Future Plans for Growth:

  • Expansion of its teahouse network both in China and internationally. This expansion will follow a "managed franchise model" to enable rapid yet quality-assured growth. Domestically, the company will implement a tiered, city-based strategy to strengthen its footprint across different urban markets. Internationally, it will focus on key Southeast Asian countries, with the goal of establishing CHAGEE as a global premium tea brand. For this, CHAGEE has allocated 40% of its IPO proceeds (US$144.8 million).
  • Brand Building and Marketing. The company aims to promote a healthy lifestyle and deepen cultural connections through its branding efforts. These initiatives include modernizing the tea-drinking experience, enhancing customer loyalty, and embedding sustainability and corporate responsibility into its brand identity. CHAGEE has earmarked 20% of the proceeds (US$72.4 million) will be dedicated for this segment.
  • Technology Investment for Automation and Digitalization. Another 15% (US$54.3 million) will be invested in technology to support automation, standardization, and digitalization. This includes upgrading automated tea-making machines, optimizing the supply chain, and improving store operations through digital tools. These advancements will help ensure consistent product quality, greater operational efficiency, and data-driven decision-making.
  • Product Innovation and Supply Chain Development. Another 15% of the proceeds (US$54.3 million) will be allocated to product innovation and supply chain development. Of this, 10% (US$36.2 million) will go toward R&D to keep product offerings fresh and competitive, while 5% (US$18.1 million) will be used to strengthen the overseas supply chain, including expanding warehouse networks and logistics to reduce costs and enhance resilience.

M+ Fair Value Price Range

We assign a fair value price range of ~US$41-55 for CHAGEE. Based on CHAGEE’s current P/E range of 13.85x to 14.92x and benchmarked against comparable premium F&B peers like MIXUE and GUMING, which are trading around average P/E of 23.5x-27.0x, the stock appears undervalued. Notably, CHAGEE’s profit margins are slightly superior to its peers, further supporting a valuation re-rating. Even under a conservative no-growth scenario, the implied fair value suggests an upside potential of 57.5%-94.9% to ~US$41-55, highlighting a compelling opportunity for multiple expansion as the company continues to scale its operations and strengthen its brand.

Assuming a modest 1% revenue growth per quarter and maintaining a 20% net margin, the upside potential expands further to between 71.3%-112.0% to US$44-60. This scenario underscores how even moderate top-line growth—when paired with healthy margins—can significantly enhance CHAGEE’s earnings power and justify a higher valuation multiple in line with its premium peers.