Oriental Starbucks-Bawang Tea Girl (CHA) IPO on US stocks

China's well-known Tea Meat Holdings Co., Ltd. (referred to as "Bawang Tea Meat") is expected to be listed on Nasdaq on April 17, with the US stock code CHA, which is the pinyin of "Tea".

On April 10, Bawang Tea Ji updated the IPO prospectus of the US stock market, seeking to raise US$411 million. The company will issue 14.68 million American Depositary (ADS) for $26-28. According to the number of issued shares provided in the document, the company's market value corresponding to the high-end issue price range is approximately US$3.3 billion.  

According to the prospectus, in 2024, the GMV (commodity transaction volume) of Bawang Tea Girl was 29.5 billion rmb, an increase of 173% over the whole year of 2023. Bawang Tea Ji's revenue mainly comes from the sales of products and services. In 2024, Bawang Tea Ji achieved annual revenue of 12.405 billion yuan and net profit of 2.515 billion yuan. In 2024, the net profit margin of Bawang Tea Ji was 20.3%, higher than the peer level, and she has extremely strong profitability among current tea beverage brands.

The Bawang Tea Girl is known as "Oriental Starbucks" by the outside world. It was founded in 2017 and is inspired by how international coffee chains have turned coffee into a global lifestyle and social concept since the 1970s. Motivate the company to leverage the power of technology and brand to make drinking tea a modern experience connecting people and cultures around the world.

Bawang Tea Ji is committed to allowing Oriental Tea to go from China to the world through her modern interpretation of tea. The series of raw leaves fresh milk tea products represented by "Boya Juexian" have won the favor of consumers. Previous public data shows that as of August 2024, the cumulative sales of "Boya Juexian" exceeded 600 million. As of the end of 2024, it has more than 177 million registered members, while the number in 2023 is only 69.4 million.

This year, as current beverage companies such as Gu Ming, Mixue Bingcheng, and Bawang Tea Ji have been listed one after another, the capital market has paid more attention to the current beverage track, and Bawang Tea Ji, the leader in the high-quality current tea beverage track, has also gained great attention in the US stock market. Some analysts believe that with the launch of Bawang Tea Girl, the tea beverage track will also usher in a more standardized and globalized development stage.

 Aim at the blue sea of ​​hundreds of billions of tea drinks

The performance of Bawang Tea Ji Gaosan Store has attracted a large number of franchisees to join. Since its establishment in 2017, Bawang Tea Ji has expanded rapidly through the "direct sales + franchise" dual-wheel drive model. According to the prospectus data, compared with 2023, the number of stores of Bawang Tea Girl has increased by 83% by 2024. As of the end of 2024, Bawang Tea Ji had a total of 6,440 stores, including 6,271 franchise stores.

In the high-line market with active consumption, Bawang Tea Girl performed well. In 2024, Bawang Tea Girl has 696 stores in four first-tier cities, Beijing, Shanghai, Guangzhou and Shenzhen; and 3,110 stores in new first-tier and second-tier cities. While the number of stores has increased, the number of cups sold in the store has also maintained growth. In 2024, the average monthly sales of single cups in the single store in the Chinese market exceeded 25,000.

Bawang Tea Girl's net profit in 2024 reached 2.515 billion yuan, a year-on-year increase of 213.3%. The net profit margin is as high as 20.3%, exceeding the 17.9% of Mixue Bingcheng and the 17% of Gu Ming. The money-making ability of Bawang Tea Sister is terrifying.

An important driving force for rapid performance growth is that in 2024, Bawang Tea Ji opened nearly 3,000 new stores, and as of the end of 2024, the number of stores reached 6,440, which still has a lot of room for expansion compared to Mixue Bingcheng with more than 40,000 Mixue Bingcheng and Gu Ming with more than 9,000 Gu Ming.

However, since the third quarter of 2024, the single-store sales growth rate of Bawang Tea Ji has fallen into weakness, with a year-on-year growth rate of only 1.5%, and in the fourth quarter it dropped to 456,000, a sharp drop of 18.4% year-on-year.

The decline in sales of single stores will also reduce the returns of a large number of new stores for tea brands, which will restrict the opening speed of Bawang Tea Girl. In fact, Bawang Tea Girl has indeed slowed down the pace of opening stores, and plans to open 1,000-1,500 new stores in China and around the world in 2025. This number is only about half of the new stores opened last year. For a franchise brand, this is a responsible decision for franchisees, but the decrease in store opening speed means a slowdown in revenue growth.

Another highlight of Bawang Tea Girl is that it currently maintains an extremely low store closure rate. In 2023 and 2024, the store closure rate is only 0.5% and 1.5%. According to public data, Gu Ming’s store closure rate in 2024 exceeded 4.5%, while Mixue Bingcheng’s store closure rate exceeded 2.8%.

