Initial Report: Guming Holdings (HK:01364), 130% 5-yr Upside (Tianyu TAN, CC VIP)
Tianyu TAN presents a "BUY" recommendation for Guming Holdings due to its large addressable market, supply chain, high-margin franchise model, innovation, and strong founder leadership.
1.Company Overview
Guming Holdings (“Good Me”) is one of China’s leading freshly-made tea shop chains, known for its mid-priced fruit teas, milk teas, and related beverages. The company operates an almost entirely franchise-based model – of its 9,90 stores at end-2024, only six were self-operated. This asset-light approach means Guming generates revenue mainly by selling ingredients, equipment, and collecting fees from franchisees. Guming’s footprint is nationwide with over 10,000 outlets as of early 2025, and roughly 80% of its stores are in lower-tier cities (tier-2 and below) where it has focused on building a strong regional presence. Founded in 2010 in a small town in Zhejiang, the company has grown explosively – store count jumped +35% in 2023 alone (from 6,669 in 2022 to 9,001), driving a 37% increase in system-wide sales (GMV) that year. Guming’s revenue reached RMB9.54 billion in 2024, with net profit rising even faster at 1604million (nearly 50%+ compared to the prior year). Guming listed on the Hong Kong Stock Exchange in Feb 2025, raising HK$1.72 billion, and at the current price of ~HK$18 per share its market capitalization is about HK$40 billion.
2.Industry Analysis
China’s freshly-made tea market – which includes the ubiquitous bubble tea and new-style fruit tea shops – is huge and fast-growing. Annual retail sales for freshly-made tea shops were roughly RMB330 billion in 2023 and are forecast to approach RMB 500 billion in the next few. This implies a robust ~16% CAGR (through 2028) for the, making it one of the most dynamic segments in China’s food & beverage retail.
Growth is fueled by evolving consumer tastes (e.g. innovations like cheese-foam teas, fresh fruit infusions) and increasing penetration of tea shops beyond Tier-1 cities. Notably, the mid-priced segment (drinks ~¥10–20) dominates the market in terms of volume – far outpacing the higher-end (¥20+ premium brands like HeyTea) and low-end (<¥10 budget chains like Mixue). Guming operates squarely in this mid-range segment and has established itself as the #1 player in China’s mid-priced tea chain. According to its IPO filings, Guming held about 18% share of the mid-priced market and roughly 9% of the overall freshly-made tea market by end-2023 Such scale, in what is still a fragmented industry (over 2,000 tea shop brands and no single player above 20% share), positions Guming well to benefit from the sector’s continued expansion. Industry experts see plenty of “white space” for growth, especially in underserved lower-tier cities and new product categories, supporting a long runway for Guming’s store expansion and sales potential.
3.Investment Thesis
1.Large Addressable Market & Expansion Runway
Guming already operates 10,000+ stores across China, yet its market penetration remains low outside its core regions. The company has thrived by targeting lower-tier cities and towns, where demand for modern tea drinks is burgeoning and competition is less intense. About 79% of Guming outlets are in Tier-2 or below, giving it a first-mover advantage in these regions. This strategy provides ample room for national expansion – for instance, Guming only recently entered provinces like Guangdong and still has minimal presence in North China. Management and third-party analyses see potential for thousands of additional stores in coming years.
Goldman Sachs forecasts ~12,100 stores in 2025 and up to 14,500 by 2026, with an illustrative upside scenario of over 30,000 stores long-term. In short, Guming is tapping into a massive addressable market, and its proven playbook in underpenetrated cities should allow it to continue gaining share as the overall freshly-made tea market grows double-digits.
According to Goldman Sachs, it uses benchmarks from other mature beverage markets like Taiwan and Japan, their analysis suggests that if Guming were to reach store density levels comparable to Starbucks in those countries (14–24 stores per million people), it could support 19,000–34,000 stores across China. Additionally, their bottom-up framework—based on regional income, tea consumption penetration, and store productivity—indicates a plausible national network of 24,000 to 31,000 stores under realistic expansion scenarios. This implies Guming’s current footprint represents only about one-third of its potential saturation, affirming a long-term runway for growth even without aggressive international expansion.
