China Galaxy Securities has released a research report stating that, as stock prices have already begun to reflect the anticipated reduction in subsidies, leading companies' share prices are currently in the process of bottoming out on the left side. MIXUE GROUP (ASX: 02097) and GUMING (ASX: 01364) have seen their FY26 P/E ratios adjust to around 15X, prompting a recommendation to monitor for fundamental inflection points or catalysts among these market leaders.
Key Company Analysis
The report highlights two specific companies. First, GUMING (ASX: 01364) is noted for launching new yogurt products in late June and planning to introduce hot food and bakery items in August, both of which are expected to contribute incremental growth. The company also holds a first-mover advantage in the coffee segment, positioning it well for competitive dynamics in the latter half of the year. Second, MIXUE GROUP (ASX: 02097) is identified as having a relatively lower proportion of its business from food delivery. Consequently, the high base effect and duration of impact from subsidies are expected to be shorter and less pronounced for this company.
Core Thesis and Market Context
The report's central argument is based on the observation that share prices in the beverage sector have already priced in the expected pullback in food delivery platform subsidies. Citing financial reports and earnings calls from major platforms, the slowdown in subsidies from April to May is seen as an established trend. This is projected to lead to a widespread decline in industry-wide same-store sales growth from May through September. However, the analyst view is that the market has already adjusted for this, and investor focus should now shift from concerns over subsidy reductions to identifying upcoming fundamental catalysts.
Critical Factors for Monitoring
Two primary areas are highlighted for close attention. The first is the recovery pace of in-store dining. The shift to online delivery, driven by the subsidy war, negatively impacted store unit economics due to lower effective take rates on delivery orders. The ability of brands to strategically recapture in-store sales share will be crucial for determining franchisee profitability and, by extension, the potential for store network expansion. The second area involves new product categories and competition in coffee. The report estimates the total addressable market for the beverage sector and notes that major brands are expected to launch a new round of subsidies in the coffee category during the second half of the year. Leveraging their asymmetric competitive advantages, these beverage chains' subsidies could generate incremental coffee sales volume and capture market share from traditional second-tier coffee brands. Additionally, expansion into categories like yogurt and ice cream is expected to provide some support for same-store growth.
Associated Risks
The report concludes by outlining several risk factors, including intensifying industry competition, potential macroeconomic downturns, and policy-related uncertainties.
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