Open Source Securities: Covering Gu Ming (01364) for the first time, giving a “buy” rating optimistic about its growth potential in the cost-effective market and empty areas of the country

The Zhitong Finance App learned that Open Source Securities released a research report saying that Gu Ming (01364) relied on “regional cultivation” and efficient collaboration with the supply chain to become the leading brand in the industry with more than 10,000 stores. The company focuses on the sinking market, and delivery costs are lower than the industry average, enabling the steady expansion of the franchise system. Optimistic about its growth potential in the cost-effective market and empty areas across the country, it is estimated that in the future, it will have more than 40,000 stores nationwide, covering the first time, giving it a “buy” rating.

The main views of Open Source Securities are as follows:

Regional intensive cultivation+supply chain empowerment, Gumingwan store is beginning to take shape

In 2010, Guming opened its first milk tea store in Wenling, Zhejiang. In 2011, the first cooperative store opened and started a chain business model. In 2025H1, Guming stores surpassed 10,000. Considering that the company has a stable position in the current tea industry, and that there are still 17 provinces in the country that have not yet been deployed, and that it has significant supply chain and channel management advantages, the bank expects the company's revenue in 2025-2027 to be 120.4/143.2/16.75 billion yuan (+37.0%/18.9%/17.0% YoY); net profit to mother is 25.8/28.1/3.08 billion yuan, respectively (+77.9%/9.0%/9.8%); the corresponding EPS is 1.08, 1.18, and 1.30 yuan, respectively The current stock price is 20.5/18.8/17.1 times PE, respectively.

Industry Perspective: Cost-effective ratio+channel decline is the direction, and the penetration rate of ready-made drinks is expected to increase further

According to Insight Consulting, the size of China's ready-to-drink market will exceed 600 billion yuan in 2024, and is expected to exceed trillion yuan in 2027. Among them, ready-to-drink beverages are the largest category. In 2024, the market size of ready-to-drink tea drinks is 313 billion yuan, and the CAGR is expected to be 15.8% from 2024-2028. By price/region: (1) the medium price/affordable tea market is expected to grow in size, with a CAGR of 20.8%/20.1% respectively in 2023-2028; (2) the sinking market has more room for ready-made drinks. The compound GMV growth rate of ready-made tea in third-tier/fourth-tier cities and below in 2018-2023 is 28.0%/33.2%, respectively. Long-term outlook: According to insight, in 2023, the consumption of ready-to-drink beverages in the US and China accounted for 19.2%/1.6% of total drinking water intake, respectively, and there is still plenty of room for improvement in the penetration rate of domestic ready-to-drink beverages.

Looking forward to the future: The supply chain first supports store encryption, and the domestic store ceiling is expected to exceed 40,000

The bank is benchmarking horizontally. The core characteristics of Guming's store development are: (1) focus+intensive cultivation, Gu Ming achieved intensive regional cultivation by steady, steady and orderly progress with Zhejiang Province as the center; (2) the channel has further sunk, and nearly 80% of Guming's stores are located in second-tier cities. The bank believes that Gu Ming's main competitive advantage lies in its excellent channel-side supply chain management ability and mature franchisee management system. Supply chain side: Gu Ming implemented the supply chain first to achieve two-day cold chain delivery to 97% of stores and franchisees at a relatively economical cost. The distribution cost was less than 1% of GMV (industry average of about 2%). At the same time, the company has strong franchisee screening and management capabilities. Guming stores have a short recycling period, the rate of franchisees bringing stores is among the highest in the industry, and the closing rate is normally low. Looking forward to the future, the bank replicates the entire country according to the current density of stores in Zhejiang, and estimates that the ceiling for long-term domestic stores exceeds 40,000.

Risk warning: the risk of raw material price increases, food safety risks, and market competition exacerbates risks.