Goldman Sachs initiates coverage on China's freshly made beverages: Buy Luckin, Neutral on Chagee

Overview

This report is Goldman Sachs' initiation of coverage on companies related to China's freshly made beverage sector, focusing on Luckin Coffee Inc. and Chagee Holdings. The visible main text shows the report takes a more positive view on Luckin, highlighting its scale, owned channels, customer base, and R&D investment; Chagee is assigned a Neutral rating, with product cycle, store expansion, subsidies, margins, and brand risk serving as the key variables to watch.

Core views

The core view is that Luckin has clear scale and channel advantages in the freshly made coffee market, users have formed a habit of ordering through its owned channels, and its large customer base supports higher R&D investment, thus earning a Buy rating; Chagee's valuation and rating are more constrained by its product cycle, innovation, the pace of domestic and overseas expansion, and margin uncertainty, resulting in a Neutral rating.

Analysis framework

The report primarily uses a peer P/E multiple method to set 12-month target prices, while combining industry share, store scale, customer base, channel structure, R&D investment, product cycle, expansion pace, subsidies, and margin risks for fundamental assessment.

Methodology notes

• Valuation methods12-month target price/P/E multiple method

  Luckin Coffee Inc. target price methodology

  Luckin's 12-month target price is HK$49, based on 21x 2026 P/E, with a 10% OTC discount applied relative to the average applicable multiple of MIXUE/Guming.

• Valuation methods12-month target price/P/E multiple method

  Chagee Holdings target price methodology

  Chagee's 12-month target price is US$13.6, based on 10x 2026E P/E; this multiple references the trading P/E of Jiumaojiu and Helens after the slowdown of their brand upcycles.

• Risk frameworkPrice Target Risks and Methodology

  Target price risk disclosure

  The report lists company-specific risks to explain the main factors that could cause deviations in target prices and ratings, including competition, pricing, costs, delivery mix, same-store sales, food safety, product cycle, expansion speed, subsidies, margins, and brand reputation.

• Goldman Sachs internal frameworkGS Factor Profile

  Growth, financial returns, valuation multiples, and composite percentiles

  The Goldman Sachs Factor Profile compares stocks' positions relative to the market and industry peers using growth, financial returns, valuation multiples, and composite indicators. Higher percentiles for growth and returns are more favorable, while a higher percentile for valuation multiples indicates a higher trading multiple.

• Goldman Sachs internal frameworkM&A Rank

  M&A probability ranking

  Goldman Sachs uses M&A Rank to classify covered companies into ranks 1 to 3 based on their potential probability of being acquired, where 1 represents high probability, 2 medium probability, and 3 low probability; Rank 1 or 2 may be incorporated into the target price.

Asset mapping & comparison

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

• Luckin Coffee Inc.

  Core covered name; Buy rating

  Strengths

  Clear scale advantage; user habits on owned ordering channels are already established; large monthly customer base; 2025 R&D investment exceeds Rmb600mn; freshly made coffee share is about 28%, more than 2x that of the second-largest player.

  Weaknesses

  Store expansion may dilute same-store sales growth; changes in delivery mix may pressure margins; if pricing is weaker than expected or competition intensifies, earnings elasticity will be affected.

  Comparison

  The target price uses 21x 2026 P/E, with a 10% OTC discount applied relative to the average applicable multiple of MIXUE/Guming; it ranks third by store count in Mainland China, reflecting high accessibility.

  Risks

  Data privacy, market competition, weaker-than-expected pricing, raw material cost inflation, delivery mix affecting margins, store expansion leading to same-store sales dilution, and food safety.

• Chagee Holdings

  Core covered name; Neutral rating

  Strengths

  Product cycle, innovation capability, and store expansion in China and overseas are the main upside watchpoints.

  Weaknesses

  The rating is more constrained by uncertainty around product cycle slowdown, expansion pace, delivery subsidies, margins, and brand reputation.

  Comparison

  The target price uses 10x 2026E P/E, referencing the trading multiples of Jiumaojiu and Helens after the slowdown of their brand upcycles.

  Risks

  Product cycle and innovation being weaker or stronger than expected, domestic and overseas store expansion being slower or faster than expected, delivery subsidies, margins and profitability, brand reputation, and food safety.

Key data

• Report date2026-06-29Both the file name and the disclosure page in the main text show this date.
• Research institutionGoldman SachsThe cover and disclosure page show Goldman Sachs / Goldman Sachs (Asia) L.L.C.
• AnalystsXinyu Ruan; Michelle ChengThe cover lists the two analysts and their contact information.
• Luckin rating and target priceBuy; HK$4912-month target price, based on 21x 2026 P/E.
• Chagee rating and target priceNeutral; US$13.612-month target price, based on 10x 2026E P/E.
• Luckin freshly made coffee shareabout 28%The chart annotation shows its share is more than 2x that of the second-largest player, and it ranks third by store count in Mainland China.
• Luckin customers and R&D>90mn monthly customers; 2025 R&D investment >Rmb600mnThe visible main text emphasizes that its large customer base supports R&D investment in the FMD field.
• Luckin valuation multiple21x 2026 P/EA 10% OTC discount is applied relative to the average applicable multiple of MIXUE/Guming.
• Chagee valuation multiple10x 2026E P/EReferences the trading multiples of Jiumaojiu and Helens after the slowdown of their brand cycles.
• Company-specific disclosuresGoldman Sachs discloses matters related to shareholding, investment banking business, and client relationships with Luckin Coffee Inc.; makes a market in Chagee HoldingsThese disclosures indicate potential conflicts of interest and should be interpreted separately from the investment view.

Impact & implications

For investors, the main signal from the report is that divergence is emerging within China's freshly made beverage sector: Luckin's scale, channels, and R&D investment support higher certainty and a Buy rating; Chagee's product cycle and expansion still offer opportunities, but the valuation reference is more cautious, resulting in a Neutral rating. Subsequent share price performance may depend more on same-store growth, price competition, delivery subsidies, raw material costs, and margin delivery.

Risks

• Luckin faces risks from data privacy, market competition, weaker-than-expected pricing, raw material cost inflation, delivery mix compressing margins, store expansion diluting same-store sales growth, and food safety.
• Chagee faces risks from changes in product cycle and innovation, the pace of domestic and overseas store expansion, delivery subsidies, margins and profitability, brand reputation, and food safety.
• The valuation method relies on 2026/2026E P/E multiples; if earnings forecasts, peer multiples, or discount assumptions change, the target prices may be adjusted.
• The report discloses that Goldman Sachs has investment banking business, client relationship, and shareholding-related matters with Luckin Coffee Inc., and makes a market in Chagee Holdings; investors should pay attention to potential conflicts of interest.

What to watch

• Whether Luckin can maintain stable same-store sales growth amid store expansion.
• Changes in the share of orders through Luckin's owned channels, delivery costs, and gross margin.
• The intensity of price competition in China's freshly made coffee and tea drink markets.
• The impact of raw material cost inflation on margins.
• Whether Chagee's product innovation and brand cycle can sustain momentum.
• Chagee's store expansion speed and unit-store profitability quality in China and overseas.
• Food safety, brand reputation, and regulatory disclosure matters.