A research report indicates that, considering Green Tea Group's (06831) same-store performance has surpassed the industry average, the adjusted net profit forecasts for 2026 and 2027 have been raised by 8% and 13% to 665 million yuan and 840 million yuan, respectively. The current share price corresponds to 7x and 6x the adjusted price-to-earnings ratios for 2026 and 2027 estimates. An Outperform rating is maintained. Due to the upward revision of profit forecasts, the target price has been increased by 10% to HK$11, corresponding to 10x and 8x the adjusted P/E ratios for 2026 and 2027 estimates, implying an upside potential of 37%.
The company's second-half 2025 results met expectations. The annual 2025 results showed revenue increased 24.1% year-on-year to 4.763 billion yuan. Adjusted net profit rose 41% year-on-year to 509 million yuan, with the adjusted net profit margin increasing by 1.3 percentage points to 10.7%. This improvement is attributed to centralized procurement and optimized single-store models, leading to cost reduction and efficiency gains. The results were in line with expectations, approximately at the midpoint of prior guidance. The net increase in store count for 2025 was 144, bringing the total to 609 stores. The proportion of stores in Tier 1 and New Tier 1, Tier 2, and Tier 3 cities was 50%, 25%, and 25%, respectively. The final dividend for 2025 was 307 million yuan, representing a dividend yield of about 6.5%. The company guides for revenue growth exceeding 20% and profit growth exceeding 30% year-on-year in 2026.
The decline in full-year same-store sales narrowed, and the contribution from delivery services increased further. Same-store sales turned positive starting from the second quarter of 2025, highlighting operational resilience amid industry pressures. By business segment: 1) Dine-in turnover rate and average spending per customer both stabilized. Dine-in revenue for 2025 increased 14.2% year-on-year to 3.541 billion yuan. 2) The revenue contribution from delivery services in 2025 increased by 6.5 percentage points year-on-year to 25.3%, indicating there is still room for growth compared to peers.
The single-store model continues to be optimized, and the domestic and international store network is being steadily expanded. According to company announcements, the sales per square meter for new stores opened in 2025 was 48% higher than for older stores, and the investment payback period shortened from 19.3 months to 12.6 months. Store efficiency and investment returns are improving steadily through single-store model optimization. Regarding network expansion: 1) Domestically, the average number of stores per city and per million people were 4.0 and 0.6, respectively, compared to industry averages of 7.2 and 1.0, suggesting significant potential for increasing store density. Furthermore, in 2025, the company entered 16 new cities below the Tier 2 level, accelerating its penetration into lower-tier markets. 2) The number of international stores reached 14 in 2025, with revenue surging 16-fold year-on-year. The company plans to add over 15 more international stores in 2026, with a medium-to-long-term goal of exceeding 100 international stores.
Potential risks include slower-than-expected store expansion, intensifying industry competition, and food safety issues.