Author: Big G
Original: U.S.-Hong Kong Stock Observatory
On January 2, 2024, Gu Ming Holdings*** hereinafter referred to as "Gu Ming") submitted a prospectus to the Hong Kong Stock Exchange to be listed on the main board of the Hong Kong Stock Exchange, with Goldman Sachs and UBS Group as joint sponsors. Founded in 2010, Gu Ming is a Chinese ready-made beverage company, mainly selling fruit tea, milk tea, coffee and other beverages.
Company Overview
Gu Ming is an industry-leading, fast-growing Chinese freshly made beverage company, committed to providing consumers with fresh, delicious, consistent, and people-friendly high-quality products. The founder of Guming is Wang Yunan, who has a deep empathy for individual merchants and is also deeply aware of the general demands of franchisees. Wang Yunan's dedication to product strength, the continuous upgrading of platform capabilities and the belief in long-term win-win cooperation with franchisee partners have formed the guiding principles for the development and operation of Gu Ming.
By the end of 2023, the number of Gu Ming stores has exceeded 9,000, covering about 200 cities at the city level in China. Among them, about 79% of the stores are located in second-tier cities and below, and 38% of the stores are located in towns and villages far from the city center. This proportion is the highest among the top five popular freshly made tea shop brands. In 2023, Gu Ming stores will sell 1.2 billion cups of ready-made beverages, and the GMV (merchandise sales) will exceed 19.2 billion yuan. According to the CIC reportIn terms of merchandise sales (GMV) and number of stores in 2023, Gu Ming is the largest mass freshly made tea shop brand in China (10 yuan-20 yuan** belt), and it is also the second largest freshly made tea shop brand in China under the whole ** belt. In terms of the number of stores by the end of 2023, Gu Ming is one of the top five ready-made beverage brands in the world.
Business introduction
Gu Ming's business is mainly divided into three parts:Commodity and equipment sales business, franchise management service business and directly operated store sales. Commodity and equipment sales business refers to the sale of goods and equipment by Gu Ming to franchisees, including raw materials, packaging materials, beverage machines, beverage cups, etc. Franchise management service business refers to the franchise management services provided by Guming to franchisees, including brand authorization, training, quality control, marketing, technical support, etc. The sales of directly operated stores are mainly the revenue from direct sales, and as of September 30, 2023, the company has a total of 6 directly operated stores.
Gu Ming's revenue mainly comes from the sales of goods and equipment, accounting for 80% of the revenue in the first three quarters of 20234%。The franchise management services business accounted for 195%。Gu Ming's franchise model has enabled it to rapidly expand its store network while reducing capital expenditures and operating costs. Gu Ming's franchisee stores maintained strong profitability. According to the data, in 2023, the single-store operating profit of Guming franchisees will reach 3760,000 yuan, with a single store operating profit margin of 202%, according to the CIC report, far exceeding the estimated single-store operating margin of 10% and 15% in China's mass freshly made tea shop market during the same period.
Gu Ming's products are mainly divided into three categories: fruit tea drinks, milk tea drinks, coffee and others. Fruit tea drinks are the core product of Gu Ming, accounting for 51% of the total number of cups sold in the first three quarters of 2023. Gu Ming's fruit tea drinks use fresh fruits as the main raw material, and ensure freshness and quality through cold chain distribution and short shelf life. The "Super A Cheese Grape" of Gu Ming's fruit tea series is one of Gu Ming's best-selling drinks, with a total sales volume of more than 1300 million cups. Milk tea drinks are another important product of Gu Ming, accounting for 38% of the total number of cups sold in the first three quarters of 2023. Gu Ming's milk tea drink uses high-quality milk source and tea as the main raw materials, and ensures taste and consistency through precise recipes and standardized production processes. The "Light Milk Tea" of Gu Ming's milk tea series is Gu Ming's innovative product that appeals to health-conscious consumers with a low-sugar and low-fat formula. Coffee and other ancillary products are complementary products to Gu Ming, accounting for 11% of the total cups sold in the first three quarters of 2023. Gu Ming's coffee and other products are made of coffee beans, milk sources, whipped cream, etc., and the quality and speed are guaranteed by efficient beverage machines and professional baristas. The "latte" of Gu Ming's coffee and other products is a classic product of Gu Ming, which has won the love of consumers with its rich coffee aroma and dense milk foam.
