Leading the way in the first quarter, where does the "resilience" of CHAGEE come from?

Before the U.S. stock market opened on May 30th, CHAGEE released its first quarterly financial report after going public.

Data shows that in Q1 2025, the total number of CHAGEE's global stores expanded to 6,681, a year-on-year increase of 63.6%; the total GMV reached 8.23 billion yuan, a year-on-year increase of 38.0%. Benefiting from the rapid growth of stores, during the reporting period, CHAGEE achieved a total revenue of 3.39 billion yuan, a year-on-year increase of 35.4%; the net profit in the same period was 680 million yuan, a year-on-year increase of 13.8%, corresponding to a net profit margin of 20.0%.

Overall, against the backdrop of intensified competition in the domestic new tea beverage market and increased overseas uncertainties, CHAGEE achieved steady growth in multiple key indicators in both operation and performance during the quarter, demonstrating strong resilience.

So, as the first financial report after going public, how is the performance quality of CHAGEE this quarter? Looking ahead, can the company's growth logic continue?

01. Despite Some Flaws, High Growth Resilience

In Q1 2025, CHAGEE recorded a revenue of 3.39 billion yuan, a year-on-year increase of 35.4%. Among them, the net income from franchised stores was 3.15 billion yuan, a year-on-year increase of 31.8%; the net income from self - operated stores was 243 million yuan, a significant year-on-year increase of 107.7%. Overall, under the upgraded industry competition, CHAGEE still maintained steady growth this quarter, showing strong growth potential.

Chart: CHAGEE's quarterly revenue performance. Data source: Wind, compiled by 36Kr.

The growth is mainly based on three factors: First, the continuous increase in the number of domestic stores drove the growth of GMV. During the reporting period, the number of CHAGEE's domestic stores increased from 3,989 in the same period last year to 6,512, a year-on-year increase of 63.2%, driving the GMV to grow by 37.2% to 8.05 billion yuan. Second, the healthy development of the user ecosystem increased the consumer repurchase rate and promoted the steady expansion of revenue. This quarter, the number of registered members of CHAGEE increased by 109.6% to 192.4 million, and the number of active users in the same period further increased to 44.9 million, a year-on-year increase of 21.4%. Third, the rapid expansion of the overseas market contributed to the incremental growth. This quarter, the number of CHAGEE's overseas stores increased from 94 in the same period last year to 169, driving the overseas market GMV to increase to 180 million yuan, a year-on-year increase of 85.3%. It is worth noting that the expansion speed of the overseas market GMV is higher than the growth of stores in the same period, indicating that the output per store in the overseas market has increased more significantly. The company disclosed that in Q1 2025, the monthly GMV per store of full - term stores in Singapore reached 1.8 million yuan, far higher than the average level of domestic stores.

Chart: CHAGEE's store and GMV performance. Data source: The company's Q1 2025 quarterly report, compiled by 36Kr.

While the revenue was growing, CHAGEE's profit performance during the reporting period was also quite impressive.

In Q1 2025, the company achieved an operating profit of 820 million yuan, a year-on-year increase of 16.3%. The net profit in the same period was 680 million yuan, a year-on-year increase of 13.8%, corresponding to a net profit margin of 20.0%. At the same time, the cash content of the company's current net profit was close to 60%, and the cash assets reached as high as 5.39 billion yuan, indicating high - quality profitability.

Chart: CHAGEE's quarterly net profit performance. Data source: Wind, compiled by 36Kr.

The impressive profit performance is mainly due to the asset - light franchise - based model, which brings high gross profit margin space and operating leverage to the company. During the reporting period, the company's gross profit margin was 53.1%, which has a significant advantage compared with the industry average of about 30%. In addition, the increase in the number of stores brought about economies of scale, combined with the wide application of automated equipment, effectively reduced the company's cost - to - revenue ratio and released profit space. In Q1 2025, the company's total cost was 2.57 billion yuan, showing a sequential decline for two consecutive quarters.

