Chagee Holdings (CHA): Searching for the next growth engine after China momentum peaked; overseas execution/new products key to watch; initiate at Neutral

研报英文原文证据摘录

Chagee Holdings (CHA): Searching for the next growth engine after China momentum peaked; overseas execution/new products key to watch; initiate at Neutral

Goldman Sachs Chagee Holdings (CHA)

PM Summary

Chagee has a differentiated positioning in China’s freshly made tea market, with a focus

on the tea segment, premium branding, and strength and investment in marketing.

These factors, along with the popularity upcycle of light milk tea, contributed to

Chagee’s strong store productivity (>Rmb500k monthly GMV reached in China in 2024,

implying close to 1k cups sold per day, compared to around 700/400 for Mixue/Guming)

and fast store expansion (growing from fewer than 500 stores in 2021 to >6000 stores in

2024). That said, since 4Q24, Chagee has entered a store productivity downcycle, due to

a moderating brand and product upcycle, market competition, and market share losses

during the delivery subsidy period, in which Chagee refrained from participating to

protect its brand positioning.

Following a meaningful share price drop (nearly 60% in 2025 vs. S&P 500’s positive

return of 16%), which reflected store productivity and earnings deterioration amid the

fading brand upcycle, Chagee’s share price rebounded by 15% since May 29 vs. flat S&P

500, after better 1Q26 results vs. market expectations, supported by per-store GMV

improvement (which we estimate provided an MSD% boost from the Qwen subsidy) and

cost optimization. The company also announced a US$150mn share buyback (6-7% of

market cap) during 1Q26 results. Looking ahead, we expect an easier SSSG base and the

resumption of new product launches (vs. muted new product launches in 2Q-4Q25),

along with cost control, to limit earnings downside. However, we see limited room for