Interpreting US Stock New Stocks | The Emperor Tea Princess (CHA.US) is listed in the United States with "Bo Ya Jue Xian", can the single product model conquer Wall Street?

In 2025, the new tea drink track can be described as extremely lively, with "landing on the capital market" becoming a key industry keyword. With GUMING and HEYTEA successfully listing in February and March, another new tea drink brand is rushing towards the IPO frontline in April. On April 17th, Chinese milk tea chain brand ChaJi (CHA.US) successfully listed on the Nasdaq. On the first day of trading, the company's stock price soared nearly 50% before falling back, ultimately closing up 15.86% at $32.44, with a total market value of $5.95 billion. Behind the increasingly crowded new tea drink track, how does ChaJi, with Chinese elements as its highlight, fare? Rapid expansion of the sales network, impressive revenue performance According to the prospectus, ChaJi was founded in 2017, specializing in high-end freshly made tea drinks, with the goal of bringing eastern tea drinks to the world. By 2024, the company had a total of 6,440 global stores, with 6,284 in China accounting for over 98%, covering 32 of China's provincial-level divisions, and 156 abroad, mainly in Southeast Asia. According to iResearch data, as of December 31, 2024, in terms of the number of stores in China, ChaJi has become the largest high-end fresh tea drink brand in China. At the same time, the company's operational data has shown rapid growth. In 2022, 2023, and 2024, the company's net income was 492 million yuan, 4.64 billion yuan, and 12.406 billion yuan respectively, with a high compound annual growth rate of 402.15%; the company's GMV was 1.294 billion yuan, 10.792 billion yuan, and 29.458 billion yuan respectively, with a compound annual growth rate of 377.13%. Looking at net profit, in just three years, the company has turned its losses into profits. In 2022, the company recorded a loss of 907 million yuan, but by 2023, it achieved a net profit of 803 million yuan, and in 2024, this number increased to 2.515 billion yuan, a year-on-year increase of over 213%. It is worth noting that in recent years, ChaJi's number of stores has been growing rapidly. As of December 31 of 2021, 2022, 2023, and 2024, the company had 427, 1,024, 3,416, and 6,284 stores in China, and 35, 63, 95, and 156 stores overseas. It is worth mentioning that ChaJi has rapidly expanded its sales network through a "franchise business model," with over 97% of its revenue coming from franchise stores. As of December 31, 2024, the company had a total of 6,271 franchise stores, accounting for over 90% of the company's revenue, while the company only had 169 self-operated stores. In terms of city distribution, ChaJi's stores in China are mainly located in the most economically active areas, especially in new first-tier and second-tier cities. For example, in 2024, ChaJi's first-tier, new first-tier, second-tier, and other city stores accounted for 11%, 50%, and 39% of the company's total stores in China, revealing strong demand from consumers in new first-tier and second-tier cities and the potential for continued growth. "Troubles" behind the high growth performance However, behind ChaJi's high growth performance are not without "troubles." According to the prospectus, ChaJi's success is inseparable from the company's big single product strategy. Data shows that 91% of ChaJi's GMV in the Chinese market comes from its "whole-leaf fresh milk tea" product. Among them, the super single product "Boya Jue Xian" had accumulated sales of over 600 million cups by August 2024, becoming the brand's iconic product. ChaJi's focus on the core menu has not only increased consumer awareness of the brand but also greatly improved supply chain efficiency: inventory turnover is only about 5.3 days, and logistics costs account for less than one percent of the total global GMV. But it is this strategy that makes the company's product barriers easily breached. It is reported that competitors such as Tea Yanse Se and Tea Li Yishihave launched similar products, which will dilute customer choices. In the long run, in the rapidly changing consumer taste environment, relying on the single category of "whole-leaf fresh milk tea" to achieve continuous performance growth might not be a sustainable strategy for ChaJi. At the same time, with the rapid expansion of stores, the company's growth rate has shown signs of slowing down. Same-store GMV has always been an important indicator for measuring the operational efficiency and growth potential of tea drink stores. According to the prospectus, in 2023, ChaJi's same-store GMV growth rate was as high as 94.9%, but in 2024, it plummeted to just 2.7%, with a particularly significant decline in same-store GMV growth rates in the eastern and central parts of China, reaching -27.3% and -14.7% respectively. Some analysts believe that while ChaJi's early strategy of rapidly increasing the number of stores may have helped with its listing, it could potentially drag down the company's performance in the future. There are also concerns that ChaJi's domestic growth may have already peaked. In this context, overseas expansion has become the hope for ChaJi's future development. According to the prospectus, ChaJi plans to further expand and intensify its store network in China and overseas. Globally, the company aims to strengthen its business influence in mature markets such as Malaysia, Singapore, and Thailand while exploring expansion opportunities in other promising markets such as the United States. The company plans to increase its overall store count by 1,000 to 1,500 in 2025. Furthermore, as the business scale continues to expand, the company's marketing expenses have also skyrocketed. During the reporting period, ChaJi's marketing expenses amounted to 73.6 million yuan, 260 million yuan, and 1.1 billion yuan, accounting for 15%, 5.6%, and 8.9% of total revenue respectively, marking an almost eleven-fold increase in marketing expenses in just three years. Compared to the industry average of around 6% in marketing expense ratio, ChaJi's expenditure on marketing is not considered low. What also needs to be noted is that the increasingly fierce industry competition has brought significant market prospects risks for ChaJi. According to iResearch data, measured by GMV, the Chinese tea beverage market is rapidly growing and of a huge scale, increasing from 102.2 billion yuan in 2019 to 272.7 billion yuan in 2024, with a compound annual growth rate of 21.7%, reaching 2In 2028, it is expected to reach 426 billion yuan. Among them, the market share of high-end freshly made tea with an average selling price of 17.0 yuan and above will increase from 10.9% in 2019 to 25.9% in 2024. This faster growth is mainly due to the increasing demand from consumers for higher quality products, diversified consumption options, and rising health consciousness. It is estimated that the total GMV of the high-end freshly made tea market will reach 167.1 billion yuan by 2028, accounting for 31.7% of the total market for freshly made tea beverages.In the global market, the growth momentum of tea beverages is also full of potential. According to iResearch data, the global tea beverage market, as the second largest non-alcoholic beverage category in the world, is expected to reach a market size of $467.1 billion in 2024, and is projected to reach $601.9 billion by 2028. With the continued popularity of freshly made tea beverages in overseas markets, driven by the growth in per capita income, the expansion of the consumer base for tea, and the potential to attract more coffee drinkers due to the affordability and health benefits of tea, the global market for fresh tea is expected to reach $122 billion by 2028, with a compound annual growth rate of 18.9% from 2024 to 2028. Although the prospects for the development of new-style tea beverage shops in China are promising, the current market is relatively fragmented and the industry competition is fierce. According to iResearch, in 2024, the top three participants in China's high-end freshly made tea beverage brands collectively held about 40.5% market share. Among them, the Ba Wang Cha Ji brand ranked first with about 20.3% market share. The company stated that it faces intense competition in the industry, with many fresh tea brands competing for consumers, including some mature competitors. Ba Wang Cha Ji also admitted that the company's product formulas are not patented, so the company cannot prevent competitors from copying and selling similar products. Overall, in the past few years, Ba Wang Cha Ji has achieved rapid growth in scale and performance, and turned losses into profits, thanks to its unique business model of focusing on a single product. However, overall, the industry barriers to entry for the company are relatively low, and it is difficult to establish a moat relying solely on a single product category. As industry competition intensifies, finding the next key SKU like "Boya Jue Xian" is also a question that Ba Wang Cha Ji needs to actively consider.