GF SEC: AUNTEA JENNY (02589) rated "buy" with a fair value of 121.32 Hong Kong dollars.

GF SEC released a research report stating that it is expected AUNTEA JENNY (02589) to achieve adjusted net profits of 560-640-760 million yuan in the years 2025-2027. The company has a clear development strategy, with its core business in China growing rapidly. There is room for expansion and improvement in both new and existing stores, and the company's two wings (Tea Waterfall and overseas markets) complement each other, covering a wider customer base and enhancing its ability to withstand economic cycles. Compared to similar companies, a 2026 PE valuation of 18 times is given to the company, with a corresponding fair value of 121.32 Hong Kong dollars per share, and a "buy" rating is recommended. GF SEC's main points are as follows: Rapidly growing, continuously upgrading mid-priced freshly brewed tea brand Established in 2013, AUNTEA JENNY has become the second largest chain of mid-priced freshly brewed teas with over 10,000 stores. Benefiting from the rise of food delivery services, the company is expected to perform well in terms of same-store sales growth. Looking ahead, the company's ability to acquire and retain users has improved, and the main brand is expected to maintain its resilience. Distinct advantage in the northern region AUNTEA JENNY has the largest number of mid-priced freshly brewed tea stores in the northern region, with 4,784 stores by the end of 2024 (approximately 1,900 more than the brand ranked second in 2023), accounting for 52.1% (other top 5 mid-priced brands do not exceed 30%). The low investment and cost of the investment model allow franchisees to recoup their investment within a reasonable period, with an initial investment of about 275,000 yuan for AUNTEA JENNY stores, lower than the average of 350,000 yuan for mid-priced freshly brewed tea stores. The renewal rate for franchisees in 2024 was 98%, and 48.8% of new stores were opened by old franchisees, indicating a successful model. Covering all-day drinking with East Asian tea and Western coffee The company actively responds to consumer demand by introducing new products. In the first half of 2025, they launched 136 new products, with 15.8 million active members and a 40.6% repeat purchase rate. In terms of expanding product categories, in 2025 the company has reorganized its coffee category, with both AUNTEA JENNY and Tea Waterfall adding new coffee options to their menus. The company expects coffee to contribute to same-store sales growth in conjunction with other categories like baking. Accelerated growth of Tea Waterfall, focus on overseas expansion Tea Waterfall's core products are priced at less than 10 yuan, catering to a price segment with a relatively good competitive position. The use of real tea and milk in the raw materials gives them a clear quality advantage, making them popular in rural towns and universities. Currently, the brand has signed contracts and operates over 1,000 stores. In terms of international expansion, AUNTEA JENNY has opened stores in the United States and South Korea this year, prioritizing economically developed countries where stores have generally performed well. It is recommended to actively monitor their progress. Risk Warning: Macroeconomic fluctuations, slower than expected store expansion, and intensified market competition.