GLMS Securities: Mixed Group (02097) rated as "Buy" with a target price of HKD 504.50.

GLMS SEC released a research report stating that it is expected MIXUE GROUP (02097) to achieve operating revenue of 29.445/33.774/38.048 billion yuan respectively in 2025-2027, with year-on-year growth of 18.59%/14.70%/12.66%. Net profit attributable to shareholders is expected to be 5.145/6.058/6.911 billion yuan respectively, with year-on-year growth of 15.97%/17.74%/14.08%. The corresponding three-year CAGR is 15.92%, and EPS is 13.55/15.96/18.20 yuan per share. The absolute valuation method measures the value per share at 474.23 yuan (equivalent to 504.50 Hong Kong dollars at the exchange rate on 4/17/2025), with comparable companies having an average PE of 27.83 times in 2025. Given the company's strong supply chain and brand power expected to further expand domestically, as well as the potential increase in coffee and overseas layout, combined with relative valuation and absolute valuation methods, the company is given a 35 times PE for 2025, with a "buy" rating for the first time. The main points of GLMS SEC are as follows: The parity beverage market is growing at a fast pace, and freshly ground coffee is accelerating its penetration. The Chinese freshly brewed tea beverage market is steadily growing, reaching 258.5 billion yuan in 2023, with a CAGR of 19.0% from 2018 to 2023. The trend of cost-effectiveness is evident, with the terminal retail sales of affordable freshly brewed tea beverages having a CAGR of 22.1% from 2018 to 2023. The growth in the lower-tier cities is accelerating, with a CAGR of 30.7% for terminal retail sales in third-tier and below cities from 2018 to 2023. Industry competition in 2024 is expected to intensify and affect same-store GMV, but the industry's supply-side competition is expected to steadily improve by 2025. The trend in the Chinese freshly ground coffee market is similar to tea beverages, with the line predicting that there is still significant room for growth in the affordable freshly ground coffee market. Strong IP marketing consolidates brand power, and a strong supply chain ensures cost and efficiency advantages. On the marketing side, the company has successfully created the "Xue Wang" IP to strengthen brand power through comprehensive marketing activities. On the supply chain side, the company's supply chain capabilities are leading, with global supplier coverage and leading procurement scale. In 2023, the company's core raw material procurement costs for lemon and milk powder were 10%-20% lower than the industry average. On the production side, with five major production bases nationwide, over 60% of the beverage ingredients provided to franchisees are self-produced, with 100% of core beverage ingredients being self-produced, leading the industry. The improvement in production capacity utilization is expected to drive a steady increase in gross profit margins. In logistics, 97% of mainland stores achieved cold chain coverage in 2024 Q3, with 90% of county-level administrative regions delivering within 12 hours, and the management expense ratio being lower than industry peers. There is still room for opening stores in the lower-tier market, and overseas and coffee markets are expected to bring incremental volume. The company's supply chain advantage gives it strong competitiveness, and the relatively low initial fixed investment in opening stores is also conducive to attracting franchisees in the lower-tier market. The bank calculates that there is still room for national store expansion in the lower-tier markets. Furthermore, the company is expanding its overseas stores in Southeast Asia with the Lucky Coffee brand, leveraging synergies from the supply chain to gain a significant cost advantage, leading coffee to drive growth in the lower-tier market. Additionally, with its expansion in Southeast Asia, overseas gross profit margins are higher than domestically, and single-store income still has room to grow. The bank predicts that "globalization of lower-tier markets" is expected to bring incremental volume to the company.