UBS: Mixue Group (2097.HK) - Post-Results Analyst Meeting Takeaways: From Expansion to Quality
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UBS published takeaways from Mixue Group's (2097.HK) post-results analyst meeting following fiscal year 2025 results that modestly beat expectations. Revenue, gross profit, and net profit grew 35%, 30%, and 33% year-over-year, respectively, driven by rapid store expansion. Total stores reached 59,823, a net addition of 13,323 locations. However, gross margin compressed from 32.5% in FY24 to 31.1%, due to rising raw material and logistics costs alongside product mix dilution, partially offset by scale efficiencies and supply chain improvements.
Management announced leadership changes, with founder Zhang Hongfu stepping back and former CFO Zhang Yuan assuming the CEO role. The 2026 strategic pivot toward store quality has raised market concerns over decelerating expansion. UBS views this shift as a deliberate effort to improve franchisee profitability, particularly given slowing same-store sales growth since 2H25 and the expected phase-out of delivery subsidies. Overseas stores declined to 4,467, though mature ASEAN locations delivered impressive SSSG of +17.6%.
Management guided long-term gross margins down to approximately 30%, reflecting cold chain upgrades, an increasing proportion of lower-margin coffee products, and enhanced employee benefits. Capital expenditure guidance stands at RMB 1.8-2.0 billion, covering domestic expansion, Vietnamese production, and the Snow King theme park. UBS maintains a Neutral rating with a revised DCF-based target price of HK$399, down from HK$468, applying a 9.3% WACC and implying 2026E/27E P/E multiples of 22x/20x.