Main points of investment

2023H1's revenue grew steadily, and its net profit turned into a profit. 2023H1 achieved an income of 2.594 billion yuan, an increase of 27% over the same period last year, and a net profit of 66.1 million yuan, turning a loss into a profit. The increase in income is mainly due to the steady expansion of the number of stores and a marked rise in orders along with the recovery in consumption since the beginning of the year. Profit turnaround is mainly due to the optimization of staff costs, rental costs and other items.

The efforts to reduce the cost have finally achieved results, and the profitability has increased.

In terms of gross profit margin, 2023H1 achieved a gross profit margin of 68.2%, almost the same as the same period last year. In terms of expense rate, the company's fine management ability has improved significantly. The employee cost / actual rental cost / other discount / amortization ratio of 2023H1 is 26.4% 15.3% and 5.5% respectively, which is improved by 8/3/1pcts compared with the same period last year, which we believe is mainly due to the scale effect after the increase in order volume. In terms of net interest rate, 2023H1 achieved a net interest rate of 2.5%, turning a loss into a profit.

Expand the store to enter a new stage of two-wheel drive, improve member loyalty and further optimize store efficiency 1) Store end: the company has 1194 stores, which conforms to the general trend of the industry and is expected to accelerate store expansion. 2023H1 Company has opened 126 net stores to achieve stable expansion of stores. In the future, the company will comply with the general trend of the industry to enter the two-wheel drive stage, on the one hand, continue to adhere to the direct operation mode to complete the encryption of stores in high-line cities, and according to the company announcement, it is expected to open 500 new direct-operation stores every year in the next 2-3 years; on the one hand, to join the mode of layout of low-line cities, increase brand exposure, and further enhance market share.

2) Shop efficiency: pay attention to product innovation and product quality, and improve member loyalty. 2023H1 has cooperated with the brand IP many times to launch time-limited activities and joint new products to increase the stickiness and activity of its members. During the 2023H1 period, the company increased about 9.8 million registered members, of which active members increased by about 1.32 million.

Profit forecast and valuation

Nai Xue is a high-end tea beverage leader with more than a thousand stores and has become a high-end tea head brand.

2023H1 store model has been greatly improved, in line with the general trend of consumer recovery, we are optimistic that the company will continue to accelerate store expansion and consolidate its market position. We estimate that the company's homing net profit in 2023-2025 is RMB 223,000,000, respectively, and the year-on-year growth rate in 2024-2025 is 122% and 49% respectively, corresponding to the current market capitalization PE of 34-15-10. In view of the high growth of the tea track and the gradual emergence of the company's brand advantages, we maintain the "overweight" rating.

Risk tips: fierce competition in the new tea industry, food safety, shop opening speed is not up to expectations, and so on.