Financial analysis
Gu Ming's financial performance shows its ability to grow rapidly and make good profits. In the first three quarters of 2023, Gu Ming's revenue was 557.1 billion yuan, a year-on-year increase of 339%。The increase in revenue was mainly due to the increase in the number of stores and the increase in same-store sales. In the first three quarters of 2023, Gu Ming's adjusted profit (non-IFRS measure) was 104.5 billion yuan, a year-on-year increase of 732%。Gu Ming's adjusted margin was 187%, compared to 14 for the whole of 20222% compared to an increase. The increase in the profit margin of Gu Ming was mainly due to the realization of scale effect and the optimization of cost control. In the first three quarters of 2023, Gu Ming's gross profit margin was 310%, compared to 27 for the whole of 20228% compared to that. The increase in gross profit margin was mainly due to the reduction in raw material costs and the increase in the proportion of revenue from the sales of goods and equipment.
In comparison, in the first three quarters of 2023, the gross profit margin of Mixue Bingcheng will reach 297% and a profit margin of 159%。The gross profit margin and net profit margin of Gu Ming and Mixue Bingcheng are basically the same, showing excellent profitability.
79% of Gu Ming's stores are located in second-tier cities and below, ** with 10 yuan to 18 yuan, despite the layout of the sinking market, Gu Ming still shows good profitability, showing the advantages of the sinking strategy.
Competitive advantage
The competitive advantages of Gu Ming are mainly reflected in the following aspects:
Product power:Gu Ming's products are characterized by freshness, deliciousness, health and diversity, which meet consumers' demand for high-quality freshly made beverages. Gu Ming's product development team continues to innovate and has launched a number of popular products, such as "Super A Cheese Grape", "Light Milk Tea" and so on. Gu Ming's product research and development capabilities are also reflected in its grasp of seasonality and regionality, such as the launch of the "Smoothie Series" adapted to summer, the "Hot Drink Series" adapted to winter, and the "Localized Series" adapted to different regions.
Platform Force:Gu Ming's platform power refers to its ability in chain management, brand building, technical support, etc. Gu Ming's first-chain management ability is reflected in its unified procurement of raw materials, packaging materials, beverage machinery, etc., quality control, cold chain distribution, etc. Gu Ming's brand building capabilities are reflected in its unified planning, implementation and evaluation of brand image, marketing and consumer interaction. Gu Ming's technical support capabilities are reflected in its unified standards, training, and supervision of store operations, data analysis, risk prevention and control, etc.
CollaborationGu Ming's cooperation refers to its good relationship with franchisees, merchants, consumers, etc. Based on the concept of long-term win-win, the cooperation between Guming and franchisees provides all-round support for franchisees, including site selection, decoration, training, materials, marketing, etc., and also requires franchisees to comply with Guming's brand standards and service specifications. Based on the principle of mutual trust and mutual benefit, the cooperation between Guming and high-quality merchants has established a stable cooperative relationship to ensure the quality of raw materials and the best products. The cooperation between Gu Ming and consumers is based on an interactive and reciprocal model, and Gu Ming maintains communication and interaction with consumers through social networking**, loyalty programs, online and offline activities, etc., increasing consumer loyalty and satisfaction.
Industry outlook
China's ready-made tea shop market has seen tremendous growth and is expected to continue to grow rapidly in the future. According to the CIC report, the GMV of China's ready-made tea shop market increased from RMB55.6 billion in 2017 to RMB168 billion in 2022The CAGR is 248%。According to the CIC report, the GMV of freshly made tea shops in China is expected to further increase to RMB451.3 billion by 2027, growing at a CAGR of 21.2%.9%。
Valuation
At present, the ready-made tea beverage track has entered a mature period, the growth is gradually slowing down, and the competition is becoming increasingly fierce. However, Naixue's unsatisfactory performance after listing poured cold water on the listing. The issue price of Nayuki at the time of listing was 198 Hong Kong dollars, currently only more than 3 Hong Kong dollars, a decline of 85%, and a price-to-sales ratio of 1 times. Compared with Naixue's valuation, the listing valuation of Gu Ming will be 69700 million RMB. This is compared to Nayuki 4The valuation at the time of listing at 3 times the price-to-sales ratio was obviously low, but it is a good result to be listed in today's ready-made tea shops.