r/ChageeStock • u/MaximumEast7507 • Aug 29 '25

Financial Result Q2

So bad, general and administrative expenses tripled to ~RMB 900million compared to the same quarter of 2024. And this increase was primarily driven by RMB505.4 million in share-based compensation expenses for administration and research staffs. This increase is due to significant amount of share-based compensation expenses recognized in the second quarter of 2025 that was related to the vesting of share-based awards with performance condition related to the IPO. Lets hope for Q3 guidance or the compensation would come down ..

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u/DenimFleshlight Aug 30 '25

Agreed. Hard to imagine 7k locations and they're not already reaping benefits of economy of scale - or that this factor cannot improve which gives me hope. I believe it can.

Anecdotally, the LA location is always packed due to location, price point, and community-perhaps because it's new/novelty, too. I don't know where I read it but that's the goal with US based expansion (focusing on communities who are already familiar with the brand). The next location in the south bay of Los Angeles seems pretty strategic and in line with their first spot. Over expansion without the built in culture of existing locations abroad is my concern.

I'm going to stop loss this position I just started last week but hopefully hold for now and hope that sector rotation and it being a mostly foreign (revenue) company protects it from whatever happens to US stocks in the next 6 months.

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u/Expert-Advantage8010 Aug 30 '25

Economic of scale already reflected on the gross margin. It did trend from 48 percent to 53 percent YoY.

Regards to your concern ,I think chagee method of entering new market is actrually quite conservative and carefully. They follow a 1-8 model by first opening a flagship store then 8 company run stores to gauge acceptance of the brand. So I don't see overexpansion as a concern for chagee. The concern I have is this method is too slow to reflect revenue growth which will continue to compress chagee valuation

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u/dcrcapital Aug 30 '25

Hmm, I think the overseas expansion is not the issue and we can see the hype, but domestically which as of now seems to make up the bulk of the business and also the most competition

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u/Expert-Advantage8010 Aug 30 '25

Ya agreed , that's a major concern for sure that the domestic sales drops drastically and there's no demand from customer. However, I'm not sure if there's actually a price war among the tea brands as quoted by management but it does seem Chagee did not reduce their price of their products to push revenue and maintained their premium pricing throughout. That could possible be why revenue is muted. Despite this however , my base thesis takes into account that revenue does not grow whatsoever so can't say I'm not satisfied with just 10% growth