Cathay Pacific Haitong Securities: First payment to Shanghai Aunt (02589) to “increase holdings” ratings, ready-to-make tea, multi-brand matrices work together

The Zhitong Finance App learned that Cathay Pacific Haitong Securities released a research report saying that for the first time, the coverage gave Shanghai Aunt (02589) an “increase” rating, with a target price of HK$116.56. Auntie Shanghai owns the three major brands of “Shanghai Aunt,” “Tea Falls,” and “Shanghai Coffee,” forming a brand matrix covering different price ranges and consumer groups. The company rapidly expands the market through efficient R&D and franchise models, and has an advantage, especially in the North. The company implements the “one, two wings” strategy, and there is great potential for opening multi-brand stores.

Cathay Pacific Haitong Securities's main views are as follows:

Leading manufacturer of beverages, building a brand matrix and expanding the national market through the franchise model

The company has ready-made tea brands “Shanghai Aunt”, “Tea Falls”, and the freshly ground coffee brand “Shanghai Coffee”. It positions different categories and differentiated price ranges, and has built a three-dimensional product matrix covering different consumer groups and market levels through three brand concepts. The company has a mature product development system, leading the new frequency industry, efficiently responding to market demand and leading the consumption trend of healthier and tastier ready-made drinks.

The ready-to-drink market space is vast, and the chain rate continues to rise

There is great potential for an increase in the consumption of ready-to-drink per capita in China, and the sinking market is the main source of growth. The takeout war sparked short-term demand and accelerated the process of increasing the penetration rate of ready-to-drink products. The current tea industry in China is fiercely competitive, and the pattern is scattered, and Shanghai aunts are leading the way in the northern market. Looking forward to the future, chain brands have more advantages in scale, supply chain, and operation than independent tea shops. The chain rate of the tea industry is increasing, and long-tail brands are being cleared at an accelerated pace.

Multiple brands expand customer coverage, coffee categories improve store efficiency

The company implemented the “One, Two Wings” strategy. Among them, “One” is the main brand of “Shanghai Aunt”. The bank estimates 18,000 domestic stores; the “two wings” are “Tea Falls” and overseas markets, respectively, and estimates that “Tea Falls” has more than 5,000 domestic stores. Currently, it has entered Malaysia and the United States. It is currently in the early stages of development and has great potential for growth. Furthermore, the coffee business has undergone adjustments and upgrades. Currently, it is integrated into Shanghai's main brand, which is expected to contribute to the growth of single stores.

Risk Alerts

Store openings fall short of expectations, franchisees manage risks, and industry competition intensifies