2.Durable Competitive Moat – Supply Chain & Cost Advantages
Guming has spent years investing in a best-in-class cold-chain logistics and supply infrastructure, which is difficult for smaller rivals to replicate. As of Sep 2024, Guming operates the largest cold-chain warehousing network among China’s tea shop chains. It has 22 modern warehouses across its operating regions, with ~76% of its stores located within 150 km of a warehouse. This enables the company to deliver fresh ingredients (fruits, dairy) to 97% of stores every 48 hours, even in remote cities – ensuring consistent product quality.
Moreover, Guming directly sources key inputs like mangoes, lemons and tea leaves straight from producers whenever possible. By cutting out middlemen and leveraging its scale, it keeps ingredient costs low, as evidenced by its logistics expense being <1% of system GMV vs ~2% industry average. The dense regional clusters of Guming stores further drive efficiency (economies of scale in delivery, regional brand awareness, etc.). These supply chain strengths form a formidable moat: competitors in the mid-tier segment, which often lack such integrated systems, struggle to match Guming’s combination of low cost and high quality at scale. As a result, Guming can deliver a reliable consumer experience (fresh fruit teas with consistent taste) across thousands of outlets at prices accessible to mass-market consumers – a key differentiator that has underpinned its store expansion success.
3.High-Margin Franchise Model & Fast-Follower Innovation
Unlike premium tea brands (e.g. Nayuki) that operate many self-owned stores, Guming’s franchise-driven model yields superior profitability and scalability. The company enjoys a gross margin around ~30% and core operating margin in the high teens, well above most peers in the tea shop space. Its franchisees also see attractive economics – average store-level EBITDA margin was ~20% in 2023, versus low-teens for typical mid-priced competitors. This win-win model (franchisees are profitable and motivated, while Guming earns high-margin supply and service fees) has allowed Guming to rapidly roll out stores with minimal capital expenditure.
Additionally, Guming’s approach to product development is a “fast-follower” strategy that mitigates innovation risk. The company invests in R&D (2.6% of revenue in 2023, far above peers like ChaPanda’s 0.3% and closely tracks emerging drink trends, but generally avoids unproven fads. Instead, it waits for successful new products to be validated in the market (often by high-end innovators), then quickly rolls out its own versions at scale. For example, when cheese-foam teas and light milk teas became hits, Guming introduced its affordable renditions across its network. This strategy, supported by strong in-house food science capabilities, ensures Guming’s menu stays current but not overly reliant on any single craze. In fact, the sales mix is well-diversified – fruit teas, milk teas, and coffees each contribute meaningful volume (41%, 47%, 12% of cups sold in 9M2024) and the top 3 SKUs are under 20% of sales, indicating no single item dominates. By combining prudent innovation with operational excellence, Guming sustains a steady pipeline of popular drinks while maintaining a high-margin, asset-light business model.
4.Strong Founder Leadership and Alignment
Guming’s founder and CEO, Wang Yun’an, remains deeply involved in day-to-day operations and culture. Wang opened the very first Good Me tea shop in his hometown (Daxi, Zhejiang) in 2010, and over 15 years has grown the business from a small local stall to a nationwide. He owns approximately 39% of the company’s shares and controls ~79.5% of voting, reflecting a significant personal stake in Guming’s long-term success. This high insider ownership aligns management’s incentives with public shareholders and gives confidence that strategic decisions will prioritize sustainable growth over short-term gains. Importantly, Wang has cultivated a grassroots, franchisee-centric culture within Guming. He is known to keep close communication with franchise owners and maintain a “hands-on” presence in the field, which helps enforce standards and morale across the vast network. The strong alignment and trust between the founder’s team and the franchise partners (many of whom are local entrepreneurs in smaller cities) form an intangible asset – it leads to disciplined execution, rapid feedback loops for improvements, and low franchisee turnover. In an industry where franchise systems can falter without cohesion, Wang’s leadership and continuity provide Guming with stability. The founder’s ongoing commitment (he did not significantly cash out at IPO) and the brand’s local roots strengthen the “moat” on the human side: rival chains backed purely by capital lack the community and loyalty that Guming’s franchise ecosystem enjoys.
