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China Fund News reporter Qiu Dekun

On the evening of August 2, Nayuki's Tea announced that the company expects its operating income in the first half of 2024 to be approximately 2.4 billion to 2.7 billion yuan.Adjusted net loss (non-IFRS measurement) is approximately RMB420 million to RMB490 million。

Nayuki's Tea is known as the "first stock of new tea drinks in Hong Kong stocks", but since its listing on June 30, 2021, the company's stock price has fallen from its highest point of HK$18.98 per share to HK$1.76 per share, a cumulative decline of more than 90%. As of the close of August 2, Nayuki's Tea's total market value was HK$3.014 billion.

Both revenue and costs are limited

Regarding the expected loss in the first half of 2024, Nayuki Tea first pointed the reason to revenue and costs.

In terms of cost, Naixue's Tea's store cost optimization has basically been in place, and there is limited room for optimization and adjustment of costs such as labor, depreciation and amortization in the short term, resulting in great pressure on store operating profit margins.

In terms of revenue, Nayuki Tea said that "consumer demand has not recovered significantly and (the company's) store revenue is under pressure."

As of June 30, Nayuki's Tea operated 1,597 directly-operated stores and 297 franchise stores, mainly in mid- and low-tier cities.

At present, the number of Nayuki Tea's directly-operated stores is relatively stable, and it is expected that the number of franchise stores will grow rapidly.

However, Nayuki's Tea did not see a significant recovery in demand in the first half of 2024. Both franchise stores and directly-operated stores in similar locations were affected by this, with similar revenue performance.

Suffering from the closure of storesring

Regarding the expected loss in the first half of 2024, Nayuki's Tea attributed another reason to "the plan to close some stores that performed below expectations and the provision of asset impairment for this purpose."

Specifically, in the first quarter of 2024, Nayuki's Tea added 23 directly-operated stores and closed 28 directly-operated stores; in the second quarter of 2024, Nayuki's Tea added 48 directly-operated stores and closed 48 directly-operated stores.

Nayuki Tea previously estimated that the scale of new direct-operated stores opened in 2024 will be lower than in previous years, and some underperforming direct-operated stores will be adjusted or closed. The company believes that this move will help boost the performance of existing direct-operated stores.

Looking back, Nayuki's Tea has been at a turning point in performance in recent years, but its performance in 2023 was lower than expected. Guosen Securities previously released a research report analyzing that Nayuki's Tea's store sales in the second half of 2023 and its full-year profit margin in 2023 were lower than expected.

In response to this, Guosen Securities lowered its overall operating income and profit forecasts for Nayuki's Tea, mainly considering that the volume and price pressures on stores remain in the current tea consumption environment, and lowered the assumption of Nayuki's Tea's single-store daily sales. At the same time, considering that its main expansion model has changed from direct operation to franchising, there is a big difference between the profit model and the contribution of a single store.

Editor: Captain

Review: Xu Wen

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