Tea plays an important role in China. China's total population exceeds 1.4 billion. According to data from the China Tea Distribution Association and the International Tea Committee, China's per capita tea consumption in 2023 exceeded 1 kg/year, accounting for more than 30% of the global total tea consumption. The US Stock Investment Network learned that with the expansion of new tea drinks, the market size is expected to exceed 200 billion yuan in 2025.

As the two largest beverages in the world, coffee's status in the United States is similar to that of tea in China. The United States has a population of 335 million. According to statistics from the National Coffee Association, the average annual consumption of coffee beans in the United States in 2023 is about 10 pounds (about 4.5 kilograms). As of January 2025, Starbucks' official website showed that its number of stores in the United States was 17,049, and it has 40,576 stores worldwide. Based on this calculation, whether from the perspective of population base, per capita tea consumption, the number of stores and the degree of internationalization, Bawang Tea Girl still has huge growth potential.

 Innovative single products, focusing on freshly made tea drinks

Both Bawang Tea Girl and Starbucks have adopted a big single product strategy. The prospectus shows that in 2024, 91% of the GMV of Bawang Tea Ji in the Chinese market came from "Zhiye Fresh Milk Tea", and the data for this caliber was 79% and 87% in 2022 and 2023 respectively. According to previous public information, as of August 2024, its super single product "Boya Juexian" has sold more than 600 million cups. Recently, Bawang Tea Ji launched a new series of light-in series in provincial capitals across the country, including Qingyin Boya Juexian and Qingyin Boya Fresh. Bawang Tea Ji reduced the caffeine content through innovative extraction technology, continuing the health strategy, and taking into account the diverse needs of users while meeting basic users.

Focusing on a simple core menu will help Bawang Tea Ji improve supply chain efficiency: The prospectus shows that its inventory turnover days are only about 5.3 days, significantly better than its peers, and logistics costs account for less than one percentage point of the global total GMV in 2024. The application of Bawang Tea Ji's automated tea making equipment and standardized processes is also easier to ensure the consistency of product quality and taste.

The successful global chain of freshly made drinks and even consumer brands adopt the "super single product + core menu" model, and builds a barrier to identity of "category = brand" by digging into consumers' minds. For example, the latte series (including derivative models) has long been the top of Starbucks' global sales list, and has established the awareness of "coffee = Starbucks" in the minds of consumers, and has obtained extremely high consumer stickiness and capital market premium.

Bawang Tea Girl focuses on the tea field. In addition to the original leaf fresh milk tea category, it has recently started to pilot the "second cup of tea" in Shanghai, focusing on freshly extracted tea. Whether it is the product rhythm or the choice of CHA as its US stock code, it shows that Bawang Tea Ji also has a clear plan and long-term development strategy in the tea field, consolidating consumers' cognitive minds about Bawang Tea Ji making "tea" rather than "milk tea".

 Listing promotes internationalization

US stock big data StockWe.com shows that as of 2025, the global tea drinking population has increased from nearly 3 billion in 2019 to more than 3 billion, covering more than 160 countries and regions. The funds raised by Bawang Tea Girl will be mainly used to expand the scale of Chinese and overseas stores, develop and innovate products, build an overseas supply chain network, and strengthen technological investment to support business development and operations.

As early as 2019, Bawang Tea Girl started the process of internationalization. In August 2019, the first store of Bawang Tea Girl in Malaysia opened, and Bawang Tea Girl took the first step in its overseas strategy. In August 2024, Bawang Tea Girl opened three stores in Singapore. On the day of the opening of the first store, a long queue was lined up outside the Bawang Tea Ji store, and the cumulative number of people received exceeded 10,000 in the three days before the opening. The news that the first store of Bawang Tea Girl in Singapore has also become a hot topic on local social media. At present, Bawang Tea Girl's overseas stores have been expanded to Malaysia, Singapore and Thailand. It is understood that the first store in the United States will be launched in Los Angeles soon, and the first store in Indonesia will also open soon. The prospectus shows that in 2025, Bawang Tea Girl plans to open 1,000 to 1,500 new stores in China and around the world.

After listing, Bawang Tea Girl will become the "first stock in the US stock market for new tea drinks". It can gain global popularity by listing in the US, further consolidate its leading position in the new tea drink industry and accelerate global expansion.

In fact, after Starbucks went public in 1992, it also promoted its expansion in the United States and even the world, and helped it develop modern coffee culture into a $100 billion industry. Now the listing of Bawang Tea Girl is expected to replicate Starbucks' successful path in the tea track.

 Valuation Analysis

According to the valuation of US$5 billion to US$6 billion disclosed in the prospectus, Bawang Tea Ji's price-to-earnings ratio is about 15 times. In comparison, Mixue Bingcheng's current price-to-earnings ratio is 32 times and Guming's price-to-earnings ratio is 25 times. Although the market is not good recently, the stock market correction is 15 times, but the valuation still gives US stock investors room to trade. But it is worth noting that the listing of Bawang Tea Girl is in a situation of escalating trade wars. In the prospectus, Bawang Tea Girl also listed it as one of the risk factors.