MIXUE ICE CITY's Q2: Steady growth in China business, unsustainable delivery subsidies, "adjusting stores" in Vietnam and Indonesia

After the mid-term performance report was released yesterday, the management of MIXUE Ice City held an analyst briefing, expecting that the level of delivery subsidies will gradually return to normalization, while the number of stores in overseas markets has decreased due to operational adjustments in Vietnam and Indonesia.

According to news from the Chasing Wind Trading Desk, Goldman Sachs released a latest report stating that the management of MIXUE Ice City confirmed during the talks that although the high subsidies from delivery platforms effectively boosted sales and store profits in the first half of 2025, the company expects this level of subsidy to gradually return to normal. A clear signal is that the growth rate of delivery sales in July has slowed compared to June.

In overseas markets, the total number of MIXUE Ice City stores declined in the first half of the year, mainly due to "operational adjustments" in the Vietnamese and Indonesian markets. However, management emphasized that this adjustment aims to improve the quality and profitability of individual stores, with data showing that sales per store achieved positive growth after the adjustment.

In the report, Goldman Sachs maintained a "Buy" rating on MIXUE Ice City, adjusting the target price from the previous HKD 599 to HKD 570 based on an expected price-to-earnings ratio of 30 times for 2026. The bank expects that the solid expansion path of the Chinese business and the rapid development of the Lucky Coffee brand will support long-term growth, while adjustments in overseas markets will help improve overall performance.

Stable Chinese Business, Expected Weakening of Delivery Subsidy Effect

The management of MIXUE Ice City holds a cautious attitude towards the growth model driven by reliance on delivery subsidies.

According to the Goldman Sachs report, the company believes that in the short term, subsidies have lowered the threshold for consumers to try new products, positively impacting sales and store profitability, but they have also posed challenges for order fulfillment and employees.

Management judges that in the medium term, high subsidies are "unsustainable," and the products and services themselves are the core of success. In fact, the slowdown in delivery sales growth in July confirms the company's expectation that the subsidy effect will gradually normalize.

Nevertheless, MIXUE Ice City's expansion path in the Chinese market remains solid. The company plans to continue consolidating its market leadership, deepening the breadth and depth of its store network, and specifically points out that there are still many undeveloped opportunities in tourist attractions, industrial parks, highway service areas, and even sinking markets.

"Lucky Coffee" Accelerates, Synergistic Development with Main Brand

As the second growth curve of the group, the rapid development path of "Lucky Coffee" has also become increasingly clear. Management believes that the Chinese freshly brewed coffee market has ample space to accommodate multiple brands, and the competitive landscape has yet to be defined.

The report points out that the core competitiveness of "Lucky Coffee" lies in fully utilizing the group's capabilities of MIXUE Ice City, including direct procurement advantages from Brazil, Colombia, and other regions, as well as a reserve of 20,000 tons of coffee beans at the Hainan production base.

In terms of brand positioning, "Lucky Coffee" uses semi-automatic coffee machines to provide freshly brewed coffee, complementing the coffee powder products used in the MIXUE Ice City tea drink menu, jointly expanding the market To support franchisees, the company has introduced measures such as waiving franchise fees and training fees, and strategically raising prices by 1 yuan in first-tier cities. Looking ahead to the second half of the year, "Lucky Coffee" will focus on enhancing product strength and accelerating the layout of stores nationwide.

Overseas Market Adjustment, Shrinking Stores in Vietnam and Indonesia

Regarding the decline in the number of overseas stores, which has attracted investor attention, management explained that this is mainly due to the company's proactive adjustments in the Vietnamese and Indonesian markets.

The report pointed out that due to entering these markets relatively early, the company has insufficient operational experience in the two markets. This adjustment aims to comprehensively improve store quality.

The adjustment does not mean retreat. Management revealed that after optimizing operations and upgrading the store network, there have been signs of performance improvement in the Vietnamese and Indonesian markets. For example, some stores have seen sales increase by over 50% after relocating to better locations.

Meanwhile, expansion in other markets such as Thailand and Malaysia is progressing smoothly. The company also entered Kazakhstan in the first half of the year and is preparing to open stores in several countries in the Americas.

Scale Advantage Offsetting Cost Pressure

In the face of rising pressure on some raw material prices, such as coffee beans and lemons, MIXUE GROUP effectively controls costs through a diversified raw material procurement strategy.

The company's management stated that costs have not increased significantly, mainly due to: a diversified raw material mix, such as the decline in sugar and milk prices offsetting the rise in costs of other categories; the company can achieve precise production based on sales forecasts through direct procurement and a vertically integrated supply chain.

Management maintains a long-term gross profit margin target of about 30% and expects to generate more cost reduction benefits in the future as scale expands and efficiency improves.

For the currently lower supply chain efficiency in overseas markets compared to China, the company plans to address this within the next 1-2 years, with measures including localizing the procurement of some raw materials and assessing the feasibility of establishing factories in distant markets such as the Americas.

Management expects that the operating expense ratio in the second half of 2025 will remain stable, and the operating leverage effect will offset the impact of business investments