Preview of New Stocks | The Long-term Business Wisdom of the Green Tea Group: Expansion Balancing Speed and Quality, Seizing Growth Opportunities in Going Global.

In recent years, the national consumer market has shown a characteristic of shifting to higher growth speeds, with consumers paying more attention to value for money. Taking the catering industry as an example, dining brands in shopping centers and streets are constantly changing, indicating a trend of continued acceleration in the process of improving quality and reducing speed in the industry. Although short-term changes in demand and intense competition among industry peers are difficult to avoid, the overall trend of development in the catering industry over the years has not changed: according to data, the current rate of chain operation in the catering industry is increasing, with a growing number of brands with 100-500 stores compared to the same period last year; the national chain operation rate is expected to reach 22% by the end of 2024, setting a new historical high. Amidst the historical process of the rapid expansion of chain operations in the catering industry, new brands emerge, but established players who have achieved growth through innovation, exploring diversified development paths, and ultimately crossing cycles, should not be underestimated. For example, ChinaGreen Group, which recently re-submitted its prospectus to the Hong Kong Stock Exchange, deserves recognition. Since opening its first restaurant by West Lake in Hangzhou in 2008, ChinaGreen Group has witnessed the industry transition from rapid growth to a more stable period. Despite the emergence of new brands, ChinaGreen Group has maintained its growth pace, expanding steadily and recently seizing opportunities for overseas expansion. At the same time, with various measures, the store model has been further optimized, allowing for a shorter investment payback period and higher overall profitability. In a market environment of complexity and uncertainty, the growth trajectory of ChinaGreen Group may serve as a valuable reference for breaking barriers and exploring new growth paths for the mass chain catering industry. The "versatile" evolution of ChinaGreen Group For ChinaGreen Group, going public is a result of reaching a certain stage of development. It should be noted that ChinaGreen Group had previously submitted applications to the Hong Kong Stock Exchange and disclosed prospectuses twice after listing hearings, but ultimately withdrew the applications due to internal and external considerations. It is not surprising that ChinaGreen Group has held a strongly cautious attitude towards going public. As the company has shown over the past decade, prudence has always been a key trait ingrained in its DNA. In the past few years, the Hong Kong stock market has been bearish, with low market turnover and the pace and amount of new stock issuances significantly impacted; in addition, amidst fluctuating pandemic situations, the catering industry was undergoing a deep adjustment, and the company's operating conditions were not at their best. Under these constraints, forcibly going public could have been detrimental to providing ideal investment opportunities for investors. By delaying the IPO, ChinaGreen Group is able to achieve a win-win situation by respecting the market and protecting investors. By the end of 2024, the Hong Kong stock market has shown signs of recovery, and more importantly, ChinaGreen Groups fundamentals have significantly improved compared to previous years. In a more mature environment, restarting the IPO for ChinaGreen Group is certainly timely. In terms of financial performance, ChinaGreen Group achieved a "triple jump" in scale from 2021 to 2023, with revenues of RMB 22.93 billion, RMB 23.75 billion, and RMB 35.89 billion respectively. As of the first 9 months of this year, the total revenue of the company has increased to RMB 29.2 billion, a 7% increase year-on-year. During the same period, due to external factors beyond their control, ChinaGreen Group's net profit indicator had declined in 2022 compared to the previous year, but quickly rebounded in 2023 to a high of RMB 2.96 billion. Since the beginning of this year, ChinaGreen Group's net profit has continued to grow strongly, reaching RMB 2.85 billion in the first 9 months, with a year-on-year increase of 10.3%, and the corresponding net profit margin is also close to double digits. From the core financial data of counter-trend growth, it is clear that ChinaGreen Group has achieved outstanding results against the backdrop of ongoing industry challenges. Behind this success, the company's strategy of steady expansion has played a crucial role. As of December 10th, ChinaGreen Group's restaurant network includes 461 restaurants, covering 21 provinces, 4 municipalities, and 2 autonomous regions in China. Considering that at the beginning of 2021, ChinaGreen Group had only 180 restaurants, this means that the number of restaurants has more than doubled in the past three years. The compound annual growth rate of the number of restaurants from 2021 to 2023 was 23.5%, but in less than 12 months, the net increase in the number of ChinaGreen restaurants