Blue Lotus China New Economy Research, Blue Lotus Research Institute

Eric Wen

Blue Lotus China New Economy Research

China growth and global non-US Internet equities

Blue Lotus Research Institute

Blue Lotus Research is a Hong Kong Type 4 Licensed investment advisory firm focusing on Chinese growth equities and global non-US Internet equities

Equity Bottom-Up

<ul>
<li>Luckin reported C4Q24 revenue 6%/1% higher than our estimate/consensus, and non-GAAP operating profit 11%/38% higher than our estimate/consensus, driven by SSSG recovery and cost material savings;</li>
<li>After turning around same-store-sales-growth (SSSG) via price hike in C3Q24, Luckin finetuned the cup sales to price ratio to reach an optimal point in C4Q24, </li>
<li>We upgrade Luckin from UR into BUY rating and set new TP at US$40.  </li>
</ul>


Luckin reported C4Q24 revenue 6%/1% higher than our estimate/consensus, and non-GAAP operating profit 11%/38% higher than our estimate/consensus, driven by SSSG recovery and cost material savings;
After turning around same-store-sales-growth (SSSG) via price hike in C3Q24, Luckin finetuned the cup sales to price ratio to reach an optimal point in C4Q24, 
We upgrade Luckin from UR into BUY rating and set new TP at US$40.  


[Luckin (LKNCY US, BUY, TP US$40) Rating Change]: Optimum Cup Sales and Price Mix Hit the Sweet Spot

HK/China Equity Long-Short

Osbert Tang, CFA

Equity Capital Markets

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mixue-group" target="_blank" data-smartkarma-citation="entities:40623:1" rel="noopener">Mixue Group (MIX HK)</a>'s IPO price of HK$202.5 looks attractive, as it is priced at 16.6x FY24 and 13.5x FY25 PER, below the mainland China peer average. </li>
<li>We estimate a P/B of 4.6x, putting it marginally lower than the sector best-fit line. We think there is potential for at least a 20-30% upside after the IPO. </li>
<li>MIXUE offers the possibility to participate in the spin-off of its overseas businesses in the medium term, which is explicitly spelt out as a plan.</li>
</ul>



Mixue Group (MIX HK)'s IPO price of HK$202.5 looks attractive, as it is priced at 16.6x FY24 and 13.5x FY25 PER, below the mainland China peer average. 
We estimate a P/B of 4.6x, putting it marginally lower than the sector best-fit line. We think there is potential for at least a 20-30% upside after the IPO. 
MIXUE offers the possibility to participate in the spin-off of its overseas businesses in the medium term, which is explicitly spelt out as a plan.


MIXUE Group (2097 HK) IPO: Reasonably Attractive Pricing

<ul>
<li>
<a href="https://www.smartkarma.com/entities/mixue-group" target="_blank" data-smartkarma-citation="entities:40623:1" rel="noopener">Mixue Group (MIX HK)</a> has a whopping market share of 32.7% in 2023, based on number of cups sold. It also has the highest profit in the sector.</li>
<li>With a strong profit record and net cash, it is a leader that captures industry growth. Its extensive network targets low-tier cities' potential and the franchise model drives expansion.  </li>
<li>It justifies trading on a premium to sector average PER of 19.6x for FY25. If aligning P/B with ROE on the best-fit line, it should be priced at 5.1x pre-money.</li>
</ul>



Mixue Group (MIX HK) has a whopping market share of 32.7% in 2023, based on number of cups sold. It also has the highest profit in the sector.
With a strong profit record and net cash, it is a leader that captures industry growth. Its extensive network targets low-tier cities' potential and the franchise model drives expansion.  
It justifies trading on a premium to sector average PER of 19.6x for FY25. If aligning P/B with ROE on the best-fit line, it should be priced at 5.1x pre-money.


MIXUE Group IPO: The Leading Player that Justifies a Premium

Equity Analyst - Asia Consumer Sector, Investory

Devi Subhakesan

Equity Analyst - Asia Consumer Sector

ASIA CONSUMER: INSIGHTS AND INVESTMENT IDEAS

Investory

Investory is a Singapore-based boutique independent equity research firm founded in January 2017 with a primary focus on consumption themes across Asia-Pacific.

We aim to generate investible ideas based on consumption trends and outlook. We screen our ideas on several parameters - product potential, long-term growth and management commitment being the most critical.  We follow a fundamental analysis approach in our stock selection process and are not restricted by market cap.

We aspire to grow into a leading source of unbiased research, free of conflict of interest, for investors yearning for independent and disciplined analysis. 

We also undertake bespoke research mandates to support our Institutional clients’ investment needs.

Our team comprises of professionals with extensive experience in the Asian equity markets, in areas ranging from research, servicing institutional clients and investment management.

