The phrase "tea at three o'clock" opened the curtain of workers' afternoon tea. After years of "market education" by successive newcomers, milk tea has naturally entered the vision of young people, and judging from the rapid development of China's new tea market in the past two years, consumers' enthusiasm for milk tea is indeed beyond imagination. The new tea race track has now become a new generation of "wealth-making machine".

On June 6, Nai Xue's tea passed the hearing of the Hong Kong Stock Exchange and was only one step away from listing. The dust of "the first share of new tea" has finally settled, but Naixue's capital journey does not seem to be over yet.

Nai Xue no longer bleed, listed for no money?

As the industry's first "bell ringer", Nai Xue's tea founder Peng Xin seems to care little about financing, saying: "We are not listed because of lack of money. The two billion yuan raised last year has not been used. We have always wanted to be able to build a global brand, so that we can operate longer, be more open and transparent, and become a company that requires more of ourselves."

From the financial perspective, the revenue generated by Nai Xue Tea Restaurant increased from 909.5 million yuan in 2018 to 2.2915 billion yuan in 2019, and further to 2.8709 billion yuan in 2020. Behind the seemingly rapid growth, the growth rate is quietly slowing down.

At the same time, after three years of losses, Naxue finally made its first profit in fiscal year 2020. According to the updated prospectus, Naixue's tea-adjusted net loss (measured by non-IFRS) decreased significantly from 56.6 million yuan in 2018 to 11.7 million yuan in 2019, further reversing to an adjusted net profit (measured by non-IFRS) of 16.6 million yuan in 2020, and an annual loss of more than 200 million yuan without adjustment.

It is worth noting that the high price of Nai Xue, which is stable at about 43 yuan, far exceeds the average passenger order level of 35 yuan in the whole milk tea industry, but it did not turn from deficit to profit until 2020, and only achieved a net profit of 16.6 million yuan for the whole year, which obviously does not satisfy the capital market.

Reviewing the development history of Nai Xue, in 2014, Nai Xue was founded, mainly in the form of "tea + soft European bag". The target users are young women between 20 and 35 years old, with the slogan: the bottom of tea is changed every 4 hours, and the soft European bag is not available overnight. After opening its first store in Shenzhen in 2015, Nai Xue moved to the whole country in Guangdong in the past 17 years, with 70% of them concentrated in first-tier and new first-tier cities, quickly building an online celebrity brand loved by young people, and then going abroad again to open its stores to the Japanese market.

There is no doubt that Nai Xue is lucky to get the push of capital when scale expansion is most needed. The number of tea shops in the company increased from about 44 in 2017 to about 491 in 2020, and further increased to 556 as of the last practicable date.

Behind the boundless scenery, Nai Xue's tea may face the embarrassing situation of "applause but not popularity".

High operating costs, break-even or difficult to maintain

In recent years, the rise of high-end tea brands such as Xi Tea and Nai Xue is essentially from product to brand building, through healthier ingredients (fresh fruit tea), better taste, appearance, scene experience, etc., give consumers a richer tea consumption experience and emotional satisfaction, build their brands through social media, social marketing, and then achieve scale replication with the help of capital strength, so as to get out of the race track.

After understanding the unlimited pursuit of high quality in today's consumption trend, it is not difficult to understand the root cause of the high operating cost of Nai Xue's tea. Zhitong Financial APP learned that the prospectus shows that Naixue's tea costs are mainly composed of raw materials, staff costs and rent. In 2018, 2019 and 2020, the company's material costs accounted for 35.3%, 36.5% and 37.9% respectively, while staff costs accounted for 31.3%, 30.0% and 30.1% respectively, and rental expenses and property management costs were basically more than 15%.

In other words, the raw material cost of a cup of Nai Xue tea accounts for 37.9% of the total cost, and the labor cost accounts for 30.1%, which leaves little profit space for the company to tap. At the same time, as a tea shop, there are some hidden expenses: the rental cost of the store, the research and development of products, marketing and promotion activities after product launch, and the establishment and maintenance of multi-dimensional operation channels.