4. Valuation
We value Guming using a 20× P/E multiple on its expected 2027 and 2029 earnings, reflecting the company’s high growth trajectory and strong profitability. Consensus forecasts project 2025 EPS of roughly RMB0.8 (around RMB1.8–1.9 billion in net profit). For 2025, applying a 30× multiple implies a per-share value of ~RMB24, which converts to approximately HK$26 (at an RMB/HKD rate of ~1:1.07). At the current stock price of ~HK$18, this represents upside of about 40–45%. In other words, Guming’s stock could reasonably trade in the mid-20s HKD within 12–18 months if it delivers on growth expectations. Notably, this valuation would still be below some consumer growth peers – for instance, domestic high-end tea and coffee chains have traded at even higher multiples during rapid expansion phases. Furthermore, Guming’s balance sheet is healthy (IPO proceeds and solid cash generation support expansion) and the company announced a special dividend (~RMB2 billion by 2025) signaling confidence in its cash.
5.Risks and Mitigation
Overhang from Pre-IPO Investors: A risk in the near term is share supply pressure if early investors decide to sell. Guming had backing from venture capital (e.g. DragonBall Capital and others) before listing, and as lock-up periods expire, these PE investors could trim stakes, possibly weighing on the stock.
Mitigation: This risk is partly offset by the founder’s large holding (Wang Yun’an’s 43% stake), which is being retained, signaling insiders’ confidence. Additionally, Guming’s strong fundamentals may attract new long-term institutional investors to absorb any selling. The company’s recent dividend declaration also makes the stock more appealing to hold onto. While periodic share placements by PE backers can create volatility, they don’t alter Guming’s business trajectory – the underlying growth story remains intact, and any post-lockup dips could be short-lived if performance stays robust.
Food Safety or Supply Chain Incidents: As a large F&B chain, Guming faces the constant risk of a food safety scare (e.g. contaminated ingredients, health code violations) or supply chain disruption. A major incident – such as reports of unsafe products, spoiled fruit, etc. – could damage the brand’s reputation and deter customers. Similarly, logistical breakdowns (for example, cold-chain failures leading to inconsistent quality) could hurt store sales.
Mitigation: Guming’s stringent quality control and vertically integrated supply chain help minimize this risk. The company carefully vets suppliers and even direct-purchases key fresh fruits and tea leaves to ensure quality. Its distribution system is centralized and technology-driven, allowing traceability of batches and quick recalls if needed. Guming’s scale actually affords an advantage in safety management – smaller rivals may lack the resources to implement such controls. Moreover, the brand has weathered a decade of operations without major scandals, indicating an established safety culture. Nonetheless, management remains vigilant: regular audits of franchise stores are conducted to enforce hygiene standards, and the company carries insurance for product liability. In the event of an incident, Guming’s nationwide presence in many markets could localize the impact (an issue in one region can be isolated). Overall, while food safety is an ever-present concern in this sector, Guming’s proactive measures and supply chain ownership serve as a robust defense, and swift response protocols are in place should a problem arise.
Slower Expansion or Margin Pressure from Competition: Guming’s growth plan depends on successfully entering new regions and defending its turf against numerous competitors. There is a risk that expansion in unfamiliar provinces could underperform – for example, stores in North or West China might not achieve the same sales productivity, or the company could face operational hurdles adapting to local tastes. Additionally, the freshly-made tea arena is highly competitive and fragmented (2000+ brands), so intensified competition could squeeze Guming’s margins. Aggressive price promotions by rivals (e.g. low-end chain Mixue or emerging regional players) might force Guming to respond with discounts or higher spending on marketing, potentially eroding its franchisee profits.
Mitigation: Guming’s strategy of regional densification and careful site selection mitigates expansion risk – it tends to build out a supportive ecosystem (warehouses, brand marketing, local supply networks) as it enters a new area.