economies of scale. Currently, 200 stores are equipped with coffee machines, achieving over 30 cups daily without promotion. The company aims to add coffee machines in 1,500-2,000 more stores next year.

CHABAIDAO intends to broaden its price range downward, targeting the RMB6-10 segment in lower-tier markets. The 2026 store expansion plan includes increasing presence in tier 3-4 cities by 11-15% and tier 5 cities by 6-10%.

This year, the company revamped its membership pricing system, implementing online-offline price differentiation to encourage mini-program orders. In 2026, online promotions for core products will be tightened while offline activities increase to drive in-store consumption.

Through operational improvements including standardized production, smart tea machines, supervisor function reforms, and semi-industrialized ingredient processing, CHABAIDAO expects to enhance store profitability in 2025 by withdrawing franchisee subsidies. The report forecasts improved profitability for both stores and the company by 2026.

Over the next three years, CHABAIDAO anticipates maintaining a 60-80% dividend payout ratio, translating to a current dividend yield of 5.4-7.2%, highlighting its investment value.