China freshly made beverages enter a divergence phase: tea drinks hit the brakes while Luckin keeps accelerating

Overview

This report is JPMorgan’s 1H26 earnings preview for China’s freshly made beverage sector, covering coffee and tea beverage names such as Luckin Coffee, Chagee, Guming, and Mixue. The core view is that the industry is shifting from broad-based expansion last year to clear divergence: consumers’ delivery habits are proving stickier, the pullback in third-party platform subsidies has not quickly brought traffic back in-store, and franchisees are more cautious about opening second stores and renovating existing stores, leading to slower expansion for tea beverage brands with higher franchise exposure. In contrast, Luckin continues to lead thanks to stronger direct operating and operational control, digitalization, product innovation, and structural cost advantages.

Core views

The report’s core views include: first, the industry is moving from a rising-tide environment into a divergence phase, with Guming’s and Mixue’s expansion pace and earnings expectations cut, and 2H26 possibly weaker than 1H26 against a high base. Second, Luckin is standing out while the industry is under pressure, with 2Q26 revenue expected at Rmb15.6bn, up 26% year on year, and non-GAAP net profit expected at Rmb1.4bn, up 3% year on year; profit growth in 3Q26 could improve further. Third, Chagee’s domestic same-store sales decline continues to narrow, and management is prioritizing member engagement and same-store sales improvement over aggressive expansion; the current roughly 7-8x trailing P/E offers room for valuation recovery. Fourth, although Guming lowered its FY26 net store opening target from about 3.5k to about 2k, its regional density strategy, supply chain, and franchise relationships still provide long-term competitiveness, while near-term investors may wait for same-store sales to stabilize in 4Q26. Fifth, Mixue ranks last in the report comparison, with the target price implying about -10% expected return, and Underweight is maintained.

Analysis framework

The report combines cross-company comparison with single-company earnings previews, focusing on net store additions, same-store sales trends, average ticket size, gross margin, non-GAAP net profit, EPS forecast revisions, consensus gaps, 12-month trailing P/E, and target P/E multiples. It separately assesses each company’s 2Q26 or 1H26 operating performance, changes in 2026-2028 earnings forecasts, reasons for target price adjustments, and downside risks.

Methodology notes

• Earnings forecastEarnings preview and forecast revisions

  Assess earnings trends through revisions to revenue, gross margin, core net profit, EPS, and store assumptions.

  The report provides 2Q26 or 1H26 revenue, profit, store expansion, and FY26-28E forecast revisions for Luckin, Chagee, and Guming to judge whether there is an earnings inflection point or downside revision risk.

• Valuation methodsTarget P/E multiple method

  Use 2027E P/E as the basis for target price, combined with historical trailing P/E and peer comparison.

  Luckin and Guming both use 15x 2027E P/E, while Chagee uses 10x 2027E P/E; the report also compares each name’s historical 12-month trailing P/E average and current valuation position.

• Operating qualityStore expansion and same-store sales framework

  Observe net store openings, same-store sales, franchisee willingness, and channel migration together.

  The report emphasizes that fading delivery subsidies, consumer delivery habits, franchisee willingness to open stores, and traffic diversion to brands’ own channels are key variables in judging whether 2H26 growth can be delivered.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Luckin Coffee / LKNCY US

  One of the sector’s top picks, rated Overweight.

  Strengths

  Strong operational control, about 22k company-operated stores, digitalization and DTC capabilities, product innovation, structural cost advantages, and still-fast store expansion.

  Weaknesses

  Changes in delivery channels and promotions can still affect margins, while liquidity and track record limit the valuation discount.

  Comparison

  It is seen as continuing to gain share in both coffee and the broader freshly made beverage market, ranking first in the report.

  Risks

  Rapid changes in consumer taste, difficulty managing partner stores, rising costs for coffee/milk/tea and other raw materials, failure of overseas localization, and food safety or reputational risks.

• Chagee / CHA US

  A preferred recovery play, rated Overweight.

  Strengths

  Premium tea beverage brand, consecutively narrowing same-store sales decline, improved member operations, new categories such as gelato, and support from buybacks and potential high dividends.

  Weaknesses

  Domestic store opening has slowed significantly, 2Q26 core net profit is still expected to decline year on year, and the unit economics of nationwide gelato expansion still need validation.

  Comparison

  Compared with other tea beverage brands, much of the downside has already been reflected in valuation, making the risk-reward more attractive.

  Risks

  Consumer churn, rising raw material costs, insufficient localization in new markets, reputational risk, and more aggressive subsidies from third-party platforms pressuring revenue and gross margin.

• Guming - H / 1364.HK

  Long-term competitiveness remains, but short-term visibility is needed; rated Overweight.

