BOCI International: First Rating of "Buy" Given to MIXUE GROUP (02097) with Strong Competitive Advantage in Sinking Market.

CCB International released a research report stating that it is covering MIXUE GROUP (02097) for the first time and giving it a "hold" rating, mainly considering the following factors: 1) The company is very strong in the tea beverage market and also has a certain competitiveness in the coffee market. Overall, its competitiveness in the lower-tier market is significant, and it is likely to benefit from the growth dividend in that market; 2) The company has a leading layout in the outbound field, entering multiple regions, and the increase in the number of stores is expected to bring new growth points; 3) The company continues to strengthen its supply chain construction, maintain the ecosystem of franchisees, and has thick competitive barriers, hoping to guard its own advantages against market impacts; 4) The construction of the brand IP is expected to resonate with consumers emotionally, creating an emotional barrier, and the increasing popularity of the IP provides greater monetization opportunities. The main views of CCB International are as follows: Leading brand in freshly made tea drinks, with a leading number of stores By 2025, the total number of MIXUE GROUP stores worldwide will reach approximately 60,000, making it the largest company in the world in terms of store scale for freshly made beverages. The company's store network covers 31 provinces in mainland China and 13 countries overseas, with lower-tier city stores in China accounting for 58.0%, stabilizing the foundation in the lower-tier markets. Overall, in the freshly made tea beverage market in China, it presents a situation of one dominating the others. Focusing on the freshly ground coffee market, as well as the overseas freshly made tea beverage market, to create multiple growth points Its affordable coffee brand, Lucky Coffee, surpassed the milestone of 10,000 stores by 2025 (included signed agreements), becoming the third coffee brand in China with over 10,000 stores. With the cost control of the supply chain of Mixue Ice City, Lucky Coffee's core product is priced at around 8 yuan, with a significant competitive advantage in the lower-tier market. In terms of overseas markets, the company has around 4,500 stores overseas, with Indonesia and Vietnam markets taking the lead; in 2025, Mixue Ice City stores successively entered Kazakhstan, the United States, and others, accelerating its globalization layout. Franchisee ecosystem and supply chain as the foundation, building long-term competitive advantages More than 97% of the company's revenue comes from selling materials to franchisees, ensuring franchisee profits is equivalent to ensuring the stability of its own income base. Under this business model, the company promotes the healthy development of its franchisee ecosystem. In terms of the supply chain, the company has built several production bases, 100% of core ingredients in-house, complemented by storage networks and global procurement, establishing a cost control barrier that is difficult to replicate. The competitive advantage brought by brand IP should not be ignored The "Snow King" IP launched in 2018 has grown into a phenomenally successful IP. With the help of the IP, the brand image has penetrated deeply into people's hearts, leading to low brand promotion expenses as a percentage of revenue and lower than its peers. As the value of the IP continues to be unearthed, it may help establish deeper emotional barriers with consumers and attract more potential franchisees, driving continuous enhancement of brand influence. Main risks facing the rating Market competition risk, macro-environmental change risk, impact of geopolitical factors on expansion expectations, food safety risk, fluctuation in raw material prices.