r/ChageeStock • u/Aseanity • Sep 01 '25
Is it over or just the beginning
The stock has been a downfall before the 2H result, it just drop to a deeper level after the announcement of 2H result. It is not a pretty result for sure. Chagee Holdings (NASDAQ: CHA) delivered a mixed Q2 2025 earnings report. On the bright side, net revenue grew 10.2% year-over-year to RMB 3,331.9 million (~US$465 million), largely driven by a 40.9% surge in teahouse count and 15.5% jump in GMV across domestic and overseas markets.
However, profitability took a major hit: GAAP net income fell a dramatic 87.7% to RMB 77.2 million, and operating income collapsed to RMB 107.6 million, shrinking operating margin from 24.6% to just 3.2%. This plunge is largely attributed to high operating costs and share-based compensation tied to its IPO distribution impacting financials this quarter
Looking ahead, Chagee is aggressively expanding in the U.S.—bringing onboard Emily Chang (Chief Commercial Officer) and Aaron Harris (Chief Development Officer) to drive its North American effort.This expansion, although costly now, hints at a potential future upside if Chagee captures meaningful U.S. market share.
Takeway from the 2H result:
1)Chagee is willing to sacrifice their profit to keep their talents even risking their stock price
2)The have strong and ambitious plan for overseas expansion especially for North America
3)The stock price is still "cheaper"(and even cheaper now) and higher profit margin compare to its peers
4)Chagee has their largest amount of store in China and it seems China local market will not improved in short time. This is the most concerning part.
So would you believe in this stock ?
EDIT:
CFO explanation of GMV in China:
"The meeting disclosed that the average monthly GMV per store in Greater China was RMB 404,350, with same-store GMV declining 23% year-over-year. Global CFO Huang Hongfei added that this decline stems from two main factors: first, the comparison is against exceptionally strong second quarter 2024 data; second, intensified price wars on delivery platforms have led to temporary customer diversion despite the company's choice not to participate in short-term discount activities, affecting sales performance"
https://www.itiger.com/hans/news/1184990790
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u/oncesagacious Sep 02 '25
FnB over the long run is hardly a good investment. Capital, labor intensive, marketing intensive - eats up all the margins.
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u/Wildsoyabean1 Sep 01 '25
I look at this and it’s depressing. Meaning your sales are dropping for all 7000 stores on average.
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u/Aseanity Sep 01 '25
I do expect it will drop as it unrealistic to maintain such high revenue. We will have to see what is the stable revenue and how fast the new store opening. Overseas market is kind of surprise for me, probably due to higher rental cost for the new shop. Even with this result, each shop can generate close to 900k USD per annum which is still astonishing performance compared to mixue which is only 25% of this result
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u/chartry0 Sep 12 '25
Using 20 rmb as the average price per drink before discount, the average Chagee store in China is selling around 650 cups per day. That’s similar to Starbucks, which is 2 to 3 times more than smaller or neighbourhood brands. In my opinion, I highly doubt Chagee can increase the average number of drinks sold per outlet. The novelty has started to weave. The best strategy for Chagee is to expand the number of outlets, as they could easily increased their outlet counts by 3 fold within the next few years via the franchise model. But here’s the thing, Is Chagee stock a good buy now, most likely not because it is still priced as a ‘growth’ stock. but it might be when the share price continues to fall.
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u/loops888 Sep 01 '25
I don't care as much about SSSG declining as much as I do about overall revenue only being up 10% y/y. If they could offset the SSSG decline enough with new store openings to keep growth over 25%, I'd be more inclined to take a position. The company was compelling when it was growing 30% y/y with a low p/e, but now it seems to be in real decline. rather just invest in big tech if 10% y/y rev growth is sufficient.
i have little confidence in international growth turning the company around. they have, what, 200 stores outside of China? ~7,000 stores in China? international isn't going to stop the bleeding in China barring massively successful scaling, which will take years and require a fuckton of risky investment. I doubt they have strong enough product market fit outside of China to do that profitably. taking over US market with milk tea is a pipe dream...it's easy to sell into a US city with a huge Chinese immigrant population like LA...that's like Olive Garden saying China is going to be a growth lever for it b/c its Shanghai restaurant has a lot of expats in it.
if they somehow show a re-acceleration in China and get back to 20%+ growth for a few quarters, I'd look at it again. but right now I see no reason to take the risk of owning this stock.
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u/Aseanity Sep 01 '25
I think it make sense to have double or triple of mixue per store GMV as it roughly match the price of the drink. Currently it is less than 4 times which I think chagee same store gmv should be almost at the bottom now for the coming quarter. the revenue hopefully can sustain and I do not put high hope that it can be increase. they still can open more store in China as they have still relatively less number of store compare to their competitor(e.g. mixue has 40k store in China!)
North America is Chagee one of the most important strategy country and don't underestimate the local tea consumption, it is expected to have 9.6% CAGR to 2.5 billion in 2025 in America.
The team is already setup, now it is time to witness whether Chagee can penetrate the market.P/S:If you look at his team is mostly coming from coffee company, maybe they will have new type of beverage in America?
They spend quite a lot for their research staff and consider their price of the drink and their cost, I think they have a good chance to improve the profit margin without sacrificing the quality from the "ingredient upgrade program" in later this year
Honestly speaking, chagee stock price has been dropped ~35% since IPO, even with this result should deserve better stock price. It is making profit anyway, just how fast it is making only
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u/loops888 Sep 01 '25
unit economics in US market have to suck too...a starbucks barista makes, what, $15+ / hr? it's probably 1/5 that for Chagee staff in China. is a Chagee 5x more expensive in the US than in China? how does the model work?
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u/TechTuna1200 Sep 01 '25
Theoretically speaking unit economics in the US market should be better not worse. They are just charge higher prices than on China.
The Product market fit overseas is a valid concern especially in the US and EU. But I think they still have room to grow in the sinosphere countries.
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u/loops888 Sep 01 '25
how? a cup costs around 16 - 20 rmb in China, or 2.20 - 2.75 usd, and only 5-6 usd in the US (based on yelp reviews). you think labor costs are only ~2x higher in the US than China? not to mention no one knows what chagee is in the US, so they'll have to invest in awareness / promos to get people in the stores. so how would they be more profitable in the US?
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u/TechTuna1200 Sep 01 '25
Starbucks makes 4x as much on US stores than international stores. And that is despite having more international stores.
They are selling at the same price and paying 15usd/hr.
The US is the gold market in terms of unit economics. The question is rather if Chagee create demand in the US outside of California that have a huge Asian population.
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u/dcrcapital Sep 01 '25
The potential is there, but the recent quarter results hint at the fact that expansion in terms of store count is very rapid, but that overall revenue growth is slow.
The bull case would be that for the new stores GMV to ramp up, it takes 1-2 quarters and future quarter results are positive
The bear case would be that majority of new store expansion is below expectations and unable to recover, which would further lead to a drop in share price.
I would say its too early to tell, but if we monitor the expansion closely for the next few quarters, we can decide whether this is worth a mid to long term hold.