Goldman Sachs maintains Neutral on Chagee: new products support SSSG stabilization, focus on traffic and same-store recovery

Overview

Goldman Sachs updated its view after hosting Chagee management at the APAC Consumer & Leisure Corp Day. The core message of the report is that same-store sales in China remain affected by a high base, but average monthly GMV per store in April-May was about Rmb350k, with sequential improvement in June, and new product launches are helping support sales stability. Management has shifted this year's KPI focus from store count to SSSG and customer base expansion, and plans to focus more on ASEAN markets overseas.

Core views

The report maintains a neutral view on Chagee. Positive factors include the contribution of new products to GMV, encouraging Geelato pilot data, temporarily low franchise subsidy pressure, greater focus on ROI in selling expenses, and potential savings in administrative expenses. Constraints include SSSG not yet returning to positive growth, a still-high delivery mix, the possibility that high bases in some overseas markets may drag on reported SSSG, and the need to further verify store expansion, margins, and brand safety risks.

Analysis framework

The report is mainly based on discussions with management, providing qualitative views and key operating data updates on 2Q business trends, same-store sales, store plans, new product performance, Geelato expansion, margins, and shareholder returns, while using the trading P/E of comparable companies Jiumaojiu and Helens as valuation benchmarks.

Methodology notes

• Valuation methodsP/E valuation method

  10x 2026E P/E

  Goldman Sachs' 12-month target price of US$13.6 is based on 10x 2026E P/E, with the target multiple referenced from the trading multiples of companies such as Jiumaojiu and Helens that have experienced slowing brand upcycles and earnings downcycles.

• Factor analysisGS Factor Profile

  Growth, Financial Returns, Multiple, Integrated

  Goldman Sachs' factor framework compares a stock's relative attributes versus the market and industry peers through growth, financial returns, valuation multiple, and integrated percentile rankings.

• M&A scenarioM&A Rank

  Acquisition target probability ranking

  Goldman Sachs uses a 1-to-3 scale to assess the probability that a company becomes an acquisition target; if rated 1 or 2, M&A factors may be incorporated into the target price.

• Data toolQuantum

  Goldman Sachs proprietary financial database

  Quantum is used to access historical financial statements, forecasts, and ratios, supporting either in-depth single-company analysis or cross-industry comparisons.

Asset mapping & comparison

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

• CHA.US

  Research target

  Strengths

  New products are contributing to GMV, SSSG is showing signs of stabilization, Geelato pilot sales contribution is relatively high, franchise subsidy pressure is temporarily low, and selling expenses are more focused on ROI.

  Weaknesses

  China SSSG is still in a year-over-year decline phase, the delivery mix at about 60% remains above target, and some overseas markets may depress reported SSSG after entering the same-store pool due to high bases.

  Comparison

  The target P/E references Jiumaojiu and Helens, both of which experienced earnings downcycles after a slowdown in brand upcycles.

  Risks

  The new product cycle, store expansion, delivery subsidies, margins, brand reputation, and food safety may all affect valuation and earnings delivery.

Key data

• China average monthly GMV per store in April-Mayabout Rmb350kAgainst a high base last year, SSSG was roughly similar to the about -16% level in 1Q.
• June average monthly GMV per storeabove Rmb350kShowed some sequential improvement versus April-May.
• SSSG targetTurn positive in 4Q26; down by a single-digit percentage for the full yearManagement expects 2Q SSSG to be stable or improve slightly from 1Q.
• Delivery mixabout 60%The company aims to reduce this to 40%-50% pre-subsidy through new products and in-store traffic.
• China store plannet addition of about 300 stores, closure of about 200 storesFranchise store buybacks are expected to be fewer than 100.
• Overseas store opening planabout 200 storesAbout 30 in South Korea, 20-30 in Singapore, more in Indonesia and Thailand, more than 10 in Malaysia, and about 20 in the U.S. by year-end.
• New product GMV contributionabout 15%Flowing Sand Tea and Lemon Milk Tea performed well; year-to-date new products contributed 10%-15%, with a full-year target of 15%-20%.
• Geelato pilotmore than 20 stores, about 20% sales contributionAverage daily sales are about 100 units, with the best stores reaching 400-500 units per day.
• Geelato expansion targetnearly 200 this summer, 1,000-2,000 long termSubject to successful testing.
• Geelato equipment capexRmb70k-100k, targeted to decline to Rmb35kGross margin is about 50%, and no additional store staff are needed.
• Administrative expense savingsabout Rmb100mn or close to that levelRelative to 2025, excluding ESOP impact.
• Share repurchaseUS$150mnThe repurchase announced by the company has continued to be executed since June.

Impact & implications

The investment implication is that Chagee's near-term share price drivers will come more from SSSG, customer base, new product contribution, and margin recovery rather than simply store expansion. If the new product cycle and Geelato expansion deliver, and the delivery mix declines, earnings quality may improve; if same-store recovery is weaker than expected or high-base pressure overseas widens, valuation upside under the Neutral rating may be limited.

Risks

• Product cycle and innovation performance may be stronger or weaker than expected.
• The pace of store network expansion in China and overseas may be faster or slower than expected.
• Changes in delivery subsidies may affect in-store traffic, sales, and margins.
• Improvements in gross margin, selling expenses, administrative expenses, and company-operated store costs may fall short of expectations.
• Brand reputation and food safety risks.
• High bases in overseas markets such as Singapore may depress reported SSSG after being included in the same-store pool.

What to watch

• Whether SSSG in 2Q and subsequent quarters stabilizes and improves, and whether it can turn positive in 4Q26.
• Whether new product GMV contribution can rise from the year-to-date 10%-15% to the full-year target of 15%-20%.
• Sales volume, gross margin, and execution effectiveness after Geelato expands from pilot stores to about 200 stores.
• Whether the delivery mix declines from about 60% to 40%-50%.
• Whether net store openings, store closures, and franchise store buybacks in China align with management's plan.
• The pace of expansion and same-store performance in overseas markets such as South Korea, Indonesia, Thailand, Singapore, and the U.S.
• The sustainability of selling expense ROI, administrative expense savings, and break-even at company-operated tea stores in China.
• Execution progress of the US$150mn share repurchase.