However, while multiple indicators were growing healthily, there were also some flaws in CHAGEE's performance this quarter. Among them, the decline in the net profit margin and the weakening of single - store/same - store sales data became the main concerns of the market.

In Q1 2025, the average monthly GMV per store of the company decreased to 432,000 yuan, and the same - store GMV growth rate showed a negative growth of nearly 20% for two consecutive quarters. At the same time, the net profit margin also declined by 3.7 percentage points compared with the same period last year.

The decline in the same - store data is mainly because after the previous rapid expansion, the store density of the company increased significantly. Coupled with the weakening of discount efforts, the store performance began to return to the normal development track. In addition, the choice of statistical method is also an influencing factor for the weakening of the same - store data. At the earnings conference, Huang Hongfei, the global CFO of CHAGEE, mentioned that the statistical objects of SSSG are stores that have been open for at least 13 months and have achieved positive sales during the comparison period. This strict statistical method resulted in about half of the stores not being included in the calculation of the current same - store data. The contribution of these uncounted new stores to the SSSG data may gradually be reflected in the future.

The decline in the current net profit margin is mainly due to the combined effects of intensified market competition, new product promotion, and rapid overseas expansion, which brought a slight increase in expenses, especially the current sales expenses increased significantly by 166%.

However, from a horizontal comparison perspective, whether it is the overall net profit performance or the operating indicators such as single - store GMV and cup - output volume, CHAGEE has significant advantages and still maintains a leading position in the industry. In Q1 2025, the company's net profit margin was 20%, the average daily GMV per domestic store was about 14,399 yuan, and the average daily cup - output volume per store in 2024 was 837 cups. According to the data of CITIC Securities, the average net profit margin, average daily GMV per store, and cup - output volume of the industry in 2024 were 15%, 6,000 yuan, and 330 cups respectively.

02. Focus on "Tea" to Face the Second Half of Industry Competition

As we all know, after the rapid expansion of the new tea beverage industry in China in the early stage, starting from 2024, the industry growth rate significantly declined from double - digits to 6.4%. At the same time, the intensified involution in the industry, serious homogeneous competition, and accelerated clearance on the supply side all indicate that the industry has officially entered a new stage of stock competition.

Facing the new environment, how will CHAGEE consolidate its leading share in the fierce competition and achieve further growth?

At present, product differentiation and innovation centered around "tea" are the key weapons for CHAGEE to face the second - half competition. This product innovation mainly focuses on two ideas: First, deeply cultivate the "fresh milk tea with original tea leaves" segment and fully leverage the advantages of its products. Second, benchmark against the coffee system and use modern technology to create pure tea products, open up new tea - drinking scenarios, and find the "second cup of tea" after the "fresh milk tea with original tea leaves".

In the "fresh milk tea with original tea leaves" segment, CHAGEE previously relied on the "blockbuster product + streamlined SKU" strategy to increase product awareness. After effectively building user stickiness, the company handed over the decision - making power for product innovation in the next stage to users. By fully listening to user feedback, simultaneously conducting technology and process R & D and sample testing, the company achieved demand - driven supply - side upgrades in products and further consolidated its leading position in the "fresh milk tea with original tea leaves" segment. On this basis, CHAGEE also continuously adapts to the cyclical changes in market taste through limited innovation in milk tea and fruit tea, resolves the risk of over - single product structure, and extends the overall life cycle of the brand.

Chart: CHAGEE's product innovation process. Data source: The company's prospectus, compiled by 36Kr.

In response to the problem of caffeine intolerance raised by some users this year, CHAGEE quickly reflected it in its products. In March, it launched "Light Caffeine Boya Juexian" in multiple provincial - capital cities, and the product received a good market response, with the proportion of new customers reaching the third - highest in history. In May, "Light Caffeine Huatian Oolong" was launched, further enriching the product line of the light - caffeine series.