However, in the high operating costs at the same time, the efficiency of Naxue is not satisfactory, its core is reflected in the single-store revenue and orders began to decline. In response, Nai Xue bluntly said that with the increase in the number of stores, the store density in the core cities has gradually increased, so the average number of orders has been pulled down-the average daily orders in 2018, 2019 and 2020 are 716,642 and 470. Single-store turnover has declined, but costs have remained the same. The company's same-store profit margin has plummeted from 24.9 per cent in 2018 to 13.5 per cent in 2020, and long-term profitability remains to be tested.

At the same time, Nai Xue mentioned that most of the company's money is used to invest in capital expenditure and related costs arising from the opening of new tea shops. From 2018 to 2020, the company's capital expenditure was mainly related to the development activities of tea shops, which were about 209 million yuan, 290 million yuan and 243 million yuan respectively.

Combined with Nai Xue's future "Thousand Store Plan", only by achieving a virtuous circle of "expansion-infiltration-innovation" can the company always maintain a leading position in the industry. In this process, a large amount of capital is still needed as a pillar, so it is very likely that listing in Hong Kong is not the end point of corporate financing.

In addition, the product is the primary connection point for the brand to reach consumers, but for the tea industry, the reproduction cost is very low, and there is no absolute commercial barrier. As early as many years ago, the homogenization and imitation of tea products continued to "war of words". In the end, the core of the tea industry was still competing over how to expand the effective scale and standardize the process to maintain quality. strengthen the control of the supply chain and adapt to consumer preferences of innovation, these are the taste of "money".

From this point of view, the shift from long-term losses to profits before listing is undoubtedly a positive signal from Nai Xue to the market. Even if the company achieves short-term profits in 2020, it is still unknown whether it will be able to maintain high growth and long-term profits. For now, the turnaround in the first year is not convincing to future growth, and long-term profit improvement and growth is the hard truth of "having the last laugh".

When the inner roll hits, where does Nai Xue go?

From a market point of view, there are many domestic tea players. The investment of single milk tea shop is relatively small, the investment of ordinary joining brand single store generally ranges from 15 to 300000, and the industry entry threshold is relatively low. Data show that by the end of 2019, the number of new tea stores in China is expected to be about 500000, and the overall players involved are relatively large.

It is noteworthy that high-end tea stores began to explore new stores with reduced area under the background of the original super-large store model, such as Xicha original standard store 120,200ping, Xi Tea go store (area 50-80sqm) in encryption, and Naxue launched Pro store model (area from 200400sqm to 80200sqm), to some extent, it is all looking for a balance between store marketing, ping ping efficiency and cost.?.

At this time, Naxue said in its prospectus that it plans to open about 300 and 350 tea shops in first-tier cities and new first-tier cities respectively in 2021 and 2022, of which about 70 per cent will be planned to be PRO tea shops. The company expects to open at least as many tea shops in Naxue in 2023 as it plans to open in 2022.

From this, we can also see that Nai Xue's tea will be in a period of growth and expansion for a long time now and in the future, and the business model of its PRO store will continue to be verified after upgrade. at the same time, fierce market competition will affect the pace of opening stores to a certain extent. Nai Xue also said bluntly in the prospectus that it depends on market conditions.

According to the current consensus in the industry, it may be difficult for the new tea circuit to have a monopoly, but the enthusiasm of consumers has spawned the process of ecological innovation and standardization in the industry, which will only push up the cost of entering the industry and further accelerate the volume of the track.

With Nai Xue about to ring the bell, the competition in the tea industry intensified, and began to enter the competition stage of the stock market. The more lively and anxious it is, the more anxious it is. In this new tea race, which is not as hot as it used to be, it is still unknown that Naisue is the first to pull the curtain of the "listing tide." the tuyere comes and goes, and who will finally get the number of the winning game? it's still unknown.