  Strengths

  Regional density strategy, strong execution, supply chain capabilities, value-for-money positioning in lower-tier cities, and same-store sales driven by new coffee and bakery products.

  Weaknesses

  FY26 net store opening target was cut sharply, 2H26 still requires about 1.2k additional net new stores, and same-store sales need to stop declining in 3Q and stabilize in 4Q.

  Comparison

  Its long-term growth runway and competitiveness are stronger than some peers, but near-term re-rating catalysts are weaker than for Luckin and Chagee.

  Risks

  Lower franchisee willingness to open stores, slow traffic recovery after delivery subsidies fade, rising raw material costs, and store management and reputational risks.

• Mixue Group - H / 2097.HK

  A relatively cautious name, rated Underweight.

  Strengths

  Large scale, low price positioning, and broad brand coverage.

  Weaknesses

  Growth slowdown is more evident, it ranks last in the report, and the target price is below the current price.

  Comparison

  Relative to Luckin, Chagee, and Guming, the report sees its risk-reward as the weakest.

  Risks

  Slower same-store sales and expansion, declining franchisee confidence, and low-price competition and margin pressure.

Key data

• Sector recommendation rankingLuckin (OW) > Chagee (OW) > Guming (OW) > Mixue (UW)New ranking given on the report cover page.
• Luckin target price and upsideUS$43, about 41% upside versus US$30.60Jun-27 target price, based on 15x 2027E P/E.
• Chagee target price and upsideUS$16.50, about 46% upside versus US$11.30Target price raised from US$15 to US$16.5, based on 10x 2027E P/E.
• Guming target price and upsideHK$26, about 22% upside versus HK$21.38Target price lowered from HK$38 to HK$26, based on 15x 2027E P/E.
• Mixue target price and downsideHK$200, about -10% versus HK$222.60Rated UW in the report comparison table.
• Luckin 2Q26 revenue forecastRmb15.6bn, up 26% year on yearThe report forecasts 2Q26 revenue of Rmb15.6bn and gross margin of 61.8%.
• Luckin 2Q26 non-GAAP net profit forecastRmb1.4bn, up 3% year on yearThe report believes 2Q26 may mark Luckin’s profit inflection point.
• Chagee 2Q26 revenue and core net profit forecastRevenue Rmb3.6bn, up 8% year on year; core net profit Rmb401mn, down 36% year on yearThe same-store sales decline is expected to continue narrowing, but profit is still under year-on-year pressure.
• Guming FY26 net store opening targetAbout 2k stores, versus previous target of about 3.5k storesManagement lowered the full-year net store opening target by about 40% in mid-July.
• Guming 1H26 core net profit forecastRmb1.5bn, up 32% year on year1H26 earnings are secure, but visibility on 2H26 expansion and same-store sales is low.

Impact & implications

For portfolios, the report recommends staying selective within China’s freshly made beverage sector rather than buying the entire industry beta. Luckin is viewed as the most certain relative winner and may benefit from a profit inflection point and consensus upgrades; Chagee’s appeal lies in same-store sales recovery, buybacks, potential dividends, and re-rating driven by low valuation; Guming has long-term expansion and supply chain advantages, but in the short term it needs to wait for recovery in same-store sales and franchisee confidence; Mixue has a weaker risk-reward profile amid slower expansion and earnings pressure.

Risks

• Consumers’ delivery ordering habits may prove stickier than expected, and the pullback in platform subsidies may not bring a rapid recovery in in-store consumption.
• Franchisees’ lower willingness to open new stores and renovate old ones may reduce store expansion and earnings in 2H26 and further out.
• To maintain traffic, brands may need to invest more in own-channel discounts, buy-one-get-one offers, dine-in promotions, and marketing expenses, thereby compressing revenue quality and margins.
• Rising prices of key raw materials such as coffee, milk, and tea may squeeze gross margins.
• Expansion into new products, overseas markets, and new channels carries localization, unit economics, and execution risks.
• Food safety issues, labor disputes, or negative social media events may damage brand trust.

What to watch

• Whether Luckin sees consensus upgrades after 2Q26 results, and whether profit growth in 3Q26 can accelerate further.
• Whether Guming’s same-store sales continue to deteriorate in 3Q26, and whether they can stabilize in 4Q26 on a low base.
• Whether Guming can complete about 1.2k net store openings in 2H26 to match the revised FY26 target.
• Whether Chagee’s same-store sales decline continues to narrow and turns positive around the end of 2026.
• Whether consumers return to brands’ own channels or dine-in after third-party delivery platform subsidies fade.
• Whether franchisees’ willingness to open stores, renovate, and open second stores improves.
• Progress on Chagee’s buybacks, potential cash dividends, and nationwide gelato rollout.
• Whether Luckin’s new products, RTD, overseas markets, and non-coffee beverages can continue contributing growth.