reached 101, with a growth rate of nearly 30%, indicating an accelerated expansion process for ChinaGreen Group in the post-pandemic era. It is also worth noting that ChinaGreen Group has placed particular emphasis on balancing quality with speed during its rapid expansion. For example, the company intentionally increased the number of smaller-sized restaurants to reduce opening costs and maintain high turnover rates. Data shows that as of September 30th this year, the number of small-sized restaurants owned by ChinaGreen Group had nearly doubled from 88 at the end of 2021, reaching 252. At the same time, ChinaGreen Group has invested heavily in product and menu development, introducing a variety of new dishes to further strengthen its value proposition and continuously convert external traffic into loyal customers. In terms of key indicators, more than 95% of ChinaGreen Group's restaurants have achieved breakeven within two months since 2021, and the average cash investment payback period for restaurants is 19.2 months. With a series of effective new measures, the average cash investment payback period for new restaurants opened under ChinaGreen Group after 2023 has been reduced to 14.8 months, which may explain why, in the current difficult environment for the catering industry, ChinaGreen Group is still able to achieve strong growth.Representative Chinese chain restaurant's top-performing student has actually opened new stores at a faster pace.Hong Kong Stock Exchange listing to kick off the next phase of "long-distance running" As the catering industry gradually enters a period of calm development, in the new normal, catering enterprises must break through uncertainty and find new paths for development. Changing development ideas and methods is almost a must. For the Heytea Group, the gears of fate started turning with their determination to enter the capital market. According to the prospectus disclosure, Heytea Group's future growth strategy can be roughly summarized in four directions, including strategically expanding restaurant network to promote sustainable growth, providing high-quality and value-for-money food to drive sales and customer flow, optimizing the supply chain to improve operational efficiency, and continuing to invest in technology and digital marketing. Given that the chain rate of the catering market in China is still ascending, it determines that the focus of chain restaurants should continue to be on rapid expansion to seize growth opportunities. Heytea Group has indeed disclosed ambitious expansion plans in the prospectus. The company expects to open more than 560 new restaurants in the next three years, which is 100 more than the current number of Heytea restaurants, equivalent to creating another Heytea Group. This also means that without considering closures, Heytea Group will become one of the strong brands among the thousand-store brands in the catering industry by the end of 2027. Furthermore, in Heytea Group's business blueprint, exploring overseas blue ocean markets will be one of the key directions for the company's expansion. As of the 10th of this month, Heytea Group already has 2 restaurants in Hong Kong, China. With these two existing restaurants as a foundation, Heytea Group will accelerate its overseas expansion in the next year, aiming to open 28 new restaurants overseas in the next three years. Considering that Hong Kong, China is globally recognized as a financial center, completing a listing in Hong Kong will also help enhance the company's brand awareness in the international market, which may also become the "Eastern Wind" for Heytea Group to expand overseas. In addition, Heytea Group plans to further accelerate its penetration into lower-tier markets. In recent years, the commercial potential of the previously overlooked "small-town economy" has gradually been valued. Heytea Group's high cost-effective pricing model fits well with the consumption habits of the mainstream consumer groups in lower-tier cities, which is also the confidence for the company to continue densifying its store network in this market. Data shows that Heytea Group plans to open nearly 300 new stores in other regions of China, excluding East, Guangdong, and North China, in the next three years, accounting for more than half of the company's planned new stores. In conclusion, the catering industry, with rigid demand and diverse supply, is inherently a long-term business. For Heytea Group, which has been deeply rooted in the Chinese chain catering industry for over a decade, the Hong Kong Stock Exchange listing can be seen as a landmark event marking the start of a new round of long-term development. It is undeniable that the current Chinese catering industry is facing both opportunities and challenges due to objective factors. It may be difficult to completely stop the phase of changing demand and intense market competition in the short term, but with a longer-term perspective, the strengthening of the Matthew effect and the increase in chain rate will only intensify. In this historical trend, we can still believe that long-term believers like Heytea Group will contribute new wisdom and strength to the industry in its return to prosperity.