In terms of new product category innovation, CHAGEE is based on the traditional Chinese "pure tea" culture and uses modern technology to create new product lines such as tea lattes, Chinese - style teas, and special blends, targeting the high - frequency, functional coffee - like consumption scenarios and covering a wider range of age groups and consumer preferences. For example, this year, the company launched the "CHAGEE NOW" freshly brewed tea category in Shanghai, using a coffee - like extraction process to make freshly brewed pure tea.

Compared with new tea beverages, pure tea products cover not only leisure and social scenarios but also extend to more extensive fields such as business and study. At the same time, the high - functional demand also gives pure tea products a higher repurchase rate. From the perspective of market composition, for freshly brewed pure tea products, the market is still dominated by traditional tea houses, with a fragmented market distribution, insufficient innovation, and a low coverage rate of young consumers, indicating a large space for standardization.

In this context, CHAGEE's entry is expected to fill the gap in the chain - store market of freshly brewed pure tea with its supply - chain and standardized operation experience. At the same time, with its brand power and product innovation, it can cover a wider range of age groups, including young consumers.

Although CHAGEE is still continuously exploring as a pioneer and there may be uncertainties in the future, it also means that once the exploration of the blank market is successful, the incremental dividend space will be very considerable, which is expected to lead CHAGEE to open up a new growth pole after the "fresh milk tea with original tea leaves".

03. Expand Overseas and Tell a New Story of Chinese Tea

In addition to continuous in - depth innovation in the domestic market, accelerating the exploration of overseas markets is also an important weapon for the company's long - term growth.

Compared with the involuted domestic market, the new tea beverage industry in the overseas market is still in the rapid penetration stage, with a much faster growth rate than the domestic market and a more moderate competitive environment. In this context, in recent years, leading new tea beverage brands have accelerated their overseas expansion to share the dividends of the overseas market expansion.

In 2018, CHAGEE established an overseas business department and started its overseas expansion with Southeast Asia as the vanguard. As of the end of the first quarter, the number of its overseas stores reached 169, with a corresponding GMV of 180 million yuan, a significant year - on - year increase of 85.3%.

Chart: The number of CHAGEE's overseas stores. Data source: The company's prospectus, compiled by 36Kr.

After years of layout, the company currently has a certain first - mover advantage in the overseas market. However, from the perspective of store distribution, 90% of the company's stores are concentrated in the Malaysian market. However, a notable signal is that since this year, while consolidating its penetration in the Malaysian market, the company has also accelerated its layout in other Southeast Asian markets such as Indonesia, Singapore, and Thailand, and the store performance has been positive. Taking Indonesia as an example, according to the earnings conference, CHAGEE opened its first store in Jakarta, Indonesia in April. The cumulative sales volume exceeded 10,000 cups within three days of opening, and it gained more than 5,000 registered users in the first week. The average daily sales volume in April exceeded 2,000 cups.

Meanwhile, the opening of the Los Angeles store in May marked that CHAGEE's overseas expansion has further penetrated into developed markets with stronger per - capita consumption ability such as Europe and the United States from its Southeast Asian base. The sales volume of the Los Angeles store exceeded 5,000 cups on the opening day, laying a good foundation for CHAGEE's expansion in North America.

Looking ahead, according to the forecast of CITIC Securities, under static assumptions, the potential store - opening space for CHAGEE in the Southeast Asian market is about 1,400. This means that even without considering the growth potential of the European and American markets, compared with the current situation, CHAGEE still has nearly 7 times the incremental expansion space overseas.

More importantly, in the long run, the rapid growth of the overseas market will not only become an important driving force for the company's future performance expansion but also help reduce its business's dependence on a single market.

04. Is CHAGEE Undervalued?

In summary, under the dual influence of the deteriorating competition in the new tea beverage market and its own growth rate adjustment, the single - store/same - store data of CHAGEE declined in Q1 2025, which to some extent raised concerns among investors. However, as a leading brand in the industry, benefiting from the asset - light franchise model and the leading position in the "fresh milk tea with original tea leaves" segment, the company still maintained a leading performance in the industry comparison, promoted the further expansion of its store network, and laid a foundation for long - term healthy growth.

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