<ul>
<li>
<a href="https://www.smartkarma.com/entities/luckin-coffee-inc" target="_blank" data-smartkarma-citation="entities:28046:1" rel="noopener">Luckin Coffee (LKNCY US)</a> reported another quarter of strong growth and is now China’s leading coffee chain by a wide margin with operating margins outperforming even premium rival <a href="https://www.smartkarma.com/entities/starbucks-corp" target="_blank" data-smartkarma-citation="entities:7641:1" rel="noopener">Starbucks Corp(SBUX US)</a> .</li>
<li>Luckin’s disruptive model—centered on affordability, convenience, and accessibility—and the competition that followed has fueled a 2.5X rise in China’s per capita coffee consumption over the past five years.</li>
<li>​Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer preference for convenience and digital experiences.</li>
</ul>



Luckin Coffee (LKNCY US) reported another quarter of strong growth and is now China’s leading coffee chain by a wide margin with operating margins outperforming even premium rival Starbucks Corp(SBUX US) .
Luckin’s disruptive model—centered on affordability, convenience, and accessibility—and the competition that followed has fueled a 2.5X rise in China’s per capita coffee consumption over the past five years.
​Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer preference for convenience and digital experiences.


Luckin Coffee: Acing It in China's Racing Coffee Market

<ul>
<li>Luckin reported C3Q24 revenue 9.8%/6.3% higher than our estimate/consensus, and non-GAAP operating profit 26%/28% higher than our estimate/consensus. </li>
<li>In the short term, Luckin managed to raise price without trigger consumer departure, and may do so for a few more quarters. </li>
<li>We put the TP and the rating under review pending further assessment of US market entry.</li>
</ul>


Luckin reported C3Q24 revenue 9.8%/6.3% higher than our estimate/consensus, and non-GAAP operating profit 26%/28% higher than our estimate/consensus. 
In the short term, Luckin managed to raise price without trigger consumer departure, and may do so for a few more quarters. 
We put the TP and the rating under review pending further assessment of US market entry.


[Luckin Coffee Inc. (LKNCY US, UR) Earnings Review]: Operational Turnaround, Now All Eyes on Growth

China

Luckin Coffee Inc. provides non-alcoholic beverages. The Company offers various types of coffee. Luckin Coffee serves customers in China.

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Luckin Coffee (LKNCY US)

[Luckin (LKNCY US, BUY, TP US$40) Rating Change]: Optimum Cup Sales and Price Mix Hit the Sweet Spot

Luckin's strong revenue and profit performance in C4Q24 driven by SSSG recovery and cost savings leads to upgrade to BUY rating with TP of US$40.

Blue Lotus Research Institute

MIXUE Group (2097 HK) IPO: Reasonably Attractive Pricing

MIXUE's IPO is attractive, priced below China's peer average with a potential for at least 20-30% upside post-IPO. Opportunity to participate in...

Osbert Tang, CFA

MIXUE Group IPO: The Leading Player that Justifies a Premium

Mixue has a 32.7% share in the freshly-made drinks market and the highest profit, poised for growth in low-tier cities with the franchise model....

Osbert Tang, CFA

Luckin Coffee: Acing It in China's Racing Coffee Market

Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer...

Devi Subhakesan

[Luckin Coffee Inc. (LKNCY US, UR) Earnings Review]: Operational Turnaround, Now All Eyes on Growth

Luckin exceeds revenue and profit estimates in Q3, successfully raises prices without losing customers, future plans for US market entry under...

Blue Lotus Research Institute

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

[Luckin (LKNCY US, BUY, TP US$40) Rating Change]: Optimum Cup Sales and Price Mix Hit the Sweet Spot

​Luckin's strong revenue and profit performance in C4Q24 driven by SSSG recovery and cost savings leads to upgrade to BUY rating with TP of US$40.

Blue Lotus Research Institute

MIXUE Group (2097 HK) IPO: Reasonably Attractive Pricing

​MIXUE's IPO is attractive, priced below China's peer average with a potential for at least 20-30% upside post-IPO. Opportunity to participate in...

Osbert Tang, CFA

MIXUE Group IPO: The Leading Player that Justifies a Premium

​Mixue has a 32.7% share in the freshly-made drinks market and the highest profit, poised for growth in low-tier cities with the franchise model....

Osbert Tang, CFA

Luckin Coffee: Acing It in China's Racing Coffee Market

​Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer...

Devi Subhakesan

[Luckin Coffee Inc. (LKNCY US, UR) Earnings Review]: Operational Turnaround, Now All Eyes on Growth

​Luckin exceeds revenue and profit estimates in Q3, successfully raises prices without losing customers, future plans for US market entry under...

Blue Lotus Research Institute

Luckin's strong revenue and profit performance in C4Q24 driven by SSSG recovery and cost savings leads to upgrade to BUY rating with TP of US$40.

MIXUE's IPO is attractive, priced below China's peer average with a potential for at least 20-30% upside post-IPO. Opportunity to participate in...

Mixue has a 32.7% share in the freshly-made drinks market and the highest profit, poised for growth in low-tier cities with the franchise model....

Luckin Coffee's strong growth, high operating margins, dominant market share contrasts with Starbucks, which is now adapting to changing customer...

Luckin exceeds revenue and profit estimates in Q3, successfully raises prices without losing customers, future plans for US market entry under...