Zhongtai Securities has initiated coverage on BAMA TEA (06980) with an "Overweight" rating, recognizing the company as a leading player in China's tea industry. BAMA TEA owns well-known brands such as "BAMA" and operates across the entire tea value chain, from cultivation and processing to distribution. The brokerage expects steady growth in the company's tea business, driven by accelerated offline expansion, improved store efficiency, and synergistic online channel development. Its focused product strategy is also expected to enhance brand strength.

With increasing diversification in tea demand and industry consolidation favoring market leaders, BAMA TEA, as the top premium tea brand, is well-positioned to expand its market share. Key insights from Zhongtai Securities include:

**Company Overview** BAMA TEA is a leading tea brand and retail chain supplier in China, offering a comprehensive range of products across all six major tea categories and tea accessories. In 2024, it ranked first in the number of specialty tea chain stores nationwide and led in revenue for oolong and black tea segments. Over the past three years, its revenue and net profit grew at a CAGR of 8.6% and 16.2%, respectively, reaching RMB 2.143 billion and RMB 224 million in 2024, with gross and net margins of 55% and 10.5%.

The company operates three key brands: - **BAMA TEA**: Core brand covering premium whole-leaf teas. - **Xin Ji Hao**: Focused on aged premium Pu'er tea. - **Wan Shan Hong**: Targets younger and female consumers with diverse flavors.

**Industry Landscape** The premium tea market is growing faster than the overall tea industry, which reached RMB 325.8 billion in 2024. The premium segment accounted for RMB 103.1 billion, with a projected CAGR of 5.6% from 2024 to 2029. China's tea market is dominated by six categories, with green tea holding the largest share, while oolong and dark tea show rapid growth. Despite fragmentation in the premium segment (CR5 of 5.6% in 2024), BAMA TEA leads with a 1.7% market share.

**BAMA TEA's Competitive Edge** 1. **Brand Heritage**: Rooted in a 300-year tea-making legacy, BAMA is associated with cultural depth and craftsmanship, particularly in Tieguanyin oolong tea. 2. **Channel Strength**: Its nationwide network of 3,585 stores (90% franchised as of H1 2025) caters to business and social needs, reinforcing its premium image. Future plans include upscale "urban tea salons" to elevate brand perception. 3. **Flagship Product Strategy**: The success of "Sai Zhen Zhu" (a premium Tieguanyin product) has set a benchmark, simplifying consumer choices. This strategy is now extended to Wuyi rock tea and black tea. 4. **Operational Excellence**: With proprietary technology and digital supply chain management, BAMA ensures consistent quality across its product matrix. Its cross-category supply chain also enhances cross-selling opportunities.

**Growth Drivers** 1. **Channels**: Plans to add 1,500 stores in three years, upgrade existing outlets, and expand overseas to promote Chinese tea culture. 2. **Products**: Strengthening flagship products while diversifying offerings across price points and demographics. Long-term focus includes ready-to-drink tea innovations. 3. **Branding**: Enhancing core brand value and building a multi-brand portfolio to serve varied customer segments.

**Risks**: Intensified competition, slower-than-expected channel expansion, and outdated research data.