A report from CICC indicates that, considering GUMING's (01364) store expansion pace has exceeded expectations, it has raised its adjusted net profit forecasts for 2025/2026 by 9%/19% to 2.5/3.2 billion yuan, and introduced a 2027 profit forecast of 3.9 billion yuan. The company currently trades at 20/16 times 2026/2027 P/E; the target price has been raised by 29% to HK$36, corresponding to 24/19 times 2026/2027 P/E and representing 22% upside potential, with an Outperform rating maintained. CICC's main views are as follows.
The bank forecasts a 64% year-on-year increase in core profit for 2025. It is estimated that the company's 2025 revenue will grow by 46%, with adjusted core net profit (excluding fair value and withholding tax impacts) increasing 64% to 2.52 billion yuan. This includes second-half 2025 revenue growth of 50% and adjusted core net profit growth of 78%, surpassing market expectations, primarily due to better-than-expected store expansion and gross margin improvement.
Same-store sales are expected to maintain strong growth in the second half of 2025, with franchisees' net receipt rates remaining controllable despite delivery subsidies. Benefiting from subsidies on delivery platforms, increased contribution from coffee, and new products like dessert bowls, the bank anticipates high growth in same-store sales for H2 2025, with steady growth continuing in Q4 2025 after the tapering of delivery subsidies. To protect franchisees' net receipt rates and profit margins, the company increased prices on delivery platforms starting in July, keeping franchisees' net receipt rates stable compared to 2024, with manageable profit margins.
Following the resolution of renovation bottlenecks in the second half of the year, store expansion is accelerating. The bank expects a net increase of nearly 3,500 stores for the full year, bringing the total number beyond 13,000. In 2025, the company is intensifying store presence in its dominant markets, with same-store sales maintaining a strong performance. Store expansion and same-store sales in Shandong have returned to a normal trajectory, with breakthroughs also made in Hebei and Shaanxi.
Benefiting from economies of scale resulting from supply chain efficiency improvements, the bank forecasts a year-on-year increase in the company's gross margin for H2 2025, alongside a decrease in selling and administrative expense ratios, leading to significant profit growth in H2 2025. The core net profit margin for 2025 is expected to be better than in 2023, although non-recurring factors such as advance dividend tax payments and exchange rate losses may cause some volatility in reported profits.
The focus for 2026 will be on dine-in services and brand upgrades, with further room for same-store sales improvement to expand the leading advantage. Company estimates indicate that the pure incremental contribution from delivery subsidies in 2025 was below 10%, suggesting the impact of subsidy tapering on same-store sales in 2026 will be limited. In 2026, the company will extend operating hours to 7:30 AM, with a focus on increasing the proportion of dine-in sales through coffee and baked goods. Considering that coffee only began making a significant contribution after October 2025, along with flexible and effective new product launches, the bank expects same-store revenue in 2026 to achieve 0-5% growth.
In 2026, the company will actively promote upgrades to its sixth-generation store image, focusing on brand enhancement to give GUMING a clearer brand identity and elevate its perceived brand value. Having weathered public opinion impacts in 2024 and delivery subsidy effects in 2025, the strong execution by the company's team and franchisees has demonstrated considerable resilience. The bank believes the company has substantial long-term potential and expects it to maintain the rapid store expansion pace of 2025 into 2026, further consolidating its leading market position.
Risks include intense competition in China's freshly made tea beverage market, potential slowdown in store expansion, and a decline in per-store efficiency.
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